Charlie Rose

SimanLi  05/18/2009 04:06 AM Report

Mania is a grandiose, obsessional feeling that all things will work out, which encourages gambling, and is the same as religious enthusiasm, or belief in progress. A belief that one can get away with anything, that will trumps reality. This is coupled with self-fulfilling crowd behavior, that Soros calls reflexivity and others trend-riding. In my view this is brought about by a kind of deprivational child-rearing (behavior mod) creating status anxiety and craving for love and attachment, or in economic terms, credit. But credit must be paid for, and at some point it can no longer be and it simply runs out. This credit crisis is the same as literally dozens if not hundreds of such in the past. It is not an accident that depression has come to be<a href='http://www.charmingirl-china.com'>sexy lingerie</a> used to describe business downturns as well as the opposite of mania, or that religious ppl, in particular Jews, suffer in larger measure from manic-depressive (now called bi-polar) disorder

vpsaline  02/10/2009 04:41 PM Report

What I find most alarming is when you combine his notion of our systemic financial fragility with our long term naïvité for perpetual growth along with our blatant ignorance for ecological limits; then an even more serious storm becomes evident on the horizon.

g_crooks  01/04/2009 08:31 AM Report

Very interesting- wish it could have been an hour.

On Capitalism 2, his statements really caught my attention regarding the comment about barber's and dentist's real work.

Martin Luther, the 15 century reformer, is reported to have said to a shoemaker when asked what he should be doing as a Christian man. Luther's response was to "make a good shoe and sell at a fare price." Gosh, how novel to actually produce something instead of speculation.

Al_london  12/29/2008 08:14 PM Report

I think you have to take some of NNT's predictions with a pinch of salt.

I respect his academic views that portfolio theory, VaR and gaussian investment markets never really hung together. You only have to see LTCM to see that. But when he starts predicting he's becoming one of those econmists he hates himself.

Who really knows if we're in for a ride worse than the great depression. Back then it took the necessary World War II government spending to finally give the workers jobs.

If governments have learnt anything from that perhaps they'll spend to kickstart the economy again and we'll avoid that Doomsday scenario.

divine_moo  12/11/2008 07:26 AM Report

Taleb's most salient point he makes toward the end of the interview is that people are going to have to go back to deriving their economic livelihoods by producing something of real value - a good shave or haircut, fixing people's teeth, a building, etc. Capitalism 2 says like a much better world then this one.

wrichcirw  12/09/2008 04:58 PM Report

Towards the end of the interview, Mr. Taleb gives his version of the new order of capitalism:

“…the only solution is for society not to depend on asset values anymore.

So 'Capitalism 2' will be some kind of independence from asset values.”

Now, correct me if I'm wrong, but a society without asset valuations is by definition communist, right? Maybe he's talking about derivatives that pose as assets these days, but if he's not...LOL

I got directed to this entertaining interview by an equally entertaining blogger who is predicting a bottom to this market. After hearing this interview in its entirety, I'd have to say the blogger was right.

Jonc  12/06/2008 04:53 PM Report

I am sorry that I missed the Dec 3 interview but am thankful for the web based recap... I was ready and waiting for the first two interview dates but was not informed about the Dec 3rd scheduling... The scheduling shuffle was impossible to keep up with…

It is my belief that Mr. Taleb has his mind around this present market morality play presented by the usual cast of self proclaimed financial charlatans... This tragedy Taleb correctly points out is another in a series of blow ups brought to us since he first experienced the 1987 incarnation of financial magical thinking in London...The Salmon Bros blow up that Warren Buffett helped mitigate at great personal risk seemed to be a remake or at least a knock off of 87 ... a ludicrous estimation of risk by people with PhD’s and fuzzy models... This same group of mathematical elves marched Hi Ho Hi Ho right into LTCM with the same lame theories Greek lettered disastrous result... Now a recent set of variants of that same sort of magical thinking has produced CDO's CDS's and a host of other alphabet soup sows ears... These seem have the potential of marching us all toward living in caves and bartering with loaves and fishes...

In the interest of avoiding a cave of my own I for one would like to hear more from Nassim Taleb... He has lived in caves or situations of equal duress and seems to know how to avoid repeating the experience...

Please put him on for at least one full hour more... Were Mr Taleb might be willing to drop a few more bread crumbs for us to follow…

REMant  12/06/2008 01:29 AM Report

This interview has been postponed several times, and it appears now to have been edited. I have never gotten around to reading his book. As I understand him from interviews, etc, Taleb believes that a system becomes more fragile by a sort of optimism that is both too trusting in the inevitability of progress and socially interdependent and thus is increasingly prone to unforeseen problems. This is not really a new understanding. Galbraith, Kindleberger, Chancellor and others have stressed the manic aspect before. That there have always been business cycles should not be news to anybody.

