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Tuesday, June 25, 2013

The dangerous fragility of debt

As long as we're on the subject of debt, this interview with Nassim Taleb seems fitting. He explains to REASON why the credit money system is intrinsically delicate and prone to fracture and collapse:
reason: Most people would say when you have a system and if there’s a contagion in it, if there’s a cancer in it, if there’s some kind of stressor that starts taking over, it’s going to spread to the whole system. This is what we hear about the banking system, the financial crisis. You’re arguing that a robust or an antifragile system is capable of seeing this part of the system being cancered and learning from it.

Taleb: To cite the great Yogi Berra, a good antifragile system is a system in which all mistakes are good mistakes. And the bad system is one, again to paraphrase Yogi Berra, where you tend to make the wrong mistakes. Let’s compare the banking system to, say, transportation. Every plane crash makes the next plane crash less likely and our transportation safer. Now, with the banking system, [a failure] leads to increased probability of failure of an entire system. That’s a bad system.

reason: What’s the best way to stop that so you’re not allowing the problem to replicate throughout the system?

Taleb: What fragilizes an overall system? Three things: One, centralization. Decentralization spreads mistakes, makes smaller mistakes. Decentralization is where we converge with libertarians. A second one is low debt. The third is skin in the game.

reason: Paul Krugman, one of your great friends or nemeses, just recently wrote that these trillion-dollar deficits don’t matter.

Taleb: All these economists, let’s put it this way: Risk is not their thing.

Debt leads to fragility. We’ve discovered since the Babylonians that debt has systemic consequences whereas equity doesn’t. Let’s say that you have two brothers. One of them borrowed and they both had predictions about the future—forecasts. One brother borrows. The other issues equity. The one who borrows will go bust if he makes a mistake. The one who issues equity will fluctuate but will be able to survive a forecast error.

reason: But is it also true that the brother with equity can never really have that big payday?

Taleb: For him! But overall the system is well distributed. There’s an accounting equality. Debt traditionally has blown up systems and has been very good for governments to wage war. I’m not against credit. I’m against leverage.

reason: So you give me a loan and I say I’m going to pay you back and that gives me the ability to get something in the short run that will help me produce more in the long run. That’s OK?

Taleb: Banking started [like this]: You’re going to Aleppo, Syria, and Florence and you’re going to send me some silk. You trust me, and my correspondent in Aleppo would pay you the minute I get my silk—that kind of transaction. That’s called letter of credit, where you have debt conditional on some commercial transaction being completed. And it also allows people to finance some inventory, provided the buyer is a committed buyer. That kind of facilitation of commerce is how it all started—the letter of credit—and it developed very well.

Before that we had debt in society and it led to blowups in Babylon, and then they had to have debt jubilees. Then of course the Hebrews also had debt jubilees. And of course, they say neither a borrower nor a lender be. The Romans didn’t like debt. The Greeks didn’t like debt, except for a few intellectuals. Intellectuals for some reason, like Mr. Krugman, like debt.

Later on debt came back to Europe with the Reformation and it was mostly to finance wars. The industrial revolution was not financed by debt. California was not financed by debt; it was financed by equity. So debt is not necessary. You can use it for emergencies. Catholic societies—Aquinas was against debt and his statements were stronger than the Islamic fatwa against debt.

We have learned through history that debt in the form of leverage can blow things up. Debt fragilizes. Now what we have had in this economy is a growth of debt mostly financed indirectly by governments. Because if you blow up, we’re going to be behind you.
The current system isn't capitalism, which is decentralized and equity based.  This is a centralized, debt-based economic system, which as Taleb notes, is extremely vulnerable in a structural sense.

Labels:

89 Comments:

Anonymous Mr. Nightstick June 25, 2013 4:17 PM  

I'm surprised that you and Taleb aren't good buddies. You two seem right up each other's alleys. (I don't mean that as gay as it sounds.)

Anonymous JartStar June 25, 2013 4:20 PM  

Debt traditionally has blown up systems and has been very good for governments to wage war.

This is where the US has an "advantage" over Greece or even Italy. If things blow up like predicted we will still be able to wage war due to military surplus and manpower alone which may gloss over the worst of the crisis.

Anonymous Mr. Nightstick June 25, 2013 4:26 PM  

Nearly all US wars have been debt financed. I don't think their ability to wage war will survive a debt collapse.

