Taleb, a U.S super bear
Times Online U.K. has an interesting interview with Nassim Nicholas Taleb. Most famous for his recent book, The Black Swan, Taleb here gives his bearish outlook for the U.S. economy.
The sub-prime crisis is not over and could get worse. Even if the US economy survives this one, it will remain a mountain of risk and delusion. “America is the greatest financial risk you can think of.”
The problem with financial crises, is that they in fact reflect economic imbalances. When an economy experience recession, some of the prior missallocated capital is liquidated. These misallocations occures during the booming years, when entrepreneurial activity is misdirected by faulty markets signals, such as artificial low interest rates. When FED and gouvernment officials speak about providing measures in order to avoid recession, they are in fact just pushing the problem forward. As Taleb points out, should the U.S. economy artificially recover, without naturally redirecting capital to its highest valued ends, we can expect the next financial wave to hit the economy with a vengeance.
Taleb continues with more gloomy words:
Governments and policy makers don’t understand the world in which we live, so if somebody is going to destroy the world, it is the Bank of England saving Northern Rock. The biggest danger to human society comes from civil servants in an environment like this. In their attempt to control the ecology, they don’t understand that the link between action and consequences can be more vicious. Civil servants say they need to make forecasts, but it’s totally irresponsible to make people rely on you without telling them you’re incompetent.
