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Any time you see this behavior in debt markets, you should batten your hatches for the coming collapse. Unsurprisingly, this is *very* common in crypto speculation, where it's obscured behind the bland, unpronounceable euphemism of "re-hypothecation":

https://www.coindesk.com/consensus-magazine/2023/05/10/rehypothecation-may-be-common-in-traditional-finance-but-it-will-never-work-with-bitcoin/

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Rehypothecation May Be Common in Traditional Finance, but It Will Never Work With Bitcoin

Several crypto lenders, exchanges and funds that used customer assets to grow rapidly had a crash course in the limits of digital scarcity in 2022.

^{Christopher Calicott (CoinDesk)}

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This is a morally and economically complicated phenomenon. On the one hand, when the government provides risk-free bonds to investors (that is, when the Fed rate is over 0%), they're providing "universal basic income for people with money." If you have money, you can park it in T-Bills (Treasury bonds) and the US government will give you more money:

https://realprogressives.org/mmp-blog-34-responses/

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MMP Blog #34 Responses | L. Randall Wray

Comments and responses on the Modern Money Primer Part 34.

^{Real Progressives}

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As 2008 forcibly reminded us, the vast mountains of complex derivatives and other forms of exotic debt only *seems* like an abstraction. In reality, these exotic financial instruments are directly tethered to real things in the real economy, and when the faery gold disappears, it takes down your home, your job, your community center, your schools, and your *whole country's* access to cancer medication:

https://www.theguardian.com/world/2012/jun/08/greek-drug-shortage-worsens

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Greek debt crisis: chronic drug shortage risking lives of the sick

Patients groups' warning comes as pharmaceutical companies become increasingly reluctant to deliver drugs on credit

^{Lizzy Davies (The Guardian)}

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The same goes for financiers during periods of loose credit. Loose Fed money created an "everything bubble" that saw the prices of *every* asset explode, from housing to stocks, from wine to baseball cards. When *every* bet pays off, you win the game by betting on *everything*:

https://en.wikipedia.org/wiki/Everything_bubble

That meant that the ZIRPocene was an era in which ever-stupider people were given ever-larger sums of money to gamble with.

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2020–2021 correlated bubble in asset prices

^{Contributors to Wikimedia projects (Wikimedia Foundation, Inc.)}

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Finfluencers are dolts, but they're also *dangerous*. Writing for *The American Prospect*, the always-amazing Maureen Tkacik describes how a small clutch of passive-income-brainworm gurus created a financial weapon of mass destruction, buying swathes of apartment buildings and then destroying them, ruining the lives of their tenants, and their investors:

https://prospect.org/infrastructure/housing/2024-05-22-hell-underwater-landlord/

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Hell Is an Underwater Landlord

Millions of tenants are trapped in a rotten cycle of overflowing trash, daily water outages, and a healthy rat population.

^{Maureen Tkacik (The American Prospect)}

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Community rooms and pools shuttered. Lawns became waist-high gardens of weeds, fouled with mounds of fossil dogshit. Crime ran rampant, including murders. Buildings filled with rats and bedbugs. Ceilings caved in. Toilets backed up. Hallways filled with raw sewage:

https://pluralistic.net/timberridge

Meanwhile, the value of these buildings plummeted, and not just because of their terrible condition - the whole market was cooling off, in part thanks to those same interest-rate hikes.

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Contributions by Boy G

51 Contributions

^{Contributions by Boy G}

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Rent control, which neoliberal economists have long dismissed as an impossible, inevitable disaster, actually works *very well*:

https://pluralistic.net/2023/05/16/mortgages-are-rent-control/#housing-is-a-human-right-not-an-asset

As does public housing:

https://jacobin.com/2023/10/red-vienna-public-affordable-housing-homelessness-matthew-yglesias

There are ways to have a decent home and a decent life without being burdened with debt, and without being a pawn in someone else's highly leveraged casino bet.

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We Should Look to Vienna for Answers to Our Housing Crisis

Vienna’s social housing triumphs show that when governments invest in housing as a human right, they can combat homelessness and inequality.

^jacobin.com

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