IslamicFinance.de

Nassim Nicholas Taleb says financial institutions today are less fragile than they were a few years ago. This isn’t because they got better at understanding risk but because, since 2009, banks have been shedding their exposures to extreme events. Monetary policy made itself ineffective with low interest rates. There’s no evidence that “zero” interest rates are better than, say, 2% or 3%, as the Federal Reserve may be realizing. Low interest rates invite speculation in assets such as junk bonds, real estate and emerging market securities. We also need to focus on risks in the physical world. Terrorism is a problem we’re managing, but epidemics such as Ebola are patently not. Finally, climate volatility will produce some nonlinear effects, and these will be compounded in our interconnected world.