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Against the Rules · November 4, 2025 · 48m

Lender of Last Resort

Emi Nakamura, Michael Lewis
Show Notes

Michael Lewis speaks with UC Berkeley economist Emi Nakamura to revisit the Federal Reserve's role in the 2008 financial crisis, the subject of his book The Big Short. Nakamura explains how the Fed acted as lender of last resort, buying bad debt to prevent a banking collapse, and offers a clear explanation of what gives currency its value. They also discuss why the Fed still holds physical gold in its vaults. The conversation is a lucid tour through monetary policy and crisis management.

This summary was generated from show notes and public descriptions, not from a full transcript review. Details may contain inaccuracies.

Canon

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The Fed as Lender of Last Resort
During the 2008 financial crisis, the Federal Reserve bought up bad debt from Wall Street banks and trading firms to stabilize the financial system.
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Curious

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Currency as a Collective Belief
Emi Nakamura explains that currency works because of collective trust — it has value only because everyone agrees that it does.
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Highlights

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Why the Fed Still Keeps Gold
Emi Nakamura explained why the Federal Reserve vaults still contain gold, even though the US dollar is no longer convertible to gold.
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References

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The Big Short — Michael Lewis (2010) — Referenced throughout the episode as the original book that depicted the Fed’s 2008 actions.
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