Nassim Taleb: Highly Critical

Thursday, June 04, 2009

In an interview earlier this year Nassim Nicholas Taleb, author of The Black Swan and Fooled By Randomness, criticized the current choices being made by our adminstration and federal reserve, even the Financial Accounting Standards Board. Taleb foresaw many of the problems with our underlying financial system, most notably mentioning the inherent risks in Fannie Mae and Freddie Mac in his book in 2007. His interview on Bloomberg television is well worth watching.

Notable Quotes:
"This is a classical problem of the same pilots who crashed the plane, we go ask them for advice when we know exactly why they crashed the plane. They did not see the obvious, the system had too much hidden risk."

"We have no choice, the environment is going to take us where it wants to take us, what is going to blow up will blow up."

"Letting banks after all this incompetence mark-to-market their inventory by themselves...shocking, I don't understand what...this is surreal...after all this crisis caused by opacity. Now, we are allowing banks to get away with more opacity."

Taleb's Vision for Overhauling the System:
1) Very low leverage (debt, but not for leverage purposes)
2) No complex derivatives
3) No too big to fail
4) Nationalize, do not bail-out


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