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Author Who Foresaw 2008 Recession Warns Ahead of US “Death Spiral”

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Author Who Foresaw 2008 Recession Warns Ahead of US “Death Spiral”

Author Who Foresaw 2008 Recession Warns Ahead of US “Death Spiral”

Source: Quora

Everyone needs to listen when Nassim Nicholas Taleb speaks, especially the United States government. In 2007, Taleb authored a New York Times best-seller titled The Black Swan, where he predicted the 2008 financial crisis. 

Taleb has spoken out again. This time, he has prophesied doom on the U.S.A., except the government takes the necessary steps.

Who is Nassim Nicholas Taleb?

Source: Quora

Born in Lebanon on September 12, 1960, Taleb is a celebrated Lebanese-American author and mathematical statistician. He attended school at the University of Paris and the Wharton School of the University of Pennsylvania. 

Taleb is a professor at multiple universities. From 2001 to 2018, Taleb authored and published a philosophical essay on uncertainty called Incerto. The Black Swan was the second of the five-volume work.

The Black Swan 

Source: Quora

What are the chances that you would see a black swan in a pond? If you were living in the old era where people believed Black swans didn’t exist, your answer is “zero.” That’s why Taleb’s 2007 book “The Black Swan” was special. Investopedia.com describes black swan events as “world-changing events that are rare and difficult to predict.”

The Black Swan stood out from its peers in the Incerto for apparent reasons. The book contained a prediction about the 2008 financial crisis that happened just as the book said it would.

Taleb Has Given Another Warning

Source: Quora

It is early 2024, and Taleb is warning the United States government about plunging the nation into a “death spiral” that he says is way more predictable than the 2008 financial crisis. 

He has called the predicted gloomy future of the nation a white swan, which could be more devastating than a black one. To avoid the evil day, America must curb its debt profile spiraling out of control.

The United States is About to Face It's "Most Predictable Crisis"

Source: Quora

Taleb is one of many experts who have sounded the alarm about the United States debt crisis. In mid-January 2024, the CEO of JP Morgan Chase, Jamie Dimon, said during a panel discussion that the country is on the verge of a global market “rebellion” due to rising debts. 

“It is a cliff. We see the cliff. It’s about 10 years out,” he warned. Paul Ryan, former House Speaker who was on the panel discussion with Dimon, described it as the “most predictable crisis we’ve ever had.” But what’s wrong with America’s debt level?

An Economy On the Precipice

Source: Quora

America’s economy is far from healthy at the moment. Even though it seems mostly in good shape from a distance, things are not what they seem to be. 

Yes, employment numbers seem to be stable, and the flood of inflation is slowly abating, but long-term indicators such as the growing national debt are a sign of bad days ahead. America is $34.14 trillion deep in debt.

America's Debt Crisis 

Source: Quora

America’s debt problem isn’t just that she has borrowed almost $35 trillion. Another alarming aspect of the matter is that parliament has suspended the debt ceiling till 2025 based on a deal they reached in 2023. 

This means that the government can borrow an unlimited amount of money. One aspect that worries Taleb is that this isn’t the first time Congress has tampered with the debt ceiling.

"A Debt Spiral is a Death Spiral"

Source: Quora

According to Taleb, the frequent adjustment of the debt ceiling is largely to blame for this debt crisis or what he calls a “debt spiral.” He warned that dire consequences await the nation if this trend continues and the government keeps running away from doing the right thing. 

“Eventually you’re going to have a debt spiral,” he told journalists. He further declared that “a debt spiral is a death spiral.”

Taleb Believes That the Situation Requires a Miracle

Source: Quora

Taleb doesn’t believe that politicians will change their ways any time soon. “We need something to come in from the outside, or maybe some kind of miracle,” he said. 

He also expressed his disenchantment with how government is being run on a global scale. “This makes me kind of gloomy about the entire political system in the Western world,” he lamented.

He Also Has a Gloomy Feeling About the Stock Market

Source: Quora

Taleb, who is also an advisor to Universa Investments, a Florida-based hedge fund, didn’t have great things to say about the future of the stock market. He lamented that analysts are making costly errors in their valuation of companies. The assigned worth of many companies have been bloated, he said. 

“In the past 20 years price per earnings was something you could grasp, today is all over the place. It’s a modern accident, an accident of history, we have no idea how to value companies,” he said.

Venture Capital Investment Are Becoming a Trap

Source: Quora

Reporters also captured Taleb’s lamentations about the state of venture capital investments in the country. He revealed that people are cashing out of shady company sales to the detriment of unsuspecting buyers. 

“Think of the number of people who made a lot of money in venture capital off of companies that ended up making no money. Someone got stuck with that bill at the en” of the meal,” he decried.

Mixed Reactions Over the Stock Market

Source: Quora

Among those who see danger at the end of the road for the stock market is Mike WStanley’srgan Stanley’s Chief Investment Officer. He warned that the S&P 500 is in a dangerous position. 

He revealed that investors who have allowed themselves to be carried away by stock prices will soon learn the hard way. However, there some other analysts are optimistic about the health of the stock market. In a short time, it will be clear who was correct.