Anonymous Noah B. June 25, 2013 4:26 PM  

Looking back on my own education, it's hard to believe that the near-total lack of economic and monetary history was anything other than completely deliberate.

Anonymous Josh June 25, 2013 4:28 PM  

Taleb is so freaking awesome

Anonymous Josh June 25, 2013 4:31 PM  

What fragilizes an overall system? Three things: One, centralization. Decentralization spreads mistakes, makes smaller mistakes. Decentralization is where we converge with libertarians. A second one is low debt. The third is skin in the game. 

This sounds a lot like Chesterton and Belloc

Anonymous Noah B. June 25, 2013 4:34 PM  

What's his downside target for gold now -- $12/oz. or something?

Anonymous RedJack June 25, 2013 4:37 PM  

Did the Hebrews every actually have a Jubilee?

Honest question. I see that example a lot, but have always wondered how it worked in practice.

Anonymous Concerned Rabbit Hunter June 25, 2013 4:37 PM  

LAPD has pissed off some people:

http://www.latimes.com/local/lanow/la-me-ln-lapd-ambush-shooting-20130625,0,5793698.story

Anonymous Josh June 25, 2013 4:38 PM  

My point is that someone who just arrived in a limo does not take lectures on finance from someone who just took the subway. That’s the idea.

Hehehe

Anonymous GreyS June 25, 2013 4:42 PM  

"All these economists, let’s put it this way: Risk is not their thing"

Wonderful.

Anonymous Cinco June 25, 2013 4:42 PM  

I tried to explain this to a Keynesian at work today. I used the centralization creates increased risk, brought up that the number of banks in the U.S. had decreased dramatically since centralization (1913), and that competing currencies would provide incentives against inflation and risk. His reply, "Keynes was a genius." These people view debt as capital, they don't understand that credit/debt markets can tap out (have tapped out); and furthermore, they have a very poor grasp of history.

Anonymous Porky June 25, 2013 4:45 PM  

Taleb is so freaking awesome


+1

Anonymous Godfrey June 25, 2013 4:45 PM  

@Noah B. June 25, 2013 4:26 PM "Looking back on my own education, it's hard to believe that the near-total lack of economic and monetary history was anything other than completely deliberate."



I'd say it was the result of a post-enlightenment "progressive" perspective that inherently, and arrogantly, rejects the past... which, ironically, will lead to the repeating of the mistakes of the past.

Anonymous Salt June 25, 2013 4:46 PM  

Did the Hebrews every actually have a Jubilee?

It was every 70 years if I recall right.

Anonymous Erik June 25, 2013 4:46 PM  

RedJack: I vaguely recall from reading Jewish history that the rabbis started lawyering around it - they wrote contracts which said "this contract is exempt from the Jubilee", which negates the whole point, but also implies that they did at some time have Jubilee.

Anonymous Randy M June 25, 2013 4:55 PM  

"Did the Hebrews every actually have a Jubilee?

It was every 70 years if I recall right."

49, I think, 7x7. But what the law said and what they did are two different things. I don't know if they had a 49-year period of continuosly following the law in Israel.

Blogger Serge_Tomiko June 25, 2013 4:57 PM  

Both of you have got it wrong.

What is fragile is civilization itself. Read Tainter's Collapse of Complex Civilizations.

The decentralized "capitalist" system of equity is not sufficiently organized to meet complex challenges. Hence, it is universally abandoned over time. A civilization gets too large, can no longer adequately solve the problems it faces, and you have collapse.

To an economist, this means the currency ceases to have value.

I'm all for alternatives to a debt based system, but since the dawn of civilization - one has not yet emerged. A decentralized state is simply not an option.

Anonymous Salt June 25, 2013 5:01 PM  

A decentralized state is simply not an option.

Why?

Anonymous Mr. Nightstick June 25, 2013 5:05 PM  

A decentralized state is simply not an option.

... because no one has ever heard of Switzerland.

Anonymous FUBAR Nation Ben June 25, 2013 5:06 PM  

Serge what's your ideal state? The Soviet Union?

Anonymous Josh June 25, 2013 5:10 PM  

Serge, you gonna stay around this time?

Anonymous civilServant June 25, 2013 5:11 PM  

This is a centralized, debt-based economic system, which as Taleb notes, is extremely vulnerable in a structural sense.

