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Gold is now the world’s reserve currency, and Trump’s tariffs and immigration policy will ‘wreck the boat’ – Nassim Taleb By Ernest HoffmanPublished:
Jun 18, 2025 - 7:38 AM
Updated:
Jun 18, 2025 - 8:12 AM
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(**promotion blocked** News) – The U.S. dollar may still be a good pricing mechanism and medium of exchange, but
gold has already become the de facto world reserve currency, and the Trump administration’s tariff and immigration policies are ‘like trying to wreck the boat voluntarily,’ according to Nassim Taleb, author of ‘The Black Swan’ and scientific advisor at Universa Investments.
Taleb was asked at the outset of an interview with Bloomberg if he believes that since the publication of The Black Swan, major unexpected disruptions might be less of a threat because everyone is looking for the unknown.
“Actually, what has happened is that [people] have started to be fooled by randomness, where people don't understand the difference between noise and signal, and mistake, very often, noise for signal,” Taleb said. “Things have gotten worse. The understanding of tail events has gotten worse. The pricing of tail events, that one would think would be more rational, has gotten worse. People use bad models more and more.”
“I don't think that consciousness of risk has improved,” he added. “We just think that at any point in time that we live in a more risky period than our ancestors or anything than we did before. But it's just a normal perception.”
Taleb was asked about the markets’ reaction to the worsening U.S. government debt situation and whether the markets are pricing in risk in that area.
“Let's look at the markets,” he replied. “Markets are not driven by long-term economic stuff, it's driven by allocations. For example, people think that the markets reflect today the impact of the tariffs and these policies that may or may not be rational. No, markets are driven by certain allocation parameters, and people, of course, panic sometimes, but they've got to satisfy these in the long run. Of course, the economy will decide, and we have severe problems, the first one being the accumulated deficit, and it's snowballing, as you know, and with interest rates here, it is adding every year to the budget, just to stay in the same place.”
Beyond the steady erosion of the value of the U.S. dollar, which Taleb said is ultimately reflected in U.S. equities, he sees another major problem on the horizon.
“There's a second risk,” he said. “The first one is the deficit. The second one is effectively that the dollar is losing its status as a reserve currency.”
“What proof do you have of that, though?” the host challenged.
“You can see the accumulation of gold in the [central bank] reserves, and the behavior of gold over the past 12 months,” Taleb replied. “And it didn't start with Trump's policies, of course. It started with Biden when he froze the accounts of people connected to Putin, thinking that it'd be limited there, but people not connected to Putin decided to stay away from the euro and the dollar.”
“Gold is effectively now the reserve currency,” he said. “Transactions take place in dollars, euros, usually dollars, and at the same rate; however, they get converted back into gold. And we can see it from the accumulation of reserves.”
Taleb was then asked about the recent Citigroup report suggesting that the
gold rally might take a time-out this year, with prices retreating after running to near-record highs.
“What do they know? How do they know?” he answered. “I'm not a central bank, but I think that’s what's going on now, particularly with the new administration. The perception of America is, the riskiness of America has increased. So on top of that move into gold that started with Biden, we have now a move into gold by people who are afraid of these policies, especially central banks around the world.”
“The dollar is a good transactional currency because people can label things in it, but not necessarily a storage currency,” Taleb said. “This is what we're facing now.”
Taleb was then asked whether he worried about the Trump administration’s economic strategy.
“Let me tell you, long-term, this is why I think that we need to worry,” he said. “We need to worry because the approach is not very rational. First of all, they're amateurs doing numbers, to start with. The other thing is, think about it: You have 4% unemployment. What are you going to do now? Use tariffs to try to shift business from high-added-value into low-added-value. This is what we're invited to do?”
“Well, that will depress GDP,” he continued. “It’s like asking a surgeon, just for balance, to clean the streets one day a week. Of course, it would depress GDP. That's exactly what the Trump administration is getting us to do. I understand that tariffs may be necessary in many areas, there's a need to be symmetric and stuff like that, so this we understand. But the way they're going about it makes no sense.”
“Can you understand the reasoning behind it?” he was then asked. “Because these are people that Trump has around him, Scott Bessant, Howard Lutnick, Steven Miller. They're not idiots, right?”
“They're not idiots, and they're not specialists in that area,” he replied. “Peter Navarro, I apologize, but I'll have to say that in his own domain, he hasn't fared well. If the other ones have had some kind of performance in an area that is orthogonal, in other words, uncorrelated to the current performance. It's like asking a dentist to do brain surgery. They may do better than average, I'm not sure. None of them really is a specialist in the area that they're discussing.”
“This is where I find myself agreeing with the economists, that basically it makes no sense, and the approach is irrational,” Taleb said. “The idea of confronting China is irrational. Now, let's think, what are going to be the effects? Well, there are two things they're doing. The first one: tariffs on things that we don't produce.” He said this is effectively a tax not on the middle class, but on the poorest of the poor, because they have less money to purchase essentials. “And then compensating that with a tax break. That doesn't work, you don't pay taxes.”
Taleb was then asked about Treasury Secretary Scott Bessant’s statement that artificial intelligence may make it work by making the economy more productive.
“Yeah, maybe for Christmas, we'll get Santa Claus coming in and distributing money,” he replied. “As the French would say, maybe you can put Paris in a bottle. The idea of these tariffs may be sound. The way they're going about it, it's like trying to wreck the boat voluntarily.”
The second big policy misstep Taleb pointed to is immigration.
“I don't know if you realize the structure of American businesses and American labor,” he said. “Last time we had a labor shortage, we saw what prices did. People have large loans. Everything is based on cheap labor coming from Latin America or elsewhere. Everything is based on it. Trying to constrain that source of labor may make sense in the long run. In Japan, for example, they have small houses. Here, people have mansions. You won't be able to find people to mow the lawn or do things.”
“And if you have to wait for artificial intelligence, okay, let me know when it comes and I’ll revise my opinion,” he said. “For the time being, we don't have cheap robots, and so there's a lot of dangers in these policies. It’s as if they didn't think of the second-order effects.”
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