Bloomberg Businessweek Weekend - October 16th, 2026

Bloomberg Audio Studios.

Podcasts. Radio.

News.

This is Bloomberg Businessweek Daily. Reporting from the magazine that helps global leaders stay ahead. With insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily Podcast. With Carol Masser and Tim Stenevek on Bloomberg Radio.

Hi, everyone. Welcome to the Bloomberg Business Week weekend podcast. Earnings got underway this past week as the big banks reported and disappointed. The AI trade and spend came under question as CoreWeave's credit risk climbed to an all-time high, rattled by the AI cloud computing company's plans to ramp up borrowing. We also got an inflation print that came in hot, reigniting fears of higher interest rates that could make the AI infrastructure boom more expensive to finance. See how it's all connected? All of this, though, is covered on the Bloomberg and at Bloomberg.com.

It's a backdrop that feels surprisingly modern, yet as it turns out, we've actually walked this path before. Later this hour, we sit down with the author of 1873, The Rothschilds, The First Great Depression, and the Making of a Modern World. It's a narrative on how the Rothschilds' massive capital deployment into global infrastructure in the 19th century unleashed a historic frenzy of speculation. And maybe, just maybe, there's a little bit of a resemblance to the eye-watering sums that tech giants are pouring into AI infrastructure today.

That is coming up in just a moment. But first up, we've been reporting on how corporate Bitcoin buying has been picking up again as more companies move crypto back onto their balance sheets. Strategy is leading that charge. The company recently added another $ 21 million of Bitcoin. giving it a total holding of $ 70 billion in Bitcoin. That's about 4% of total supply.

Strategy CEO Michael Saylor now says that Bitcoin will climb back above $ 100, 000, arguing that the AI spend is actually pushing investors instead towards scarce assets, like Bitcoin, that robots can't replicate. We caught up with him earlier this week, not on Bloomberg Businessweek, but rather on another program that Carol and I hosted, Bloomberg Crypto, We absolutely love the chat.

It began with Michael Saylor's upbeat outlook for Bitcoin.

Well, we think we're at the beginning of a bull market. We normally look at where Bitcoin is versus 200-week moving average, and we bounced slightly below it. Now we're moving up 25% premium. So the headwinds were restrictive trade policy, restrictive foreign policy, restrictive currency or monetary policy. And now we're rotating into some tailwinds. We've got a very favorable regulatory environment. We've got banking adoption accelerating. We've got tokenized securities and the digital asset space accelerating. We've got the formation and the strengthening of digital credit networks and, of course, banking credit coming online. And all these things are very auspicious for the asset.

Having said that, I feel like, Michael, everyone is competing for capital against AI. So much money flowing into it. We see it just kind of squeezing out investments elsewhere. How long do you think that continues? And what kind of an impact are you guys feeling in the crypto space as a result?

Well, you can see that AI is going to demonetize a lot of equities that are based upon labor and talent. And so there's a lot of risk in the AI trade, especially across equities, either equities that are attempting to create the next magic product and they might miss, or equities that are based upon tens of thousands of humans and they're getting demonetized and degraded. On the other hand, there's going to be a rotation into scarce desirable capital, whether that's Palm Beach real estate or gold or digital gold in the form of Bitcoin or some trophy asset. Capital investors are going to look for things that the robots can't make more of. And certainly the king of commodities right now is Bitcoin because it's digital capital.

So why haven't we seen that yet? Because the narrative that you're explaining right now, we've seen it Let's say with the SaaS-pocalypse, and we've seen concerns about software companies, Michael, when it comes to the AI trade. If the thesis that you espouse comes true and that people will look for stuff with scarcity, why hasn't it materialized with Bitcoin yet?

Well, if we look at the Bitcoin standard error, which started when we bought our first Bitcoin in August of 2020, Bitcoin is up approximately 38% a year every year. MSTR, the digital equity that our company represents, is up 52% or 53% every year. The only stock you know of that's outperforming that is NVIDIA. Every other MAG7 stock and all the other major S & P stocks are underperforming that.

Bitcoin is outperforming gold. Gold is outperforming the S & P index. And ultimately, if you look at the entire complex, digital capital is the strongest performing capital and digital credit like STRC is paying double to triple other conventional credit instruments. And the digital equities like MSTR or Strive ASST, they're outperforming most, you know, 98% of the other publicly traded stocks.

So I am curious, though, Michael, you know, the debate that's been out there that crypto overall Bitcoin, it's a safe haven or it's a growth asset. So how should investors be clarifying it or considering it?

