For markets to make the global economy safer, we must allow markets to decide, not the regulators.

Sir, I can of course understand insurers like Henry de Castries and Eric Chaney wishing and praying for some safe and liquid assets comparable to US treasuries, and with which they sincerely believe it would be easier for them to responsibly fulfill their undertakings, “How markets can make the global economy safer” January 7.

But, safe assets are not something you just pull out of a hat, and on top of that, safe assets are also something which can turn into very risky assets, with a blink of an eye.

But, if we really want to allow markets to make the global economy safer, we need to stop interfering and distorting these.

For instance when the authors write “On the positive side, financial regulations has been strengthened” they are wrong. That is only repeating what regulators say of their own work. The sad truth is that financial regulations have been even further weakened with the introduction of even more layers that make it even harder to understand what their consequences are. And the risk-weighting of the capital requirements for banks, the mother of all distortions of the allocation of bank credit in the real economy, is still very much alive and kicking.

And when the authors write “The twin sovereign and banking crisis in the eurozone have forced leader to embrace serious reforms” I really do not know what they refer to. In that respect I just know that the embrace between banks and sovereigns is, because of the fact that banks need little or no capital when holding exposure to sovereigns, getting tighter by the hour and soon, if left alone, it will just mean they strangle each other to death.

The authors end asking for “a rebalancing solution based on a pragmatic fusion of policy and markets”… but, might our real problem be an excess of pragmatic fusions?