Nassim Taleb Vs Larry Summers On The Financial System: SALT

Nassim Taleb

Nassim Taleb is a former derivatives trader who became a philosophical essayist, and researcher in probability in 2006. Larry Summers is one of the most distinguished voices in America today on issues ranging from the global economy to education to the role of the United States in the world.

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The Shape of Things to Come: A Discussion on Global Fiscal Policy Challenges & Economic Realities

Lawrence H. Summers, Charles W. Eliot University Professor, Harvard University’s Kennedy School of Government & Director, White House National Economic Council (2009-2010)

Nassim Taleb, Author, “The Black Swan” & Distinguished Scientific Advisor, Universa Investments

Anthony Scaramucci, Managing Partner & Founder, SkyBridge Capital (Moderator)

Nassim Taleb, Lawrence Summers: Discussion on Global Fiscal Policy Challenges & Economic Realities

Below are some VERY informal notes on the debate between Taleb and Summers

Nassim Taleb and Larry Summers now speaking

The shape of things to come

LS- We are in better shape than 1934 and 2008 was just as bad if not worse than 1929

 

NT- we did not address the cancer in 2008, we only treated with pain meds

There is no skin in the game for banks/bankers

2010 was the biggest bonus pool ever

bankers are PAID to hide risk

the people who rose from 2008, were the ones that should have died

banks are bigger now than in 2008.

we did not take care of what caused 2008

 

LS- banks are now more capitalized than they have been in the past

 

NT– need to bring interest rates up

until we cure the cancer, the crisis’ become bigger and bigger

need to cut the systemic risk in the market and insulate the system

LS- trying to argue that people were hurt in the crisis

NT- not having it…shareholders of equity don’t count for being hurt. people should have gone to jail, not gotten paid and giant bonuses

 

NT- the govt just transferred debt onto tax payers

provided a stop-loss to bankers

banks should be utilies..they should not take any risk…that is not the role of banking…if you want to take risk, then give your money to a hedge fund

 

LS- trying to argue that Lehman and bear sterns weren’t banks, and they still failed (my comment: if Lehman, bear, and AIG weren’t holding all the counter party risk for the banks, then none of them would have failed.)  LS does not understand this

 

NT—  he is not saying don’t bailout…he is saying don’t let it get to that point

Have a list of those we will bail out and what we won’t bail out

moral hazard is still there

risk taking is still huge

skin in the game is not sufficient. it is NECESSARY!!

perfect society– punish those that fail
Really hard to follow….they just argued back and forth and LS could not figure out what NT wanted to do with society

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Sheeraz Raza
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