Bitcoin is a block of digital capital. And so it's about a 40 vol, 40 ARR asset. You can carve that block of capital and step it down into digital credit. So you can create something with a volatility less than 10 that pays a 10% dividend as a return of capital. Or you can amplify it and step it up and you can create an equity like MSTR, which is an 80 vol asset. And when you feed the high vol equities in the derivatives market, you get extremely valuable options.

So think of Bitcoin as just raw financial energy. Look, there's more volatility in gold. Gold was showing a vol of 25, whereas the S & P is 10 to 15. And so if you're a vol trader, if you're a derivative trader, you want to feed high volatility into the derivatives. If you're an equity investor, you want either amplified Bitcoin or Bitcoin. If Bitcoin is up 40 percent, how do I get 50 or 60 percent? And the way you do that is you amplify the equity by using credit investment.

in order to drive increase in Bitcoin per share. So there's something for every type of investor here, depending upon whether you're a short-duration credit investor, a long-duration credit investor, a long-duration capital investor, or you're an equity investor. I think that most of the markets fixated on AI, they understand digital intelligence. But what I'd say there is those investments are expensive and risky and complicated. Most of the market doesn't understand digital capital, digital credit, and digital equity.

Those investments aren't that risky, and they're actually not that complicated. They're just contrarian, and people don't think this way. And so they have a hard time getting their heads around these new ideas.

Hey, so, okay, Michael, new ideas, I get it. So if there's something there for everything, why did you guys actually sell some Bitcoin back in June? It was just a handful. Bitcoin was trading at around $ 73, 000. It kind of broke with your longstanding idea of recommendations to never part with Bitcoin. So it was a tiny amount, but do you regret doing that? And why sell in the first place if you think that it kind of makes sense in multiple environments?

The way to think of our company is we're a structured finance company. So on any given day, we might buy Bitcoin or sell Bitcoin. We might buy dollars or sell dollars. We might buy equity or sell equity. We could sell MSTR or buy it back. We might buy credit, STRC. We might sell it. To the extent that we can swap equity for capital, capital for cash, cash for for our securities or back for credit, then we can arbitrage any opportunity in the equity, credit, or capital markets to the benefit of our shareholders. If we were to take the position that we will never sell the equity or we will never sell the capital or we will never sell the credit, we actually degrade the value of the company.

So it's important for us to be able to trade any asset pair in any direction, anytime, And what we established this summer is the ability for the company to buy and sell the credit, buy and sell the equity and buy and sell the Bitcoin. And that was a big unlock for all of our investors and every asset class.

Well, it was it was you might call it unlock, but it spooked the crypto or it spooked the crypto market and specifically spooked Bitcoin. And you saw Bitcoin move lower as a result of that because they they saw Michael Saylor of strategy move. sell something that he said people should hold on to forever. Was that a mistake?

We were inoculating the market. And the first move of 32 Bitcoin, people overreacted to. But then later on, we were able to sell thousands of Bitcoin without the market reacting to it at all. In fact, later on, we sold thousands of Bitcoin and the market traded up So the important thing is that when you do something for the first time, sometimes you get a cramp, but you have to condition all of your investors and the market in general that you're going to buy and sell depending upon what's in the best interest of the shareholders. if you're going to run the company and do the right thing for Bitcoin and the right thing for the credit investors and the right thing for the equity investors. It's

just growing pains and we're growing up.

So then are you conditioning the market and investors for selling more Bitcoin in the next few months?

Yes.

As a general rule, we're an acquirer, so we have acquired quite a bit of Bitcoin. I think we've acquired more Bitcoin than any company in the world this year. And you should expect that we will increase our Bitcoin holdings over time. We're moving into a bull market, so I would expect we'll probably be acquiring Bitcoin and we will be issuing credit into the bull market. In a bear market, you would actually use dollars to pay the credit dividend or you might raise dollars with Bitcoin. But it depends upon the market cycle.

You've said twice during this conversation that we're in a bull market when it comes to Bitcoin right now. How high in this cycle do you see it going?

Yeah, I think that it should definitely move back into the six figures, back beyond $ 100, 000. And our long-term forecast is Bitcoin grows 20% to 30% a year over the next 20 years. So clearly the last 12 months have been a contraction. I think we hit the bottom around slightly below $ 60, 000. I think we bounced off it. Now we're moving up into the 80s. I think we'll continue to march forward from here.

100,000 by when, Michael?

I'm not a short-term trader. We make plans, you know, in centuries. But you understand this market.

