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

Quote from Angrycat:

Achilles,

Bubbles have occurred throughout history and economies have developed and grown. Bubbles themselves are not the problem.

I fear the Argentina scenario because, unlike throughout most of history, governments now take much more active roles in economies and spring into action when a bubble bursts. This distorts incentives and leads to unintended consequences, which lead to more government action to prevent the negative results of its previous actions. The housing bubble had its roots in monetary policy and congressional economic engineering in response to the tech bubble bursting, for example.

Once the endless intervention strangles all economic growth, the economy collapses.

This is a much worse scenario than that which precipitated the Great Depression. This is more like a South American scenario or, at best, Japan since 1990.
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Agree 100%

However, Bubbles do destroy wealth and can hamstring economies significantly.

The result - when taken as a single event - is never apocalyptic. Even the Great Depression - if credit and money were readily available post crash - would have only lasted a few years.

The culprit was Government intervention.

This time is somewhat different as we're not dealing with a stand-alone bubble. We're dealing with two or three Bubbles compounded on the ones before it. All it does is pile debt, mal-investment and overproduction to extremes, making the eventual crash that much more severe.

Yes, it really will be a Depressionary fallout. If we continue to inflate, its possible the currency will go to shit and then we'll have much larger problems.

While a Bannana Republic only needs one or two blowouts to spur a currency collapse, an economy the size of the titanic needs several torpedoes before the Dollar goes under.

Its possible Schiff, Faber and Paul are right. We could see a flight from the dollar within 10 years. That happens and its over.
 
Quote from Now is Now:

Angrycat,

That is precisely why the goverment must "let go" and let the natural forces of the market place work.
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The so-called natural forces is just a way for the thieves and scammers to run away with all of the money. They did it in 1929 under Hoover, and they did it again under the know-nothing (truely so) Bush administration. This is not a academia world which is composed of nice guys taking care of each other (as Greenspan was surprised to learn), but a world where those who break rules and get around rules make tons of money when the government enforcement agencies bury their heads in the sand so that their pals can make billions.

I think most of the nation has pretty much had it with this silly, naive, "free market" solution. In its place now, we have commonsense.
 
Quote from richrf:

The so-called natural forces is just a way for the thieves and scammers to run away with all of the money. They did it in 1929 under Hoover, and they did it again under the know-nothing (truely so) Bush administration. This is not a academia world which is composed of nice guys taking care of each other (as Greenspan was surprised to learn), but a world where those who break rules and get around rules make tons of money when the government enforcement agencies bury their heads in the sand so that their pals can make billions.

I think most of the nation has pretty much had it with this silly, naive, "free market" solution. In its place now, we have commonsense.
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Common Sense intervention when applied to markets spells Crash.

The only reason why "Free Markets" evidently "Failed" was because they were never free to begin with.

The United States Banking System is built on a gigantic moral hazard. That being the Federal Reserve.

The Banks own the FED, and as a proxy , the Treasury (ex Goldman CEO), and literally voted themselves a bailout.

No FED = No Bailouts = No retarded leverage and criminal underwriting.

The Failure was one of "Government" Intervention - that being the existence of the FED and "Fair" home ownership law that legislated mortgages to those that couldn't afford them!

I use quotations because the FED is not even a Government body, but rather a Private Corporation endowed with monopolistic power by Congress to create money.

Thats the problem.

When accountability with consequence of bankruptcy reigns supreme, there is no failure of Free Markets.
 
Quote from achilles28:

Agree 100%


Its possible Schiff, Faber and Paul are right. We could see a flight from the dollar within 10 years. That happens and its over.
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Not a complete thesis of mine, but our geopolitical position as military superpower has a huge impact on our economic relationship with the world. It catalyzes our relationships and enables the trade imbalances that exist today. Chicken and egg --- economic superpower vs military superpower... Those forces intermingle naturally.

I don't know if hyperinflation + currency dump is in the cards. Not unless for some reason we are invaded, conquered, and economically raped. High trend inflation is much more highly probable.. ie 15-20%/yr until we get it under control... (could see prices double or triple in a period of a decade)
 
Quote from achilles28:

Common Sense intervention when applied to markets spells Crash.

The only reason why "Free Markets" evidently "Failed" was because they were never free to begin with.

The United States Banking System is built on a gigantic moral hazard. That being the Federal Reserve.

The Banks own the FED, and as a proxy , the Treasury (ex Goldman CEO), and literally voted themselves a bailout.

No FED = No Bailouts = No retarded leverage and criminal underwriting.

The Failure was one of "Government" Intervention - that being the existence of the FED and "Fair" home ownership law that legislated mortgages to those that couldn't afford them!

I use quotations because the FED is not even a Government body, but rather a Private Corporation endowed with monopolistic power by Congress to create money.

