Nassim Taleb: "The Government Debt Is Becoming A Pure Ponzi Scheme"

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Thu, 07/29/2010 - 09:50 | 493929 Misean
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"is becoming"  heh!  Like the "current recovery"..."A little bit pregnant"...the "US becoming a police state"...

Thu, 07/29/2010 - 10:02 | 493954 MarketTruth
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100% agree. And the 'becoming' as in the article's title is a joke per se (with all due respect) as Social Security and other line items are PURE PONZI schemes at this point. 

Thu, 07/29/2010 - 10:30 | 494016 Whizbang
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Well, the 'becoming' part refers to the fact that the federal government is now completely funded by debt issuance, the tax reciepts are just a way to remind the tax payer who works for who. The sad thing is that right now they can't stop. They need to keep expanding the money supply to keep the deflationary spiral we are in from turning into a crash. Very sad.

Thu, 07/29/2010 - 11:47 | 494189 MarketTruth
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Agreed, yet as always with such schemes they eventually run out of other people's money. The USA is there now and so the Fed is just massively printing up new money from thin air. Since raising taxes would kill the economy plus never really pay 100% for the government debt, more printing continues unabated and at a higher rate/quantity.

Thu, 07/29/2010 - 14:44 | 494562 ElvisDog
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There is no evidence that the "Fed is just massively printing up new money". What statistics are you looking at? When I look at M2, M3, total credit outstanding, all of these measures are falling. And for the most part the Fed does not "print money". What the Fed mostly does is issue buy and sell debt. They may be issuing a lot of new debt, but it's clear to me anyway that the new debt created is less than the old debt being destroyed.

Thu, 07/29/2010 - 14:53 | 494594 jd2iv987
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Thu, 07/29/2010 - 20:29 | 495325 hedgeless_horseman
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Look at M3?  Hah!  Inconceivable, you twit!  The U.S. central bank no longer collects or publishes this most-inclusive measure of the growth of the U.S. money supply, although it will continue to publish narrower measures such as M1 and M2.

Thu, 07/29/2010 - 12:01 | 494222 aldousd
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the federal government is now completely funded by debt issuance, the tax reciepts are just a way to remind the tax payer who works for who.

Very good way to put it.

Thu, 07/29/2010 - 10:41 | 494039 bonddude
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"Peter Orszag you're a facsist pig"


Thu, 07/29/2010 - 12:58 | 494334 BlackBeard
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Heckler had a damn good voice too.

Thu, 07/29/2010 - 14:20 | 494500 Pladizow
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"The studious examination of the past in the greatest of detail does not teach you much about the mind of history; it only gives you the illusion of understanding it." - Nassim Taleb.

Thu, 07/29/2010 - 19:36 | 495262 mitack
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Hey Pladizow, would you mind changing your avatar ?

I like it so much on a subconscious level, that my eyes

stop on it for just 1 or 2(max) HFT trades time, but then

I have a hard time reading your comments past my erection...



Thu, 07/29/2010 - 09:51 | 493933 Oh regional Indian
Oh regional Indian's picture

It's not just a ponzi.

It's a ponzi so big that now it is devouvering itself. When there is no one left, it will eat it's own tail, like it is already doing.

And Naseem, the Black Swan came and went, just that the effects have been supressed. It's been a couple of years actually. Maybe you were asleep. It was quick!

But, now, any moment, thar she blows!!!


Thu, 07/29/2010 - 09:53 | 493939 Cognitive Dissonance
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My next [book] is about beliefs, mostly. How we are suckers and how to live in a world we don't understand.

Let me make a few changes for you Nassim. There, that's better.

How we are willing suckers and how to live in denial of a world we don't want to understand.

Thu, 07/29/2010 - 12:14 | 494255 contrabandista13
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Early Cuyler...  


Thu, 07/29/2010 - 09:54 | 493940 Gully Foyle
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Secretary of State: We were thinking, what could be a bigger threat than aliens invading from space?
General Panzer: Ooh boy! Scare the shit out of everyone. Even me, sir!
U.S. President: Jesus, is this the best you could come up with? What about, ya know, international terrorism?
General Panzer: Well, sir, we're not going to re-open missile factories just to fight some creeps running around in exploding rental cars, are we, sir?

Thu, 07/29/2010 - 10:32 | 494019 Whizbang
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Climate change is the 'new' war as far as population control and government waste go. It will be the motivation to strip people of their money, rob them of their standard of living, and give more power to the looters that control them.

