U.S. Faces 'Death Spiral' of Swelling Debt

Black Swan author Nassim Nicholas Taleb said the U.S. deficit is swelling to a point that it would take a miracle to reverse the damage.

“So long as you have Congress keep extending the debt limit and doing deals because they’re afraid of the consequences of doing the right thing, that’s the political structure of the political system, eventually you’re going to have a debt spiral,” he said Monday night at an event for Universa Investments, the hedge fund firm he advises. “And a debt spiral is like a death spiral.”

Taleb defined the ballooning debt load as a “white swan,” a risk that’s more probable than a surprise “black swan” event. While he didn’t identify specific outcomes in markets, he did say white swans include both the U.S. deficit and an economy that’s far more vulnerable to shocks than in prior years.

The reason for that, he said, is that the world is far more interconnected due to globalization, with issues in one region able to ricochet around the world.

Taleb joins a number of observers on Wall Street and beyond voicing concerns about the growing U.S. debt pile.

This month, former Treasury Secretary Robert Rubin said the world’s biggest economy is in a “terrible place” with regard to its federal deficits, while BlackRock Inc. Vice Chairman Philipp Hildebrand has warned that any default could imperil the dollar as a global currency.