The stock market is ignoring these ‘white swan’ events that could upend everything, Roubini warns

In my 2010 book, “Crisis Economics,” I defined financial crises not as the “black swan” events that Nassim Nicholas Taleb described in his eponymous bestseller, but as “white swans.”

According to Taleb, black swans are events that emerge unpredictably, like a tornado, from a fat-tailed statistical distribution. 

But I argued that financial crises, at least, are more like hurricanes: they are the predictable result of built-up economic and financial vulnerabilities and policy mistakes.

There are times when we should expect the system to reach a tipping point — the “Minsky Moment” — when a boom and a bubble turn into a crash and a bust. Such events are not about the “unknown unknowns,” but rather the “known unknowns.”

Nouriel Roubini MarketWatch Feb 18, 2020

Hyman Minsky showed how stability leads to instability. 

Humans have a way of reinterpreting stable periods that seemingly redefines words like reasonable, manageable, and prudent. That’s why we continue chasing yield and risk until we go too far.

John Mauldin 10 January 2020



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