Nassim Taleb, scientific advisor to the well-known hedge fund Universa Investments and author of the bestseller 'The Black Swan,' has issued new warnings about US debt and trade policies pursued by former President Donald Trump. He also renewed his criticism of Bitcoin, calling it an 'electronic tulip.'
Universa Investments currently manages over $20 billion in client assets and specializes in hedging 'tail risks' – rare and extreme market events.
Taleb points out that the market is currently facing an 'enormous amount of risk,' but it is 'not necessarily related to what you read in the newspapers every day.' He specifically mentions the US federal debt, which has more than tripled in the last 25 years, reaching approximately $37 trillion. With Trump's 'big and beautiful bill' expected to add at least another $3 trillion in the next ten years, the debt will continue to rise.
According to the Congressional Budget Office, the US government paid $881 billion in interest on its debt in fiscal year 2024 – exceeding the amount it spent on the federal healthcare program (Medicare, at $865 billion) or defense spending ($850 billion).
Taleb says, 'We are carrying extremely heavy debt.' He adds, 'It makes perfect sense that Elon Musk is dissatisfied with the two-party system,' referring to his support for the Tesla CEO and former 'Government Efficiency Department' (DOGE) head, who founded an 'American Party' after disagreeing with Trump on legislative issues.
Concerns about US debt, along with other factors including Trump's tariffs, have led to a decline in the value of the dollar by about 10% against a basket of global currencies this year.
Taleb believes that the dollar 'is no longer a reserve currency' when the United States announced in February 2022, following the Russian invasion of Ukraine, that it would freeze assets linked to the Russian government. He adds that many felt 'unease' about US overreach, prompting some central banks to replace the dollar with gold, fueling a broader trend towards de-dollarization.
Regarding tariff policies, Taleb believes that Trump is 'annoying' US trading partners by imposing taxes on imports. He says he 'does not oppose tariffs in principle,' but the way Trump uses them to reach agreements 'is not very coherent and scares the rest of the world.'
Taleb also says that the deterioration of confidence in the dollar and the United States 'is bad because we have to borrow, and we don't want a debt crisis,' noting that rising interest costs make debt 'a source of weakness.'
Taleb has long been a vocal critic of Bitcoin, calling it a 'manic cult,' a 'tumor,' and a 'magnet for idiots.'
Even as Bitcoin's price continues to reach new record highs exceeding $120,000, Taleb still sees Bitcoin as an 'electronic tulip' – a reference to the Dutch tulip mania in the 17th century, when a wave of speculation drove tulip prices to staggering levels.
Taleb reiterates that Bitcoin 'cannot be a currency,' emphasizing its volatility and the desire of cryptocurrency enthusiasts for it to continue to rise, while stability is at the heart of a reliable medium of exchange.
He also questions how this currency can be widely adopted when many governments are hesitant to support it for fear of weakening their national currencies.
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