Save capitalism from the banks - Nassim Taleb

Discussion in 'Economics' started by Thunderdog, Feb 9, 2009.

  1. To be fair, this item was posted by someone else in the Politics & Religion forum, which does not do it justice. And so, I decided to post it here, in Economics:

    Reuters Blogs
    James Saft
    James Saft’s blog
    January 30th, 2009

    Save capitalism from the banks - Nassim Taleb

    Nassim Nicholas Taleb, the author of “The Black Swan: The Impact of the Highly Improbable”, has a simple proposal to as he puts it, “save capitalism and free markets from the banks.”

    Nationalise the banks, limit the rewards to those who work in what he calls the “utility” part of the system and have a completely uninsured second leg that can take all the risks it wants and lose its shirt, he said in an interview in Davos at the World Economic Forum.

    “They rigged the game. We pay them for their profits, there is no clawback so their incentive is to hide the risk they are taking.”

    “Which is why eventually as someone who loves free markets, a total nationalisation of the part of the business that requires insurance and does clearing and payments needs to happen.”

    “I am angry with U.S. policy. What we had is exactly the opposite of socialism, they got TARP to pay their bonuses and to take more risk.”

    He describes his plan as Capitalism 2.0. It would have a barbell structure, with the insured utility-like part on one end and the free market bit with privatized risk on the other.

    He describes banking bonuses as asymmetric because the banker gets the upside but does not share in the liability which ultimately may be funded by taxpayers, as we have seen.

    Taleb, who as you may have noticed doesn’t mince words, is no fan of private equity.

    “Private equity has absolutely no reason to exist. The private equity holder has all the upside and the banks all the downside.” He’d have no objection to a system where private equity funds itself via hedge funds, so long as neither party had any recourse to government insurance.

    And a bit like an Old Testament prophet, Taleb is angry and wants those he thinks are responsible to suffer.

    “I want them poor and they deserve to be poor.You can’t have capitalism without punishment.”

    Oh, and another thing, he wants Bob Rubin, who trousered millions while chairman of Citigroup, to cough up.

    “I want Bob Rubin to return his $110 million dollars to the American taxpayer.”
  2. If wanted to do it justice, you should have moved it to Chit Chat.
  3. Really? Tell me what you don't like about it? Please be specific. Personally, I think it's food for thought and and an interesting starting point for a potentially meaningful discussion.
  4. Taleb is a genius-I don't use the term loosely-and T-Dog is correct-good article.

    Banks are nothing more than the de facto retail arm of the Fed with an FDIC backstop. They're ALREADY a quasi government institution. Allow investors, i.e. depositors a transparent appraisal of risk. Some folks want no risk-for them 3%. Others are ok with funding a strip mall-for them 11%. If anyhing that's an increased free market exercise than this crappy hybrid we're presently funding.

    Kind of ironic but wasn't Bob Rubin lionized by the Left as an example of how much better economic policy was under Clinton than Bush?
  5. I have met with the guy and had a chance to pick his brain. He is not only a GENIUS, he is a very delightful person. His views are clear and razor sharp! I always consider him "the best head" in our business. Listen very closely to what he has to say; usually he is bang on!
  6. hands down the best thinker in the world.
  7. Illum


    He is going to be on CNBC in a couple mins.
  8. The man is talking about nationalizing banks and you are wondering why I would post that comment? Insurance & guarantees by the government, oh boy.
    He makes no reference to the real issue, which is the monetary system. Or the fact that the economy of USA moves on paper, not real production.
    I read that blog and I sense that the author has little understanding of banking & its history. Or he is just shilling. My guess is that he is a shill, judging from his CNBC appearances & his background.

    The answer to the problem is obvious and has been obvious for decades. Can't keep prolonging the inevitable, it only makes it worse.

    Here is a fruitful exercise. Remove the name from the article and read it at face value. It is absurd.
    Learn how to think for yourself and stop letting "the experts" think for you. Whether Nassim Taleb is a genius or not, is not relevant, as the man comes from a connected family, which is the real cause of his success.
  9. Do you know exactly when?
  10. Where to begin?

    I don't think that Taleb presented his idea as a magic bullet to solve all problems. Rather, I think he chose to address one component of it. As for your aversion to nationalizing banks, did you actually read the article? It's about clarity and accountability. It is about correcting the perverted risk/reward arrangement currently in place. Please read Pabst's post again. He and I don't agree on a lot of things, but I think his post sums it up nicely.
    #10     Feb 9, 2009