naked capitalism

Anonymous says:

I read Taleb’s ten principles for a Black Swan-proof world and ask why not?

They all make sense to me and I expect others can and should be added and then we need to implement it along with a new money system/supply that is distributed initially to all equitably (no exchange for existing dollars)…..if you are going to dream…

psychohistorian

Anonymous says:

Am I just dreaming, or is this, the trilogy of red, blue, green Mars played out here, on Terra, by Kim Stanley Robinson.

Skippy…please poke me with a pole and wake me up….not advised to make physical contact upon waking…old school thing.

Anonymous says:

the chimp article has some good points. It has given me some leads. Where did i put that meat loaf recipe.

Glen says:

Agree 101% with Taleb’s 10 points and I share your confidence Yves, along with the other bloggers here, that this will never see the light of day. I do slightly disagree however with wintermute that “we the people need saving from the excesses of our corporate and elected leaders.” In Australia, and most likely in other countries, we probably needed saving from ourselves just as much. In many a conversation, people would invariably slip into stream just how much their house was now worth or comparing their 20% vs. 22% super or asset returns. This all had to come from somewhere and at some point had to come to an end.

jh says:

My understanding is that a Black
Swan event is unpredictive. Taleb
makes good suggestions, but it seems
graft on old stock. Black swans do
not breed in known waterways.

Anonymous says:

Wintermute – Expressing confidence that Taleb’s list will not be implemented is not necessarily “cynicism”, it is rather a correct reading of the reality.

The root problem is not a flaw in democracy. The root problem is the deception that corrupts and prevents that democracy. Everyone does not get one vote, and disingenuously promising “freebies” to one group (so as to ultimately set it against another group), is a method of exploitation.

——

Why do the chimps exchange meat for sex? Why not sex for meat? Hmmmm … and that from a woman science reporter.

anon 7:11, I don’t like meat loaf. Let me know when you are doing some broiled chicken …

Deception is the strongest political force on the planet.

i on the ball patriot

Anonymous says:

wintermute:
“
The root of the problem is a flaw in democracy: Everyone gets one vote – but most people are not economists. So the majority will vote for the government which offers the most freebies.”

Did you read Taleb’s list? Do you honestly believe the problem is a lack of influence by economists? Seriously, what planet are you on?

vlade says:

It’s not a flaw in democracy, it’s a flaw in humans. We humans crave certainity, and will pay anything for a promise of it (and, in our feeble minds ignore the uncerainity of the promise, even one made in good will)

Thus, certainity pedlers will have a place in human society for any foreseable future.
Assuming anything different is wishful thinking.

Eleanor says:

The birds are very cute.

Anonymous says:

Politicians will remain captive to the money as long as the system of paid TV to run for political office is allowed to remain in place. Combined with abolishing the graduated income tax that had prevented obscene concentrations of personal wealth, the inevitable has happened. We no longer have even the pretense of representative government. Bernanke has replaced Paulson as Dictator, and the Congress is positively supine.

The wealth concentration factor is quantitatively enhanced by the opportunity to issue stock –just ‘create your own money.’ Anyone with the inclination and cohorts has been enabled to do so without interference from anything like an SEC.

The victims of this 30-year war are the decent people whose peace-of-mind and security have been destroyed by the graduating erosion of their right to work peacefully and creatively and happily care for themselves and their families.

The erosion of income and rights of the last 30 years is so much like ‘we watched as they took the other guy (10,000s at a time down sized) and then they came and got us.’

All of this while we continue to subscribe to whatever propaganda is created by TPTB. Why should we accept “legacy” in place of “toxic.” We don’t have to.

This is after all where the battle lines are being drawn -in the area of propaganda: re naming and re branding; although it is more like slaughter when everyone in print caves in. I agree, although I didn’t read the article, that new ‘innovative’ securities are re naming for the purpose of dodging the rule of law over the issuance and trading of stocks and bonds.

I remind you that $73,000,000 is the amount of personal wealth spent by Bloomberg to get himself “elected” Mayor of the great City of New York. And at the end of his two terms he has been able to game the system, the democratic system, the representative government system, with an end run around the voters of this great city by recently tearing down the term limits achieved by the voters so that he can now ‘run’ for a third term.

Not only did Mayor Bloomberg preside over the arrest of more than 1200 peaceful demonstrators at the site of the Republican National Convention 2004 and illegally detain them for the duration of the convention in holding cells he had specially prepared for just that occasion in the greatest city in the world and one of its most liberal at the same time that orange alerts were being issued that increased Bush’s polling rate 1.7% each time, Bloomberg had months prior denied Central Park permits to anti-war organizers on the fallacious basis that the lawns must be preserved.

