We cannot have both debt leverage and a hyper-efficient system—the volatility is just too great. What Taleb explains—which no one else does—is that efficiency is already a form of leverage. A highly efficient system removes slack and magnifies small changes. Think of the efficient system as a high-performance aircraft. Each minute of steering input creates a rapid and violent shift of course, speed, or altitude. The system itself is souped up even before you add the debt. Once you do, the pilot is equally jacked up and twitchy, creating an explosive combination. Now imagine that fighter jet trying to fly in a 1,000-plane formation, and you get an idea of the world financial system in the 21st century.
We can’t erase the technology that created the planes, so we’ll have to make sure we fly sober, maybe even with an onboard computer that dampens the controls. That means getting rid of the debt. It’s that simple.
There’s something to this. The technology stock bubble inflated in the late 1990s and collapsed in the early 2000s without devastating the economy. Why was that? Mainly because there wasn’t much debt involved. Very few people had borrowed money with Pets.com shares as a collateral.
That said, I don’t see how a no-debt capitalist system would really work (although maybe I just need to spend some time studying Islamic banking). But a lot less less debt sounds like a good idea.