You've seen the ups and downs. I mean, and you've got conviction behind this number. I'm just curious, by the end of the year, by the middle of next year?

You know, what I would say is if you need your money in the next three months, you should probably have it in a money market fund. If you want to make a decent return in the crypto economy and you need the money in three months to four years, you should buy the digital credit like STRC. If you don't need money for the next four years and you're a capital investor, you want to minimize your counterparty risk, you ought to buy Bitcoin and you ought to expect to get like a 20% to 30% ARR on that.

And then if you're an equity investor and you want to outperform that, you should buy the digital equity of a company like MSTR or Strive. And you can expect to outperform Bitcoin because we're able to amplify our Bitcoin per share with our digital credit.

Michael, if I may just go back to something you said, maybe because it's flu season. You said inoculating, you know, introducing when you guys sold some this idea of inoculating the market. So introducing an idea is the idea that crypto is going to be something you're buying and selling, like I've been hearing, and that you no longer hold to that idea that you kind of hold it forever.

The idea is the company has something in excess of $ 70 billion of Bitcoin in any given day, and that's what backs the credit. So if the company is going to back billions of dollars of digital credit and pay billions of dollars of dividends in the future, then it's important to be able to monetize our primary asset when and if we need to. We can do that by selling derivatives like MSTR. We can also sell Bitcoin derivatives, but we can also sell the Bitcoin, and there are times when we would sell any of those in order to raise US dollars, in order to back the credit.

That's the big idea.

I think it's fair to say that that strategy is the original accumulator. It's the company that invented the digital asset treasury model. Since then, though, many other DATs have emerged. ETFs too, there are a lot of ways to own Bitcoin. Why in your view is strategy still the best way?

If you go online and you try to buy credit right now, you're getting 4% or 3.5% from a money market. You're getting 8% or 9% from private credit. It's illiquid. We're able to create credit that pays 10% to 12% as a return of capital, which means you defer the tax on it. It's the highest effective yield, and it's the highest performing credit in the world, and that is a $ 300 trillion asset class. The reason that you want to buy a company like Strategy is we are able to create credit, billions and billions of dollars of it.

If we sell $ 10 billion of digital credit next year, then our hurdle rate's about 10%, which means that if Bitcoin performs more than 10%, we just made $ 10 billion in net income. If Bitcoin appreciates 20%, we made $ 20 billion. So the company is a money machine. And of course, Bitcoin's been appreciating 38% a year for the past six years.

So we think that Bitcoin will exceed our hurdle rate. We think that our credit sales generate pure cash flow. We think we've got the best product in the world, which is credit. I mean, who doesn't want a bank account that pays 10% that doesn't get taxed? I mean, everybody wants that. So we have the best product in the world. And the only way to create that product, which is high performance credit, is to have the highest performance capital, which is Bitcoin. And we're holding the largest volume of capital in the world. That gives us a massive advantage in the financial markets.

Hey, we want to switch gears a little bit, Michael, and talk about what we expect to hear from MSCI on Friday. It's considering rules that could exclude you all from its global equity indices. What kind of decision do you expect and how important is it to you?

You know, it's not that important to us. It's a fairly de minimis amount of capital that they control. We think their position so far has been disappointing because they're imposing prejudicial values on digital assets and deciding that, you know, oil or natural gas or land or machinery is capital, but Bitcoin is not capital. is a value judgment and they're acting like an unregistered financial advisor. I think it's a bad precedent for them and for the industry and I hope they reconsider it. But having said all that, digital assets are smarter, faster, stronger. They are the future.

MSCI may not want to share in that future, but I think the investors will disagree. And of course, the nation disagrees.

Do you expect to be excluded?

I don't have any particular expectation right now.

But would you be happy if you were included?

I think it would be good for them and good for the industry if they if they drop their initiative. But, you know, that's above my pay grade.

At issue, though.

Is the question of whether you or not you are a quote, operating business, rather than engaged in accumulating assets.

Where do you view strategy is? Are you an operating business? It's a silly notion because insurance companies and banks have assets and they're operating businesses. If MSCI decided that insurance company financial assets were non-operating or the bank's assets were non-operating, then they would exclude every insurance company, every bank, and have the oil and gas businesses from the index.

But insurance companies, to be fair, provide a service other than. Accumulating assets in the case of making a payout. They provide a service to customers.

Yeah, the product of the insurance company is the insurance policy. And the product of the bank is banks buy credit. Our product is digital credit. So we sell a product. It pays 10% to 12% dividend yield. The insurance company It sells you an insurance policy or an annuity, right? So all of these are finance companies. They're selling financial products.

