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‘Black Swan’ Author More Worried About U.S. Than Europe

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Author Nassim Nicholas Taleb
Nassim Nicholas Taleb, author of the best-selling book “The Black Swan.” Source: Bank of America Merrill Lynch via Bloomberg

Sept. 13 (Bloomberg) -- Nassim Nicholas Taleb, author of the best-selling book “The Black Swan,” said he’s more concerned about prospects for the U.S. than Europe because the country lacks awareness of its fiscal woes.

“The difference between Europe and the U.S. is the consciousness of the problem,” Taleb, a New York University professor, said today at a news conference in Tokyo organized by Bank of America Corp. “There’s no consciousness in the U.S.” about the fiscal deficit, he said.

Global financial-market turmoil intensified this quarter as Europe’s sovereign debt crisis deepened and the U.S. economy showed signs of slowing. Standard & Poor’s cut the U.S.’s credit rating for the first time in August, criticizing lawmakers for failing to cut spending or raise revenue enough to reduce record budget shortfalls.

Jacques Attali, a former European banking official, told reporters at the same briefing that the U.S. is in a worse state than Europe because of factors including political paralysis over its debt burden as well as unemployment.

“I’m quite pessimistic about the future of the U.S. economy for quite a long time,” said Attali, who advised French President Francois Mitterrand in the 1980s and later became the first head of the European Bank for Reconstruction and Development. “The U.S. economy is in very, very bad situation.”

Fate of Euro

The euro is likely to avoid collapse and the trouble in the region will help to speed up action by governments, said Attali, who is now president of Planet Finance, an organization that seeks to fight poverty through microfinance.

Europe’s 17-nation currency fell toward its lowest level since 2001 against the yen today on speculation Greece is nearing default and before Italy sells bonds. German Chancellor Angela Merkel said in a radio interview that she won’t let Greece go into “uncontrolled insolvency” because of the risk of contagion for other euro-area countries.

Michael Spence, a Nobel laureate in economics, was less optimistic than Attali when asked about the euro’s prospects at a conference in Beijing today.

“If the group as a whole can’t agree on the burden sharing, who’s going to pay the price of solving the problem?” he said. “There is probably at least 30 percent chance this could go badly wrong. Maybe more.”

No U.S. Crisis

Spence, a professor at New York University’s Stern School of Business who won the Nobel Prize in economics in 2001, stopped short of saying the U.S. is in a crisis. “We have a debt problem, we have a political problem dealing with it, and we certainly have a growth and unemployment problem, but it’s not a crisis,” he said.

His colleague Taleb, who said in June that the U.S. debt situation is worse than that of Greece, commented on Japan’s record government borrowings. For Japan, the “main problem is the level” of its debt, Taleb said, adding that the nation’s high household savings help to compensate.

While Japan has the world’s largest public debt burden, more than 90 percent is held by domestic creditors. Japanese households had 1,476 trillion yen ($19.2 trillion) of financial assets as of March 31, according to the Bank of Japan.

Taleb popularized the term black swan, which derives from the once widespread Western belief that all swans were white -- until explorers discovered the black variety in Australia in 1697. He argued that unforeseen events with a large impact on markets occur more frequently than statistical analysis predicts, thereby justifying the high cost of hedging against disasters.

“There is no moral reason why a world so wealthy should have so much debt,” Taleb said today.

To contact the reporter on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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