Skip to main content

Taleb tries not to say "I told you so"

In the dead slot of the BBC Radio 4's Today programme, after 8.45 when everyone is arriving at work, there are often interesting debates about the issues of the day.

Today Nassim Nicholas Taleb was one of the guests and, as he has done before, he spoke out about the systemic risks that bankers did not realise that they were undertaking.

He also made the point that in the 1982 Emerging markets crash the Bankers lost all the money that they ever made, and then they did it again in the 1991 Savings and Loans crash. In other words, most of the banking system has not, in the long term, been a profitable business. He added that with each successive crash, risk has become concentrated in a smaller and smaller number of banks. As a result the problems have grown larger.

The answer is clear- if not simple- the ecology of the global banking system needs to change and become more diversified. Single risk should not be concentrated in the system. Diversity is critical in order to reduce the concentration of risk.

The problem is that the regulators are now simply trying to cope with the crisis that is happening now- they are not focusing on creating a more diversified ecology of banks- indeed, far from it. The primary result of the crisis in the UK has been the concentration of ownership of bank assets into only six super-banks. This, of course presupposes that size alone is the biggest guarantee against failure, whereas the loss of Lehman, Merill, etc. shows that this is certainly not the case.

The fact is, that in trying to address the problems of today, the state is now creating a regulatory environment which is likely to concentrate systemic risk still further. In the way the state is dealing with the crisis of 20o8, they are creating the conditions for a still bigger crisis in 2018 or so. This can not be said to be even a Talebian "Black Swan"- it is actually quite easy to forecast.

Listen again to Taleb's words of wisdom (and Evan Davis' continuing mispronunciation of his name) on the Today website at 08.45 on the running order.

Comments

Newmania said…
Interesting to see the European banks in an even worse state than the US . I am not at all convinced our system is secure C.It is rumoured that a household name insurer is about to go. This has a very long way to go

Popular posts from this blog

Concert and Blues

Tallinn is full tonight... Big concerts on at the Song field The Weeknd and Bonnie Tyler (!). The place is buzzing and some sixty thousand concert goers have booked every bed for thirty miles around Tallinn. It should be a busy high summer, but it isn´t. Tourism is down sharply overall. Only 70 cruise ships calling this season, versus over 300 before Ukraine. Since no one goes to St Pete, demand has fallen, and of course people think that Estonia is not safe. We are tired. The economy is still under big pressure, and the fall of tourism is a significant part of that. The credit rating for Estonia has been downgraded as the government struggles with spending. The summer has been a little gloomy, and soon the long and slow autumn will drift into the dark of the year. Yesterday I met with more refugees: the usual horrible stories, the usual tears. I try to make myself immune, but I can´t. These people are wounded in spirit, carrying their grief in a terrible cradling. I try to project hop

Media misdirection

In the small print of the UK budget we find that the Chancellor of the Exchequer (the British Finance Minister) has allocated a further 15 billion Pounds to the funding for the UK track and trace system. This means that the cost of the UK´s track and trace system is now 37 billion Pounds.  That is approximately €43 billion or US$51 billion, which is to say that it is amount of money greater than the national GDP of over 110 countries, or if you prefer, it is roughly the same number as the combined GDP of the 34 smallest economies of the planet.  As at December 2020, 70% of the contracts for the track and trace system were awarded by the Conservative government without a competitive tender being made . The program is overseen by Dido Harding , who is not only a Conservative Life Peer, but the wife of a Conservative MP, John Penrose, and a contemporary of David Cameron and Boris Johnson at Oxford. Many of these untendered contracts have been given to companies that seem to have no notewo

Bournemouth absence

Although I had hoped to get down to the Liberal Democrat conference in Bournemouth this year, simple pressure of work has now made that impossible. I must admit to great disappointment. The last conference before the General Election was always likely to show a few fireworks, and indeed the conference has attracted more headlines than any other over the past three years. Some of these headlines show a significant change of course in terms of economic policy. Scepticism about the size of government expenditure has given way to concern and now it is clear that reducing government expenditure will need to be the most urgent priority of the next government. So far it has been the Liberal Democrats that have made the running, and although the Conservatives are now belatedly recognising that cuts will be required they continue to fail to provide even the slightest detail as to what they think should guide their decisions in this area. This political cowardice means that we are expected to ch