And as he also notes is not as profitable. Centralized systems simply are more efficient and thus more profitable to the owners. Therefore such systems are preferred by those who are able to implement them.

reason: But is it also true that the brother with equity can never really have that big payday?

Taleb: For him!


http://www.youtube.com/watch?v=fLrpBLDWyCI

Anonymous Noah B. June 25, 2013 5:15 PM  

"Therefore such systems are preferred by those who are able to implement them."

Well yeah. The bankster is happy to take the profits and leave you holding the risk.

Anonymous Catan June 25, 2013 5:20 PM  

The decentralized "capitalist" system of equity is not sufficiently organized to meet complex challenges.

Read "I, Pencil" and get back to us.

Anonymous Hunsdon June 25, 2013 5:20 PM  

How freaking sad is it that Reason felt it necessary to insert [Scottish philosopher David] in the sentence Hume figured it out.

Anonymous Cheddarman June 25, 2013 5:23 PM  

"Both of you have got it wrong.

What is fragile is civilization itself. Read Tainter's Collapse of Complex Civilizations" Serge_Tomiko

Tainter left out an important point in his analysis. Government bureaucracy and sanctioned monopolies prevents free markets from functioning. This kills private innovation that could solve the problems associated with increasing societal complexity.

If we had a free market for money and banking, we would not have the inherent risks of a highly centralized money system that is run for the benefit of the few at the expense of the many.

Anonymous Josh June 25, 2013 5:28 PM  

And as he also notes is not as profitable. Centralized systems simply are more efficient and thus more profitable to the owners. Therefore such systems are preferred by those who are able to implement them.

They're not profitable when they go bust and blow up the entire economy.

Stealing from people is more profitable for the thief than working, but it's a net loss to society.

Anonymous Conservative Language Institute of America June 25, 2013 5:29 PM  

"The decentralized 'capitalist' system of equity is not sufficiently organized to meet complex challenges."

And thus the banal leftist "complexity" meme is hurled out once again, in the arrogant assurance that the rubes will be gobsmacked by the sheer wonderousness of it.

Sorry, but you've got the wrong audience... go back home and play with your toys.

Anonymous Jack Amok June 25, 2013 5:31 PM  

And as he also notes is not as profitable. Centralized systems simply are more efficient and thus more profitable to the owners. Therefore such systems are preferred by those who are able to implement them.

They are neither more efficient, nor more profitable. Well, in the short term they can be more profitable, but like any Ponzi scheme, at some point it comes down and the "implementers" left holding the bag when that happens are lynched, guillotined, or burned at the stake.

As to efficiency, they are never more efficient, because they create such an incentive to be at the center that the majority of energy and effort go into ways to game the system instead of ways to actually make it work.

For cryin' out loud, look at our own society and the percentage of high achievers who go into parasitical occupations like Law or Banking. Almost every one of them had the ability to be something much more productive, but the centralization of things sucked them into being parasites.

Anonymous Salt June 25, 2013 5:31 PM  

"I, Pencil", the cliff notes version.

Blogger Nate June 25, 2013 5:33 PM  

i think demonstrated in pretty clear terms during the debate just what a clusterfutastrophe the current monetary system really is.

for crying out loud we can't even measure the money supply at this point.

Anonymous Catan June 25, 2013 5:34 PM  

Serge, I think at least two of us say "I, Pencil" is an appropriate response to your 'complexity' theory.

Why don't you please explain to us why that little story has it wrong?

Anonymous Jake June 25, 2013 5:36 PM  

Serge has it backwards, the greater the complexity, the more essential the resource allocation mechanisms of a capitalist system become. In a simple system a top-down directed economy can work (on the scale of, say, a family). By the time you're talking about a community of even a few hundred people it quickly becomes impossible for any person, computer, whatever to figure out who gets what in a way that keeps everyone motivated to work and doesn't result in a downward spiral into starvation.

Anonymous dh June 25, 2013 5:37 PM  

for crying out loud we can't even measure the money supply at this point.

Is this a good metric? In a decentralized equity based system, would you be able to measure it?

Blogger Nate June 25, 2013 5:38 PM  

Also... Serge...

does Moldbug know you've wandered away and left his ballsack un sucked?

