Nassim Nicholas Taleb submits to to quick Q&A with Time Magazine. The very first thing he says is that this market is not a highly unpredictable Black Swan event. It’s a “white swan” that was missed not because it was unpredictable but because the our risk management systems are highly defective.
So what happens next? Taleb says banks are going to become utilities.
I think that we’ve got to progressively become a society where banks are deemed to be too precious for us, for our currency, to take too much risk. We need to have a banker who is just as responsible as someone working for the water company. Banks are going to become a utility. And banks probably will not have a lot on their balance sheet, and the risks taken will be borne by individuals like myself who have capital, and who know the risks, with their own money. Otherwise you’re going to keep having a cycle that’s deeper every time.
History buffs will remember that JP Morgan Chase actually started its life as a water company. It was going to supply clean water to a city rife with yellow fever. Ashes to ashes, water to water.