Thursday, June 10, 2010

[Video] Nassim Taleb Emerges from Self Imposed Exile

Last we heard of Black Swan author Nassim Taleb, he had put himself in self imposed exile in the closing days of 2009 over his disgust over the reappointment of Ben Bernanke.

What I am seeing and hearing on the news -- the reappointment of Bernanke -- is too hard for me to bear. I cannot believe that we, in the 21st century, can accept living in such a society. I am not blaming Bernanke (he doesn't even know he doesn't understand how things work or that the tools he uses are not empirical); it is the Senators appointing him who are totally irresponsible -- as if we promoted every doctor who committed malpractice. The world has never, never been as fragile. Economics make homeopath and alternative healers look empirical and scientific.

No news, no press, no Davos, no suit-and-tie fraudsters, no fools. I need to withdraw as immediately as possible into the Platonic tranquility of my library, work on my next book, find solace in science and philosophy, and mull the next step. I will also structure trades with my Universa friends to bet on the next mistake by Bernanke, Summers, and Geithner. I will only (briefly) emerge from my hiatus when the publishers force me to do so upon the publication of the paperback edition of The Black Swan.

Thankfully, people with large egos cannot stay self exiled for long.  The need for attention is too great.  He's back baby!  (of course as he says above to help plug his book!)

Back in August 2009 he had these thoughts:

  • We're all in denial
  • We're replacing private debt with public debt.
  • We're not dealing with the cancer in our banking system.
  • We're not making the structural changes we need to make.
  • We're not being aggressive enough about restructuring debt (debt for equity swaps).
  • Bernanke is a wimpy Greenspan sycophant
  • Obama's rewarding the fools who got us here (Summers, Bernanke, Geithner)
  • The banksters are taking over again

Hard to disagree with a one, although I'd argue Bernanke is Greenspan 2.0 - faster, stronger, with the ability to flush fiat money through the system in a single bound. 


Here are his latest thought via 2 videos on CNBC Europe

Video 1: 
"We have no other solution but to slash debt," Nassim Taleb, author of 'The Black Swan', told CNBC Thursday. He discusses the outlook for the global economy with Bob Long, CEO, Conversus Capital.

Video 2:  
"The balance sheets of banks are just as bad as they were" two years ago when the crisis began and "the quality of the risks hasn't improved," Nassim Taleb

  • The economic situation today is drastically worse than a couple years ago, and the euro is doomed as a concept, Nassim Taleb, professor and author of the bestselling book "The Black Swan," told CNBC on Thursday.
  • "We had less debt cumulatively (two years ago), and more people employed. Today, we have more risk in the system, and a smaller tax base," Taleb said. 
  • "Banks balance sheets are just as bad as they were" two years ago when the crisis began and "the quality of the risks hasn't improved," he added.
  • The root of the crisis over the past couple of years wasn't recession, but debt, which has spread "like a cancer," according to Taleb, who is now relived that public attention has shifted to debt, instead of growth.
  • The world needs to prepare itself for austerity, he warned. "We need to slash debt. Unfortunately, that's the only solution," Taleb said.
  • Obama administration's efforts to pull the US out of recession haven't succeeded, according to Taleb. "It's not that they make mistakes, it's that they almost get nothing right." Moreover, a second major stimulus package may be futile, he warned.
  • "Obama promised us 8 percent unemployment through stimulus. It hasn't worked." There are significantly more liabilities in the US than in other countries around the world, he said.  "Don't give a junkie more drugs, don't give a debt junkie more debt." 
  • The "Black Swan" metaphor is used to describe those rare, unexpected but consequential events that people cannot predict because they view the world through a sort of tunnel vision - as something structured, ordinary, and comprehensible.  "I want to live in a society that is robust to adverse events. We don't live in that world," Taleb said.
  • He suggested that incentives in corporate culture are inherently flawed.  "Size is bad for companies," he said. "We shouldn't give a manager of a nuclear plant an incentive bonus. People are given bonuses to hide risk, to cut corners. The same thing happens with every large corporation. It permeates the entire economic system."  (amen, a conversation we've had on the blog many times in 2008-2009.  A broken incentive system that focuses everything on the short run, to the detriment on the long run - Cramerica)

    [Aug 13, 2009: The Parallel Reality: Nassim Taleb and Elizabeth Warren]
    [Apr 8, 2009: 10 Principles for a Black Swan Proof World]
    [Apr 2, 2009: The Tale of Political Influence in Changing Accounting Rules, Nassim Taleb on CNBC]
    [Dec 4, 2008: Nassim Taleb on Charlie Rose

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