Eurodollar University The 3 Stages of Every Financial Collapse (We’re in Stage 1)
8 snips
Jan 18, 2026 Financial crises unfold in three stages, each marked by unique indicators. Currently, we're in Stage One, characterized by bubbles and gray swans prompting investor withdrawals. Distinguishing between gray and black swans helps us understand the dynamics at play. Historical examples, like the 1929 crash and the 2006–2008 housing crisis, illustrate how questions can lead to bank pullbacks and forced asset sales. The discussion emphasizes the need to stay alert for signs of escalating towards Stage Two.
AI Snips
Chapters
Transcript
Episode notes
Stage One: Gray Swans And Early Withdrawals
- Stage one begins when a visible 'gray swan' breaks the bubble's rationalizations and investors start asking questions.
- Initial withdrawals from the bubble mark the start of reversal but may be temporarily absorbed by others standing behind the market.
Monitor Bank Backstops Closely
- Watch for investors demanding redemptions and whether banks supply cash to cover them.
- If banks stop backstopping withdrawals, prepare for forced sales and deeper stress.
1929: Banks Temporarily Masked The Damage
- In 1929 the stock crash triggered stage one while banks initially backstopped brokers and markets.
- Banks later reduced support in 1930, which shifted the cycle into stage two and accelerated the downturn.