They're operating companies. They're in the index. So the thing that many people miss is that digital credit is the product, and you need an operating business that's actively managing its capital to create a product. Nobody doubts that J.P. Morgan is an operating company and they do stuff. Nobody doubts that AIG is an operating company. They do stuff. Nobody doubts any finance company as an operating company. You have to do things with the capital. We're not a holding company.

We're doing things with the capital, right? You just went into detail about how people were having an apoplectic fit about us doing things with 32 Bitcoin. The thing that we were doing was backing the credit. The credit is the product, and we've found a way to create the world's best credit and do it with the world's best capital.

So we are an operating company. That's not really a debate in the accounting profession. The accountants agree. The SEC filings agree. Under SEC law, that's very, very clear. MSCI is out on their own on this one. I don't know why, but again, not my decision.

Hey, we do want to get your view on the regulatory backdrop. What do you make of it following the Senate's failure to advance the Clarity Act? It certainly got a lot of coverage here at Bloomberg. Also, the recent rulemaking efforts from both the SEC and the CFTC.

Yeah, so we have very pro-digital assets regulators. Within a week of clarity stalling, we got positive guidance from Treasury, from the CFTC, and from the SEC. The CFTC gave very good guidance for crypto derivatives. The SEC gave good guidance for tokenizing securities. Treasury gave good guidance for digital currencies.

The Clarity Act had 600 pages of restrictions in it. And so while it would de facto or de jure legitimize the industry, it did it with 600 pages of restrictions. When Clarity stalled, the restrictions went away and the guidance that came out is actually much better for the industry.

So.

The reason the industry is rallying and the reason Bitcoin is rallying is because Bitcoin doesn't need the law. And the rules coming out of the administration are actually progressive, pro-digital assets. And I think that they'll catalyze a wave of growth in the industry. And I think clarity stalling was the best thing that could have happened to our industry.

Wow.

That's surprising to hear from you. I don't know if a lot of people necessarily think that. Just in the last 30 seconds that we have with you, Michael... Is there a risk that all of this changes after the midterms or even in a new administration in just a couple of years?

Look, the key to durability is to create a magic product. So if you sell a billion robots that everybody loves and a billion cars that drive themselves, and if you give everybody a bank account that pays 10% instead of 4%, or you give them digital assets that empower them and delight them, then you'll pry those magic products from people's cold dead fingers. So the key is give 100 million people a product they want. It doesn't matter who gets elected in 2028. They're not taking away people's Teslas or Starlinks or Uber or iPhones or AI because people love it and they see the value in it. So the key is product excellence.

Our thanks to Michael Saylor, CEO of Strategy. We spoke to him on Bloomberg Crypto, which you can catch on Bloomberg Television every Tuesday at 12 p.m.

Wall Street time.

You're listening to the Bloomberg Businessweek Daily Podcast. Catch us live weekday afternoons from 2 to 5 p.m.

Eastern.

Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube.

Now, while on the subject of crypto, a lot of that compute that was originally set up to mine crypto... has been repurposed into AI data centers. And as history teaches us anything, it isn't unprecedented. In fact, we've been here before. For now, for a moment back in time, we do travel back to 1873 and discover how the 19th century railroad frenzy and massive debt bubble created the first Great Depression and what those lessons teach us about navigating the AI-dominated markets of 2026.

We do that with Liaquat Ahmed. He's the Pulitzer Prize winning author of Lords of Finance, The Bankers Who Broke the World, about what led up to the Great Depression. His latest book out earlier this year is 1873, The Rothschilds, The First Great Depression and the Making of the Modern World.

It was actually the first global financial crisis and covered both Europe, the US, and in fact, across the world. I started it five years ago, so I had no idea that we were going to be talking about AI and the boom in AI infrastructure.

Well, let's get to that part because you mentioned it. I mean, I couldn't help but, as I was reading the book, to compare what's happening with the AI investment boom right now, the financing of it. Every time I.

Read something about the frenzy.

around railroads and railroad financing, not just in the United States, but really throughout the world.

What are the parallels there?

Well, many parallels. So start out with there's a new technology, the railroads. It gets people very excited. It's a technology that requires a gigantic amount of capital. So in the U.S., 5% of GDP is was devoted to railroad construction, which in today's terms would be $ 1. 5 trillion, so comparable to the amount of money that's going into data centers and AI infrastructure.

What was also true then and is beginning to be true now is most of it was debt financed. The equity market was tiny.

Mm-hmm.

And 80% of the money that went into railroads was financed through the bond market.

