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Re: Nassim Taleb: Ten principles for a Black Swan-proof world
I completely agree. People talk about how capitalism has failed. Well, no, it hasn't; what has failed is a system that has capitalist aspects and socialist aspects. We evolved a system where Big Government was captured by financial interests and used it to guarantee themselves. Capitalism means you get to take risks, you are not prevented by government from taking risks, but you yourself suffer the penalities of failure as well as the rewards of success. What we have is a system, as many have pointed out, where success is privatized and failure is socialized. That's not capitalism and the inevitable failure of such a stupid system is not a failure of capitalism.
IMHO, the real solution here is to let everything fail that would need a government bailout or guarantee to survive. There would be massive losses...and lessons deeply learned. The people who took risks would lose their money, which is how it should be. The problem is we have trained the citizenry to think there is such a thing as risk-free investing by doing things like guaranteeing banks via FDIC. We've also come to believe that government deficits don't matter...another lesson we're going to have to re-learn the hard way.
But I don't expect that the powers that be will let the failures fail. They will bail them out and bring down the whole system in the process, though the collapse may be delayed longer than it would be if the failures were allowed to fail now.
I agree that the flaw in Taleb's thinking is that government wise men will know how to properly write regulations that will allow the right amount of freedom while prohibiting the too-dangerous things, like hedge funds. All that will accomplish is the creation of entities that do the same things as hedge funds but using a different name.
The real solution is for everyone to learn the old dictum "buyer beware". There are no guarantees. There are no riskless investments. And you make it worse if you give power to government to try to create "riskless investments" by guaranteeing them with taxpayer dollars. What we need is a frugal, wary, worldly-wise population like our grandparents were after the Great Depression...not eager to part with a buck, not buying what snake-oil salesmen are selling, not willing to believe there's such a thing as a free lunch. There will still be bubbles but there's no reason a cautious person needs to be burned by bubbles if they have saved for a rainy day and if the government hasn't been given the power to steal their money in the guise of "sharing the wealth". And even if it has, there are always ways for a prudent, alert person to protect themselves, like the jews who left Germany when Hitler came to power.
Ultimately, the whole "wise government can guide us away from human folly" idea is in a bubble itself. People putting their trust in the government to fix these things is as foolish as people trusting a financial institution. Liberalism, which is in a sense a belief that government can perfect human nature, has in my opinion reached its bubble top with the election of Obama. It's downhill for the people of the West from here, and many believers in liberalism are going be in for a rude shock just like believers in Bernie Madoff were.
Originally posted by occdude
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IMHO, the real solution here is to let everything fail that would need a government bailout or guarantee to survive. There would be massive losses...and lessons deeply learned. The people who took risks would lose their money, which is how it should be. The problem is we have trained the citizenry to think there is such a thing as risk-free investing by doing things like guaranteeing banks via FDIC. We've also come to believe that government deficits don't matter...another lesson we're going to have to re-learn the hard way.
But I don't expect that the powers that be will let the failures fail. They will bail them out and bring down the whole system in the process, though the collapse may be delayed longer than it would be if the failures were allowed to fail now.
I agree that the flaw in Taleb's thinking is that government wise men will know how to properly write regulations that will allow the right amount of freedom while prohibiting the too-dangerous things, like hedge funds. All that will accomplish is the creation of entities that do the same things as hedge funds but using a different name.
The real solution is for everyone to learn the old dictum "buyer beware". There are no guarantees. There are no riskless investments. And you make it worse if you give power to government to try to create "riskless investments" by guaranteeing them with taxpayer dollars. What we need is a frugal, wary, worldly-wise population like our grandparents were after the Great Depression...not eager to part with a buck, not buying what snake-oil salesmen are selling, not willing to believe there's such a thing as a free lunch. There will still be bubbles but there's no reason a cautious person needs to be burned by bubbles if they have saved for a rainy day and if the government hasn't been given the power to steal their money in the guise of "sharing the wealth". And even if it has, there are always ways for a prudent, alert person to protect themselves, like the jews who left Germany when Hitler came to power.
Ultimately, the whole "wise government can guide us away from human folly" idea is in a bubble itself. People putting their trust in the government to fix these things is as foolish as people trusting a financial institution. Liberalism, which is in a sense a belief that government can perfect human nature, has in my opinion reached its bubble top with the election of Obama. It's downhill for the people of the West from here, and many believers in liberalism are going be in for a rude shock just like believers in Bernie Madoff were.
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