The Next 2008 Is Already Here — But This Time There Is No Bailout (Professor Jiang Analysis)

Added: 2026-05-24

[00:00:00]So, today I want to talk about something that is happening right now in the global financial system that almost nobody is paying attention to. And I need you to understand why this matters to you personally, not to hedge fund managers, not to Wall Street traders, to you. Your savings, your pension, your mortgage, your job. Everyone is watching the war. Everyone is watching the missiles and the oil prices and the diplomatic statements. But underneath all of that noise, something far more dangerous is unfolding in the financial system. And the reason most people do not see it is because it is happening in a part of the economy that was specifically designed to be invisible.

[00:00:36]It is called private credit, and it is a three and a half trillion-dollar market that is now cracking in ways that look disturbingly familiar to anyone who studied what happened in 2007 and 2008.

[00:00:49]Let me explain what is actually happening. And more importantly, let me explain why this time there may not be a bailout coming to save it. So, first, let me walk you through what private credit actually is. Because most people have never heard this term. After the 2008 financial crisis, governments around the world told the banks, "You cannot do this anymore. You cannot make these reckless loans. You cannot gamble with ordinary people's money." New regulations were put in place. Capital requirements were tightened. Banks were forced to be more careful. And on the surface, that sounds like the system was fixed. But here is what actually happened. The lending did not stop. It just moved. It moved out of the regulated banking system and into what economists call shadow banking. Instead of banks making loans, private investment funds started making loans.

[00:01:36]Pension funds, insurance companies, wealthy individuals pooling their money into funds that then lend directly to companies. Same risky lending, same aggressive behavior, but now happening outside the rules that were supposed to prevent another 2008. And this shadow lending system has grown from roughly $2 trillion dollars in 2020 to over three and a half trillion dollars today. That is not a small corner of the financial system. That is a massive structural pillar of the global economy, and it is shaking. Let me give you the specific events that should concern you. In mid-2025, two American companies called Tricolor and First Brands went bankrupt. And when investigators looked into these bankruptcies, they found something alarming. These companies had been pledging the same assets as collateral for multiple loans simultaneously. Think about what that means. Imagine you own one house, and you go to three different banks and take out a mortgage on that same house from each of them. Each bank thinks they have a claim on your house.

[00:02:41]But when the loans go bad, there is only one house for three banks. That is what was happening, and nobody caught it until the companies collapsed. Then, in February of this year, something bigger happened. A firm called Blue Owl Capital, one of the largest private credit managers in the world, permanently froze investor withdrawals from one of its retail funds. They had promised ordinary investors, not just billionaires, but regular people through their retirement accounts, that they could withdraw their money quarterly.

[00:03:10]And then one day, they said, "No, you cannot have your money back. We are shutting the door." The fund experienced a 200% surge in withdrawal requests.

[00:03:20]Investors panicked. Blue Owl stock fell for 11 consecutive days and lost roughly 60% of its value. And instead of returning people's money, they announced they would slowly liquidate assets and return maybe 30 cents on the dollar over the next several months. If this sounds familiar, it should, because in August 2007, the French bank BNP Paribas froze withdrawals from three of its investment funds. That was the moment, not the Lehman Brothers collapse a year later, but that moment in August 2007, that was the first crack, the first sign that the entire financial system was about to come apart. And prominent economists are now drawing exactly that parallel. Then, just weeks later, a London-based firm called Market Financial Solutions collapsed. This was a specialist property lender with a loan book of roughly $3.2 billion.

[00:04:10]And when it went into insolvency, creditors alleged that as much as 1.2 billion pounds in loans were backed by only 230 million pounds of actual collateral value. That is an 80% deficiency. And the list of institutions caught in this collapse reads like a who's who of global finance. Barclays lost over $300 million.

[00:04:31]HSBC took a $400 million hit. Apollo, Elliott Management, Wells Fargo, Jefferies, Santander, all of them exposed. All of them scrambling. Now, if you're listening to this and thinking, "Well, these are isolated incidents.

[00:04:45]These are just a few bad actors." Let me explain why that thinking is exactly what people said in 2007. And let me explain the structural problem that makes this fundamentally different from a few bad loans. The entire private credit system has a design flaw built into its foundation. And that flaw is very simple. These funds took money from investors and promised them they could get it back relatively quickly.

[00:05:08]Quarterly redemptions, semi-liquid access. But they lent that money out in long-term illiquid loans to companies that cannot pay it back on short notice.

[00:05:18]This is called a liquidity mismatch. It is the single most dangerous structural flaw in finance. Because as long as confidence holds, as long as nobody panics, the system works. But the moment confidence breaks, the moment people start wanting their money back, the fund cannot sell its loans fast enough to pay everyone. And that is when you get a run. Not a bank run in the traditional sense, because these are not banks. They are shadow banks. And shadow banks do do have access to the Federal Reserve's emergency lending window. They do not have deposit insurance. They do not have the safety nets that were built after the Great Depression to prevent exactly this kind of panic. And here is the part that connects directly to your life.

[00:05:59]Where do you think the money in these private credit funds comes from? It comes from pension funds. It comes from insurance companies. It comes from retirement accounts. It comes from the financial institutions that are supposed to be safeguarding ordinary people's futures. If these funds suffer major losses, if they cannot return capital to their investors, the people who feel it are not Wall Street executives. The people who feel it are retirees whose pension funds just lost a significant portion of their value. Workers whose retirement accounts just shrank.

[00:06:30]Insurance policy holders whose companies just took massive write-downs. Now, let me add another layer to this. Because the private credit crisis is not happening in isolation, it is happening at the same time as another bubble that is reaching extraordinary proportions.

[00:06:46]The artificial intelligence bubble.

