The Nobel Winners Who Almost Crashed the Economy
Summary
Hosts Jacob Goldstein and Robert Smith explore the rise and catastrophic fall of Long-Term Capital Management, a hedge fund founded by John Meriwether and Nobel laureates Myron Scholes and Robert Merton. The episode details how the firm’s reliance on complex mathematical models and extreme leverage initially generated massive profits during the 1990s. However, the 1998 Russian debt default triggered a global market panic that their models failed to predict, leading to billions in losses. The story concludes with the Federal Reserve orchestrating a bailout to prevent LTCM’s collapse from des…
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