Anonymous dh June 25, 2013 5:40 PM  

In a simple system a top-down directed economy can work (on the scale of, say, a family). By the time you're talking about a community of even a few hundred people it quickly becomes impossible for any person, computer, whatever to figure out who gets what in a way that keeps everyone motivated to work and doesn't result in a downward spiral into starvation.

This may true on larger scales, but the eternal promises of socialists are that the science is coming to centrally manage the entire thing.

There is some evidence to suggest this is the case. You have huge monster companies like Walmart, who centrally plan inventory and distribution to the point that their suppliers are essentially shells of a company, receiving orders and planning production at the direction of Walmart planners. The entire ecosystem, Walmart plus the suppliers, is a greater centralization of control than just about any historical economy. I don't have numbers, but it wouldn't surprise me to find out that Walmart's production and ecosystem is larger or at least a large fraction of the Soviet Union in it's biggest year.

Anonymous Noah B. June 25, 2013 5:41 PM  

Inspiring. Something there is that doesn't love an unsucked ballsack...

Anonymous JartStar June 25, 2013 5:47 PM  

If QE is going to taper off, isn't gold going to continue to go down until a possible bust?

Anonymous Conservative Language Institute of America June 25, 2013 5:51 PM  

dh, your analogy and thus your premise is flawed...

Walmart can centralize and be successful up to a point, because they ruthlessly eliminate any and all factors which are either difficult to quantify and/or are otherwise out of their control.

In a viable real-world economy it is impossible to know everything for everybody at all times. Which is why any centralized economy quickly devolves into tyranny as the elitists running the show decide to eliminate any and all factors which are either difficult to quantify and/or are otherwise out of their control.

Anonymous zen0 June 25, 2013 6:03 PM  

@ Randy M.
49, I think, 7x7. But what the law said and what they did are two different things. I don't know if they had a 49-year period of continuosly following the law in Israel.

The actual Jubilee year was the 50th in the cycle.
The Hebrews were supposed to observe the 7 year sabbath and 50thJubilee years but did not or did so imperfectly.

During the Babylonian exile the land lay desolate for 70 years to make up for their lack of observance.

Anonymous Salt June 25, 2013 6:04 PM  

Centralized mega-corp planning is so wonderful that even a smaller one like GM makes cars no one wants and just what does Wal-Mart do with all that un-bought shit?

Anonymous dh June 25, 2013 6:12 PM  

Centralized mega-corp planning is so wonderful that even a smaller one like GM makes cars no one wants and just what does Wal-Mart do with all that un-bought shit?

Cars are bad to plan for, too many drivers and routers.

Wal-mart, Amazon, etc, they all stuff down to the supplier. But it's a low amount compared to others. They have inventories down to next to nothing. They adjust.

Anonymous dh June 25, 2013 6:15 PM  

Walmart can centralize and be successful up to a point, because they ruthlessly eliminate any and all factors which are either difficult to quantify and/or are otherwise out of their control.

Right, but they still make it and are afloat, despite externalizing as many factors as possible.

I know it's not a great example. There is no hope for the flawed premise at it's core.

BUT, it is interesting to see how far centralization has come in short-order. In a few decades, it's allowed Walmart to build an empire that is massive. And it's all centralized.

Imagine, then, that Walmart drives out the money of the transaction. Whats the base unit of value? Labor? What if they start buying your labor direct from your employers, and trading in return scrit good for their products?

Is that more, or less, efficient that money?

Anonymous insane white rabbit warren June 25, 2013 6:25 PM  

unbought shit goes to ghetto-in-the-making discount outlets in semi-abandoned shopping malls, which goes to (no shit) assembly line goodwill stores (witnessed tv's, toys, u name it, thrown from dumpster sized bins onto roller belts and sent out to the "bargain hunters"- shit broke and fell off, what an incredible sight. from there to yard sales to the land fills. humanity = entropy in action.

Anonymous Jake June 25, 2013 6:27 PM  

This may true on larger scales, but the eternal promises of socialists are that the science is coming to centrally manage the entire thing.

