Going back to where we were will just lead to an even bigger crash

The Washington Post has an interesting interview with Nassim Nicholas Taleb, the author of the black swan thesis. In it, he’s very dismissive of economists and makes some sensible comments about bonuses. But what struck me as most interesting was his final answer:

“My rosy scenario is that a better economic environment will develop, a low-debt, robust growth world, in which whatever is fragile will be allowed to break early and not late.

My nightmare scenario is that the government saves Citibank once again, as well as the other banks, and business resumes as usual. Then, the next time the system breaks, it breaks much, much bigger.”
One of the most dangerous things that is going on at the moment in response to this crisis, are the continuing attempts to reflate all the bubbles that caused this problem. The desire to get back to where we were just before the crash is understandable but a very bad idea that ignores that the crash was a consequence of the system itself.