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Archive for January 15th, 2009

Watch the video and see for yourself. The video even includes the dates when the interviews(predictions) were made. Take note though, that he also predicts that the bailout is bad and will cause the dollar to crash.

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Fareed Zakaria interviews Quantum Fund manager George Soros on CNN to hear his take on the ongoing financial crisis.

Soros, promoted the term “Reflexivity” especially as it applies to economics: which describes the tendency for market trends to become self-fulfilling and propagate itself until it eventually becomes unstable and collapses on itself. He is also a staunch critic of “Market Fundamentalism” which is the belief that markets self-regulate and tend to equilibrium, which is far from what is observed in real life: markets bubble and crash. In this interview he shares some of his insight regarding bubbles and crashes, and how the present political and financial system allows these phenomena to occur with regularity.

He describes bubbles as resulting from misconceptions, which can continue longer than people expect, but eventually misconceptions are reversed dramatically. The misconception in today’s crisis is over-leverage of the housing bubble which eventually gave way to the present economic crisis.

Unlike other critics such as Peter Schiff and Jim Rogers, Soros supports government intervention to regulate markets, since he believes that the notion that markets “self-regulate to equilibrium” is a fallacy. However, similar to skeptics like Nassim Taleb, Soros rejects any notion that markets and the future can be predicted with any accuracy since the future is always in flux depending on the actions of the present.

Soros’ distinguished track record in his successful Quantum Fund has been largely due to his uncanny ability to anticipate market bubbles and resulting panics.

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In these clips, the first from his exposition for the Long Now Foundation, the second from CNBC, Nassim Taleb outlines the characteristics of the term he has injected into popular culture: The Black Swan, or the rare event.His experiences draw heavily from history, economics and financial markets. Nassim Taleb was a former derivatives trader now turned philosopher and pundit. Taleb criticizes conventional economic thought and attitudes to risk management which are all based on a notion that rare harmful events almost never happen–when in fact they do.

His ideas represent the school of skeptical empiricism which differs slightly from conventional empiricism in its treatment of empirical evidence: an empiricist in general would place value on evidence as a confirmation of a statement, while a skeptical empiricist would consider the existing evidence only as one opinion and is not exhaustive of all other possibilities, however evidence that contradicted a statement would be considered as a credible basis to disprove it. A naive empiricist, would look at evidence and reject any other possibility not represented by the evidence.

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Our favorite skeptical empiricist Nassim Taleb is interviewed by financial journalist, Consuelo Mack, where he shared his insights about history and rare events. He provides a definition of his most popular phrase “The Black Swan” which he uses to describe rare, unpredictable events that have unexpectedly large and widespread consequences for society. He cites as examples: The World Wars, the rise of the internet, Google, and stock market crashes. All these events were unexpected and unpredictable but had tremendous consequences for society after they happened.

He continues to explain that some fields and areas are more prone to Black Swans than others, in this case: economics, finance, technology, and history. Taleb describes how people in general do not understand the impact of rare events on their lives.

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