Nassim Taleb on Charlie Rose: "Massive Deflation Nightmare, Roubini Too Bullish"

Quote from JamesVU2000:

So you think the government can legislate higher asset prices and prosperity? I wont make that bet.
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Higher asset prices, yes very easily. The only reason Japan failed was because they simply did not print ENOUGH. (yes.. look at money supply of Japan vs US starting 1990... The US wins, and we weren't even in a collapse to respond to)

Prosperity... Much tougher .... As we know, prosperity does not come from higher asset prices. Look at Zimbabwe.
 
Quote from JamesVU2000:

So you think the government can legislate higher asset prices and prosperity? I wont make that bet.
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Isn't that a factor in how we got into this mess?

History is full of lessons about how this doesn't work... but politicos are so greedy, they apparently can't help themselves from continually trying .. :mad:
 
Your giving the government way too much credit. And blindly assuming Bernanke knows what is doing is a very bad assumption and I think its going to cost alot of people a lot more money.
 
Quote from JamesVU2000:

how is that great moderation working out for him?
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What did you want him to say? 'I think the credit market is in a bubble and every major bank is doing stupid things.' Do you realize what the ramifications of that from an elected official would have been? Get in reality.

hey i'm merely saying this guy knows how to print money and stimulate demand, and the simplest laws in economics define if you do it enough, eventually deflation is beat.

(Of course, I'm definitely NOT arguing that he'll be sharp enough to even contemplate an out of control inflation.)
 
I'm sure both Bernanke and Paulson know what they're doing. I'm just as sure we don't know why they're doing it.
 
Quote from scriabinop23:

Higher asset prices, yes very easily. The only reason Japan failed was because they simply did not print ENOUGH. (yes.. look at money supply of Japan vs US starting 1990... The US wins, and we weren't even in a collapse to respond to)

Prosperity... Much tougher .... As we know, prosperity does not come from higher asset prices. Look at Zimbabwe.
More...

the US didn't win anything. the US Fed and congress with the cooperation of wall street
created a bubble which the rest of america and the world will have to pay for. american capitalism the envy of the world has been destroyed as a result.
 
Quote from scriabinop23:

Markets can be all terribly wrong.

The credit markets were wrong before this blowup, and they are likely wrong now.

This video makes one good point: markets are great at being wrong. Furthermore, Taleb is contradicting himself by saying with certainty what is going to happen.

Lets look how markets were wrong:
1) Buying subprime for 100c on the dollar.
2) Buying oil at 147 (inflation and supply fear), then 6 months later selling at 42.
3) Shipping rates. Why was everyone so wrong signing drybulk ship leases 1 year ago at 230k/day that now are practically free in comparison?
4) Credit markets are priced to MORE defaults than the great depression right now (yes, this is true). Is this true?

I don't buy that since credit guys are more sophisticated because they are 'professionals', that pricing that results is necessarily the reflection of the truth vs the stock market. Giant mispricings in their markets led to this mess.

My chips are on the reflation bet through increased money supply to offset this credit-induced deflation. Those who still have credit and assets will be rewarded, since a return of economic activity spurred by int. rate policy and fiscal stimulus multiplied * increased money supply = elevated GDP as well as obviously higher prices.
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Excellent insight Scriabinop.

You are one of the few on ET that can actually turn their brains on and evaluate a given situation.
I enjoy your posts!
 
Deflation is always temporary. the gov't won't allow deflatio n because it would mean job losses===less taxes causing economic instability and riots. etc. from economic decline. lower asset value==less taxes...

in the long run real inflation is what matters. there is no inflation if incomes rise or inflation is resulting from increase growth or productivity with price increases.
 
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