Thats the problem.

When accountability with consequence of bankruptcy reigns supreme, there is no failure of Free Markets.
More...

lol. It is as if the last 10 years and this great Recession never happened.

Let's get this straight. Bush and Friends came into office and totally neutered all regulating agencies. You know, created a silly and naive free market. Yes, the world is full of goody-two-shoes. lol. Anyway, this is what Greenspan pleaded mea culpa to.

Anyway, the goody-two-shoes, took our money (yep, the money in the banks), placed it off-balance-sheet, so they didn't have to reserve against it (this is a very nefarious plan), loaned it out to any schmo who could sign his name, took their fees off the top, and then got S&P and Moody's to rate this junk as AAA (you know equivalent to GE).

Then this junk was poured into mutual funds, overseas investment banks and groups, who had no idea what the heck was going on, until the Economist broke the story last year. Then everyone ran for cover, sold the junk off, and voila, everyone loses their money except for Paulsen and friends.

But just to make sure every billionaire gets their share, Bernanke, floods the market with money one last time, pushing oil to $140, and as Paulsen's friends are getting ready to pile out, Goldman issues the greatest prediction of all time - Oil Going to $200.

A Den of Thieves. No thanks, I think American People have had enough of the naive Free Market ideas. All except those who profited from this grand delusion are now going back to sane, commonsense notions of the way the world works and how to move ahead so 99% may benefit instead of 1% (the wealth gap grew to its greatest since the Great Depression under Bush).
 
Quote from scriabinop23:

Not a complete thesis of mine, but our geopolitical position as military superpower has a huge impact on our economic relationship with the world. It catalyzes our relationships and enables the trade imbalances that exist today. Chicken and egg --- economic superpower vs military superpower... Those forces intermingle naturally.

I don't know if hyperinflation + currency dump is in the cards. Not unless for some reason we are invaded, conquered, and economically raped. High trend inflation is much more highly probable.. ie 15-20%/yr until we get it under control... (could see prices double or triple in a period of a decade)
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Not when the whole world is inflating. In case you haven't noticed, the dollar is much stronger. Why? Because everyone is in worse shape than use, because they bought those junk CDS and CDOs from us. We did them in but good.
 
Quote from scriabinop23:

Not a complete thesis of mine, but our geopolitical position as military superpower has a huge impact on our economic relationship with the world. It catalyzes our relationships and enables the trade imbalances that exist today. Chicken and egg --- economic superpower vs military superpower... Those forces intermingle naturally.

I don't know if hyperinflation + currency dump is in the cards. Not unless for some reason we are invaded, conquered, and economically raped. High trend inflation is much more highly probable.. ie 15-20%/yr until we get it under control... (could see prices double or triple in a period of a decade)
More...

Good point.

But would the US risk WW3 against Asia or Europe if they refused to soak up Treasury Debt? If faced with certain collapse, possible. 50/50 with a Neo-Con hawk.

If the world coordinated a sell-off and everyone dumped at once, there's not much America could do. One or two countries, maybe a war..
 
Richrf,

Greed did them in but good.

There are a number reasons why the dollar strengthened including the obvious, but what is not so obvious was that the Eastern bloc borrowed dollars ,, weak and weakening at the time, to invest in their respective countries and when it came to paying the interest and principal on their failing investments they all rushed simultaneously to cover their liabilities by having to sell their weakening currency to buy US dollars.

The end result... some of these countries will have to ultimately devalue their currency; thereby strengthening the US dollar further..

This has also happened in Europe and South East Asia to lesser extent.
 
Quote from Now is Now:

Richrf,

Greed did them in but good.

There are a number reasons why the dollar strengthened including the obvious, but what is not so obvious was that the Eastern bloc borrowed dollars ,, weak and weakening at the time, to invest in their respective countries and when it came to paying the interest and principal on their failing investments they all rushed simultaneously to cover their liabilities by having to sell their weakening currency to buy US dollars.

The end result... some of these countries will have to ultimately devalue their currency; thereby strengthening the US dollar further..

This has also happened in Europe and South East Asia to lesser extent.
More...

I agree that greed has no boundaries. But when it comes to scoundrels, no country can beat the U.S.'s financial network. It was all so cute. Especially the way they paid of S&P and Moody's for those crucial AAA ratings. No one in Asia, Europe, or Middle East would have bought this crap, if they knew what they were getting.

Why do we have a credit crisis? Because we screwed everyone around the world, by tricking them to take total crap and giving Goldman's partner's (including Paulsen), hard currency. Most of which ended up in gold or Swiss accounts. No one trusts us anymore, and will not lend to us, because we are not to be trusted - for the first time in American history. Thanks to the "free market". We make the Russian oligarchy look like wimps, when it comes to criminal scamming.
 
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