And I feel like, you know, we just take the bond market for granted today. It wasn't, I mean, it was the creation, really, in many ways, of the bond market that we exist in today.

Yes. I mean, it was actually the main financial market. Yeah. In the U.S., the bond market was $ 3 to $ 4 billion. Equities were less than a billion. So it was dominated by the bond market. I suppose the other parallel, I mean, I can come to all the many parallels, but so the first was you get this construction boom in railroads.

Like lots of booms, there's overinvestment. So there's too much money going into the railroads. As a consequence, the profitability of the railroads starts eroding. So by 1872, only one in five railroads was paying a dividend. So sort of watch out for this AI boom when profitability starts declining.

Should we be watching out right now? I mean, you write about bubbles in the story. In the book, you write, quote, It does not actually take enormous prescience to spot when a market has entered bubble territory. What is difficult is predicting when exactly it will burst. Are we in an AI bubble right now?

Yes, but getting the timing right of when it's going to burst is the giant challenge. Previous infrastructure booms have taken anywhere from two to four years to play themselves out. So I don't know. We're two years into this one. It could go on for another two years. So some of them have only lasted two years. Some of them have lasted as long as four years.

Do they all end badly?

The major ones all end badly.

And this would be a major one?

Yes. And there's a sort of pattern to the way they play out. The first thing is you start getting the erosion of profitability.

Like negative cash flow?

Yes. Just for example.

Sorry, keep going.

The second is the amount of money that goes into it during the boom is so large that it begins to cause interest rates. To spike up. So that happened in the 1870s. It happened again in the 1880s. It happened again in the 1920s and the lead up to the Great Depression. It happened again in 1999, 2000. And it also happened in the lead up to the real estate bubble in 2008. There's a pattern. It causes interest rates will spike up. And that has all sorts of repercussions throughout the economy.

What would, in this environment, cause interest rates to spike?

Well, they already have done.

Like a war and higher energy prices.

And lots of debt?

Do you consider this a spike that's worthy of something ahead of some sort of unwind?

Real interest rates have gone up by 150 basis points in the last 12 months. And the other thing to remember is this is not just in the U.S., This is a global phenomenon. And everyone's trying to get their hands on as much capital as they can. And at a time when governments are borrowing an enormous amount. That's the thing.

It's multiple layers, right? You have governments with a lot of debt. You have a lot of debt being created because of the AI bill. you have energy infrastructure, which is related to AI, but again, that's another bit. There's just a lot of layers, and that's when it gets a little bit more complicated, and for policymakers, be it monetary policymakers or government, to kind of figure out what is the right policy.

Yeah, I mean, the other thing that typically happens in these booms is inflation starts going up. So in addition to... interest rates going up because of inflation, real interest rates also start going up. And essentially, everyone's competing for the same territory, so there's crowding out not only in the financial markets, but everyone's competing for workers.

Right, or capital.

Everyone's competing for construction spaces. And we're seeing some of that go on today.

We're going to get to more on the parallels between 1873 and the events leading up to 1873 and today. But I want to go back to the invention of the government bond market, because the subhead of this book is The Rothschilds, The First Great Depression, and the Making of the Modern World. You write about how the Rothschilds family invented this government funding mechanism. What's the history of that?

Well, they started out in the Napoleonic Wars as smugglers. So they helped the British government evade the Napoleonic blockade.

This is Nathaniel.

This is Nathaniel, yes. There are a lot of Rothschilds. Oh, yeah. They're hard to keep track of. He was actually the third son of the founders. He was a founder, five brothers. And he was the most enterprising of all of the sons. And his father had made a lot of money because he was in charge of the Landgrave of Hesse. This is money. And Hessian soldiers were... The British Army employed Hessian soldiers during the American War of Independence. So the father accumulates all this sterling, and he sends Nathaniel to Britain to invest it. And he says, go into the textile business. And Nathaniel's much too enterprising for that. So he moves to London, and he figures out there's a great opportunity in the smuggling business. And so starts... supervises

helping the British avoid the blockade. And he has four other brothers who then spread across Europe, and they create a network of smugglers, essentially. And so by the end of the Napoleonic Wars, they're one of the richer families in Europe. Not the richest yet, but they were one of the richest. And then they go into taking this money and using it to finance, help governments finance the reconstruction after the Napoleonic Wars. Don't forget, the Napoleonic Wars lasted a whole generation. Europe was in terrible shape. And they became the primary financiers for governments from about 1820 until 1850. And that puts them in a league with the royal families of Europe. And they're treated as princes.