[00:06:48]Between 2023 and 2025, the AI sector received over $200 in investment capital. Global AI spending is projected to reach two and a half trillion dollars in 2026 alone.

[00:07:01]Companies like Microsoft, OpenAI, Oracle, and Nvidia have been spending at levels that dwarf even the dot-com era.

[00:07:09]OpenAI alone projects it will spend $665 billion by 2030. And yet, AI still does not have a clear path to profitability. OpenAI is projected to lose $17 billion in 2026.

[00:07:23]Microsoft was losing $20 per user per month on some AI products. The math simply does not work at current spending levels. And here is where private credit and AI intersect in a way that most people completely miss. A significant portion of private credit lending has gone to technology companies. Enterprise software companies have been a favorite sector for private credit lenders since 2020. And now AI is threatening to make many of those software companies obsolete. If AI tools can do what these software companies do, but faster and cheaper, then the companies that borrowed billions from private credit funds may not be able to pay those loans back. The loans go bad, the funds take losses, the investors, your pension fund, your retirement account, take the hit. So now you have two enormous bubbles sitting on top of each other. A three and a half trillion dollar private credit bubble built on aggressive lending, weak oversight, and a fundamental liquidity mismatch. And a multi-trillion dollar AI bubble built on spending that far exceeds any revenue these companies are generating. And both of them are threatening to deflate at the same time. And this brings me to why I said there may not be a bailout this time. In 2008, the United States government stepped in and rescued the financial system. It cost trillions of dollars, but America could do that in 2008 because its national debt was roughly 10 trillion dollars, and the government still had borrowing capacity.

[00:08:50]Today, American national debt stands at 39 trillion dollars. The debt held by the public now exceeds the entire annual economic output of the country for the first time since World War II. The government is already running a deficit approaching two trillion dollars per year. Net interest payments on the debt [laughter] have nearly tripled in five years. The Congressional Budget Office projects that interest alone will consume nearly 15% of all federal spending by 2028. So when, not if, when the next financial crisis arrives, the American government will face a choice it did not face in 2008. It will have to decide who gets saved and who gets destroyed because there is not enough fiscal capacity to save everyone. And that is the fundamental difference between 2008 and today. In 2008, the government could write a blank check because it still had a relatively manageable debt load. In 2026, the checkbook is already overdrawn, and the consequences of this extend far beyond America. The entire global financial system is interconnected. When Market Financial Solutions collapsed in London, American banks lost hundreds of millions. When Blue Owl froze withdrawals in New York, pension funds in Europe and Asia felt it. Private credit is global. The losses will be global. And the nations that depend on American financial stability, which is essentially every nation on Earth, will feel the aftershocks. If you have found this analysis useful, please subscribe to this channel. I break down the economic forces reshaping the world in simple English so you can understand what is actually happening to the global economy and how it affects your life directly. Hit the subscribe button so you do not miss the next analysis. Now, let me explain the historical pattern because this is not the first time we have seen this exact sequence of events.

[00:10:38]In the late 1990s, everyone was pouring money into internet companies. The spending was extraordinary. The revenues were nonexistent. And for a while, it did not matter because confidence was high and money kept flowing. Then, confidence broke. And between 2000 and 2002, the NASDAQ lost nearly 80% of its value. Trillions of dollars evaporated.

[00:11:01]But the key lesson from the dot-com crash is not about technology stocks.

[00:11:05]The key lesson is about what happens to the broader economy when a massive bubble deflates. After the dot-com crash, the Federal Reserve slashed interest rates to fight the economic downturn. Those low rates created the conditions for the next bubble, the housing bubble, which then caused the 2008 crisis. And after 2008, central banks slashed rates again and pumped trillions into the system through quantitative easing. And that created the conditions for the current bubble.

[00:11:33]Cheap money flowing into private credit, cheap money flowing into AI, cheap money inflating asset values far beyond what the underlying economics justify. This is the pattern. Bubble, crash, bailout, new bubble built on the bailout money, bigger crash, bigger bailout, even bigger bubble. And each time, the debt gets larger, the bubbles get bigger, and the capacity to bail out the system gets smaller. We are now at the point in this cycle where the bubble is enormous and the bailout capacity is nearly exhausted. That is not an opinion. That is arithmetic. So, what does this mean for ordinary people? It means the financial system that your retirement depends on, the system that prices your mortgage, the system that determines whether your employer can get the loans it needs to keep operating and paying your salary, that system is under structural stress that the people running it do not want you to understand. Because if you understood it, you would be asking very uncomfortable questions. Questions like, why is my pension fund invested in a market that just froze investor withdrawals? Why are insurance companies putting policy holder money into loans that turn out to have fraudulent collateral? Why is nobody regulating a three and a half trillion dollar shadow banking system that operates outside every safety net built after the last crisis? The world you grew up in, the world where financial crises came and government stepped in and fixed everything and life went back to normal, that world is ending. Not because governments do not want to fix things, but because the mathematics of 39 trillion dollars in debt and two trillion dollar annual deficits and a private credit market built on illusion and an AI bubble built on spending with no revenue, those mathematics do not leave room for another blank check rescue. The nations and the people who understand this now, who take steps to reduce their exposure to these financial risks, who think carefully about where their savings and pensions and investments actually are, those people will be in a fundamentally stronger position than those who assume someone will always step in and fix it. Because the next 2008 is not coming. It is already here. And this time, the safety net has a $39 trillion hole in it.

[00:13:52]Subscribe for more analysis of the economic forces reshaping the world explained in simple English. And tell me in the comments, where is your retirement money invested right now? Do you actually know? And does your pension fund have exposure to private credit?

[00:14:07]Because that might be the most important question you ask this year. I will see you next time.