TFTC: A Bitcoin Podcast #610: The Basis Trade That Could Crash Everything with James Lavish
8 snips
Apr 23, 2025 AI Snips
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Need for Financial Literacy
- Financial literacy is critically lacking across all education levels, even MBA programs.
- Simplifying complex financial concepts empowers people to better manage wealth and understand economic events.
Treasuries Aren't Risk-Free
- Bonds are traditionally seen as safer than stocks, but recent inflation and rate hikes have devastated bond holders.
- The "risk-free" U.S. Treasury is not truly risk-free due to inflation debasing the currency daily.
History of Basis Trade Crisis
- In 1998, Long-Term Capital Management used extreme leverage on basis trades that led to a market crisis.
- The Fed orchestrated a bailout of Goldman Sachs to prevent systemic collapse due to intertwined risks.