There is some evidence to suggest this is the case. You have huge monster companies like Walmart, who centrally plan inventory and distribution to the point that their suppliers are essentially shells of a company, receiving orders and planning production at the direction of Walmart planners. The entire ecosystem, Walmart plus the suppliers, is a greater centralization of control than just about any historical economy. I don't have numbers, but it wouldn't surprise me to find out that Walmart's production and ecosystem is larger or at least a large fraction of the Soviet Union in it's biggest year.


dh,

You're not appreciating the depth of the problem. Directing an economy from the top does not work, and cannot work, because it becomes impossible to calculate the relative cost & benefit of any decision.

Walmart still operates within a market economy, they have prices to guide their planning and they can tell by how their costs compare to their income whether or not they're doing well. Without the information given by prices Walmart would have no hope of planning anything.

Example: Supplier A sells a widget for $20, but shipping from their dock is going to add $4 per unit. Supplier B sells the same widget for $23 but shipping is only $.50 per because they're located next door. Assuming the widgets are identical, Even a gov. bureaucrat can figure that B is the better option, but only because the prices are known, and those prices can only exist as meaningful data when they're established by a market. Without the prices it is IMPOSSIBLE to know which supplier to use, how do you compare the marginally greater use of gas/trucks for supplier A to ship with the greater labor use by supplier B. Which is more valued by society (and thus should not be used), an extra gallon of gas, or an extra hour of labor? As long as we have markets establishing the prices of these inputs the question is trivial (which is cheaper?) as soon as you control things from the top though you have no way of knowing. Even if there are prices, they don't accurately reflect the realities of supply and demand when the government is intervening in the economy, creating externalities, etc.

This is my (admittedly poor) layman's description of how Mises demonstrated the impossibility of socialism. You can read it for yourself here

Anonymous Concerned Rabbit Hunter June 25, 2013 6:28 PM  

Diversity is the fragility of strength:

http://dailycaller.com/2013/06/25/seventh-grade-boy-allegedly-raped-during-gym-class-at-barack-obama-prep/

Blogger Nate June 25, 2013 6:29 PM  

The centralization fad started at GE with Jack Welsh. And as history has proven... its all good and well in certain companies under certain leadership... but more often than not... it ends in to total epic failure.

Anonymous VD June 25, 2013 6:40 PM  

it is interesting to see how far centralization has come in short-order. In a few decades, it's allowed Walmart to build an empire that is massive. And it's all centralized.

It can do so because it is piggybacking on the price information produced outside its centralized system. You're not grasping the intrinsic problem with centralization, most likely because you have not read Mises's Impossibility of Socialist Calculation or Hayek's update of it. The former is pretty short, I highly recommend it.

Anonymous Salt June 25, 2013 6:49 PM  

Pandora's Box, The Engineers' Plot as to central planning may be of interest to some.

Anonymous Concerned Rabbit Hunter June 25, 2013 6:57 PM  

"They're not profitable when they go bust and blow up the entire economy."

They are if you can privatize the profits and socialize the losses.

"Stealing from people is more profitable for the thief than working, but it's a net loss to society."

Some people are winners, some are losers. Government steals from people all the time.

Anonymous Dr. Doom June 25, 2013 7:09 PM  

How can you not have Centralized Planning when you have a Private National Bank issuing the notes to their favorites and freezing out the competitors? Certainly small financial institutions like credit unions and community banks can thrive simply through the influx of small amounts of capital directly by workers, but even they exist in the greater macrocosm of the banking system which gets its cues from the Private National Bank.
With the Federal Reserve's Iron Grip on the Money Supply or rather the Debt Instruments used as Money by the Federal Government granted by the Power of the Banksters at the Federal Reserve, the issue of new "Money" or Debt is definitely controlled from a Central Point - The Federal Reserve.
As long as there are Central Private National Banks controlling the issue of new "Money" or Debt, decentralization is Impossible. The Federal Government has mandated this as law by making the Greenbacks of the Federal Reserve a Monopoly Enterprise with harsh and Draconian penalties for "counterfeiting" or issuing your own Money. This ensures that the Banksters control the supply of "Money" or debt instruments which makes the Cabal controlling the banking, finance, media, and even government possible.

Anonymous Desiderius June 25, 2013 7:21 PM  

"As to efficiency, they are never more efficient, because they create such an incentive to be at the center that the majority of energy and effort go into ways to game the system instead of ways to actually make it work."

The former savagery, the latter civilization.

Analogous to difference between polygamy and monogamy.

