Federal Reserve 'Will Be Gone' in 25 Years, Predicts Black Swan Author Taleb

Shahien Nasiripour
Huffington Post

A mere half-hour after Treasury Secretary Timothy Geithner praised the “necessary” and “very substantial” actions of the Bush and Obama administrations to “break the back of the financial crisis,” one of the world’s leading financial minds said Thursday that the United States is in the same economic predicament today as it was in 2007, predicting that within 25 years the Federal Reserve “will be gone.”

Nassim Nicholas Taleb, renowned derivatives trader, university professor and author of “The Black Swan,” warned a gathering in Washington of the growing risk the nation has taken on as a result of poor decisions by the Fed and policymakers, including trillions of dollars in taxpayer money funneled into bailouts of private industry.

“This transformation from private debt … to public debt” is “bad” from a risk standpoint and “immoral” from an ethical standpoint, Taleb — a member of the Derivatives Hall of Fame whose book became a bestseller — told a crowd at the Washington Ideas Forum, an event held by The Atlantic and The Aspen Institute. Deficits “will break the Fed” and it will be replaced, he predicted.

“The Romans had a saying,” Taleb added: “The grandchildren should not bear the debt of the grandparents.”

That debt is made more dangerous, Taleb said, by the increasingly complexities of the financial system, a problem that he said has not been ameliorated during the last three years. “Debt and complexity are not friends,” he said, because “complexity causes unpredictability,” and heavy debt burdens mean one false move, whether by an individual actor or a system, could spell disaster.

Nobel Prize-winning economist Paul Krugman, a popular columnist for The New York Times, “doesn’t understand” the economic situation the U.S. finds itself in, Taleb claimed, nor do most economists.

Because of the significant rise in debt, within 25 years “anything fragile will break,” Taleb said. That includes the Fed, he argued, because the Fed “fragilized this country.”

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