Daily Archives: October 4, 2013

Dr. Nassim Taleb: “My Friend Nouriel Roubini Has A Weakness, He Likes Bernanke Too Much”

I found this CNBC segment from 2009, Dr. Nassim Taleb: “My Friend Nouriel Roubini Has A Weakness, He Likes Bernanke Too Much”.

Very special CNBC Squawk Box this morning, with Dr. Nouriel Roubini as the guest host and Black Swan, Dr. Nassim Taleb as a segment guest.  We will have more from just Roubini later, but this is by far the best clip from the morning group, as it includes interplay and commentary from both. Taleb is difficult to transcribe because virtually every sentence is meaningful.

A conversation between Taleb and Roubini  is like a dream to me.  I won’t give you the dream adjective that comes to mind.

I tend to side with Roubini in this segment. Taleb is too much of an absolutist. While he is right about the mistakes of Bernanke, and Roubini agrees, someone who didn’t learn anything from his mistakes would have been much worse than Bernanke as the crisis unfolded. This is not to say that there couldn’t have been somebody better.

Of course what would have been better would have been a government to step in with the right fiscal policies rather than to force the Fed to use its inappropriate tools as best it could to solve the problems the rest of the government was incapable of handling.

Bernanke worked with the hand he was dealt better than a Greenspan would have. That may be faint praise, but it is praise nevertheless.

Nassim Taleb’s Cure for Fragility

Harvard Business Review has the book review Nassim Taleb’s Cure for Fragility by Larry Prusak.

What I can say confidently is that Taleb is writing original stuff—not only within the management space but for readers of any literature—and that you will learn more about more things from this book and be challenged in more ways than by any other book you have read this year. Trust me on this.
Taleb actually has something new to say that is worth pondering. And in a world where large-scale, unpredictable events are the norm, pondering it is important. You can count on chaos, and work to make your organization antifragile. Or you can keep planning for the probable. If you choose the latter course, then brace yourself for the next black swan — and pray that it isn’t your swan song

I like this review of the book.  Although I think Prusak makes a few minor errors in assessing whom Taleb likes and whom he doesn’t like, by and large I think he describes the value of the book quite well.

I have to admit that both Taleb and the reviewer are in sync with some (and I emphasize some) of my preconceived notions.  Taleb does challenge some of my preconceived notions, too.

2013/10/04 8:20 PM

OK, I have spoken some more to RichardH about Taleb, Black, Scholes, and Merton.

Perhaps I just don’t know enough to make a valid judgment. Richard is going to give me a little help in trying to separate fact from fiction.

Ultimately, I think the lesson about life and economics may be the same as Taleb is trying to teach, but Taleb’s opinion of who gets the cheers and who does not may be highly faulty.

Questioning Keynes

Since I have been reading the Antifragile book by Taleb lately, I have been wondering what he would say about Keynes’ economic theory.

I found a 2010 CNN article Questioning Keynes.

“Keynes was too smart to make a mistake — the problem is we live in a different environment,” said Nassim Taleb, author of The Black Swan, which looks at the impacts of improbable events. Taleb added that with debt levels as high and problematic as they are in parts of Europe and the United States, accurate forecasting on indicators such as unemployment rates become more crucial.

One of the parts of the “different environment” may be that the economic collapse came after the Republican administrations had run a vicious anti-Keynesian policy of running up huge deficits at exactly the point in the economy when Keynesian theory said you should be paying down the debt.  Doesn’t anybody remember the mantra, “You know how to spend your money better than the government does”? This was used to justify giving the surplus back to the tax payers rather than using it to pay down the debt incurred by the taxpayers.  The policy of giving taxes back to the tax payer lasted long after the surplus became a deficit.  The economy had gotten so used to huge deficits during boom times, that the size of the deficit that was needed to make a difference during the recession became unbelievably huge.

Maybe Keynes’ prediction error was in not predicting that fools like Reagan, Bush, and Bush would come along to so perfectly mistime the policies that he was advocating.  Of course Taleb was not saying that Keynes mispredicted, but what Taleb said did trigger my thought in the previous sentence.

See, RichardH, I don’t always agree with Taleb either.

Video Definition Of A Bully

If you might ever need to show a video that demonstrates how a bully behaves, book mark this video.

You might also use this video as a visual definition of chutzpah. Blame one of the victims of your decisions for doing their job to carry out your decisions. Sounds like this will make its way into an upcoming Dilbert cartoon.

How GOP Extortion Is Rooted in Southern Slavery

Alternet has the Consortium News story How GOP Extortion Is Rooted in Southern Slavery by Robert Parry.

The Federalists despised the concept of states’ rights (as enshrined in the Articles of Confederation) and believed in centralizing power in the federal government, albeit with a system of checks and balances to restrain ill-advised decision-making, but with few other limits on what elected representatives could do for the nation’s well-being.

That is why – in both the Preamble and in Article I, Section 8 (the so-called “enumerated powers”) – the Framers included language giving Congress the authority to “provide for the common Defense and general Welfare of the United States” and “to make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers.”

As historian Jada Thacker  has written, “The Constitution was never intended to ‘provide limited government,’ and furthermore it did not do so. … This is not a matter of opinion, but of literacy. If we want to discover the truth about the scope of power granted to the federal government by the Constitution, all we have to do is read what it says.”

Given the malleable phrase “general Welfare” and the so-called “elastic clause” for passing all “necessary and proper” laws, Thacker notes that “the type, breadth and scope of federal legislation became unchained. … Taken together, these clauses – restated in the vernacular – flatly announce that ‘Congress can make any law it feels is necessary to provide for whatever it considers the general welfare of the country.’

As further proof to the point, my fractured High School learning about the Constitution tells me that the Bill of Rights (the first 10 amendments) was insisted upon by the states in order for the Constitution to be accepted.  The states (or the people) insisted that their individual rights be explicitly protected from the powers given to the Federal government in the main part of the Constitution.

Of course the book Lies My Teacher Told Me: Everything Your American History Textbook Got Wrong by James W. Loewen puts some doubt in my mind about what I learned in school about history.