Nassim Taleb on Covid Misconceptions, Fed Policy, Inflation, Dollar Reserve Status

Bloomberg, Released on 9/22/20

Nassim Taleb, New York University distinguished professor of risk engineering, discusses what he sees as misconceptions about the coronavirus pandemic and comments on the Federal Reserve’s shift in monetary policy. He speaks with Bloomberg’s Erik Schatzker.

“The most underestimated risk in financial markets today is that the dollar ceases to be a reserve currency.”

Timestamps:

1:27 how would you describe yourself?
3:25 What is it that people are getting wrong about the pandemic?
9:23 Are firms like JP and GS doing the right thing to call traders back to the office?
12:19 Pandemic is putting our systems at extreme stress. Which ones are passing the anti-fragile test?
16:10 Will these changes depress growth and constrain financial returns?
– it depends. differentiation of outcomes
20:01 Deglobalisation happening. Are you still against globalisation?
– Not really. All I am saying is that supply chains are very fragile.
22:30 Where are those fragilities?
– essential drugs being produced in one country. supply chain too broad
24:01 Is it still necessary to buy tail risk protection?
– yh…
26:04 even when the Fed is providing unlimited liquidity? – same question 29:52
– yep. nobody is bigger than the market even the Fed
31:50 How will zombie companies collapse?
– Fed could raise interest rates with inflation.. etc.
35:37 When inflation comes, will it be a non-linear event?
– historically very non-linear
after this US dollar losing its reserve status as a tail risk etc.

Nassim Taleb spent 20 years as a derivatives trader and, after closing 650,000 option transactions and examining 200,000 risk reports, he changed careers in 2006 to become a scholar and philosophical essayist. Taleb is currently Distinguished Professor of Risk Engineering at New York University’s Polytechnic Institute, but he self-funds his research and operates in the manner of independent scholars. He is the author of four novels, most notably The Black Swan and Antifragile: Things That Gain from Disorder. Taleb’s works focuses on decision making under opacity, as well as mathematical and philosophical problems with probability, in other words on “what to do in a world we don’t understand” as well as on the properties of systems that can handle disorder.

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