Money & Company: 'Black Swan' author Taleb sees government debt as 'pure Ponzi scheme'
In any case, Taleb doesn't offer any novel advice to investors who fear a government-debt crisis. He recommends keeping cash in short-term Treasury bills.
If government debt is "pure ponzi" but he still recommends government debt, then everything else must be pure ponzi too!
“Because governments can print more of their own currency, the risk comes from a rise in interest rates rather than a government default,” he notes. “When you have hyperinflation, deficits, or debt problems, with short-term bills you can catch higher interest rates to compensate you for the inflation or whatever return you've missed.”
I'm not sure it is the safe haven he thinks it is though. Note the 1970s in the following chart.
Real Interest Rates After Taxes
And yet, what are you going to do if the pain continues?
Pick your favorite ponzi poison?
Stocks aren't cheap.
Real estate isn't cheap.
Bonds aren't cheap.
Oil isn't cheap.
Precious metals aren't cheap.
So where exactly is the value? I'd say canned goods and toilet paper, but there's only so much we can buy. That said, when all investments seem expensive, perhaps cash isn't all that bad. Perhaps that's why I'm still deflationary. Put another way, if everyone felt cash was the place to be, then perhaps all the other options would be cheap.
The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. - Alan Greenspan, 1966
Herding behavior is not your friend in a welfare state it would seem.
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