Fallacious is not just an opinion. A small item on the upper right hand corner of an inside page of the New York Times reported the finding many months after the fact that Bloomberg had lied about the reason he gave for denying the permit; the reason, it was found, was indeed political. We could have guessed that of course -but having it officially reported by the New York Times was, I thought, momentous. Did anyone take notice, maybe ‘liberal’ blogs? No. Nothing. Nada! Maybe I missed it. I did look for it.

Does this say something about the people of my country being perhaps so beaten down by being unemployed, underemployed, underpaid; or employed, even overpaid but overworked and propagandized with “the greatest country in the world” sloganeering while living in fear of losing their jobs with the specter of never recovering and losing health insurance.

Bloomberg is a reasonable candidate for Mayor of New York City given his demonstrated acumen for management and control and the problems facing the city in the face of the finance/economic crisis.

But on the other hand, the newly fenced off areas that have been created over the winter in Central Park designed in patterns of contiguous plots of fenced off grounds delineated with narrow paths around them gives pause –a bit militaristic. The only thing missing is the barbed wire.

This is not a gratuitous slam on Bloomberg. His personality in the private corporate sector under the rule of law is worthy of admiration, encouragement and exceptional remuneration. It doesn’t give him the right however to elective office.

Bloomberg is yet another former Goldman, Sachs guy. And what is the Goldman, Sachs credo? Look ‘em in the eye –and LIE.

LeeAnne

Anonymous says:

+5 for leeanne

donna says:

Eh, not so sure about fragile things breaking early. I prefer spreading money around encouraging young things to grow. Tend to think the real problem is too much money piled into too few hands, myself. “too big to fail” is because, well, it’s too big.

And my children would have been safe with sticks of dynamite, because we have a rule in our house — no explosions. It is far more about what you teach children, rather than what you give them. They played with model rockets, dry ice rockets, and all sorts of other things just fine. Their uncle was a chemist and designed many fun experiments for them…

I also tend to think the problem is not the existence of black swans, but the inability to see them, notice them and enjoy them properly. I watched my stocks go up and just laughed at what the world imagined them to be worth. I watch them go down now with wry amusement, since I don’t currently need the money. Perhaps the real answer is to allow finance to do what it does well, but not to depend too much on the results. The assets I need right this minute are not financed, but managed. I may only be making a pittance on them, but they are safe.

As to the debt deflation spirals, it makes me wonder if we could organize some kind of collective actions that would be helpful within a smaller group, but not too sure how. I’m certainly making small loans within family and friends and trying to support small businesses and not put off larger purchases too much right now, paying college tuitions of course, etc., but not sure how to extend this or encourage others to do so… how do we get enough people out of fear mode and making reasonable purchases again?? I agree government has to do most of the work, but is there something we could do as individuals/within smaller groups to help??

I mean, I spent years encouraging everyone I knew to get out of debt before this mess began when everyone around them was full of greed and spending like crazy — how do I now encourage them to spend again now that we need people to stop being afraid and everyone around them is full of fear??

Evelyn Sinclair says:

The picture is of a whole lot of Zebra finches (they have stripes as well as those little polkadots) and a couple of Cordon Bleu finches squooshed in between.

Zebra finches emit little contact calls the entire time they’re awake. Soft and soothing to have a cageful around susurrating: “beeb-beeb-beeb beeb beeb…”

A lone Zebra finch will make a loud, distressed contact all, also all the time. However, once you have two Zebra finches, you have an infinite number of potential Zebra finches, as they are astonishingly good at breeding more.

The blue finches don’t breed as hardily.

Yves Smith says:

Anon of 4:58 PM,

Calling Taleb arrogant is an ad hominem attack.

He is 100% right in how off base financial economics is, to the point of being criminal. Everyone KNEW these models had major flaws, yet they kept using them because they were easy to use and profitable since they understated risk, which encouraged customers to take on more than they realized. This is no different than selling people a supposed medicine that makes them feel more energetic but produces cancer in a significant number of cases. We’d clearly that as immoral.

The behavior of those who devised and sold these products is equally tainted. It was WIDELY known the models understated risk, even a non quant chump like me was FULLY aware of it. The behavior was inexcusable and Taleb’s ire is fully warranted. These people have a lot to apologize for and almost no one is apologetic.