Unlike the others, they're Jewish. But they're the first and richest Jewish family in the world. By 1850... They are the richest family in the world. By 1873, if you translated it in today's terms, they would be worth the equivalent of $ 250 billion. Now, you know, in a world of, you know, Musk, that's still small. $ 250 billion. It was still a lot of money in terms of their presence in this world.

You know, I guess what's interesting, too, is in terms of bonds, like now you are reaching out to everyday people to help finance things, which wasn't the way it used to be. And that's a big change.

Yeah. Well, the Rothschilds really catered to very high net worth individuals. They actually catered to the high end of the market. The person who democratized... the bond market.

Mr.

Cook?

Yes.

Jay Cook.

Jay Cook. And the interesting thing about the Rothschilds is they became the richest family in the world despite avoiding the U.S.

Why did they avoid the U.S.? I mean, there's a great sort of like emissary agent who comes to the U.S., and you write about him and his son as well.

Yeah, Belmont.

Belmont, and Belmont Stakes, I believe, is the reason why it's called that. He was very into horse racing. Why did they avoid the United States?

Because they lost a lot of money in the 1840s during the canal boom. And the canal boom was primarily driven by the states, the states in the U.S., And so when that went belly up, the Rothschilds, Nathan and his brothers, decided to try and retrieve this money. And they discovered you couldn't sue states in the United States because they had sovereign immunity. So they thought, this is crazy.

I mean, this is sort of a. A banana republic sort of situation. So they dismissed the US as a banana republic. And they said, we want nothing to do with the United States. And much to their regret, because the United States became the big economic power during the 19th century. But they did pretty well.

So I don't think they.

I just want to reintroduce Liaquat Ahmed. He's the author of 1873, The Rothschilds, The First Great Depression, and The Making of the Modern World. He joins us here in the Bloomberg Interactive Brokers Studio.

I want to mention, because we asked viewers and listeners to send in questions, and we do have a loyal viewer and listener, Brendan from Maryland. He asked for you, they say that history doesn't repeat, but it rhymes. Yes. And human nature is what it is. The great financial crisis was also a debt crisis. Why aren't we learning from all of this? We know it will lead to misery.

Does greed drive everything here or will AI truly and genuinely deliver on its promises? And we have conversations and we get so much pushback, even when we raise the idea of the circular financing where NVIDIA is working with this company and they're buying the chips and that that's a good thing, that that's them kind of supporting and helping out those companies that maybe aren't as established, if you will. So I don't know. Do we not learn? Oh, no.

We learn. The problem is you can't repeal human nature. So circular financing. What is circular financing? It's essentially a hidden form of borrowing. So it's leverage. And the thing we've learned... in crisis after crisis, is the thing that kills you is when you borrow a lot of money in a boom. Because when it turns around, that thing just bites you on the way down. So circular financing, we all know what it is, and it's great on the way up. And it's terrible on the way down.

You know, there's a part in your book where you talk about kind of the corruption that came into with the railroad build out. And you say the best documented examples of such schemes were the two deployed by the transcontinental railroad companies. Union Pacific subcontracted the construction of its line to a dummy corporation, the exotically named Credit Mobilier?

Mobilier, yes.

Thank you. Owned by directors and officers of Union Pacific. The majority stake was held by a consortium led by Massachusetts Congressman Oaks Ames, a millionaire who had made his fortune in the shovel business during the California gold rush. It keeps going on and on. And one of the things, like Amazon doing a special purpose vehicle, I'm not saying there's anything sketchy. Companies do this all the time. But when it starts to get interesting and complicated and Layers below.

Like maybe off-balance sheet stuff?

Or off-balance sheet. Are we smart to ask questions or start to make some assumptions?

I would draw a distinction between off-balance sheet and hidden borrowing.

Okay.

And pure corruption.

Okay. Fair.

If you remember during the dot-com bubble, there were all sorts of conflicts of interest. I mean, I'm forgetting the names of the people.

Well, and the telecom build-out during that, right?

Yes, exactly.

WorldCom and.

Exactly. And those people were... That was real corruption. I mean, they were breaking the law. And we got a whole revamp of securities laws after the dot-com bubble.

But nobody's breaking the law here.

No one's breaking the law today, although we actually don't know. We'll find out at some point. whether, you know, whether anyone's been breaking the law. But certainly in the 1870s they only found out in 1872 when this whole scheme where essentially the sponsors of the railroads were ripping off their own shareholders and because they had created this dummy corporation, and they were overcharging the railroads to build the... And the U.S. Transcontinental Railroad cost about $ 70 to $ 80 million.