Thu, 07/29/2010 - 10:00 | 493949 aheady
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I heard somebody the other day call it "Ponzilla" lol

Thu, 07/29/2010 - 10:04 | 493952 Übermensch
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Because governments can print more of their own currency

That is incorrect.

Thu, 07/29/2010 - 11:09 | 494098 greyghost
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Thu, 07/29/2010 - 10:04 | 493959 trav7777
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I landed a couple hours early once...was a flight from SFO to EWR, we surfed the jetstream.  Ground speed in excess of 700mph

Thu, 07/29/2010 - 12:36 | 494297's picture

I landed a couple hours early once...


Lots of folks have landed early simply by ending their trip in an ocean or on a mountainside rather than at the scheduled destination.

Thu, 07/29/2010 - 14:22 | 494507 New_Meat
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The Zen thing: how can you drop an egg 3 feet and have it not break? - Ned

Thu, 07/29/2010 - 21:08 | 495370 KevinB
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Drop it from four feet.

Thu, 07/29/2010 - 10:04 | 493961 TooBearish
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Tell it to Billy Gross who claims 1Bil a month in in flows and probably controls 1trillion+ of govt debt.....

Thu, 07/29/2010 - 11:47 | 494188 NumberNone
NumberNone's picture

Are we at a point where Pimco controls so much debt they can start dictating government policy?  Is this why his bitch-boy Neel Trashkari made he statements about entitlements?

Tough shit grandma...Bill Gross says we gotta cut your check.  

Thu, 07/29/2010 - 10:09 | 493979 RicktheDick
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I am a big fan of Nassim, but it is somewhat of a copout to suggest that people should rely on capital markets only for "entertainment value." The general public is beholden to Wall St in some way shape or form. Whether you extract the majority of your wealth from your own business or not, all businesses need to rely on financing from banks at some point. He downplays the inter-connections between entrepreneurship, investment, and financial speculation. I think the average person would love to not to have to rely on Wall St for a return on their savings, but your options are fairly scarce and limited. Whether it's from lack of expertise or barriers to entry, the investment vehicles that are available to him are not the norm for 99.9% of the population. Your only option to completely avoid systemic financial and geo-political market risk is to stuff your money in a mattress and pray that inflation is 0% into perpetuity... Good luck with that.    

Thu, 07/29/2010 - 10:38 | 494032 umop episdn
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I often get things wrong, especially about finances...but if you read this site long enough you will learn how to protect your savings without having to rely on Wall Street, Da Boyz, or The Fed...

Silver, female dogz!

Thu, 07/29/2010 - 10:50 | 494051 RicktheDick
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Like? Enlighten me... Precious metals? Anything that can have short or long term volatile price swings does not constitute wealth preservation. Wealth preservation is a myth in this market. Don't get me wrong, I like gold and other metals over the long term, but don't kid yourself into thinking there isn't inherent risk involved in owning them.   

Thu, 07/29/2010 - 11:00 | 494079 SilverIsKing
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What are the risks in owning them other than someone taking your life to steal them from you?

Thu, 07/29/2010 - 11:07 | 494095 RicktheDick
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Time... Do you think gold can't retrace 50% from where it is and stay there for an extended period of time? If it does, I'll be buying hand over fist don't get me wrong, but I can afford to wait for that snap back. Someone older, approaching retirement can't afford to have a substantial amount of his net worth wiped out and take solace in the fact that on a long enough time line he'll get it all back and then some... And that's to say nothing about what the federal government is capable of as far as legislation against private gold ownership. 

Thu, 07/29/2010 - 14:19 | 494497 Calculated_Risk
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Ideally a 50% retracement would mean a shrink in the money supply. A shrink

in the money supply would mean the $ is more valuable. Which should buy you the same

goods and services as the +50%.

PMs are a buoy in a sea of fiat.


Thu, 07/29/2010 - 14:59 | 494609 RicktheDick
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But that would imply a perfect correlation of 1 between the money supply and gold. That's not the case. 

Thu, 07/29/2010 - 17:31 | 495012 Calculated_Risk
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Hence the word "ideally".

Strip out all the paper shorts, leverage, leases, leases on leases derived from leases...

trying to find the "real" price on anything controlled by the banksters

is like looking through a mud prism..

edit: Most gold bugs, including myself enjoy the fact there is no third party

risk of default, little downside risk, and a way to opt out of the bullshit theft

and games.