Blogger tz June 25, 2013 7:29 PM  

He doesn't use the term "letters of credit", but this interview, Antal Fekete says a lot of the same things. I pointed to it earlier but it bears repeating, including on the debate.

Blogger tz June 25, 2013 7:40 PM  

Jubilee was every 50 years, every 7th year was to be a sabbatical year, and after 7 sets the next year was to be a year of jubilee. See Leviticus 25 and Deuteronomy 15.
Debts were to be cancelled every 7 years.

Anonymous John Regan June 25, 2013 7:41 PM  

Gotta love when someone cites Aquinas.

Anyway, there's a big picture discussion in here somewhere, having to do with faith.

People with faith will tend towards an equity economy, where people invest in things they believe in and are willing to take the chance that it won't pan out.

People without faith will tend towards a debt economy, where the creditor demands to be paid regardless of how things pan out, and relies on the force of law, and all that that entails, to collect what he is owed. Emphasis on the word FORCE.

Discussions of economics lead to discussions about law and religion.

Blogger tz June 25, 2013 7:46 PM  

Thomas Woods is on the other side (and wrong) - he suggests banks were not allowed to cross state lines in offering services so were smaller and weaker. Maybe, but more likely it would simply take longer and blow up bigger. He means fractional reserve which is a ponzi scheme. The large banks were equally subject to runs, and even the solvent ones failed (the Bank of the United States eventually returned 97% of depositors money in the Great Depression after it failed, but fail it did since it wasn't backstopped during the run).

Blogger James Dixon June 25, 2013 8:01 PM  

> You have huge monster companies like Walmart, who centrally plan inventory and distribution ...

And yet, if you actually need something Walmart had in stock just last week, you can be almost certain that they will not have it when you get to the store. And yes, this is the voice of experience speaking.


Anonymous Josh June 25, 2013 8:18 PM  

Is dh bashing the greatest company in the history of the world?

Anonymous Outlaw X June 25, 2013 8:24 PM  

I figure the economy is like shooting a shotgun. It is a game of angles, shoot fast and don't hesitate. It should be automatic and there is no need for a Modified or full choke because if that clay pigeon, dove or quail are beyond 50 yards is just out of bounds. Don't waste your shells and be patient, when game is involved. Yet shooting Trap don't hesitate as soon as you see it smoke it.

The economy is the same way don't let it get to far out before you pull the trigger and don't pull the trigger until it is almost right on top of you.

People figure too much and don't ride instinct. Throw the closed chokes away and shoot at what is there, stop trying to reach out. An Improved cylinder will do you much better.

Anonymous Porky June 25, 2013 8:35 PM  

Give it up, folks. When a 5-Year-Plan crashes and burns after only 4 years, leftists like dh proudly proclaim an 80% success rate and promise that the next one will be better.

Anonymous Anon123 June 25, 2013 8:42 PM  

Walmart benefits from the US giving China "Most favoured nation" status as well as the fact that the US gives subsidies to Walmart at the local level across the nation. Municipal governments give huge subsidies to get Walmart in, especially in areas where property tax rates are fixed and theyre desperate for revenue.

And one cant forget that the US has the strongest military, guaranteeing safe transport of goods from China to the US. If corporations had to pay for their security, all the gains from off-shoring would vanish instantly. There would only risk and no reward.

Anonymous allyn71 June 25, 2013 8:52 PM  

"Don't waste your shells and be patient, when game is involved. ... Throw the closed chokes away and shoot at what is there, stop trying to reach out." - Outlaw X June 25, 2013 8:24 PM

You obviously have never hunted wild Chukar's behind a flushing dog.

Anonymous Stilicho June 25, 2013 8:55 PM  

The Federal Government has mandated this as law by making the Greenbacks of the Federal Reserve a Monopoly Enterprise with harsh and Draconian penalties for "counterfeiting" or issuing your own Money. This ensures that the Banksters control the supply of "Money" or debt instruments which makes the Cabal controlling the banking, finance, media, and even government possible.

Sure, they can ride the tiger...for a while. The issue is that the central planners/banksters face the same insurmountable problem faced by the socialist central planners which Von Mises pointed out: they cannot determine what the price should be. Central bankers try to fix the price of money (and derivatively, fix the price of EVERYTHING) so it is no surprise that things spiral out of control. The center cannot hold.

