Government deficits are becoming "a pure Ponzi scheme," Taleb says

Though he didn't spell it out this time, "Black Swan" author and hedge-fund adviser Nassim Taleb gave a tacit endorsement to investing in tangible assets such as gold bullion in an interview with Bloomberg this month.

Asked what everyday investors should do with their savings, Taleb says: "Don't use the stock market as a repository of value. It has vastly more risks than you think. ... People should have three sources of variation in their income. The first one is their own business that they understand rather well. Focus on that. The second one is their savings. Make sure you preserve them. The third portion is the speculative portion: Whatever you are willing to lose, you can invest in whatever you want.

"In the second category - preservation of value - you should have the consciousness that there is something called inflation. You should avoid some classes of investments that are very fragile."

Asked about "potential sources of fragility or danger," Taleb targets government debt and - indirectly - long-term U.S. Treasurys: "The massive one is government deficits. ... The problem is getting runaway. It's becoming a pure Ponzi scheme. It's very nonlinear: You need more and more debt just to stay where you are. And what broke [convicted financier Bernard] Madoff is going to break governments. They need to find new suckers all the time. And unfortunately the world has run out of suckers."

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