Final answer:
Cotton being 'too big to fail' means it was so crucial to the economy it could not be allowed to collapse, similar to large financial institutions during the 2008 crisis. The comparison to the banking crisis illustrates how critical sectors can threaten the entire economic system if they fail.
Step-by-step explanation:
When cotton is referred to as being "too big to fail," it suggests that cotton was so vital to the economy that its failure would have catastrophic consequences, much like certain large financial institutions. This term is often associated with the financial crisis that occurred in 2008, where large banks were deemed so critical to the financial system that they required a government bailout to prevent a wider economic collapse. The authors of the podcast make a comparison to the 2008 mortgage/bank crisis to illustrate the notion of a critical economic component, being deemed too significant to the economy to be allowed to fail.
The 2008 banking crisis saw many banks facing bankruptcy due to investments in mortgage-backed financial assets that depreciated significantly as housing prices fell and mortgage defaults increased. This led to the failure of 318 banks in the United States between 2008 and 2011. The comparison here emphasizes how certain industries or sectors, like cotton historically or banking in 2008, become so interwoven with the fabric of the economy that their downfall could trigger a systemic collapse, leading to the perception that they are too big to fail.