Slate Money – "Shutdown" (September 11, 2021)

Host: Felix Salmon (A), Emily Peck (B),
Featured Guest: Adam Tooze, economic historian and author of Shutdown: How Covid Shook the World’s Economy (C)

Episode Overview

This special episode of Slate Money centers around Adam Tooze’s new book, Shutdown, a sweeping analysis of the worldwide economic impact of the COVID-19 pandemic. Tooze joins Felix Salmon and Emily Peck to break down how close the global financial system came to disaster in March 2020, the unprecedented actions of the Federal Reserve and central banks, China’s distinct pandemic trajectory, and the looming humanitarian catastrophe in Afghanistan. The discussion is rich with historical perspective, sharp economic insights, and a candid exploration of what “winning” and “losing” meant for nations in 2020.

Main Themes and Discussion Points

1. Adam Tooze's Book: Shutdown

• Introduction to the Book
  Shutdown: How Covid Shook the World’s Economy is described as "the definitive pandemic book before the pandemic is even over" (A, 02:07). Tooze’s core thesis is about the surprising realization that societies can—and did—afford the extraordinary spending required in crisis.

  “What we have learned is that whatever we can actually do, we can afford to pay for. And that, I think, is the central message.” — Adam Tooze (C, 02:21)

• The book is positioned as a follow-on from debates post-2008 and conversations with the Modern Monetary Theory (MMT) group.

The "Keynesian Rift"

• Tooze frames the moment as a “Keynesian Rift,” expanding macroeconomic policy to levels previously unthinkable, not just in the US but globally (C, 02:21).

2. The Treasury Market Crisis of March 2020

• How Close the World Came to Financial Meltdown

  • The episode vividly revisits March 2020, when the US Treasury market—the world’s deepest and most liquid—“almost broke in two” (A, 08:28).

  • Extraordinary Fed intervention:

    “They were buying a million dollars a second in the last week of March. ... They bought 5% of the US Treasury market in a matter of weeks.” — Adam Tooze (C, 09:23)

  • The entire financial system, portfolios, and asset allocation strategies depended on the liquidity of Treasuries. If that failed, the world was staring at a “death spiral”: forced sales, cascading into equities and corporate bonds (C, 17:09).

  • Memorable Analogy

    “If you can’t stabilize [the Treasury] market...your entire portfolio is illiquid, and that's not a sustainable position. So then you need to shrink the entire portfolio really dramatically. In other words, we would have seen spiraling fire sales.” — Adam Tooze (C, 17:09)

  • The Fed didn’t just rescue America, but global finance—liquidity for emerging markets depended on strong US dollar and Treasury markets (C, 13:11).

Timestamps for Key Segments:

• [02:21] – Tooze's main thesis: Keynesian Rift.
• [05:15] – The near-breakdown of the Treasury market.
• [09:23] – Fed’s emergency actions by the numbers.

3. The International Perspective & China’s Ascendancy

• China’s Response & "Winning" the Pandemic
  • Tooze and the hosts discuss how, despite initial missteps, China emerged from 2020 having maintained social stability and economic growth—in sharp contrast to Western dysfunction (C, 21:23).

    “It’s as though in the first half of the game, China shipped two goals and then in the second half...the opposing team came out, ran down to its own goal, and spent the next half firing the ball into its own net.” — Adam Tooze (C, 21:23)

  • The episode highlights how effective social control, lockdowns, and the central party’s authority led to China’s rapid recovery, while the West faltered with internal division and inconsistent policy.
• US-China Geopolitical Tensions

  • The pandemic crystallized a shift from counterinsurgency (Afghanistan) to peer-to-peer competition, especially in technology and industrial policy (C, 24:44).

    “We are now in a much tougher, much more aggressive, winner-takes-all strategic competition.” — Adam Tooze (C, 23:23)

  • [21:23–24:44] – China “wins” the pandemic, US/Europe lose coherence.

  • [24:44–27:38] – Rise of US-China economic “war.”

4. US Societal and Economic Fracture: “The Fed with Nukes”

• The US is described as a country where financial rescues are smooth and swift, but “social rescue” is chaotic and adversarial, reflecting deep social divides (C, 26:51–31:16).

