Nassim Taleb: "Debt slashing is the only solution"

For the past few years, when asked about solutions to the world's problems, I have suggested simplistically that it will come down to knocking zeros off from debt ledgers across the world. For the past three years since the crisis hit, the world has moved in the opposite direction. In fact in efforts to rescue people and financial firms, governments have added trillions of debt on top of debt. This has left us more heavily indebted today than we were in 2007.
I agree with Taleb's comments in this clip that unfortunately “austerity” measures are not just necessary in Greece to balance their budgets. We must all embrace austerity measures in order to stop wasting good money to rescue bad. We have to admit, reconcile and write down to get to the next healthy expansion. The sooner the better.
A 'bad debt' is written off as an expense because it cannot be collected: the borrower has no ability to repay the remaining balance on the loan. The government should not be rescuing creditors from their bad business decisions.

The analogy of the oil spill in the Gulf reminds me of the world economy today: the world financial system was flooded with credit derivatives and toxic leverage for years.
The solution now is both in stopping the flow and cleaning up the mess. It will take years of hard work and focus. But in order to fix and heal we have to stop flooding and start implementing the clean up discipline required.