The New York University professor, Nassim Taleb, who made his name predicting the credit crunch, has told investors to dump equities and government bonds and buy ‘hard assets’.
He has poured scorn on the economic recovery, claiming that the global economy is in worse shape than it was during the subprime crisis and warns that the US could yet lurch into a Greek-style meltdown.
In an interview with Bloomberg TV, Taleb said the fragility in the banking system that he spotted in 2007 is still there and the bail-out of the financial sector has encouraged bankers to continue their ‘casino’ operations by increasing moral hazard.
“Look at all of the money they made with our backing- it is like they spat in our faces,” he said.
His main concern is that the transferal of debt from the private to the public sector has seen the risks within the financial system increase and ‘take a much more vicious form.’
keeping interest rates lower than inflation and letting the currency take the strain is another way to reduce the real value of debt.
Stealthily robbing savers by eroding the purchasing power of money is less likely to cause riots in the streets than spending cuts, because inflation tends to hit older people hardest while unemployment hits the young.
“The great Irish dramatist George Bernard Shaw said: ‘You have to choose between trusting the natural stability of gold or the natural stability and intelligence of members of the government. And with due respect to these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold.’ I have to say, I’m with Bernard Shaw on this.”