A third of that was siphoned off in the form of excess profits.

You write about The railroads, so many of the railroads going bust during the crisis. What ended up happening to that infrastructure that had been placed? And one thing that was just fascinating in here was the land grant that the U.S. government had done and how these companies were able to amass so much land thanks to the U.S.

Government. Yeah, yeah. You know, that was actually a pretty well-thought-out scheme for essentially subsidizing the construction of railroads and providing for a subsidy to settlers. Because the railroads made no sense. The Transcontinental Railroad would have made no sense if there weren't people who were settling. So it was a double subsidy. It went to the railroads, but it allowed them, some of the land was reserved for people to move out and settle in that area. So it was actually a reasonably well-thought-out scheme. The problem was, after the corruption scandals, in 1872, after this giant construction scandal, Congress said, no more land grants. And Jay Cook and company had then gotten into, after the Civil War, he

had decided, He wanted to finance the second transcontinental railroad. And unfortunately, he got into the business just when Congress closed down the spigot of money that was coming his way, which was one of the reasons he got himself into so much trouble.

What I want to ask you, you know, great financial crisis, a lot of things changed, I think, in terms of bank oversight or what they had to make sure that they, you know, didn't get into the predicament and whether it was how much money they had to keep, you know, on their balance sheet and to kind of protect reserves and so on and so forth. I wonder, do you believe we have the right market safeguards in place? And, you know, and even when it is with the circular financing, are we doing the due diligence that we need to be doing to understand these relationships and the risks and vulnerabilities or the leverage.

Okay, so after the 1870s, there was actually not much reform. The real time when we had reform was after the 1929 crash. Do we have enough safeguards? Look, we have journalists and everyone's pouring over these companies. So I don't think there's a giant amount of information that we're not getting. So I think it's quite... We know what NVIDIA is doing.

And people like you publicize all of this. So I don't think that is going to be the problem. I think the problem is going to be that... we can't predict everything. So in 1873, you know, we have this boom. We then have war breakout in Europe, which causes a giant financial problem for anyone trying to raise money in Europe.

And Jay Cook and company wanted to raise money in Europe, and the European capital markets closed down. So you can't You can't predict the sort of geopolitical events that could sort of change the landscape in a way that makes the whole system very vulnerable.

Which just makes us think about this year, you know, in terms of the geopolitical events and most notably right now what's going on in the Middle East.

Or the dot-com bubble. Yeah. You know, that burst at the beginning of 2000. Right. You know, it was bad. It was bad. But 9-11 is what really took the whole economy down. And that's what caused the, you know, that's what made the thing 10 times worse.

I think some people forget it took like more than a decade for the Nasdaq to recover. Right. And if you look at what the Nasdaq has done since, let's say, 2015, it's just Remarkable to sort of look at a 10-year period of time where after something that wasn't even like a major global financial crisis, it was still under pressure.

Well, you put your finger on something that we've never had in a financial crisis before. Until 2000, the size of the equity market was about, it got up to 110% of GDP. Today, the size of the U.S. equity market is $ 85 billion in a U.S. economy that's $ 33 billion. So it's about 200... A trillion. Yeah, sorry, 33 trillion.

Yeah.

So the U.S. equity market is 250% of GDP. Wow. And on top, in the last 12 months, a trillion dollars has come into the U.S. equity market from foreigners. So the combination of an over-bloated U.S. equity market, and there I'm counting private equities as well as, you know, so people often forget that, public equities is now only 75% of the story, and there's this giant overhang of, you know.

Which we've talked about for the last couple of years, the worries in those markets.

Well, SpaceX, I mean, who was counting on SpaceX and... anthropic and open AI.

Hang on for a second. We're going to come back with Liaquat Ahmed. We're talking about his book, 1873, The Rothschild, The First Great Depression and the Making of the Modern World. We're not done. We want to get a little bit into geopolitics and impact on society. We're going to continue. We're back in a moment.

You're listening to the Bloomberg Businessweek Daily Podcast. Catch us live weekday afternoons from 2 to 5 p.m.

Eastern.

Listen on Apple CarPlay and Android Auto with the Bloomberg Business app.

Or watch us live on YouTube. I want to get right back to Liaquat Ahmed. He is the author. the Pulitzer Prize-winning author of Lords of Finance, The Bankers Who Broke the World.

Who writes their first book and gets a Pulitzer Prize?

Congratulations.

Especially after a 25-year investment career.

Very impressive.

Okay.

Well done, well done.

