 Good day, fellow investors. Today we're going to explain in detail why the current financial environment is more fragile than it was in 2007. We all know what happened in 2008, so what is to come might be even more dangerous and we have to be prepared. The source of this video is a recent interview that Dr. Professor Black Swan Nassim Taleb made for Bloomberg. However, he doesn't explain things in a methodical way. He is very, very intelligent, but he doesn't really put things into perspective. So in this video I want to put his thoughts into perspective by explaining everything in detail. So the topics are how come that the world is more fragile today? Of course, it leads to debt. So we're going to look into the debt around the world, what's going on, then we're going to see where is the financial world already cracking. So the first indications of what is to come, stock market crash, economic collapse, currency collapse, that's also what we are going to discuss, explain and then we're going to see, okay, if that is about to happen or there is a high probability or that is a highly probable risk that's going to happen, how to position ourselves at the end so that we are at least protected. So let me immediately start with the debt, which is the core of Taleb's thesis. So many think that we have had beautiful deleveraging over the past decade, but that's not correct. The debt is higher than it was in 2007. It is just in different places. Let's see. If we first look at the household debt outstanding, the mortgage debt, we see that it is at the same level as it was in 2008. So no fears there, 10 years later, house prices are higher, the debt is at the same level. So someone would say no risk there. But look at where the debt has gone. So the government has taken on much more debt and look at where it is now. It is more than double where it was in 2008. So the debt went from housing to the government. If we look further at corporate debt, corporations just took advantage of low interest rates and leveraged themselves to the hilt. So similar situation in China, in Europe, in Japan, we have corporations with extremely high debt levels. We have governments with extremely high debt levels at this moment. So first in 2008 it was housing and now we have corporate and governments. And that's something that's about to end very, very badly. Further, what are companies doing as they can borrow at 0%, they are buying back their own stock because that is financial engineering. That's the most trendy thing to do if you're a manager, of course, and logical if you can borrow at a low interest rate. So corporations are greedy, governments are greedy because they think they can borrow forever. But that is not the case. And here we can see the US budget deficits over the past 50 years. So always huge and always bigger, bigger, bigger and bigger. And this leads to the second point, which is that the debt will lead to an inevitable collapse. Because at some point in time, the interest payments that we see here are growing, growing and growing for the US government will become a larger and larger burden. So the interest payments are now above $550 billion for the US government. So about half of the budget deficit is used just to repay the interest on the debt from the past borrowings. So the governments are now in the phase where they are borrowing more, more and more just to pay the interest on the debt from the past. Nassim Taleb says that that is a Ponzi scheme or a Medov scheme where you borrow more and more and more just to pay the interest, not to repay the debt. So that's something that eventually has to collapse and then we have a crisis. But the debt we see that we discuss the numbers there is not all the debt we have. There is also hidden debt. If I go to the financial report of the US government from 2017, I first take a check on the balance sheet and this is what I see. Total debt position, okay, 20.4 trillion net. When you see the assets minus the liabilities, that's it. And that's what everybody talks about. However, if I go to page 57 of the report, then I can find this. This is the present value of the liabilities that will come in the future when we talk about social security. And here the total present value of future expenditures in excess of future revenue in 2017 is 49 trillion. So the US government will have to put up to close the gap of 49 trillion at present value to cover for social security expenditures in the future. So that is the present value. We have 21 trillion that everybody's already scared about. And now we have 49 trillion on top of the 21 trillion that nobody's talking about because that will come over the next 75 years. Who cares about the 75 years? Well, you cannot put things under the carpet for eternity. Sooner or later those things come out and that is what Taleb is warning us. Now where are things already cracking? Taleb says that in the past we have had Argentina or Iceland always some borderline things that were cracking which led to crisis. However, now the crisis lies in the core. We have already mentioned the huge US debt, the obvious and the hidden debt but also Italy is in a big mess. So if Italy is in a big mess, this is not Greece, this is Italy, this is the core of the European Union. Japan we don't even have to mention what's going on there. So things are already starting to crack there and with higher interest rates that we see around the world that might crack even bigger and sooner. Now as the main problem is debt, how do you pay off debt? You pay off debt by debasing your currency. By lowering the value of your currency it's much easier to pay debt. However, that implies inflation and inflation is something nobody never in history managed to control. So inflation is controllable because like they hope to spore some inflation in the last 10 years they didn't, they had mostly deflation even if they printed money. When they wanted to really hit a lot of inflation to repay the debt that will be uncontrollable again because monetary policies can't control our behavior. If I know there will be inflation I will do everything to prevent it and that usually leads to hyperinflation. Let me show you this. Just to change countries this is the United Kingdom inflation in the 1970s. Look at the average we are talking inflation rates of 25%, 16, 16.9, 16.2, 8.4, 12, 16, 10. So a decade of such inflation, do you know what it does to the debt? It erases the debt but it leads to a lot of problem and you have to be ready for inflation. Something also that Talib is mentioning when the Chinese and the oil guys stop buying those US treasuries then it might be even higher interest rates and even higher inflation for the US government. On the question what will happen? Well those who benefited from free money so we have real estate, we have the stock market will eventually get crashed by higher interest rates because it is impossible that high valuations are kept with rising interest rates. Sooner or later and we are already seeing that in this market we see the gravity pulling down stocks and you see this 1%, 2% down a little bit up but the trend is going down and October was down 7%. So this might continue especially if interest rates go higher more or if investors start fearing inflation and investors start seeing that this will be worse than the 1970s. Just look at this dividend yield. The dividend yield is 2% on the SAP 500. If you can get free something on the treasuries why would you risk holding very risky over leveraged stocks when you can buy the US government which is also over leveraged but okay let's discuss that in another video. So also something that Talib is mentioning is we will see more volatility because with rising interest rates volatility increases. When interest rates were low everybody was happy everybody was high on low interest rates and everything was stable until interest rates started to go up and we have seen much more volatility in 2018 than it was the case in the previous few years. So that's one and then on the question where to invest Talib wrote the book Skin and the Game where he says that he will say what he invests so he said that he invests in has invested in gold even if he doesn't understand gold but he likes to own it just in case if governments decide to push for a lot of inflation we have hyperinflation so gold is a good hedge then he says that he owns land olive oil producing land that is not speculative land but with a nice yield so that's also something to think about in diversification and then he said that bonds should be a terrible investment because those go down with interest rates going up especially if you have inflation and I want to remind my viewers that in the 1970s bonds were called certificates of confiscation so keep that in mind if you invest in bonds and number four is if you're long stocks which is okay and I will discuss all my strategies in the next video so please subscribe and hit that notification bell where we'll also discuss what kind of stocks might help us in such a crisis inflationary environment so I'll discuss my strategy in the next videos so please tune in also then so stocks if you are long stocks please be hedged with the protective put so that in case there is a crash you can see protection so Talib is all about protection in this market and the main message is limit your downside because things are looking much worse than it was the case in 2007 so thank you for watching please subscribe to this channel because we are going to look into various investments from gold miners gold hedges quality businesses focus on great businesses with low debt with low debt risk in order to protect protect ourselves from whatever might happen thank you for watching and I'll see you in the next video