  “We used to say about post-Soviet Russia it was a gas station with nukes. ...The United States is like a Federal Reserve with nukes and a frankly non-existent welfare system." — Adam Tooze (C, 29:15)

• Massive asset gains for the top half, but “the bottom 50–100 million” suffered social and educational crises, with little structural support (C, 27:38–29:15).

• Delayed, temporary, and brittle social safety nets compared to the immediate financial market responses (C, 31:16).

  • [27:38–32:06] – Discussion of US wealth, social safety nets, and disparities.

5. Afghanistan: Humanitarian and Financial Crisis

• The Looming "Sudden Stop"
  • Tooze draws parallels between the “financial heart attack” averted in March 2020 and the “sudden stop” now facing Afghanistan following US withdrawal (C, 33:59).
  • Afghan cities are described as fueled by modern imports, totally dependent on foreign currency and aid—now cut off, risking mass urban destitution and famine.

    “It’s more like cutting off the oxygen to a kid in intensive care.” — Adam Tooze (C, 39:37)

• Sanctions and International Aid

  • Adam argues that sanctioned financial flows are pushing Afghanistan “in the direction of demodernization,” matching what the Taliban wants (C, 39:19).

  • Only multilateral, non-US humanitarian aid offers any hope for staving off mass crisis (C, 38:18, 39:37).

  • [33:59–41:01] – Afghanistan’s economic implosion explained.

  • [41:01–44:00] – Discussion on what (little) Western spending actually accomplished in Afghanistan.

Notable Quotes & Memorable Moments

• On MMT and Government Spending:

  “We can afford anything we can actually do. So it's the actually doing that...has been revealed as the central issue.” — Adam Tooze (C, 04:12)

• On the Scale of Fed Intervention:

  “They were buying a million dollars a second...over $70 billion [in Treasuries] a day...They bought 5% of the Treasury market in a matter of weeks.” — Adam Tooze (C, 09:23)

• On the US Systemic Divide:

  “There are two realities and they coexist within this country...The United States is like a Federal Reserve with nukes and a frankly non existent national welfare system.” — Adam Tooze (C, 29:15)

• On Afghanistan:

  “It's more like cutting off the oxygen to a kid in intensive care. We've just had the baby, ...and we're basically saying in the incubator, we're turning off its food.” — Adam Tooze (C, 39:37)

• Dark Humor:

  “Better yet, just put it in GameStop.” — Felix Salmon (A, 32:06)

Numbers Round (44:02–46:00)

• Felix Salmon:
  $7.3 trillion — Total spent on private defense contractors since 9/11; Lockheed Martin’s share price up 10x in 20 years (A, 41:54).
• Emily Peck:
  $17,010 — Price of a Theranos lab coat on Poshmark, nod to the ongoing Elizabeth Holmes trial (B, 44:06).
• Adam Tooze:
  -0.008% — Negative yield on a Greek 5-year bond, underscoring how financial conditions have shifted since the eurocrisis (C, 45:22).

Timestamps for Key Segments

| Segment | Topic | Time | |---|---|---| | Book thesis & Keynesian Rift | 02:21 | | Treasury market crisis | 05:15–11:38 | | Fed's emergency actions | 09:23 | | China’s pandemic "win" | 21:23–24:44 | | US-China economic “war” | 24:44–27:38 | | US economic/social disparities | 27:38–32:06 | | Afghanistan crisis explained | 33:59–41:01 | | Numbers round & Theranos story | 44:02–45:22 |

Tone and Language

Throughout the episode, conversation is incisive, often wry, and plainly explanatory, with frequent analogies, vivid metaphors, and a candid acknowledgment of the limits and ironies in global financial and political systems.

Conclusion

The episode offers a compelling synthesis of the extraordinary economic interventions of 2020, the resilience and fragility of the global system, the new geopolitics of post-pandemic power, and the continued divides—both within and between nations. Through Adam Tooze's historical breadth and clarity, the Slate Money team provides both a record of a year of shocks and a primer on the challenges ahead.

Select Episode Quotes (by timestamp):

• “What we have learned is that whatever we can actually do, we can afford to pay for.” — Adam Tooze (02:21)
• “This was a nightmare scenario, death spiral…total meltdown.” — Adam Tooze (17:09)
• “It’s more like cutting off the oxygen to a kid in intensive care.” — Adam Tooze (39:37)
• “The United States is like a Federal Reserve with nukes and a frankly non existent national welfare system.” — Adam Tooze (29:15)