Anonymous Outlaw X June 25, 2013 9:05 PM  

You obviously have never hunted wild Chukar's behind a flushing dog.

No I haven't, I trained my dogs to never flush until I told them, but that was quail. Never been pheasant hunting either. So you may have a point. I guess my economy is small.

Blogger LP 999/Eliza June 25, 2013 9:09 PM  

We've been so far from a free economy and/or capitalism to the point of countless surreal financial scandals no longer disturb the public or go to court...The continued econo contraction and the obese debt expansion will lead to an ugly collapse.

Blogger LP 999/Eliza June 25, 2013 9:16 PM  

Thanks, I have some reading to do; http://mises.org/econcalc.asp

Anonymous allyn71 June 25, 2013 9:30 PM  

Outlaw, when you are climbing to the top of this .......

http://strengthinperspective.com/Pictures-Oregon/SnakeRiver-1/images/Brownlee-Dam.jpg

to shoot little Iranian bastards that run fast and flush wild, ammo conservation and range restraint are not high priorities.

I was told this by an old timer on my first Chukar hunting trip. "First time is for fun, after that it is for revenge."

Truer words have never been spoken. A gentleman's hunt it is often not.

Blogger Nate June 25, 2013 10:48 PM  

"Is dh bashing the greatest company in the history of the world?"

No.

He has not mentioned Guinness.

Anonymous Godfrey June 25, 2013 10:55 PM  

This isn't capitalism. Accumulated capital is meaningless. Accumulated capital is being devalued.

Anonymous dh June 25, 2013 10:56 PM  

It can do so because it is piggybacking on the price information produced outside its centralized system. You're not grasping the intrinsic problem with centralization, most likely because you have not read Mises's Impossibility of Socialist Calculation or Hayek's update of it. The former is pretty short, I highly recommend it.

I added it to my list, thanks for the rec.

Anonymous Godfrey June 25, 2013 10:58 PM  

@Serge_Tomiko June 25, 2013 4:57 PM
"... A decentralized state is simply not an option."



Correct, it isn't an option. It is the ultimate result of a highly centralized state.

Anonymous dh June 25, 2013 11:00 PM  

Give it up, folks. When a 5-Year-Plan crashes and burns after only 4 years, leftists like dh proudly proclaim an 80% success rate and promise that the next one will be better.

The problem is we can agree that the 5-year plan is probably bad. But what is an alternative, what are it's weaknesses and/or strengths, and more importantly, how we do we go from there to here?

The answer I most commonly hear is "pain". Assuming you are all right, why have more pain now? Because the claim is it's less now, than more later. That is a tough sell. People naturally want to wait until the last moment.

Anonymous E. PERLINE June 25, 2013 11:10 PM  

Let's say you have to make a decision. It takes several thousand strokes to sketch something and several hundred strokes to write something. And what have you got? A representation that is incomprehensible and incomplete. Private Institutions and Government Departments make a brave try to describe systems but they're really too simple to represent the complexity of reality.

Let's say you're trying to determine whether buying a certain piece of real estate will be a good investment for you. The numbers say it will, but you don't immediately jump. You let your subconscious mind mull it over for a while. It will weigh infinitely more factors than you could do with man-made calculation.

Anonymous The other skeptic June 25, 2013 11:41 PM  

OT and not sock-puppetry.

There is a good chance that George Zimmerman is going to get away with killing the President's son (if he had one.)

Anonymous Josh June 26, 2013 12:02 AM  

He has not mentioned Guinness.

Okay, well, greatest American company.

Anonymous rho June 26, 2013 1:43 AM  

Skin in the game started with Hammurabi, led later on to eye-for-eye, and led to the Golden Rule.

I like Taleb, but he suffers from his habit of thought-compression. That one phrase parses easily to most of the Ilk, but to a lot of people sounds like a non-sequitur. If it wasn't a reason interview, he'd have to explain everything between Hammurabi and Jesus.

Don't get me wrong, I like the shortcuts, but I feel for the guy when some halfwit with a college education, but not the learning, pesters him.

Blogger Jordan179 June 26, 2013 1:59 AM  

Apparently, Obama believes that if he had a son, that son would be a violent fool who idolized the "thug life" and was so stupid that he assumed it was a good idea to get into a potentially-lethal fight with someone just because that person followed him around and asked him what he was doing. Though that's, of course, not to what Obama meant to admit.

