Current bank regulations cause less new growth and more inequality

Sir, John Plender in “Corporate cash power is holding the state hostage”, August 17, discusses the excessive savings of corporation produced “by investing less than the sum of its retained profits… well into an upturn”… and which forces governments “to accommodate these surpluses by running large fiscal deficits”. 

As a possible explanation Plender cites Andrew Smithers of Smithers & Co., who advances that this “has been driven by the dramatic growth of the bonus culture” which creates a bias in favor of short term profits and which are maximized by refraining from investing. 

That plays a role but it is small when compared to that that utter nonsense of allowing, like it is done now, bank regulation bureaucrats to decide what should be considered “not-risky” and be favored, and what should be considered “risky” and be discriminated against, and all that without any consideration given to the purpose of banks. 

The perceived as “not-risky” are normally related to past successes and current wealth, and the “risky”, like small businesses and entrepreneurs, harbor more often the possible future successes and those in need of bank credit. Favor the “not-risky” and discriminate the “risky” and you will get less new economic growth and more inequality. It is as simple as that! 

Regulators have no problems when bankers and market understands... their role is not so much understanding what is happening but preparing for when no one understands. A regulator that accepts being dumb, is immensely better than a regulator who believes himself to be smart.