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Is the United States on the verge of another financial crisis?
As the world has rightfully been focused on the war in Iran, there has not been enough
attention paid to a major problem emerging in Wall Street.
In fact, it's getting so bad that the former CEO of the major Wall Street bank, Goldman
Sachs, warned that he smells a new crisis that could be similar to the 2008 financial
crash.
And this new crisis could impact a lot of average people and hit the retirement funds.
So what exactly is happening?
Well, there is a crisis emerging in the private credit market on Wall Street, which is a
three trillion dollar industry.
And this has grown exponentially since the 2008 financial crisis because after that last
crash, Wall Street banks were more heavily regulated.
So more and more financial firms began to give out loans, risky loans to private companies.
And this is known as private credit.
And these financial firms are not regulated.
Much of the information about their lending practices is not publicly available.
And yet many investors bought into these private credit funds because they were attracted
by offers of very high double digit returns.
However, in late 2025 and early 2026, there were some major bankruptcies involving private
credit.
And in response to that, the CEO of the largest Wall Street bank, JP Morgan Chase, Jamie
Diamond is the CEO.
He famously warned that when you see one cockroach, it's likely there are other cockroaches.
So this is his way of saying that the bankruptcies we saw are likely the beginning of a larger
crisis.
And this is why in the first three months of 2026, we've seen the stocks of private credit
firms plummet.
For instance, Blue Owl is a financial firm that's deeply involved in private credit.
And in the first three months of 2026, it stock fell by 40%.
But this crisis is not only impacting smaller, relatively less known alternative investment
companies.
It's also impacting some of the largest asset managers on earth, like BlackRock, for instance,
BlackRock and many other Wall Street giants have actually been forced to limit withdrawals
from their private credit funds.
Because when investors bought into these private credit funds, that money was then lent
out to these risky companies and BlackRock doesn't have that money on hand.
If the investors want to simply withdraw their capital, they're not able to do so immediately.
This is very similar to a kind of bank run where investors in private credit are freaking
out and demanding all of their money, which is leading to many of these companies trying
to sell their holdings.
But the problem is many of these holdings are not liquid.
They cannot be quickly converted into cash, which is leading to a feedback loop because
then when BlackRock and these other major Wall Street firms put limits on the withdrawals,
investors freak out even further and they say, where is my money?
I want my money.
So there is a very real risk here that this contagion in the private credit market could
spread to other sectors in the finance industry.
And it's also big banks on Wall Street that are exposed to some of these bad loans.
So there's a very real concern here that this contagion in the private credit industry
could spread to other parts of the finance industry.
And it's not just these private credit firms that are at risk, but also some major Wall
Street banks.
Moody's estimated that US banks are exposed to nearly $300 billion of private credit loans
because even though these Wall Street banks after the 2008 financial crisis were more heavily
regulated and they stopped lending as much to risky companies, instead, these banks were
lending money to the private credit firms, which were then making risky loans to companies.
So they're still exposed.
If many of these companies start defaulting on the private credit loans, which were already
seeing happen, then many of the private credit firms could go bankrupt, which means they
will not be able to pay the loans to the major Wall Street banks.
The former CEO of the massive Wall Street bank Goldman Sachs warned in an interview with
Bloomberg that he can smell another financial crisis on the horizon.
Listen to this clip of the former corporate executive Lloyd Blankfein, who was the head
of Goldman Sachs during the 2008 financial catastrophe.
And in a way, you have market problems and crashes and problems simply because a lack
of discipline builds up over time, it's human nature, there's an inevitability about
it.
We're kind of, I don't know for the absolute end of the cycle, but we're getting close
to the end of late stages of cycles on this.
And we do for a kind of a reckoning.
So generally, I'd be very, very, I'm always very cautious, I'm in the risk management business,
but especially cautious at this time, you can point to several reasons.
But if for no other reason, just because we haven't had a problem for such a long time,
undoubtedly, we've put money in places where right also going to need to happen.
And when you're dealing with opaque illiquid assets, like credit, that's a place that
one would clearly have to look.
But what's even worse is as this crisis is expanding in Wall Street and financial analysts
are warning of a potential new crisis, do you know what the response of the White House
has been?
The Donald Trump administration has been supporting the private credit industry.
In August, 2025, the Trump White House announced a new executive order that is extremely cynical,
titled democratizing access to alternative assets for 401K investors.
Now what does this mean?
It means Trump was being lobbied by some of his major supporters and donors from Wall Street
in order to find new investors to hold the bag for these bad investments in private credit.
