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http://www.businessweek.com/news/20...-concerned-about-hyperinflation-update1-.html
By Subramaniam Sharma and Bob Chen
March 12 (Bloomberg) -- Nassim Nicholas Taleb, author of “The Black Swan” about how unforeseen events can roil markets, said he is concerned about hyperinflation as governments around the world take on more debt and print money.
“We are facing an environment with a huge amount of debt,” he said in a speech in New Delhi today. “The next mistake is going to be overprint, which is going to be the way out for them, which is why I fear hyperinflation.”
Taleb joins Mohamed A. El-Erian, co-chief investment officer at Pacific Investment Management Co., in warning governments about rising public debt. Failing to carry out fiscal measures in time would raise the possibility of governments seeking to eliminate excessive debt through inflation or default, El-Erian said yesterday.
“Why is the state converting private debt into public debt?” said Taleb, who advises Universa Investments LP, a $6 billion fund that bets on extreme market moves. It’s “because public debt is permanent.”
The U.S. budget deficit widened to a record in February as the government spent more to help revive the economy. The gap grew to $221 billion after a shortfall of $194 billion in February 2009, the Treasury Department said on March 10. The figures indicate the deficit this year will probably surpass the record $1.4 trillion in the fiscal year that ended in September.
Global economic output will expand 3.9 percent in 2010 after contracting 0.8 percent in 2009, and inflation in advanced economies will quicken to 1.3 percent from 0.1 percent, the International Monetary Fund predicted in January.
In a report published on Feb. 12, the IMF said a higher inflation goal may give central bankers more leeway to respond in the event of turmoil such as a global recession, terrorist attack or pandemic.
A quarterly Bank of England survey published yesterday predicted inflation in Britain would accelerate to 2.5 percent in a year’s time, compared with 2.4 percent in November.
As the founder of New York-based Empirica LLC, a hedge-fund firm he ran for six years before closing it in 2004, Taleb built a strategy based on options trading to protect investors from market declines while profiting from rallies.
He wrote the 2007 bestseller “The Black Swan: The Impact of the Highly Improbable,” which argues that history is littered with rare, high-impact events. The black swan theory stems from the ancient misconception that all swans were white.
Taleb last year questioned why Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Timothy F. Geithner kept their posts after failing to foresee the collapse in global credit markets.
By Subramaniam Sharma and Bob Chen
March 12 (Bloomberg) -- Nassim Nicholas Taleb, author of “The Black Swan” about how unforeseen events can roil markets, said he is concerned about hyperinflation as governments around the world take on more debt and print money.
“We are facing an environment with a huge amount of debt,” he said in a speech in New Delhi today. “The next mistake is going to be overprint, which is going to be the way out for them, which is why I fear hyperinflation.”
Taleb joins Mohamed A. El-Erian, co-chief investment officer at Pacific Investment Management Co., in warning governments about rising public debt. Failing to carry out fiscal measures in time would raise the possibility of governments seeking to eliminate excessive debt through inflation or default, El-Erian said yesterday.
“Why is the state converting private debt into public debt?” said Taleb, who advises Universa Investments LP, a $6 billion fund that bets on extreme market moves. It’s “because public debt is permanent.”
The U.S. budget deficit widened to a record in February as the government spent more to help revive the economy. The gap grew to $221 billion after a shortfall of $194 billion in February 2009, the Treasury Department said on March 10. The figures indicate the deficit this year will probably surpass the record $1.4 trillion in the fiscal year that ended in September.
Global economic output will expand 3.9 percent in 2010 after contracting 0.8 percent in 2009, and inflation in advanced economies will quicken to 1.3 percent from 0.1 percent, the International Monetary Fund predicted in January.
In a report published on Feb. 12, the IMF said a higher inflation goal may give central bankers more leeway to respond in the event of turmoil such as a global recession, terrorist attack or pandemic.
A quarterly Bank of England survey published yesterday predicted inflation in Britain would accelerate to 2.5 percent in a year’s time, compared with 2.4 percent in November.
As the founder of New York-based Empirica LLC, a hedge-fund firm he ran for six years before closing it in 2004, Taleb built a strategy based on options trading to protect investors from market declines while profiting from rallies.
He wrote the 2007 bestseller “The Black Swan: The Impact of the Highly Improbable,” which argues that history is littered with rare, high-impact events. The black swan theory stems from the ancient misconception that all swans were white.
Taleb last year questioned why Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Timothy F. Geithner kept their posts after failing to foresee the collapse in global credit markets.
