Jump to content
House Price Crash Forum
lowrentyieldmakessense(honest!)

Government Deficits Could Be The Next 'black Swan

Recommended Posts

no shit Nick

link

What are are potential sources of fragility or danger that you're keeping an eye on?

The massive one is government deficits. As an analogy: You often have planes landing two hours late. In some cases, when you have volcanos, you can land two or three weeks late. How often have you landed two hours early? Never. It's the same with deficits. The errors tend to go one way rather than the other. When I wrote The Black Swan, I realized there was a huge bias in the way people estimate deficits and make forecasts. Typically things costs more, which is chronic. Governments that try to shoot for a surplus hardly ever reach it.

The problem is getting runaway. It's becoming a pure Ponzi scheme. It's very nonlinear: You need more and more debt just to stay where you are. And what broke [convicted financier Bernard] Madoff is going to break governments. They need to find new suckers all the time. And unfortunately the world has run out of suckers.

You're saying that what is supposed to be the safest place to invest, government debt, is in some ways the most dangerous?

Unless you invest in your own home currency in very short-term Treasury bills. Because governments can print more of their own currency, the risk comes from a rise in interest rates rather than a government default. When you have hyperinflation, deficits, or debt problems, with short-term bills you can catch higher interest rates to compensate you for the inflation or whatever return you've missed.

I dont think the world has quite run out of suckers just yet

Share this post


Link to post
Share on other sites

I dont think the world has quite run out of suckers just yet

I would point out that 'planes frequently do arrive early, if the upper atmospheric winds are behind them. However, this will only ever happen if you are meeting someone at the airport, and they are running late, obviously, due to Conservation of Murphy effects.

Share this post


Link to post
Share on other sites

It's not a black swan if people can see it coming.

A black swan is a totally unexpected, unpredictable event for which no allowance can be made.

Like when that Icelandic volcano blew.

Share this post


Link to post
Share on other sites

It's not a black swan if people can see it coming.

A black swan is a totally unexpected, unpredictable event for which no allowance can be made.

Like when that Icelandic volcano blew.

Beat me to it.

This is more like a herd of elephants playing trombones while dressed in pink tutus and holding flashing neon signs saying 'we are going to stamp on you'.

Share this post


Link to post
Share on other sites
Guest spp

It's not a black swan if people can see it coming.

A black swan is a totally unexpected, unpredictable event for which no allowance can be made.

Like when that Icelandic volcano blew.

Depends whether or not you were duped by previous politicians. (Unexpected!)

Share this post


Link to post
Share on other sites

Out of interest how many actual "black swan" events were not predicted anyone?

Some lucky few, including Taleb himself, thought the market would crash in 1987 but I am sure no one predicted anything like a 22% decline in a single day. In that case it was the sheer magnitude of the event that was the black swan.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.