{"id":15948,"date":"2016-01-03T21:20:06","date_gmt":"2016-01-04T02:20:06","guid":{"rendered":"http:\/\/olduvai.ca\/?p=15948"},"modified":"2016-01-03T21:20:06","modified_gmt":"2016-01-04T02:20:06","slug":"nassim-nicholas-taleb-on-the-real-financial-risks-of-2016","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=15948","title":{"rendered":"Nassim Nicholas Taleb on the Real Financial Risks of 2016"},"content":{"rendered":"
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PHOTO: GETTY IMAGES<\/div>\n<\/div>\n
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Nassim Nicholas Taleb on the Real Financial Risks of 2016<\/a><\/h3>\n<\/div>\n
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Worry less about the banking system, but commodities, epidemics and climate volatility could be trouble<\/p>\n

How should we think about financial risks in 2016?<\/p>\n

First, worry less about the banking system. Financial institutions today are less fragile than they were a few years ago. This isn\u2019t because they got better at understanding risk (they didn\u2019t) but because, since 2009, banks have been shedding their exposures to extreme events. Hedge funds, which are much more adept at risk-taking, now function as reinsurers of sorts. Because hedge-fund owners have skin in the game, they are less prone to hiding risks than are bankers.<\/p>\n

This isn\u2019t to say\u00a0that the financial system has healed<\/a>: Monetary policy made itself ineffective with low interest rates, which were seen as a cure rather than a transitory painkiller. Zero interest rates turn monetary policy into a massive weapon that has no ammunition. There\u2019s no evidence that \u201czero\u201d interest rates are better than, say, 2% or 3%, as the Federal Reserve may be realizing.<\/p>\n

I worry about\u00a0asset values that have swelled in response to easy money<\/a>. Low interest rates invite speculation in assets such as junk bonds, real estate and emerging market securities. The effect of tightening in 1994 was disproportionately felt with Italian, Mexican and Thai securities. The rule is: Investments with micro-Ponzi attributes (i.e., a need to borrow to repay) will be hit.<\/p>\n

Though \u201canother Lehman Brothers\u201d isn\u2019t likely to happen with banks, it is very likely to happen with commodity firms and countries that depend directly or indirectly on commodity prices. Dubai is more threatened by oil prices than Islamic State.\u00a0Commodity people have been shouting<\/a>, \u201cWe\u2019ve hit bottom,\u201d which leads me to believe that they still have inventory to liquidate.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

PHOTO: GETTY IMAGES Nassim Nicholas Taleb on the Real Financial Risks of 2016 Worry less about the banking system, but commodities, epidemics and climate volatility could be trouble How should we think about financial risks in 2016? First, worry less about the banking system. Financial institutions today are less fragile than they were a few […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[63,9004,151,11420,1851,11419,5386,431,534,7248,690],"class_list":["post-15948","post","type-post","status-publish","format-standard","hentry","category-economics","tag-banks","tag-climate-volatility","tag-commodities","tag-commodity-firms","tag-commodity-price-collapse","tag-epidemic","tag-financial-risk","tag-interest-rates","tag-monetary-policy","tag-nassim-taleb","tag-risk"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15948","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15948"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15948\/revisions"}],"predecessor-version":[{"id":15949,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15948\/revisions\/15949"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15948"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15948"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15948"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}