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Top Theorists Examine Rippling Economic Turbulence

As the financial sector shifts, so does the reach of the jolt to economic structures around the world. Economist Nassim Nicholas Taleb and his mentor, mathematician Benoit Mandelbrot, speak with Paul Solman about chain reactions and predicting the financial crisis.

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  • RAY SUAREZ:

    Finally tonight, we return to a subject on many minds these days: the financial crisis. Our economics correspondent, Paul Solman, checked back in with one particularly prominent voice in the investment world and his colleague, who guided his thinking.

    Here is the pair's sobering conversation on what may lie ahead.

  • PAUL SOLMAN, NewsHour Economics Correspondent:

    One of the world's hottest investment advisers these days, Nassim Nicholas Taleb, author of "The Black Swan," who's been warning of a crash for years, betting on one, and winning big.

    He's been ubiquitous in the financial media of late, from cable TV's "Colbert Report" to the BBC's "Newsnight," where he was infuriated by what he called "bogus accounting."

    NASSIM NICHOLAS TALEB, Scholar and Author: The first thing I would get immediately, immediately, I would suspend something called value at risk, quantitative measures of risk used by banks, immediately.

  • PAUL SOLMAN:

    We sat down with Taleb and the man he calls his mentor, mathematician Benoit Mandelbrot, pioneer of fractal geometry and chaos theory. And even more than feeling vindicated, they're both scared.

  • NASSIM NICHOLAS TALEB:

    I don't know if we're entering the most difficult period since — not since the Great Depression, since the American Revolution.

  • PAUL SOLMAN:

    The most serious situation we've been in since the American Revolution?

  • NASSIM NICHOLAS TALEB:

    Yes.

  • PAUL SOLMAN:

    Professor Mandelbrot, can that possibly be true?

  • BENOIT MANDELBROT, Mathematician:

    It's very serious.

  • PAUL SOLMAN:

    More serious than the Great Depression, possibly?

  • BENOIT MANDELBROT:

    Possibly. I hope not.