His new book, 1873, The Rothschilds, The First Great Depression, and the Making of the Modern World. I want to start with sort of the timing of crises and how this stuff percolates and then suddenly becomes a global issue.

You know, one of the most... one of the most quoted lines from Hemingway, The Sun Also Rises, was one character asked the other, how did you go bankrupt? And the response was, two ways, slowly, gradually, and then suddenly. And that's actually a perfect description for the way financial crises work, that they take much longer to happen than you thought they would. And everyone's talking about things being overdone, and still the thing keeps going, and still the band keeps playing. And then suddenly, and it all takes place in the space of a few months. So that was the story in 1873. For two years, everyone had been saying, this thing cannot continue. And they were wrong all the way.

And then suddenly they were right.

Wait, was Karl Marx finally right?

You know, a stop clock.

Is right.

Because you write in the book, you know, he'd been calling for a crisis for decades and then he finally hit it.

Yeah, I was actually, I developed a lot of affection for Karl Marx.

Would AI, if this indeed does become a crisis, and the boom goes bust, is it a global crisis? Because is the exposure the same in the U.S. versus China versus Europe?

Well, I think there are two aspects to these crises. One is the boom-bust cycle.

Mm-hmm.

And boom-bust cycles are terrible, and they cause a lot of disruption, but they don't actually lead to a massive financial crisis, or don't necessarily. The economy is surprisingly resilient. What really converts a boom-bust cycle into a crisis is a mistake in monetary policy. You know, that's what happened in 1873, and I can talk about that. That's what happened in 1929 when they let the banks go under.

That didn't happen in 2008.

You know, we only have a few minutes left with you, and I promised that we'd talk about some of the social elements of the book. There's an entire chapter in here toward the end of the book. It's entitled, in quotes, The Jews Themselves Are to Blame. And I want to talk a little bit about the anti-Semitism and the rise of anti-Semitism in Europe, and we all know what happened you know, in the 1930s in Germany, but how the seeds of that were planted post-1873.

So financial crises are great breeding grounds for conspiracy theories because a lot of people get hurt and then they're looking for someone to blame. And in most financial crises, in the lead-up, Everyone starts blaming the bankers. And in Europe, what made it worse was after the crisis, bankers did well.

So they did well on the way up, and then they did well on the way down. And so in Germany, they all pointed the finger at Jewish stockbrokers. You know, totally unfairly. But it's not a coincidence that the word anti-Semitism was coined in 1879 by one of these rabble-rousing journalists who decided to stir up hatred against the Jews.

And he used the word anti-Semitism... as a word of approbation, i.e., this was a good thing, that suddenly the West had woken up to this problem in our midst, which was undermining Western culture, and it was the Jews who caused it all. And we know where that eventually led.

We only have about two minutes left, and I just wonder about the rise of populism that we've seen globally. Is that a response to the great financial crisis where people were really hurt in their livelihoods, generations, kids who grew up in it? Is that the result in what we're seeing, kind of political pensions?

We keep on getting it because, as I said, bankers were thought to have caused it, but then they did well in the aftermath. If you go back to 2008, who was bailed out? The bankers. Who was not bailed out?

The homeowners.

Homeowners. And, you know, you talk to treasury officials and they spent hours trying to figure out how can we bail out homeowners because there's too many of them and how, you know, do we bail out everyone? But it created enormous resentment And it created resentment both from the right wing, remember the Tea Party, and the left wing, so Bernie Sanders and Occupy Wall Street. And so you get this unholy coalition of both the right and the left saying this system does not work. And that's sort of... Here we are.

We only have 30 seconds left. If there's one lesson for our investing audience from 1873, what is it?

I think the lesson sort of reveals itself, which is don't get caught up in the heat of the moment. Think for yourself.

Be Walter Badgett.

I love that. Liaquat, thank you so much. All this time. We so, so appreciate it. Liaquat Ahmed, the book is 1873, The Rothschild, The First Great Depression and the Making of the Modern World. So appreciate it.

I really appreciate it as well.

Thank you.

Really fun for us.

Hey, we're looking forward to your next book too.

I know this one only took five years.

Five years we'll give you and then we'll come back to you.

Do come back before then.

We appreciate it. Once again, Liaquat Ahmed, author of 1873.

The book is out now.

This is the Bloomberg Businessweek Daily Podcast. Available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

Bloomberg Businessweek Weekend - October 16th, 2026

Kapitelklicken springt direkt hin

Shownotes

Transkriptvom Podcast bereitgestellt · Zeitmarken springen hin