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'We're in the Middle of a Crash': Black Swan
By: CNBC.com | 02 Jul 2009 | 03:22 PM ET
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The financial system is crashing and action must be taken by the US government to convert debt into equity to produce a more stable environment, Nassim Taleb, author of "The Black Swan," told CNBC Thursday.

"You may have green shoots, whatever you want to call them, you may have temporary relief,
but you are still in a world that's breaking," Taleb said on "Squawk Box."

Anything that's fragile like the financial system will eventually crash, he said.

"We're in the middle of a crash," Taleb said. "So if I'm going to forecast something, it is that it's going to get worse, not better."

The government needs to deleverage debt and not try stimulus packages that will inflate assets, he said.

"What makes me very pessimistic in not seeing any leadership or awareness on parts of government on what has to be done, which is deleverage $40-to-$70 trillion," Taleb said.

"The monkey on our back is debt," he added.

As an example, Taleb said banks should not be sending demands for larger and larger sums from homeowner in arrears on their mortgage. Instead the bank should offer to lower the monthly payments in return for part-ownership of the property.

"People would be able to start from scratch on a healthy basis. You don't want to wait for foreclosure," he said.

More from and About "The Black Swan"

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CNBC HIGHLIGHTS

  • Warren Buffett and Bill Gates discuss the economy and other subjects with CNBC's Becky Quick.
  • Congressman Ron Paul explains to Squawk Box why he’s pushing legislation to audit the Federal Reserve.
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  • One shopper explains why he gets up at 3am on the day after Thanksgiving to go shopping every year.
  • From the AIG&T to the Merrill Lychee, Jane Wells lists this year's holiday cocktails.
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