Worse Case Scenarios

Predicting Crisis: Dr. Doom & the Black Swan!

Ya gotta watch this! Here we have a bunch CNBC talking heads — need I say, clowns? — firing stock-tip questions at two heavyweight economists who are trying to explain to the talking heads the nature of reality! Reality: the world is on the threshold of a total financial collapse, and you ask for stock tips? Sheeesh!

Nouriel Roubini, Dr. Doom: The recession is in danger of becoming L-shaped, rather than U-shaped, meaning it stays a recession for a loong time. Even if we do everything right, i.e., monetary easing, fiscal stimulus, fixing banks, we could still end up with the L-shape. Stock tips? Cash is king!

Nassim Taleb, The Black Swan: People who got us into this mess are still around; they should be thrown out and replaced by people like Nouriel who saw the crisis coming. Stock tips? 100% to 200% in cash!

Go HERE to watch this amazing video.

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  1. Michael’s avatar

    I agree with them both (or they me) Keynesian mythology and American imperialism rather than any semblance of ‘Free Market’ Capitalism brought us to this place and a continued reliance on such failed policies that we’ve been following for nearly 80 years now will not extricate us from this hole.

    While they rightly believe that the President’s plan will not probably work, they also advocate the more extreme position of Nationalisation of the banks. The libertarian in me just can’t see how placing the Banks in total control of a Government who didn’t see this coming and was outright complicit in building the current burst bubble with the likes of Fannie and Freddie and the Community Reinvestment Act (on Clinton’s watch no less…in order to stave off the burst bubble of the Dot Com implosion) is somehow going to help.

    They both warn of inflation, but inflation will be a SERIOUS risk if we allow the Fed to simply have the Treasury print more money in order to come up with the 3 Trillion that Geithner mentioned today.

    I agree this is a good video, but I think it makes more my point than yours.

  2. Mardé’s avatar

    Oh, hey, I don’t want to keep arguing with you, Michael. But neither one of them said Keynesian mythology and American imperialism brought us to this place. The policies didn’t start 80 years ago! They never said that. They implied that the people in power now got it started by creating those risky securities, which is certainly true. In my view, it started with Reagan and the deregulation craze. And they didn’t say the President’s plan would not work. Nouriel gave exactly the President’s plan and assumed that that had to be done, but that it might not work because of the seriousness of the situation, the inherent slowness of getting anything done in our democracy, or because of mistakes. I didn’t hear them say anything about inflation either. See, I can read things into what they said too! 😉 😆

  3. Josh’s avatar

    I’m so sick of the government trying to bail us out of the same problems they get us into. If they would just stop spending, let people keep their income instead of taxing them to death, and let free market principles take over, everything would sort itself out in the long run.

  4. Mardé’s avatar

    Many feel it’s the free market that got us into this mess and that the free market suffers from lack of regulation.

  5. Michael’s avatar

    I understand why many feel this way, but they are confusing an Oligarchical Market in which the Corporations have purchased influence and protection of their puppets in Government for a Free Market.

    A truly Free Market, regulates itself. Economics 101 teaches us that we will always end up with a surplus of whatever we subsidise. (If you pay a farmer a guaranteed fee to grow GMO corn and not to organic broccoli, she’s going to grow GMO corn.) The Profit Motive is the ONE Law that all Corporations must obey. When we subsidise Market Manipulation (by bailing out Corporations that acted negligently with the responsibilities that they were entrusted with and those which refuse to adapt to the changing realities of the Market) we are ensuring that we’ll have more of the same behaviour from like Corporations in the future.

    If CEOs, CFOs and reckless Boards of Directors can rely on the our grandchildren’s grandchildren to pay the costs of failure and they simply walk away unscathed (and keep their bonuses) after over leveraging their Corporations and gambling far against the odds with complicated monetary instruments built on nothing but a promise, that they don’t have any chance of paying for should the house of cards collapse, then we’ll continue to have such bubbles burst cycle after cycle to our detriment.

  6. Mardé’s avatar

    The many who feel this way I refer to are people like Roubini, Soros, Krugman, Stiglitz, and others who predicted that the collapse of housing would bring about collapse of the market in general and a recession. The reason had to due with allowing risky derivative instruments. If these had been regulated the collapse of housing would not have had such a profound effect. It’s true those in government, including Greenspan himself and Robert Rubin, allowed these instruments and didn’t foresee the danger. Perhaps they were puppets of corporations but I’m sure if they had it to do over again they would have advocated tighter controls on the free market in the sense that these dangerous instruments (CDOs and other structured credit products) should be under tight control or not allowed. Greenspan at least acknowledges this. These same people I refer to above — including also the National Assoc. of Manufacturers, U.S. Chamber of Commerce, and at least four Republican governors — also all favor government action now in the form of stimulus to provide jobs (private enterprise can’t do it now), help for the unemployed, etc., as a way of at least relieving the pain and helping the economy to turn around. The world is obviously in a complex situation here and I come down on the side of pragmatism instead of ideology.

  7. Online Writing’s avatar

    I don’t know, this is a tough call. While it’s safest to have your money in cash, this type of stock market is a great opportunity to make a ton of money once the economy rebounds. Frankly, while it might not, if it doesn’t and the market stays this way, then we’re all in a lot worse position anyway!

  8. Mardé’s avatar

    Obama threw only crumbs at Wall Street in what I thought was a great speech last night. He was talking “beyond the beltway” to middle class Americans. Health care should be our number one priority.


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