Too much debt
Nassim Taleb on the real evil of the current crisis …. too much debt, the article here deserves to be read in full.
Some quotables “Bubbles and fads are part of cultural life. We need to do the opposite to what Mr Greenspan did: make the economy’s structure more robust to bubbles.” and “the complexity created by globalisation and the internet causes economic and business values (such as company revenues, commodity prices or unemployment) to experience more extreme variations than ever before. Add to that the proliferation of systems that run more smoothly than before, but experience rare, but violent blow-ups.”
The imbalances from Chimerica that led to the current crisis have not really been solved, just papered over with lots of hot money/stimulus. The ‘rise of the rest’ continues as the west is propped up for now, but are they able to withstand the violent blow-ups that are to come? Resilience is an overused word, but it bears repeating that in wounded beast scenario, how does Singapore cream the top of the globalisation wave, while dampening the lows? Specifically, are our social systems strong enough to handle the more extreme ups and downs to come?
Last quote “Asking the economics establishment for guidance (particularly after its failure to see the risk in the economy) is akin to asking to be led by the blind – instead we need to rebuild the world to make it resistant to the economist’s mystifications.”
