E28: Current state of public & private markets, Archegos debacle, US debt issues, wealth tax & more

Evidence from 2022 shows that, as the 18–24‑month clocks on the huge 2020–2021 SPAC cohort started to run out (deadlines falling mostly in late 2022 and early 2023), the SPAC market experienced exactly the kind of stressed, distorted behavior Chamath described.

• Deadlines from the 2020–2021 boom created a wall of expiring SPACs by late 2022. An August 2022 analysis by SPACInsider/Institutional Investor noted that 141 SPACs had already been searching for a target for 18+ months and that by September this would jump to 256 – about 44% of all 576 SPACs still looking – mainly from the Q1 2021 boom. The report warned that many of these would likely be forced into liquidation as the 24‑month window and proposed SEC rules converged, explicitly tying the coming “reckoning” to approaching deadlines on the 2020–2021 SPACs.(institutionalinvestor.com) Similarly, a May 2022 Daily Upside piece highlighted roughly 280 “untethered” SPACs with transaction deadlines in Q1 2023, calling the situation a “ticking time bomb” and warning that, in their desperation to avoid forfeiting $5–10 million of sponsor capital, some SPACs could merge with weak companies just to beat the clock.(thedailyupside.com) This matches Chamath’s mechanism: deadlines on the COVID‑era SPAC wave driving abnormal behavior.

• Market dislocation and extreme investor behavior intensified into late 2022. A Russell Investments review, using SPAC Research data, shows SPAC liquidations jumping from 1 in Q1 2022 to 6 in Q2, 14 in Q3, and 117 in Q4 2022, a step‑function increase right as many 2020–2021 vehicles hit or neared their two‑year limits. The same source notes average redemption rates climbing above 90%, forcing sponsors either to rely on onerous PIPE/convertible financing or to liquidate and eat their upfront costs, with sponsor losses in 2022 alone well over $1 billion.(russellinvestments.com) Bloomberg/Carrier Management described the “Great SPAC Crash of 2022” and reported that for SPACs going to a vote in December 2022, an astonishing 96% of shareholders on average chose to redeem, with expectations that December would see as many liquidations as the prior five years combined – a dramatic market breakdown tied directly to this maturing cohort.(carriermanagement.com)

• “Crazy behavior” in dealmaking: cancellations, retrades, and heavy pressure on sponsors. Legal/market commentary from Wachtell Lipton documents that 2022 saw 65 de‑SPAC M&A deals withdrawn (vs. 18 in 2021), alongside a collapse in new SPAC IPOs and de‑SPAC activity, as high redemptions, regulatory pressure, and poor post‑merger performance made deals much harder to close and forced renegotiations or terminations.(clsbluesky.law.columbia.edu) Concrete examples include the Circle–Concord SPAC: Circle’s valuation was doubled from $4.5B to $9B in a renegotiated February 2022 deal, then the transaction was repeatedly delayed and finally terminated in December 2022; broader coverage noted that at least 56 SPAC tie‑ups were called off in 2022 and that dozens of SPACs were being liquidated with many more expected.(paymentsdive.com) Another example is the FinTech Acquisition V / eToro transaction, which had its valuation cut and then was abandoned in July 2022; FinTech V failed to find a replacement target in time and moved to dissolve and return capital by December 9, 2022, explicitly because it couldn’t close a deal within its required period.(fxnewsgroup.com) This pattern of repricings, failed deals, and mass liquidations illustrates the “re‑trades” and dislocation Chamath anticipated.

• Sponsors resorted to unusual sweeteners and maneuvers to fight redemptions and buy time. With redemption rates soaring, sponsors in 2022 began using aggressive non‑redemption agreements and founder‑share giveaways to keep deals or extensions alive. For example, a February 2022 non‑redemption agreement for East Stone Acquisition Corp. committed the sponsor to transfer founder shares to investors who agreed not to redeem, and to increase that transfer for each month from May–August 2022 that the business combination had not yet closed – effectively paying investors extra equity just to delay redemptions while up against the clock.(sec.gov) Reddit posts tracking individual SPACs in December 2022 show similar behavior: Williams Rowland Acquisition Corp.’s sponsors signed non‑redemption agreements covering over 2.1 million shares, promising blocks of founder shares in exchange, while its co‑CEO personally bought ~742k shares near trust value to backstop redemptions ahead of a vote to extend the deadline; another SPAC, Northern Star Investment Corp. II, repeatedly adjourned its extension meeting “to allow additional time…to solicit…redemption reversals,” while its sponsor entered non‑redemption agreements that transferred sponsor shares to investors who agreed not to redeem.(reddit.com)(reddit.com) These kinds of side deals, special extensions, and sponsor‑funded sweeteners are not normal IPO behavior; they reflect exactly the kind of “really crazy” sponsor pressure Chamath predicted would emerge as expirations loomed.

Putting this together:

• The massive 2020–2021 SPAC cohort did in fact run into a wall of 18–24‑month deadlines in late 2022/early 2023.
• In roughly the six quarters leading up to and through November 2022, the SPAC market went from boom to crash, featuring record redemptions, waves of liquidations, a spike in withdrawn or repriced deals, and an explosion of unusual sponsor concessions and sweeteners.
• Contemporaneous commentary explicitly tied these dynamics to impending deadlines and sponsors’ desire to avoid losing their at‑risk capital.

