Submitted by Taps Coogan on the 13th of May 2019 to The Sounding Line.

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Legendary trader, risk analyst, and author, Nassim Taleb, recently spoke with Bloomberg in a wide ranging interview. While he begins the interview with political considerations which we don’t focus on here at The Sounding Line, Taleb goes on to warn of rising government debt, the risk of inflation, and the need for a Paul Volcker like Fed Chairman.

 

Some excerpts from Nassim Taleb:

“… The job of the Federal Reserve should be minimum harm, not policies that may entail side effects. (Jerome Powell) gets that a lot better (than Alan Greenspan). Of course, he is not the great Paul Volcker, not yet, He hasn’t shown it yet…”

“I think that’s lunacy (Modern Monetary Theory). It’s a lot of risk taking, saying something may work. You’ve got to look at the consequences if it doesn’t work. Now we know that the consequences if that theory is wrong can be monstrous… It’s not a prudent policy to engage in things that may create hyperinflation, and once you have hyper inflation, you’ve got to get old Paul Volcker… and bring him back because without him we’d be in trouble now… The problem with inflation is it’s very non-linear. So, it’s like a ketchup bottle. Nothing comes out and then suddenly things jump out. So you have to worry about it.”

“I am more concerned about the general situation today than (by) talk of MMT because people realize it doesn’t make a lot of sense… We’re in a situation were we have record low unemployment, so they claim, plus what do we have? We have huge deficits. Explain to me, which one is wrong… unemployment or the deficit? In other words, the story is delivered by which one of the two? I think we have a problem, because… if we have a recession the deficit will explode and if we have an expansion, raising rates will… cripple the mechanism of growth… We already have north of $300 billion of just interest on previous debt at record low interest rates… So we are not in an enviable situation. This is why I am worried. I am worried mostly about deficits. Employment comes and goes. Deficits are very hard to control.”

“… We have a lot of debt, but debt has shifted from private to public, which is worse, because public debt doesn’t go away. Private debt you can always turn into equity or punish people, Public debt is generated, not be the people responsible for the debt, but by civil servants. Public debt is generated by people without skin in the game and goes out of control…”

There is much more to the interview, so enjoy it above.

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