Tuesday, May 17, 2016

A monetary future of the United States

The Financial Times has a balanced article about "black swan" inspired hedge-fund manager Mark Spitznagel. Besides his own economics, his fund draws on advice from Nassim Taleb. Towards the end of the article, Spitznagel discusses his current big bet --

After the financial crisis, Universa bet that the Fed pumping money into the system would spur hyperinflation. So far inflation has been notable for its absence, but Mr Spitznagel is undeterred. “This is the greatest monetary experiment in history. Why wouldn’t it lead to the biggest collapse? My strategy doesn’t require that I’m right about the likelihood of that scenario. Logic dictates to me that it’s inevitable,” he says.

One tricky thing about interpreting the hyperinflation expectation is that unlike some classic black swan events, not widely seen as likely, the hyperinflation expectation has been widely held since 2008, especially among Republicans; e.g. House Speaker Paul Ryan's views have veered in that direction, and he's also predicting a US federal debt crisis. The monetary system itself seems to be resilient to the belief that it could collapse.

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