Nassim Nicholas Taleb, a professor at New York University and author of “The Black Swan” and “Antifragile: Things That Gain From Disorder,” talks about risks created by government debt and Federal Reserve monetary policy.Here is a direct video link.
Just to clarify, Taleb notes that unlike personal or government debt, corporate debt is not an issue because it turns into equity. What he means there is that in the normal capitalist model of a corporation, if the company becomes insolvent the bond holders take their losses and in some cases end up holding equity in a restructured company. But at the end of the day investors and lenders are left to bear their own losses where they make bad bets.
Unfortunately however, over the past several years this model has been hijacked and contorted into a trend toward corporate welfare where some companies like big auto and big finance have not been allowed to fail and restructure but have been repeatedly bailed out by public funds in order to save them from the healthy creative destruction process. In these cases then, high corporate debt is a huge risk because it has been thrown on to the public purse.
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