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Told you so

March 16th, 2009 · Posted by Skuds in Politics · No Comments · Politics

[Cross-posted from Common Endeavour]

I am rarely in a position to say “told you so” but someone who is in a great position to utter those words is Naseem Nicholas Taleb.  I am nearing the end of his book The Black Swan (published in 2007) and on page 225 he says:

We have never lived before under the threat of a global collapse. Financial institutions have been merging into a smaller number of very large banks. Almost all banks are now interrelated. So the financial ecology is swelling into gigantic, incestuous, bureaucratic banks (often Guassianized in their risk measurement) – when one falls they all fall.  The increased concentration among banks seems to have the effect of making financial crisis less likely, but when they happen they are more global in scale and hit us very hard.  We have moved from a diversified ecology of small banks, with varied lending policies, to a more homogenous framework of firms that all resemble one another.  True we now have fewer failures, but when they occur… I shiver at the thought.

The Tories, of course, paraphrase that by saying it is all Gordon Brown’s fault…  In a footnote to that paragraph Taleb is even more specific when he says:

Likewise, the government-sponsored institution Fanny Mae, when I look at their risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup.

As the book was published in April 2007 those words would have been written in 2006 or early 2007 at the latest.  In September 2008 Fanny Mae was rescued/nationalised/taken into conservatorship when the fuse got lit to that barrel of dynamite.

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