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Jason returns after COVID. He says he caught it at a Billy Joel concert, was ill for an intense 48 hours and recovered after taking Paxlovid. The hosts then trade Olympics jokes before turning to the week's market sell-off.

Jason frames Monday's sell-off, with the Dow down 700 points and the Nasdaq down about 6%, as a reaction to Japan's central bank raising rates by 15 to 25 basis points after years near zero or below. His explainer: investors borrow yen at close to 0%, put the money into higher-yielding assets such as U.S. T-bills paying 5% or stocks like Nvidia, and keep the spread.

Chamath, who says he has never run such a trade, argues the spread is small, so the profit comes from leverage: doing it on $1 billion and levering it five or ten times, with collateral posted as margin. When it unwinds, he says, holders scramble to avoid being margined out and pressure spreads to other asset classes. He estimates positions of tens of billions, possibly $100 billion or more, resting on perhaps $5 billion to $10 billion of equity.

Chamath does not think the unwind is over. Citing Goldman Sachs observations, he says algorithmic funds sold about $41 billion of global equities during the turmoil and, if volatility stays low, would need to sell roughly another $160 billion, pulling hundreds of billions more from other holders. Jason adds that a margin call can force a lender to sell pledged shares programmatically.

There's no free money, basically.

Friedberg sets out the constraint: debt at 263% of GDP, about 1.3 quadrillion yen of public debt, and 5% of GDP spent each year on interest even at near-zero rates. He says the Bank of Japan holds 53% of government bonds, about 100% of GDP, so higher rates would be unsustainable. Aging compounds it: average age rose from 21 in 1950 to about 48, and 33% of government spending goes to social security, against about 20% of U.S. federal spending.

He treats debt as coming due through contraction, taxes or inflation, and says Japan is paying through inflation, which reached a 40-year high near 4% a year. Chamath cites Simon Kuznets's remark that there are four kinds of countries, developed, undeveloped, Japan and Argentina, and doubts Japan's price controls offer lessons for others.