Formerly Free Money Now Getting Very Expensive PodCasts Archives - McAlvany Weekly Commentary

Companies weaned on easy credit now facing bankruptcy

Milton Friedman warned you can't fight inflation without loosing jobs

China facing credit crises, high yield debt at 24.9% yield



Formerly Free Money Now Getting Very Expensive

July 12, 2022



“During the worst of the pandemic, if you go back to the spread between high yield and Treasurys, it reached a thousand basis points. If you go back even further to the global financial crisis, it was 2000 basis points. That is a tough environment to survive. So, of course, bankruptcies proliferate as the spread to Treasurys passes a series of key thresholds. We’re not there yet, but there are good reasons to believe that we will be before too long. When we get to the Chinese numbers, I think you’ll fall out of your chair.” — David McAlvany



Kevin: Welcome to The McAlvany Weekly Commentary. I’m Kevin Orrick, along with David McAlvany. 



It’s funny, my family’s from Texas, the Panhandle of Texas, that’s where my dad grew up. I spent every summer there. I ended up going to school at North Texas for a while, but you know, I’ve never been to San Anton. I would love to go visit the Alamo and just, what is it called? The River Walk. You sent me pictures the other day. You and Miles were there in San Antonio. You went over to the Alamo. And just looking at that, I think back as to what a small place that building was, the Alamo, yet small places can change very, very large points in history. Can’t they?



David: For sure. We sat with a gentleman who was there to guide and answer questions. And I asked him, why are you here, of all the places that you could be, of all the things that you could be doing? And he gave me a short history of his great, great grandfather. Maybe it was great, great, great grandfather, I don’t remember. But it was basically the history of the Tejanos, and these were Mexicans in the north part of Mexico, and they weren’t getting the benefits of being a part of the nation, but they were expected to pay taxes and everything else. And so they were like, nope, this isn’t working for us. So they were in support of this revolution, right, that happens at the Alamo. They’re fighting at the Alamo against the Mexican government.



Kevin: So you, in a way, because you’ve talked often about how the financial leads to the economic, which leads to the political or the geopolitical, when it gets political, it starts to get bloody. That’s where the blood flows, right? It’s not the economic, but it can lead to that.



David: That’s right. Now, the tragedy was that after the Alamo, they were Mexicans and the Americans didn’t trust them. And the Mexicans didn’t trust them either. So they were at the losing end. At least this is the story that I was told while at the Alamo.



Kevin: Didn’t you get to the bar where— Okay. I don’t have a lot of first edition books, but I do have a first edition Rough Riders by Teddy Roosevelt written in the last couple of years of the 1800s.



David: The Menger Hotel is where he rallied— shots going off through the roof. You don’t want the room right above the bar. That’s for sure. Not in those days. But, yeah, Roosevelt rallies the Rough Riders at the Menger Hotel. And so to sit and have a beer sitting there where he was decades before was fun. 



One other really fun thing from the San Antonio trip was a Commentary listener approached me. We’re just at a breakfast spot meeting with a client of ours. And he says, “Are you are David McAlvany? I’ve been listening to the Commentary for years.” Anyways, it was really— It was a special moment for me. And I went around to say something to him later on, and he’d already left. Again, breakfast spots, people come and go pretty quick, but that was a highlight from San Antonio to run into a Commentary listener who’s been a part of this for years and years n...