The exact month Chamath highlighted (November 2022) ended up being part of a broader 2022–early‑2023 bust rather than a single inflection point, but the core content of his prediction—that as the two‑year clocks on the 2020–2021 SPACs approached expiry, the sector would see significant dislocation and “crazy” behaviors in dealmaking and sponsor incentives—was borne out by subsequent events. Therefore, this prediction is best classified as right.

Friedberg’s prediction was that, from early 2021 until roughly the 2022 midterms, Democrats would be able to keep pushing through large spending bills because they held unified control of the federal government.

Unified Democratic control during the period
In the 117th Congress (January 3, 2021–January 3, 2023), Democrats held the presidency, a majority in the House, and de‑facto control of the 50–50 Senate via Vice President Harris’s tie‑breaking vote, giving them a federal “trifecta” through the 2022 midterms. (en.wikipedia.org)

Major large spending laws enacted before the 2022 midterms
During that April 2021–November 2022 window, several very large spending packages were in fact enacted under Democratic control:

• American Rescue Plan Act of 2021 – a $1.9 trillion COVID‑relief law, signed March 11, 2021, just weeks before the episode, providing stimulus checks, expanded unemployment benefits, state and local aid, and more. (aarp.org)
• Infrastructure Investment and Jobs Act (“bipartisan infrastructure law”) – about $1.2 trillion in authorized spending (with $550 billion in new spending), signed November 15, 2021. (phmsa.dot.gov)
• Consolidated Appropriations Act, 2022 – a $1.5 trillion omnibus funding bill (including Ukraine aid), signed March 15, 2022. (en.wikipedia.org)
• CHIPS and Science Act – roughly $280 billion in new funding for semiconductors and research, signed August 9, 2022. (en.wikipedia.org)
• Inflation Reduction Act of 2022 – a major budget‑reconciliation law, with about $437 billion in new spending (mostly climate/energy and health) and $737 billion in offsets, signed August 16, 2022. (en.wikipedia.org)

Contemporary overviews of Biden’s first‑term domestic record routinely cite the American Rescue Plan, the $1 trillion‑plus infrastructure law, and the Inflation Reduction Act as landmark spending achievements of the 117th Congress, all enacted before the 2022 midterms. (apnews.com)

Constraints did emerge but did not negate the core prediction
Democrats were constrained on the specific Build Back Better Act, a larger social‑spending package that passed the House but stalled in the Senate because Senator Joe Manchin opposed it, leading to months of negotiation and its eventual replacement by the slimmer Inflation Reduction Act. (en.wikipedia.org) This shows that their power was not literally unlimited and that internal moderates imposed real limits.

However, Friedberg’s normalized claim is not that Democrats would pass every wish‑list item, but that unified control would allow them to continue passing large spending bills up to the midterms with relatively fewer constraints than in a divided government. Measured against that standard, the period from early 2021 to the 2022 midterms did indeed see a sustained run of very large spending laws—relief, infrastructure, industrial policy, and climate/health—enabled by Democratic control of both chambers and the presidency.

Given the volume and scale of spending legislation actually enacted in that 1.5‑year window, the prediction that Democrats would keep being able to pass large spending bills under unified control is overall borne out, even though some specific ambitions (like the original Build Back Better framework) were pared back or blocked.

Sacks tied several specific claims together: (1) a very strong post‑COVID boom in 2021, (2) U.S. unemployment falling to roughly 3% by the end of 2021, and (3) COVID in the U.S. being effectively “over in May” 2021.

1. Economic rebound / “Roaring 20s” boom
   The direction of this part was broadly right. U.S. real GDP grew about 5.7% in 2021, the strongest annual growth since the early 1980s, with broad-based increases in consumption and investment, consistent with a sharp post‑pandemic rebound. (bea.gov) Labor markets also recovered rapidly, with solid job creation and falling unemployment. (unemploymentdata.com) So the general idea of a strong 2021 recovery was largely accurate.

2. Unemployment at ~3% by end of 2021
   However, the specific unemployment call was too optimistic. The official U.S. unemployment rate in December 2021 was 3.9% (seasonally adjusted), not “about 3%.” (unemploymentdata.com) The annual average unemployment rate for 2021 was about 5.4%, well above 3%. (theworlddata.com) While unemployment did fall quickly, it did not reach the low‑3% range he endorsed.

3. COVID “over in May” 2021
   This part of the prediction clearly failed. In May 2021, the U.S. was still recording tens of thousands of new COVID cases per day; CDC data show a 7‑day average of roughly 21,000–35,000 daily cases that month. (archive.cdc.gov) The federal COVID-19 public health emergency was repeatedly renewed through 2021 and 2022 and did not expire until May 11, 2023. (aota.org) Later in 2021, the Delta variant drove a major surge; by mid‑August the U.S. was back above 130,000 cases per day and hospitals in many regions were at or near crisis levels. (en.wikipedia.org) That is inconsistent with the acute phase being “over” by May 2021.

