Failed bank regulators must adore Nassim Nicholas Taleb’s black-swan.

In “Learning to love volatility”, Wall Street Journal, November 17, Nassim Nicholas Taleb writes:

“Several years before the financial crisis descended on us, I put forward the concept of "black swans": large events that are both unexpected and highly consequential. We never see black swans coming, but when they do arrive, they profoundly shape our world…. Still, through some mental bias, people think in hindsight that they "sort of" considered the possibility of such events; this gives them confidence in continuing to formulate predictions” 

And so Nassim Taleb still provides the failed bank regulators with the comfort of this being an unforeseeable crisis. Boy how much they must adore him and his black swan. 

Well several years before this crisis, me and others, put forward that this was a crisis doomed to happen… no black-swan… a totally man-made crisis.

When regulators allowed the banks to hold immensely less capital for exposures considered as not risky, “The Infallible”, than for exposures considered “The Risky”, they virtually doomed the banks to originate dangerously excessive exposures to “The Infallible”, precisely the kind of exposures that have always detonated major crisis when, ex-post, most often because they are too much financed, turn out, ex-post, as very risky…. like the triple-A rated securities backed with lousily awarded mortgages to the subprime sector, like Greece, like Spanish real estate… 

And by the way there is nothing much new in the concepts in “Learning to love volatility” or “Anti-fragility”, they represent precisely what we mean when praying in our churches “God make us daring!”