The Tough Times - Taleb's Thoughts on the Coming Depression

Tuesday night, on the Jim Lehrer Newshour, the economic correspondent interviewed Nassim Nicholas Taleb. Taleb, author of the book The Black Swan and an investment adviser who has profited greatly off of the crash because he successfully predicted it. The thing about Taleb is that he seems genuinely concerned about the future economic state of the world.

Here are some of the best quotes from the interview.

The banking system, the way we have it, is a monstrous giant built on feet of clay. And if that topples, we're gone. Never in the history of the world have we faced so much complexity combined with so much incompetence and understanding of its properties.


The banking system, the way we have it, is a monstrous giant built on feet of clay. And if that topples, we're gone. Never in the history of the world have we faced so much complexity combined with so much incompetence and understanding of its properties...that consolidation is what's putting us at risk, because we are -- when one bank, large bank makes a mistake, OK, it's 10 times worse than a small bank making a mistake.


Now you understand why I'm worried. I hope I'm wrong. I wake up every morning -- actually, I don't wake up every morning now. I start to wake up at night the last couple of weeks hoping that I'm wrong, begging to be wrong. I think that we may be experiencing something that is vastly worse than we think it is...Of all the books you read on globalization, they talk about efficiency, all that stuff. They don't get the point. The network effect of that globalization, OK, means that a shock in the system can have much larger consequences.


I don't know if we're entering the most difficult period since -- not since the Great Depression, since the American Revolution.

When faced with a depression like the Great Depression, or something worse like Taleb predicts, I wonder how we will survive it. I have heard that the Depression was inconsequential out here amidst the fields of maize where I live, but that was in another time. Now, because of technology and globalization, everyone in the world is more connected with one another. The farmers now raise food that is good for only one thing, making corn syrup. It has almost zero nutritional value. Maybe the wheat and soy beans could sustain us if we were able to continue farming. The farming requires oil from the Middle East to run these giant combines and trucks that send the food to markets around the world. Our personal jobs are all in the surrounding cities that we also have to travel to. There is nothing self-sustainable about our lifestyle except for the artesian wells in the fields around our homes.

Yesterday, I took the scenic route home from Fort Wayne and traveled the backroads through Amish country. I doubt the Amish, with their horses to raise crops and solar and wind power to run the electricity in their barns, will see much of a setback from a depression. They are used to being self-sufficient. They have become more connected in recent years as I see them shopping in Meijer and Walmart, but their strings of connectedness are thin compared to the rest of us.

The current situation worries me at times, but then I have to check myself. Worry doesn't do any good if it does not spur us on to action. If times get real tough, all I want is for my Lindsay and I to be able to provide our children with food, shelter and warmth, adequate health care, clothing, and a loving environment. If we focused on just those things now. And who knows, maybe a depression will make us a little less connected around the world and a little more connected with our neighbors. Maybe we will be happier after all.

All of this makes me focus on another quote.

Therefore I tell you, do not worry about your life, what you will eat or drink; or about your body, what you will wear. Is not life more important than food, and the body more important than clothes? Look at the birds of the air; they do not sow or reap or store away in barns, and yet your heavenly Father feeds them. Are you not much more valuable than they? Who of you by worrying can add a single hour to his life?

And why do you worry about clothes? See how the lilies of the field grow. They do not labor or spin. Yet I tell you that not even Solomon in all his splendor was dressed like one of these. If that is how God clothes the grass of the field, which is here today and tomorrow is thrown into the fire, will he not much more clothe you, O you of little faith? So do not worry, saying, 'What shall we eat?' or 'What shall we drink?' or 'What shall we wear?' For the pagans run after all these things, and your heavenly Father knows that you need them. But seek first his kingdom and his righteousness, and all these things will be given to you as well. Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own.