23 Nov 2010 Bloomberg (Presenter) How is it that Ben Bernanke doesn't understand risk? (Taleb) Did he see the accumulation of hidden risk in the system? No. He crashed the plane because he didn't see the hurricane. He was risk blind when he termed the crisis the great moderation. He reminds me of LTCM. Here we have brilliant people who blew up Wall Street. And the Fed saved the day. We have the use of wrong tools to estimate risk. I do not mind someone saying this is the policy, these are the risks, these are the returns. Let's see what works. Bernanke is not taking that approach. He is someone who talks about returns without talking about risks. It is equivalent to a pilot talking about speed not safety. Quantitative easing may work... but should it fail the risks are humungous. (Presenter) [On former Fed Governor Randy Crosner, currently a professor at the University of Chicago] Some say QE2 makes sense because it is an insurance policy effectively against deflationary expectations and maybe the only way for the US to avoid a repeat of what happened in Japan. (Taleb) It's good that this guy is at the University of Chicago. He reminds me of those people who sell out of the money options and claims it is safe. And he says it is not only safe but it is the thing to do for insurance problems. He should definitely stay at the University of Chicago and not get involved in economic life. (Presenter) How much greater are these risks now that QE is in place than beforehand <b>...</b>
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