At the national level, the system is more fragile. One tall tower is more likely to fall in a storm than a lawn of grass. This leads to Taleb’s contention that US federal debt is the most fragile of all, and should be decentralised, because default is unthinkable. Hence, “I’m kind of happy with what’s happening in the US now. We’d like the government periodically to come back with a plan, just like a corporation that has a debt addiction.”

Implementing this idea in practice without extreme volatility will be hard. But the Taleb arguments remain strong. Fragility, he insists, trumps growth. If a plane has an elevated chance of crashing, even if that chance is very small, we would give that priority over its speed or its price. So, governments should have a risk manager’s mindset, and not try to prod the economy into growing. Without a risk-averse mindset, risks will grow.

Source: FT.com

Part ll

HatTip to Dave Lull