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The real question is if enough fails to cause systemic risk. Hopefully the GSIBs ( https://en.wikipedia.org/wiki/List_of_systemically_important_banks https://en
by philipwhiuk 1y ago
The real question is if enough fails to cause systemic risk. Hopefully the GSIBs ( https://en.wikipedia.org/wiki/List_of_systemically_important_banks https://en.wikipedia.org/wiki/List_of_systemically_important... ) aren't too badly exposed.
- zerosizedweasle 1y agoI think the debt is what makes the risk systemic. Sure it can be overvalued, but alone that won't cause a generationally painful economic meltdown. It's the spending and debt that make something that is a bubble into something truly dangerous. All the exotic private credit and structured finance that is powering this thing along with the lack of any viable revenue stream to keep up with the debt plus interest that make this thing so dangerous. Sure maybe Meta can take a huge hit and limp away (it's still gonna be very painful for them and people who own a lot of its stock) but can OpenAI, can CoreWeave or any of the firms that lent to them? It's a domino effect. The fact that Meta is doing this is a huge red flag. The problem is the market is rewarding this endless cash burn without any way to generate the appropriate revenue. Once reality catches up there are a ton of knock on effects.