Mania is a grandiose, obsessional feeling that all things will work out, which encourages gambling, and is the same as religious enthusiasm, or belief in progress. A belief that one can get away with anything, that will trumps reality. This is coupled with self-fulfilling crowd behavior, that Soros calls reflexivity and others trend-riding. In my view this is brought about by a kind of deprivational child-rearing (behavior mod) creating status anxiety and craving for love and attachment, or in economic terms, credit. But credit must be paid for, and at some point it can no longer be and it simply runs out. This credit crisis is the same as literally dozens if not hundreds of such in the past. It is not an accident that depression has come to be used to describe business downturns as well as the opposite of mania, or that religious ppl, in particular Jews, suffer in larger measure from manic-depressive (now called bi-polar) disorder.

Joint-stock co ventures were always seen as speculations in the beginning (they were called "projects") and not part of the normal finance system. Part of our problem with the stock mkts is that many ppl have come to see it otherwise, due in large part to the continual increase in the supply of money and credit, and so have the cos themselves, encouraged by a truly bizarre tax code. Thus speculations have come increasingly to compromise the financial system. This was realized in the 30's when the Glass-Steagall Act was passed, and forgotten 60 yrs later. During the 20's the asset inflation problems that always accompany booms were overlooked by fixing on the prices of a narrow range of consumer goods, a problem which is still with us.

Characteristic of booms is the building up of economic slack, liquidated in busts, leaving jobs and goods of more actual utility. The main issue here is that the mkt has to determine who gets what part of what is left before ppl can again get to work and recapitalize themselves. A lot of this has already taken place with the decline in asset values, but we will get nowhere until the rich realize that their money is worthless without the labor of the poor, and the poor cannot labor without the means to do it. Progressive taxation and a negative income tax would probably help speed the process, justifiable since the rise in the price of assets transferred wealth from poor to rich during the boom. The point tho is not to "jump-start" anything, but simply to make it possible again for people to afford what they make.

Now, we also have the problem that not only was boom inflation sunk into houses, stocks, gold, etc, but that ppl started buying more and more cheap goods overseas, and the mvt of this money into Treasury bonds rather than in the purchase of US-made goods helped fuel the asset bubbles even more. We must therefore develop the productivity here at home to pay for things, as well as, make the rich dependent on the poor here at home, ensuring that investment always comes from savings and not from printing money. Let me note in passing that Friedman, himself, called for zero growth in high-powered money just before he died. In any case, interest rates are of little consequence now. If set too low, the lenders won't lend at that rate. If set too high lenders will be leery about repayment. The rates therefore are what they are, and they should remain so.

The problem with the American economy and I think all who consider money and the social standing it is part of the goal, rather than the production of goods, is they would rather produce fewer goods with higher margins than more goods with lower margins. A matter of laziness I suppose, but also of attitude, and it means the gradual shift of wealth as ppl are deprived of resources, and hence the gradual contraction of the economy, another perverse outcome of speculative mania. Essentially many ppl would rather be among the wealthy few than the potentially much wealthier many. But this deprives the majority of the means to produce goods of value to themselves. The past generation as a result has seen the creation of an underclass in America, and the steady decline of the formerly independent middle-class. Another significant problem is the tendency to provision of services rather than production of things, which also deprives individuals of independence. The stock mkt likes this just fine, because as the economy contracts the price of what remains necessarily rises. However, relfation without structural change is a chimera.

By trying to reflate the economy, Bernanke is rewarding the holders of equities (who in nearly all cases are the richer portion of the population), at the expense of those who hold dollars, or receive interest (which includes mostly the poor and elderly, both here and abroad). This is the typically American way of doing things, and marks us out as still undeserving of being called a first-world nation. As for Bernanke, I would ask him to go on his own, but if he will not, then legislate him out of office in rewriting the act creating the Federal Reserve, which I think is long overdue. In no way can the nation afford to subsist on the cycle of equity bubbles we have generated for the last several decades.