Because a lot of more sophisticated investors on Wall Street could see there was a crisis
brewing in the private credit sector.
So a lot of these investors were trying to find less sophisticated retail investors,
average people, pension funds to invest in private credit so they could sell their holdings
and sell off these bad loans to less sophisticated investors, average people.
So in other words, the White House is helping Wall Street leave average people and pension
funds holding the bag of these bad loans, which are on the verge of imploding.
That was the point of this executive order, which was framed as though it's going to
help people by democratizing access to private credit and private equity.
When in reality, it's the exact opposite of helping average people.
It's hurting average working people for the benefit of Wall Street.
Although these kinds of cynical policies are not that surprising when you keep in mind
that Donald Trump is himself a billionaire, he surrounded himself with a dozen billionaires
in his administration and one of the biggest donors to Donald Trump's 2024 presidential
campaign was the highest paid executive on Wall Street.
Steven Schwarzman, who's the CEO of Blackstone, which is the largest alternative asset manager
on earth.
And Blackstone has a very large private equity arm with exposure to private credit, which
is why Blackstone's stock fell by 30% in the first three months of 2026.
So it's no surprise that Trump's friends on Wall Street and his donors are freaking
out and demanding help from the White House.
But unfortunately, that's not all.
There are even more problems that are cascading that could potentially lead to a perfect storm.
So AI is also linked to this private credit crisis because many of these private credit
firms were lending to software companies and many of these software companies are now going
out of business due to the spread of artificial intelligence technology.
And then there's another major problem here, which is that the AI sector is also in an
enormous bubble in which all of the major AI companies are lending to each other and
investing in each other.
Despite the fact that many of these AI companies are not making money, like for instance, Open
AI has very low revenue and yet it has over a trillion dollars in obligations.
And no one knows where Open AI is going to get all this money from.
But big tech companies in the US are in an enormous bubble, the stock market capitalization
of just the top seven big tech companies in the US, which are known as the magnificent
seven, that is Amazon, Apple, Google, meta, Microsoft, Nvidia and Tesla.
Just these seven companies, if you take their market cap, it is bigger than the entire stock
market in Europe, the entire stock market in China and every other part of the world.
And if you look at the entire stock market in the US, it is in the biggest bubble in
history.
The total value of all publicly traded stocks in the US is over 210% of GDP, which is
more than double the peak in 2007 before the 2008 financial crisis.
And it's even significantly larger than the peak of the 2000 dot com bubble.
And if the AI bubble pops that will not only lead to a massive crisis on Wall Street and
a crash of the stock market, but it could also lead to a massive depression in the US,
because the Harvard economist Jason Furman estimated that in the first half of 2025, more
than 90% of US GDP growth came from investment in information processing equipment and software,
which is largely involving AI.
That is to say that AI is basically the only part of the US economy that is growing.
These big tech companies in Silicon Valley are growing so fast that it makes it look like
the US economy is growing overall because GDP growth is an aggregate number.
But in reality, 80% of the US population has been living in a recession.
So if the AI bubble pops, it's likely going to lead to a very severe recession for the
entire country.
And this would lead to even more inequality and poverty in the US at a time when the richest
10% of Americans already make up half of all spending in the economy.
And then as if all of that weren't already bad enough, I haven't even mentioned the economic
impact of the US Israeli war on Iran, which is causing the largest oil shock in history.
And many world leaders are now warning it could lead to a global recession.
So this really is a perfect storm and it could lead to a significant economic crisis.
You have the private credit crisis, you have the AI bubble and the US stock market bubble,
you have the energy crisis and oil shock due to the war in Iran, which will also lead
to a return of inflation and food prices will go up because so many fertilizers and chemicals
in fertilizers come from the Persian Gulf region and that will now be disrupted due
to the war.
There are so many problems here that are feeding into each other.
If you want to learn more about how the war in Iran is transforming not only global politics
but also the economy, you should check out our video on the topic in the description
below.
We will link to that video exploring the enormous implications of this conflict and how
Iran is challenging the global dominance of the US dollar and the petrodollar system.
But with that said, I'm going to conclude here.
I'm going to do a longer follow up video explaining in greater detail the very real danger
of another financial crisis potentially on the horizon and I'm going to interview the
economist Michael Hudson, who is a leading expert on financial crises.
Be sure to come back soon to check out the follow up interview.
On that note, I'm going to conclude.
I am Ben Norton.
I am the Editor-in-Chief of Geopolitical Economy Report.
Please like and subscribe, please share this.
I will see you all next time.

Geopolitical Economy Report

Geopolitical Economy Report

Geopolitical Economy Report
