Bloomberg has two interesting interviews, December 16, 2010 Nouriel Roubini Interview on Economy and December 17, 2010 Taleb Interview on U.S. Economy, New Book.
In the Roubini interview, one of the key explanations by Nouriel Roubini is the following:
We need the fiscal austerity because otherwise there is a fiscal train wreck but unfortunately in the short run raising taxes and cutting spending makes the recession worse. It makes a vicious circle of deflation and recession. Same things for the structural reforms. You have to fire workers, you have to close down firms and move resources to the other sector in the short run that is deflationary. And if you don’t have growth you have two problems. One is social and political, the backlash against it – revolts, demonstrations, strikes, free governments falling. And the other one is economic. You have to stabilize debt and deficit in the private and public sector as a share of GDP, but if GDP keeps on falling stabilizing those things becomes mission impossible. So you have to restore economic growth, because without it the condition for doing these things is going to fail.
It would be easy for someone listening to the interview to take away the lessons of his long term prescriptions without remembering what is needed to get past the short run problems. If you take only the second prescription without first taking the short run prescription, you are doomed to failure as he says in the above quote.
What you get out of Taleb requires more interpretation and filling in the gaps on the listeners part. For that reason, there is less practical advice in the Taleb interview. If you have the knowledge to fill in those gaps, you might get more out of Taleb than I have hinted at here.
To understand the significance of the title of Taleb’s new book, The Bed Of Procrustes: Philosophical and Practical Aphorisms, it helps to have the explanation of Procrustes from WikiPedia.
In the Greek myth, Procrustes was a son of Poseidon with a stronghold on Mount Korydallos, on the sacred way between Athens and Eleusis. There, he had an iron bed in which he invited every passer-by to spend the night, and where he set to work on them with his smith’s hammer, to stretch them to fit. In later tellings, if the guest proved too tall, Procrustes would amputate the excess length; nobody ever fit the bed exactly because secretly Procrustes had two beds. Procrustes continued his reign of terror until he was captured by Theseus, travelling to Athens along the sacred way, who “fitted” Procrustes to his own bed:
“He killed Damastes, surnamed Procrustes, by compelling him to make his own body fit his bed, as he had been wont to do with those of strangers. And he did this in imitation of Heracles. For that hero punished those who offered him violence in the manner in which they had plotted to serve him.”
Killing Procrustes was the last adventure of Theseus on his journey from Troezen to Athens.
If Roubini and Taleb spoke more slowly and put in all the words in their sentences, it might be easier for people to understand all the nuances of what they are saying. To get the Roubini quote above, I replayed the segment of the interview many times to transcribe his words. Few people will have the time or patience to do that. More’s the pity. (Perhaps, as per Taleb’s book excerpts, Taleb would call me a nerd for trying to explain.)
I was going back to Bloomberg to find the interview with Mario Gabelli to post here in order to demonstrate my even handedness (fair and balanced) when I stumbled across this video. It may serve a purpose similar to the Gabelli interview.
November 12, 2010 (Bloomberg) Taleb Interview on Bernanke, QE.
The interview is introduced by Erik Schatzker on Bloomberg Television’s “Inside Track,”
The ink was barely dry on the FED statement last week announcing QE2 when a distressed email lit up my inbox “Something needs to be done about Bernanke” and it was from none other than Nassim Taleb.
I am having a devil of a time trying to reconcile what he is saying with my preconceived notions. He keeps going in and out of focus in my mind. I think what he says at the end of the interview does bring him back into focus without having to cut off his head to fit him into my Procrustean bed.