CHARLIE ROSE:  It goes down the line.  

	NASSIM NICHOLAS TALEB:  It shuts -- the factory closes in China hours 
later.  Right?  So you realize runs on a bank today -- all right -- so 
things happen very quickly. 

	So I think it is going to happen very quickly.  It is going to be a 
lot worse.  

	CHARLIE ROSE:  What is going to happen very quickly?  A collapse?  A 
collapse of...

	NASSIM NICHOLAS TALEB:  Unfolding (ph).   

	(CROSSTALK)

	CHARLIE ROSE:  Tell me what.  I have a hard time -- I have a hard time 
ever getting anybody to say to me, you know, how bad is it going to be and 
how will we know, and what will be the manifestations of the badness?  

	NASSIM NICHOLAS TALEB:  OK.  I see, let me tell you, it is like I 
don’t like prediction, but -- except in a situation where if you are in a 
satellite and you see clouds coming, you know you are going to have rain.  
OK?  You are not doing any mathematical thing.  You see a satellite.

	And here, I see this deck of orders, how much people have to sell.  
And the two sources of selling...

	CHARLIE ROSE:  Inventory.  Inventory.  

	NASSIM NICHOLAS TALEB:  Inventory.  OK?  How much people have -- hedge 
funds have to deleverage.  

	CHARLIE ROSE:  Right.  

	NASSIM NICHOLAS TALEB:  So they have got to sell their stuff.  They 
still haven’t sold what they need to sell.  

	CHARLIE ROSE:  Because if they sell, they have to sell at a huge loss 
and nobody wants to buy it?  Is that the idea?

	NASSIM NICHOLAS TALEB:  No, no.  Because they are selling over time.  
Every time we have good news, the market rallies, and then they sell, all 
right?  So, you know, number one, we have a deck what you call, we have 
inventory to go.  

	Second one, think now of -- the people are disillusioned with the 
market.  Think of someone turning 64.  His 401(k) today is half of what 
it was probably if he’s lucky.  Or I mean, it can be worse, depends on what 
he has in it.  Has much less money to retire.  Depends on his allocation, 
could be between 25 percent less to 75 percent.  What is he going to do?  

	CHARLIE ROSE:  I don’t know.  Tell me.  

	NASSIM NICHOLAS TALEB:  He is not going to buy stocks.  

	CHARLIE ROSE:  What is he going to do?  

	NASSIM NICHOLAS TALEB:  So it is sort of like that Ponzi scheme of 
buying stocks is over.  All right?

	CHARLIE ROSE:  So -- you’re right.  What is he going to do?  

	NASSIM NICHOLAS TALEB:  He needs -- doesn’t he need cash...

	CHARLIE ROSE:  Yes.

	NASSIM NICHOLAS TALEB:  ... to pay for his retirement? 

	CHARLIE ROSE:  His rent and his food... 

	NASSIM NICHOLAS TALEB:  His whatever.  His rent and his cigars or 
whatever -- he has to sell.  He has to sell stocks to buy cigars.  

	CHARLIE ROSE:  Yes.  

	NASSIM NICHOLAS TALEB:  OK.  So this person has to sell.  So now we 
have inventory to go.  

	CHARLIE ROSE:  So now you are evaporating savings.  

	NASSIM NICHOLAS TALEB:  And who is going to buy?  

	CHARLIE ROSE:  Who?  

	NASSIM NICHOLAS TALEB:  I don’t know.  Not me.  I mean, I don’t know 
if you heard, you have the intention of buying stocks, there’s no -- people 
don’t have money.  So pension funds are suffering.  University endowments 
are suffering.  Everybody is suffering. 

	Now I tell people, if the system is so fragile that everybody is 
hoping for a rise, all right, the only solution is for society not to 
depend on asset values anymore.  So capitalism II will be some kind of 
independence from asset values.  To achieve that state of capitalism II, 
you need a huge amount of deleveraging, and unfortunately a lot of selling 
of securities.

	To reach capitalism II, which will be a society that is more stable -- 
we are in a complex environment...  

	CHARLIE ROSE:  Define capitalism II for me.  

	NASSIM NICHOLAS TALEB:  Banks become utility companies.  A lot less 
debt.  Less speculation in asset values, all right?  You make fewer -- a 
barber, you make your money shaving people and cutting hair and so on, and 
talking to them, rather than money in the stock market.  Or if you’re a 
dentist, dentists used to make money in dentistry, and then later on they 
started making money in investments.  You go back to making money in 
dentistry.  

	So we’re seeing people reverting to old habits.  And of course that 
can be achieved with a decrease of the allocation to assets, unfortunately.  

	Stocks -- there is no reason for stocks not to be much cheaper than 
they are today.  

	CHARLIE ROSE:  So what is going to happen to commodity prices, 
especially oil?  

	NASSIM NICHOLAS TALEB:  I don’t know, but I know that we are going 
have massive deflation.  The overhang of debt, massive deflation.  Debt 
needs to be reduced.  And I think Paulson seems to be doing a good job, 
particularly that they were part of the cause of what happened, you know, 
it is quite commendable.  

	CHARLIE ROSE:  All right.  This book is called "The Black Swan: The 
Impact of the Highly Improbable."  Nassim Nicholas Taleb.  Thank you again.  
Great to have you back.  

	NASSIM NICHOLAS TALEB:  Thank you for inviting me.  Thanks a lot.  
Thank you.

	CHARLIE ROSE:  Pleasure.  Thank you.  





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