“Black Swan” Author Nassim Taleb to US: End Stimulus, Deleverage Debt or Suffer a Crash

July 3, 2009

(ChattahBox)—Messianic philosopher of the unknown, Nassim Taleb appeared recently on CNBC’s “Squawk Box,” warning the United States and other world governments to immediately start converting the massive debt choking the global economy into equity, or risk a full-blown financial crash.

Lebanon born, Nassim Taleb, author of his newest book, “The Black Swan” and the popular Wall Street cult favorite, “Fooled by Randomness,” is a former Wall Street trader, turned financial philosopher and advisor to Universa Investments, a hedge fund firm, who believes human beings are continually blindsided by dramatic, improbable events that shape the course of history.

Taleb rejects Plato’s view of a structured and ordinary world, instead viewing the world controlled by a series of random, unexpected events that he compares to the existence of mutant black swans.

Against this philosophy, Taleb provocatively asserts that anyone making financial predictions, based on past history don’t know what they are talking about. Taleb told the Squawk Box crew when asked to make a prediction about the financial crisis and rising unemployment, “We’re in the middle of a crash.” “So if I’m going to forecast something, it is that it’s going to get worse, not better,” said Taleb.

Taleb described our global financial system as extremely fragile that is destined to crash. He referred to stimulus programs as an example of monetary policy that’s out of control, producing little “green shoots” of economic recovery, “…but you are still in a world that’s breaking,” said Taleb.

Teleb advised the U.S. government to deleverage debt and not rely on stimulus packages that will only inflate assets. He recommended that the government convince banks to take aggressive, large-scale steps to convert debt into equity.

He called for a worldwide, deleveraging of debt totaling $40-to-$70 trillion,” to make a transition into a more stable financial environment.

Taleb suggested that banks attempt to negotiate with homeowners on the verge of foreclosure, offering to lower monthly payments in return for part-ownership of the property, averting foreclosures and additional debt on the banks’ balance sheets.

“The monkey on our back is debt,” said Taleb. Government leaders need to “take the devil by the horn” and aggressively deleverage our massive debt into equity or suffer the consequences of a global financial crash.

Dire words indeed from one of the world’s hottest thinkers, who predicted the financial crisis and earned millions during the financial meltdown, against all odds, based on his “Black Swan Protection Protocol.”

Video of Taleb’s remarks can be found here.



2 Responses to ““Black Swan” Author Nassim Taleb to US: End Stimulus, Deleverage Debt or Suffer a Crash”

  1. Twitted by USAMIA on July 4th, 2009 3:31 pm

    […] This post was Twitted by USAMIA […]

  2. joebhed on July 6th, 2009 7:42 pm

    Nassim Taleb is the only financial personality with the brains to understand the debt-money equation, there is an IMPOSSIBLE amount of debt to be paid, but has yet to achieve an identity with the solution.

    His banks-negotiate-new-equity proposal is a shot in the dark.
    Will not work, Nassim. And, not necessary.

    He is absolutely correct that we need more equity in the economy, but he has not yet understood that it is the monetary system that needs that equity, and not banks or financial services marketers.

    He is also correct that traditional economists of ALL political stripe have been denied the tool of monetary system reform, basically because this is NOT part of the curriculum at ANY of the country’s business schools.
    Were it so, there would be a certain loss of the endowment.

    The Chicago Plan for Monetary Reform.
    Look it up, Nassim, and you are on your way.

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