Published: April 7 2009 20:02 | Last updated: April 7 2009 20:02
1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest.
2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.
3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess. Instead, find the smart people whose hands are clean.
Read on...
Peacenik has mentioned Black Swan events before. Highly improbable events with huge impacts. Like the collapse of capitalism. Like the collapse of society. The world is now witnessing the consequences of the biggest black swan event in history. Historians will name it in the future. Is it possible to black swan-proof the world.? Probably not. Does it make sense to plan for a black swan event? Probably not. But read Taleb's list and start thinking about black swan events. Past, present and future. Here's chapter one of Taleb's book The Black Swan.
2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.
3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess. Instead, find the smart people whose hands are clean.
Read on...
Peacenik has mentioned Black Swan events before. Highly improbable events with huge impacts. Like the collapse of capitalism. Like the collapse of society. The world is now witnessing the consequences of the biggest black swan event in history. Historians will name it in the future. Is it possible to black swan-proof the world.? Probably not. Does it make sense to plan for a black swan event? Probably not. But read Taleb's list and start thinking about black swan events. Past, present and future. Here's chapter one of Taleb's book The Black Swan.
