Tom Bilyeu

For instance, it wasn't a mortgage crisis.

In the same way this moment is about gold or the war, the mortgages were just the trigger.

the euro dollar system freezing due to well-founded paranoia around an unknown amount of toxic asset exposure was the actual loaded gun if you look at 2008 through a forensic lens what you'll see is a horror movie style atmosphere of extreme fear and paranoia no one knew what was hiding around the next corner and that made the entire euro dollar system which runs on trust

begin to freeze in terror.

Hopefully that's starting to sound familiar with what's happening right now due to private credit.

By 2008, every major bank on earth knew they were sitting on exposure to mortgage-backed securities.

Everyone knew their own books were dirty.

The problem was they didn't know how dirty everyone else's books were.

Why?

Because the banks had spent years taking pools of mortgages, slicing them up, repackaging them into complex securities, and burying them three layers deep inside of off-balance sheet vehicles that nobody had to disclose clearly.

You could lend 500 million to a bank that looked perfectly healthy on paper, and that bank could be carrying $50 billion in toxic exposure that had been structured specifically to be invisible.

Nobody knew where the bodies were buried, including the banks themselves.

So here's the choice every bank faced in September of 2008.

Sure, I could extend this credit line to my counterparty.

They look fine on paper, and maybe they actually are fine.

But if they're not, if they're the next Lehman, I will lose everything.

And when there's that much uncertainty, the rational choice for every single bank was to stop lending.

Not because they knew someone was going to fail, but because they couldn't afford the risk that they might.

This is what actually causes a credit freeze.

It's not one bank deciding to pull from one client.