The point of any attempt to make houses more affordable should not be to restart housing price inflation, and reward mortgage holders, but to make it possible for ppl to refinance what amounts to extortionate mortgages at lower rates, and ppl forced out of the housing mkt to buy the existing housing stock at prices they can afford. The admin is opposed to refinancing, however, and would no doubt be opposed to any redistribution, even if it were pointed out to them that their own monetary policy, and probably also fiscal policy, did exactly that. If mortgage interest is reduced enough by the Treasury plan and ppl buy houses, presumably the price of those houses increases, which offsets the reduction in the interest, but none of this necessarily leads to ppl as a result earning more, etc., unless a lot of houses are sold, but even then we can't have an economy with so much reliance on the housing industry. Houses are very nice, no doubt, and useful to some extent, but they are not on the whole productive. Recovery of the housing industry will be a help to credit, but it is not the root of the problem, which is declining productivity and savings, in no small measure because a lot of effort and savings are being diverted into buildings. Since this happens in every boom/bust cycle you'd think ppl would have got the msg by now. This plan makes about as much sense as printing more money to restore economic capacity.

tmtravel  12/05/2008 01:41 PM Report

Is it not that the prediction of Mr. Taleb of the present crisis is itself a black swan event and if his future prediction were to come true they would violate his own theory? Seems like an example of the incompleteness theorem by Godel.

The point about explaining a phenomena after it has happened in economics seems valid. People make mistake in other scientific fields too, but the price of mistakes are generally not as widespread. Also, in economics you don't really get more than one opportunity to test the prediction of your theory/model, while in sciences you do get to falsify a it in controlled experiments.

tartufe  12/05/2008 12:40 PM Report

The most useful "Black Swan" would be to have a thorough FBI, SEC, etc investigation of the egregiously greedy perpetrators of the financial wise-guys that caused the melt down. A society, nation(s) that would tolerate this kind of predatory manipulative greed without corrective retribution deserve its natural outcome. The moral hazard is writ large for a repeat without it. Ironically Paulson and Bernanke (Bush) are shamelessly bailing out the likes of AIG, Citigroup et al without constraints, while the auto guys that actually produce things (other than complicated Ponzi scheme financial instruments) with honest employment are being ignored. $1.00 annually for the financial predators would be obscenely too much compared to the meaningful level of fines and imprisonment they deserve. A quid pro quo WORLD-WIDE MISERY index would have them all in the gated community in Leavenworth, Ks till their maker has to take them - lest He rejects them as well. Alack and alas, only in my dreams.

hrc  12/05/2008 12:26 AM Report

Good down to earth stuff, still not less complicated the solution. International currency economics is beyond all measures of difficulty. This crisis was no surprise to many, it's been spiraling towards this end for well over a decade. Homeowners stood in awe as their homes were increasing in value $1,000 an upwards weekly for years and yet thought it not ominous. Deflation is the natural byproduct of hyper-speculation, sustained cheap money. The crisis is to build a floor to withstand its impact in a timely manner, (with break-walls and such in the interim). It is still very complicated, every nation state has got to get its house in order and then come together and what? This is the greatest show because it endears constructive dialogue, it is unique, really good stuff.

ekzept  12/04/2008 08:13 PM Report

Yes, I agree: A full hour would be useful. Indeed, it would be useful to get Taleb, Roubini, and Krugman around the table at the same time.

A side matter: I watched Peter Schiff on a YouTube capture the other day being vilified in 2006 and 2007, being laughed at, for his predictions that all this would come down. The other aspect of this is to explore what it is like to be the Cassandra, to have confidence in your opinion yet be scorned by a public and the pundits, and then see it come true. So that suggests a Schiff-Roubini-Taleb trio would be revealing, too.

Note, even Mr Buffet missed all this and these.

Another matter-- Things are developing faster than news folks and Mr Rose can cover them. What the heck is a contango or is backwardation? And what's all this weirdness of how commodities like oil are plummeting in price, yet are piling up at shores and on ships, because the people who move them from A to B can't get reasonably priced loans to carry the stuff? So, with prices low, and surplus of commodities, we may end up with shortages at the consumer end.

Weird, weird, weird.

KMGuru  12/04/2008 08:03 PM Report

Yes, I agree that we need an hours of time with him. If our economy is going to get worse than what Rubini says...we need to take proactive steps. Based on my consulting experience in business analysis with many type of industry, I have found that it is the silo-based thinking that is causing all the mess and creates an inability to solve systemic issues.

Thank you Charlie. The interview was crucial.

Gustav  12/04/2008 07:08 PM Report

Finally someone wise as Nouriel Rubini...

This really needed a full hour. There seems to be too much school smart finansial economists that doesn't see the whole picture, they've learned all the mathematical curves and what numbers are supposed to mean in the supposed untouchable system.

It is in these times when we're travelling in fragile times we need men and women like Mr. Taleb, who clearly see far into the horizon, that know that no system is perfect and needs to be approached from all aspects.

laughtercloud  12/04/2008 06:30 PM Report

Great interview. Nassim implies that we are returning to a cash-based economy, whether we like it or not.