Roubini : No crisis is identical but many of them are similar. There is a stage of boom and bubble before the bust and the crash. People will see the value of certain assets like homes or equity go up, then they will use these assets as a collateral for borrowing too much and therefore you have a build-up of leverage in the financial system. And then, once the bubble goes bust, the value of the assets falls and people are stuck with all this debt they can't repay.
in www.spiegel.de
Showing posts with label Crisis. Show all posts
Showing posts with label Crisis. Show all posts
Monday, February 14, 2011
Tuesday, August 10, 2010
Nouriel Roubini : We are still in the middle of this crisis
Nouriel Roubini: “We are still in the middle of this crisis and there is more trouble ahead of us, even if there is a recovery. During the great depression the economy contracted between 1929 and 1933, there was the beginning of a recovery, but then a second recession from 1937 to 1939. If you don’t address the issues, you risk having a double-dip recession and one which is at least as severe as the first one.”
Tuesday, August 3, 2010
WHY DID THIS CRISIS HAPPEN?
WHY DID THIS CRISIS HAPPEN?
by Nassim Taleb :
Summary of Causes: The interplay of the following five forces, all linked to the misperception and hiding of consequential tail events (Black Swans).
1) Increase in hidden tail risks across all aspects of economic life, not just banking; while tail risks are not possible to price, neither mathematically nor empirically. The same nonlinearity came from the increase in debt, operational leverage, and the use of complex derivatives.
2) Asymmetric and flawed incentives that favor risk hiding in the tails, two flaws in the compensation methods, based on cosmetic earnings not truly risk-adjusted ones a) asymmetric payoff: upside, never downside (free option); b) flawed
frequency: annual compensation for risks that blow-up every few years, with absence of claw-back provisions.
Read Full Article >>>
by Nassim Taleb :
Summary of Causes: The interplay of the following five forces, all linked to the misperception and hiding of consequential tail events (Black Swans).
1) Increase in hidden tail risks across all aspects of economic life, not just banking; while tail risks are not possible to price, neither mathematically nor empirically. The same nonlinearity came from the increase in debt, operational leverage, and the use of complex derivatives.
2) Asymmetric and flawed incentives that favor risk hiding in the tails, two flaws in the compensation methods, based on cosmetic earnings not truly risk-adjusted ones a) asymmetric payoff: upside, never downside (free option); b) flawed
frequency: annual compensation for risks that blow-up every few years, with absence of claw-back provisions.
Read Full Article >>>
Sunday, June 27, 2010
Nassim Taleb : The Crisis may have just Started
Nassim Nicholas Taleb Angry
Nassim Nicholas Taleb angry with economists. The interviewer was just a journalist clueless about his ideas but he got them across anyway by ignoring her questions.
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