You grossly misrepresent what Taleb said. Nowhere did he call for economists to have NO role, and there is no mention of MBAs. He is highly critical of what he calls the “economics establishment”. In fact, there is an orthodoxy in both neoclassical and financial economics that have successfully rejected all criticisms (you can’t get a paper published in a leading journal if it takes on the party line).

And he calls for people who have “their hands clean”. to take the reins That would include folks who were in policy roles who dissented with the mainstream view (Ed Gramlich, were he still alive, would be the perfect example, along with Stiglitz, Rogoff, and people who were not in policy roles but saw the mess coming, like Bob Shiller).

Anonymous says:

yves,

Thank you. I’m glad to be corrected about something I’ve never questioned as true; never looked it up obviously.

Which reminds me of how important professional journalism is with its fact checkers and experienced writers who know how to make a point without going off into ad hominum attacks, etc.

Also glad to have the information on Australian voting.

LeeAnne

MyLessThanPrimeBeef says:

Chimps exchange meat for sex; humans exchange sex for meat.

Which one is smarter?

You tell me.

Hint: when humans exchange sex for meat, other humans exact a piece of the action…in Nevada, at least.

doc holiday says:

Which one is smarter?

I’ll tell yah what, next thing we see is chimps opening markets and then pondering Keynes. I think this is well documented in 2001: A Space Odyssey
a
FYI: Over images of an African desert, a caption reads "The Dawn of Man." A tribe of herbivore apes is foraging for food. One of them is attacked and killed by a leopard. They are driven from their water hole by another tribe. Defeated, they sleep overnight in a small exposed rock crater. Waking at sunrise, they find that a mysterious black, rectangular monolith has appeared in front of their shelter. They approach the monolith shrieking and jumping. Subsequently, one of the apes, played by Daniel Richter, realizes how to use a bone as both tool and a weapon while having mental flashbacks to the monolith, indicating that the monolith has either "taught" or inspired him to this knowledge. The apes are now able to kill animals and eat meat. Next morning they wrest control of the water hole away from the other tribe, killing their leader in the process. Exultant in victory, the ape leader throws his bone into the air which switches via match cut to a shot of an orbital satellite millions of years in the future, circa 1999.

> I'm sorry to put anyone through that, but I see TARP as the monolith and the apes as the government-backed thugs like Timmy and Paulson that have found a new >☭< tool in hyper-capitalism (a term which I'm in the process of defining on-the-fly). The old capitalist tools and models are broken and the reason for that, is the clear abuse and usurping of power, by the neo financial über Gods that are using The Treasury to enslave future generations with untold and unthinkable debt burdens — while the press, Congress and the people ignore the reality of theft!

If yah can't friggn see 2001 in this, then your as blind as One Eye'd Timmy:

Timmy is HAL 9000 and someone needs to pull the plug, before Timmy does anymore damage!

Also see: As Dave slowly disconnects one module after another from Hal’s circuitry, Hal continues to protest. Eventually he ends up repeating, “My mind is going. I can feel it.” Then he repeats, “I'm afraid.” Hal then goes into a monologue about his first day of operation, regressing to his earliest days. During this he offers to sing the song ("Daisy Bell") his instructor taught on his first operational day. Dr. Bowman replies he would like Hal to sing the song. As Hal sings, his voice continuously slows down. When Hal is disconnected, a television monitor is activated showing a pre-recorded briefing that was supposed to be played only when they reached Jupiter's space and the entire crew had been revived. It is the last piece of dialogue in the film.

> * The author is not responsible for anything written here or suggested (this also is not an attack).

Anonymous says:

Doc,

As the first thing I saw the first time I was stoned I understand what you are saying, but it is a bit of a stretch.

But then again who would have thought we would be where we are some 40 years later.

psychohistorian

Eleanor says:

Evelyn — Thanks for identifying the birds. I suspected zebra finches, but was thrown by the blue guys.

I still want cute pictures of dinosaurs, but maybe I will have to make do with cute pictures of dinosaur descendants.

Masked Financier says:

I just made a posting at my blog about this article.

While in one sense I agree with Nassim, in three areas I don’t:

- There are some parts of the modern capitalist society that required large companies or entities to actually work e.g. try building silicon wafers in your back shed. You can’t de-risk this type of situation completely.

- The economic environment can never match the biological one. The economic environment is completely at the mercy of human psyche and emotions, which don’t operate to scientific principles like the biological world.

- I’m not sure I want the economic (or social) world to resemble the biological world. The biological world can be a frightening world – species are exterminated by other species with humankind’s help, the law of the jungle prevails, and environmental catastrophes can and do happen.