Overall: The broad call of a strong economic rebound was directionally correct, but the specific unemployment target was missed and the assertion that COVID would be “over in May” 2021 was decisively wrong given ongoing high transmission, renewed surges, and the continuation of the federal public health emergency into 2023. Taken as a single bundled prediction, this makes the overall forecast wrong.

Sacks’ claim was conditional: because the U.S. used very large stimulus in 2020–21 despite a rebounding economy, if another major economic emergency occurred in the near future, the federal government would have much less fiscal capacity to respond effectively.

Facts that support the premise of his concern:

• Between the CARES Act and related packages in 2020 and the $2.3T Consolidated Appropriations Act plus the $1.9T American Rescue Plan in late 2020–2021, the U.S. undertook extraordinary multi‑trillion‑dollar fiscal measures.(en.wikipedia.org)
• Debt and deficits remained historically high afterward: public debt hovered around ~95–100% of GDP in 2022–23, and total federal debt exceeded 120% of GDP by 2024–25, with deficits above 6% of GDP.(ycharts.com)
• Nominal debt rose from about $27.7T in 2021 to $34–35T in 2023–24 and then over $37–38T by 2025, well above pre‑COVID levels.(visualcapitalist.com)
• All three major rating agencies (S&P, Fitch, Moody’s) have now downgraded U.S. sovereign debt, explicitly citing high and rising debt, large structural deficits, and the increased vulnerability of the fiscal position to future shocks.(cnbc.com)

However, the test of his prediction—another major economic emergency in the “near future” that required large new fiscal action—has not clearly occurred:

• After 2021, the U.S. did not experience a COVID‑scale or 2008‑style recession. Growth remained positive in 2022–24, with many observers characterizing the outcome as a “soft landing,” not a deep crisis.(cnbc.com)
• The main genuine shock, the 2023 regional banking crisis (SVB, Signature, First Republic), was addressed primarily through regulatory and monetary tools: the Treasury authorized a systemic risk exception so the FDIC could guarantee all deposits at SVB and Signature, and the Federal Reserve launched the Bank Term Funding Program to provide emergency liquidity.(en.wikipedia.org) These moves did not require a massive new fiscal stimulus bill from Congress, and there is no clear evidence that high pandemic‑era debt prevented such a bill; the constraint was more political than market‑driven.

Because:

1. No crisis comparable to 2020 or 2008 struck in the “near future” window where very large discretionary fiscal action was clearly needed, and
2. In the main shock that did occur (the 2023 banking turmoil), the government was able to mount an effective response using existing tools, without evident bond‑market refusal or an explicit statement that fiscal space was exhausted,

we cannot empirically determine whether 2020–21 stimulus in fact left the U.S. unable to respond fiscally to a major new emergency. The underlying fiscal risk he pointed to is real and documented, but his specific conditional prediction about future emergency response capacity has not been decisively confirmed or falsified.

Therefore the appropriate classification is ambiguous: enough time has passed to judge the “near future,” but the required triggering event (a comparable major economic emergency demanding large new fiscal stimulus) never fully materialized, so the prediction’s accuracy can’t be cleanly evaluated.

The prediction was conditional on California enacting the proposed state‑level wealth tax (the “California Tax on Extreme Wealth” structured as 1% on wealth over $50M and 1.5% over $1B under ACA 8/AB 310, later AB 2289 and AB 259). The underlying academic analysis indeed projected roughly $22.3B per year in revenue if such a tax were in force. (cffp.recherche.usherbrooke.ca) However, AB 310 (2021–22) failed in committee and died on February 1, 2022, and its successor AB 2289 likewise never advanced to enactment. (legiscan.com) The most recent version, AB 259 with accompanying constitutional amendment ACA 3, was held in the Assembly Revenue and Taxation Committee in January 2024 and did not pass; Governor Newsom publicly opposed wealth‑tax proposals. (a24.asmdc.org) Current overviews as of mid‑2025 confirm that no California wealth tax is in effect; all such proposals have stalled or died in committee. (halberthargrove.com) Because the triggering policy (this specific wealth tax) has never been implemented, there is no empirical basis to judge whether it would have raised the projected revenue or reduced overall tax revenue, so the prediction has not been testable in the real world yet.

Legislative records show that Assembly Constitutional Amendment 8 (ACA 8), titled “Wealth tax: appropriation limits,” was introduced in March 2021 but never advanced: its official status is listed as “Introduced – Dead” as of May 2, 2022, after being re‑referred to the Assembly Revenue & Taxation Committee, with no floor votes or passage in either chamber in 2021 or 2022. (legiscan.com) Independent coverage likewise notes that ACA 8, tied to an earlier wealth‑tax bill (AB 310), “failed to advance out of its committee.” (caltaxandpolicy.com) Later summaries of California tax policy confirm that no state wealth tax has been enacted at all, let alone via ACA 8 in 2021–2022. (halberthargrove.com) Since the wealth tax amendment did not receive sufficient legislative support and was not enacted into law in 2021 or 2022, Sacks’s prediction is correct.