The national debt of the United States is attracting more and more concerned experts. Nassim Taleb, who predicted the financial crisis in 2008, also looks at the debt situation in the USA like a hawk.
• Nassim Taleb sees US debt crisis as a death spiral
• USA needs “a miracle”
• Negative view of the stock markets too
Nassim Nicholas Taleb, the author of the bestselling book “The Black Swan,” predicts dark times ahead for the US economy. In particular, it is the high level of debt in the USA that he considers to be a major problem.
Warning of a death spiral
As Bloomberg reports, the market expert warned at an event hosted by Universa Investments, a hedge fund to which Taleb is an advisor, against a continuation of the current spending policy in the United States: “As long as Congress continues to expand the debt limit and make deals, Because he is afraid of the consequences of doing the right thing – that is the political structure of the political system – at some point there will be a debt spiral. A debt spiral is “like a death spiral,” Taleb continued.
“White Swan” that requires a miracle
The US national debt currently stands at $34.14 trillion. Taleb calls this escalating national debt a “white swan”, a risk that is predictable and more likely to occur than a “black swan”, a momentous event that was difficult to foresee in advance.
At the event, Taleb left it open what consequences the debt crisis will have on the markets, citing not only the US deficit but also a shock-prone economy as such a white swan event. The expert cited the strong interconnectedness of the world through globalization as the reason, so he considers the risk of infection to be possible.
“We need something from the outside or maybe some kind of miracle,” said Taleb when asked how the problem could be solved. “That makes me kind of gloomy about the entire political system in the Western world.”
Taleb is also not very optimistic about the stock market
The “Black Swan” author is also not very optimistic when looking at the financial markets, especially with regard to the valuation of companies. Analysts lose sight of appropriate company valuations and set them higher than tangible results allow, he is quoted by Fortune. “For the last 20 years the price-earnings ratio was something you could grab, today it’s all over the place. It’s a modern accident, an accident of history, we have no idea how to value companies.” It’s mostly just about “narratives and stories about the future,” warns the expert. He also takes aim at the practice of raising money through investors with a positive future narrative, only to be able to later sell the company to someone else: “Think about the number of people who have made a lot of money with venture capital from companies , which ultimately didn’t make any profits themselves. Someone has to foot the bill at the end of the meal. That’s what I mean by these crazy company valuations.”
Editorial team finanzen.net
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