Our jobless youth is now paying for the meek aprės nous le deluge styled bank regulations

Sir, Mohamed El-Erian writes that “in the aftermath of the 2008 global financial crisis… governments and central banks interfered more in the functioning of the financial markets. By choosing where in the capital structure to intervene directly and what to influence, the official sector altered the risk-return characteristics” “Enter the sci-fi world of central banks and their zero rate action”, July 11.

He is correct, but that was not done only in the aftermath of the global crisis. Indeed, by allowing banks to hold much less capital for exposures to "The Infallible" than for exposures to "The Risky", and thereby allowing banks to earn higher expected risk adjusted returns on their equity when lending to “The Infallible” than when lending to “The Risky”, they caused banks to overexpose themselves to some not so infallible infallibles, holding little or no capital, ergo the crisis.

Given the frequency with which “The Risky” of yesterday becomes “The Infallible” of today, and “The Infallible” of today can turn into “The Risky” of tomorrow, in words similar to those of Mohamed El-Erian, these bank regulators lived on the risk taking of yesterday without creating the opportunities of tomorrow. I short a shameful aprės nous le deluge strategy that our jobless youth is already paying for.