Blogger Jordan179 June 26, 2013 2:01 AM  

The reason why the banking systems of the West are fragile is because, in every Western country, the State has assumed the role of running a central bank which purports to insure all member banks against failure. This means that, when there is a systemic stress which might cause some banks to fail, either no banks are in danger of failure or all banks are in danger of failure. Without this system, some banks would fail even in good times, but all banks would be in danger of failure only in the event of an apocalyptic catastrophe on a scale such that the security of our bank accounts were a very secondary consideration.

Anonymous dh June 26, 2013 2:17 AM  

Apparently, Obama believes that if he had a son, that son would be a violent fool who idolized the "thug life" and was so stupid that he assumed it was a good idea to get into a potentially-lethal fight with someone just because that person followed him around and asked him what he was doing. Though that's, of course, not to what Obama meant to admit.

You may be over-reading what Obama was saying, or you may not. On the one hand, it's basic empathy. He looks like a member of my family.

On the other hand, it could be, hey, lots of kids have a phase in their life where they smoke pot, have school troubles, and don't fit in. And luckily we/they don't all get shot.

Anonymous The other skeptic June 26, 2013 2:19 AM  

CA heads down the toilet:

If you are suicide prone, perhaps you should not be in the Air National Guard

Anonymous Niall June 26, 2013 9:26 AM  

dh wrote: "You may be over-reading what Obama was saying, or you may not. On the one hand, it's basic empathy. He looks like a member of my family."

Obama was making an explicit racial identification with Trayvon Martin on account of their shared blackness. That Martin was in all probability a thug made this kind of raw tribalism especially shocking, coming as it did from a man who is supposed to be the leader of all Americans, even the white ones.

Anonymous Porky June 26, 2013 10:59 AM  

dh: "why have more pain now? Because the claim is it's less now, than more later. That is a tough sell. People naturally want to wait until the last moment."

This is the kind of abnormally twisted version of "compassion" that results in a 900 lb. bedridden son or daughter covered in a mixture of feces and extra-crispy KFC crumbs.

"But he was hungry!"







Blogger RobertT June 26, 2013 12:55 PM  

i'm a big fan of taleb, quoting him often. I think some of his conclusions are original to him

Blogger RobertT June 26, 2013 12:56 PM  

"I'm surprised that you and Taleb aren't good buddies."

Genuine sigmas don't pal up too readily.

Blogger RobertT June 26, 2013 1:05 PM  

"My point is that someone who just arrived in a limo does not take lectures on finance from someone who just took the subway. That’s the idea."

Yes, i use that same analogy to warn people off financial advisers who all seem to drive used Ford Falcons. But in all honesty, it's not solid advice. One of the richest people I ever knew drove a used Ford Falcon. And parked in the CEO slot. But the concept is still solid. Don't take financial advice from people who struggle to support themselves.

Blogger RobertT June 26, 2013 1:18 PM  

"credit/debt markets can tap out"

More important, they can foreclose and wipe you out. In a closely held business that you own, debt is dangerous. Debt almost always replaces the profits you didn't make. Instead of running a successful business, you are running a sub-profitable business on debt. It's a sloppy man's way of doing business. Two things I throw around like confetti are "debt kills" and "assumptions kill". Doesn't seem to make much difference. People continue to die from these causes.

If you are going to go into debt, go real far in debt. I have heard it said, if you owe a little, the bank has their hands around your gonads. If you owe a ton of debt, you have their gonads in your hands. One of my clients who took this advice to heart once went bankrupt and took Continental Illinois with him. There was an alpha male.

Blogger RobertT June 26, 2013 1:28 PM  

" since the dawn of civilization - one has not yet emerged "

This may well be true. but Taleb's point is still valid. If markets go up and you're hurt, you're fragile. If markets go down and you're hurt, you're fragile. If you're in debt and your banker calls it, you're fragile. But if your banker hates your guts but can't call your debt because you don't owe him anything, you're anti fragile, at least to that jerk.

Blogger RobertT June 26, 2013 1:35 PM  

FUBAR

By the way fubar, Friday is the final day for filing your FBAR. If you intentionally fail to file, penalties are 50% of unreported assets. Could well be in the millions. This is nothing to take lightly. And if you think they won't ever find out, NSA already knows. You silly goose.

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