Thu, 07/29/2010 - 18:12 | 495133 RockyRacoon
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Rick, Rick, Rick, you are fiddling while Rome burns.  Get on board!

Thu, 07/29/2010 - 12:15 | 494256 Hansel
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Anything that can have short or long term volatile price swings does not constitute wealth preservation.

You just described everything.  Good luck finding your holy grail of wealth preservation.

Thu, 07/29/2010 - 12:32 | 494289 RicktheDick
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My point exactly!

Thu, 07/29/2010 - 14:08 | 494475 Hansel
Hansel's picture

I don't think you really have a point.  You think not playing the markets is a copout, gold is risky, and money in a matress, praying for no inflation, is as close to no risk as you can get.  I think you are trying to justify playing the markets, thinking you have no choice.

Thu, 07/29/2010 - 14:51 | 494556 RicktheDick
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I am not trying to justify playing the markets, I am illustrating the point that no one is devoid of the implications of market speculation. The idea that we can completely disassociate ourselves from geo-political and macro-economic risk is a myth. You can lesson the severity of your exposure, but whether its direct or in-direct, the actions and policies of government and the financial markets play a roll in your life and financial well-being. To assume otherwise is to either mis-calculate or altogether ignore risk. So Nassim's point that if "your a dentist, just be a dentist" is a cop out. It's not that simple.    

Thu, 07/29/2010 - 14:23 | 494513 Sick Boy
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There are no sure fire wealth preservation strategies, there is only impermanence.

Thu, 07/29/2010 - 15:01 | 494616 PhattyBuoy
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What a fucking moron!

How many times do you have to get burned by these Wall St. cocksuckers?

Many should be in jail right now, and you want to give them more of your money ... sheeple led to the slaughter AGAIN!


Thu, 07/29/2010 - 15:10 | 494650 RicktheDick
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Who the fuck are you talking to? Who's a moron? No one in this conversation is suggesting giving your money to Wall St, but if you had half a fuckin brain you would have realized that. Go back under your rock unless you have something coherent and credible to say.  

Thu, 07/29/2010 - 18:14 | 495136 RockyRacoon
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price swings

...has nothing to do with value.   Get with the program.

Thu, 07/29/2010 - 18:33 | 495161 reave the sheeple
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Like? Enlighten me... Precious metals? Anything that can have short or long term volatile price swings does not constitute wealth preservation. Wealth preservation is a myth in this market. Don't get me wrong, I like gold and other metals over the long term, but don't kid yourself into thinking there isn't inherent risk involved in owning them.  

Here's a bit of enlightenment: stop thinking in dollar terms, and try thinking in purchasing power terms.  Wealth preservation still exists, but if you insist on looking through dollar-tinted glasses, you are going to just see the volatility of dollars superimposed on everything else.  (hint: read Roy Jastram's The Golden Constant)

There are only two certainties in life, so saying that anything has inherent risk qualifies as a common sense faux pas.

Thu, 07/29/2010 - 10:48 | 494053 kaiserhoff
kaiserhoff's picture

Good points all around.  Nassim is an original thinker, but has limited experience in small business and hands on problems.  He doesn't seem to understand how and why businesses are formed and how much employment and productivity depends on confidence in the future.

For those who liked the Black Swan, his first book, Fooled by Randomness is a small masterpiece of philosophy and insight.  One of my all time favorites along with The Territorial Imperative, and Wealth of Nations.  Books everyone talks about but few read. 


Thu, 07/29/2010 - 11:01 | 494081 RicktheDick
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I know everyone loves to talk up "The Black Swan," but "Fooled by Randomness" is a much better book. 

Thu, 07/29/2010 - 11:33 | 494161 DoChenRollingBearing
DoChenRollingBearing's picture

Rick, both books are indeed fantastic.  The world is truly a very non-linear place.

Normal distributions are for suckers.


@ above poster comments on gold.  Yes, there are big price movements, but I think gold and PMs are good for more people than he thinks.  You can pass along your gold to your children, for example.  And buy as prices go down.

Of course, I am no expert, just ask Muir!

Thu, 07/29/2010 - 11:48 | 494192 RicktheDick
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I agree with that. If you put it in the context of inter-generational transfer of wealth, gold is king, as is any other finite commodity. 

Thu, 07/29/2010 - 23:42 | 495531 Moneygrove
Moneygrove's picture

I am buying platinum too !!!!

Thu, 07/29/2010 - 13:55 | 494447 turds in the pu...
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CFG was an eminent douchebag

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