November 30, 2014

ECB’s Mario Draghi should be stopped from wasting a QE in the Eurozone, even if a straitjacket is needed

Sir, credit risk weighted capital (equity) requirements for banks make banks lend too much to what is perceived as absolutely safe and too little or at too high rates to what is perceived as risky, like to small businesses and entrepreneurs.

And while these regulations remain, banks are not able to allocate credit to the real economy in an efficient way. In such circumstances, in a Eurozone where bank credit is so important, to inject liquidity through a QE or any other similar means, would just be a very dangerous waste of resources.

But to explain that to a former chairman of the Financial Stability Board, one who refuses to understand how wrong the distorting credit risk weighing of bank equity is, is not easy… especially when he receives so much applauses from famous connoisseurs such as you Sir, “Draghi needs support on QE in the eurozone”, November 29.

A sizable QE, in terms of monetary policies, is similar to a nuclear device. Once it detonates it could take years before its dangerous radiation dissipates. And therefore QEs need to be placed in hands of those who would only use these as a last resource and when absolutely sure they would do more good than bad… not in the hands of a Dr Strangelove.

Yippee-ki-yay Europe, here comes QE!

November 29, 2014

Gauging the level of understanding of Fed statements assumes, kindly, Fed understands what it writes. Does it?

Sir, Tracy Alloway tackles the issue of “Why Fed statements have become literally harder to read” November 29, which generously assumes that the Fed understands what it writes. Can we be so sure of that?

One of the most important documents of our time is the Explanatory Note on the Basel II IRB Risk-Weight Functions issued by the Basel Committee; as with it the regulators try to explain what they are betting all of our banking system on. And, that document is such a mumbo jumbo, that the only thing I can conclude is that none of the experts and not-experts who read it understood one iota of it, and therefore did not dare to question it.

And so seemingly the rule is that the more complicated a document is, the less the chances it will be questioned. And the add-on to that would be, the more expert an expert think he is, the less likely he will confess not understanding something.

Therefore friends, given that FOMC statements currently “require reading grade levels of 18 to 19 to understand” hold on to your hats, someone might want to hide something, and we might soon be in to suffer the Chinese curse, I refer of course to that of “May you live in interesting times!”

Basel Committee and Financial Stability Board: “Beware, beware, walk with care, care for what you do, or Mumbo-Jumbo is going to hoo-doo you, or Mumbo-Jumbo is going to hoo-doo you, boom le boom le boom le boom!”… and hoo-doo our banks, and hoo-doo usPlease, we are NOT expendable!

If only the Basel Committee for Banking Supervision had contracted an Abraham Wald.

Sir, Tim Harford’s recalls how the American statistician Abraham Wald when asked how to reinforce returning shot planes, advised to first figure out where those planes not returning had been shot, “ Learn from the losers”, November 29.

And Harford writes “It’s natural to look at life’s winners [but] if we don’t at life’s losers too, we may end up putting our time, money attention or even our armour plating in entirely the wrong place”.

Absolutely and had the Basel Committee for Banking Supervision contracted someone like Abraham Wald, they would have understood that banks did not really need to hold more equity for what was perceived as “risky” but, if anything, they needed to hold more of it for what was perceived as “absolutely safe”, because there were where the shots that brought them down usually hit.

PS. Reading this article I was also reminded of Benjamin Franklin’s beautifully counterintuitive but so correct saying of: “if you want something done, ask a busy person”.

Do liberal values include risk-aversion? If so, bye-bye Europe

Sir, Richard Vinen in his “The Pope is wrong – old Europe is a new world” of November 29 extols Europe’s liberal values. And I have a question for him, and for you.

During the last decades regulators have imposed on the European banks credit risk weighted equity requirements. With these they allow banks to earn much higher risk adjusted returns on equity when lending to what is perceived as “absolutely safe” than when lending to what is perceived as “risky”. And so of course return on equity maximizing banks, respond to these incentives and do not lend more to the “risky”, like to small businesses and entrepreneurs. And, given that risk taking is the oxygen of any economy moving forward, Europe is now stalling and falling.

And so my question is: do liberal values include such risk-aversion?

And I ask that because in my opinion little has turned Europe in that old granny Pope Francis refers to, that these risk-adverse regulations.

Risk-taking is for the young, for the optimists, for the believers in a bright future. Risk aversion is for the old, the pessimists, for the ones who do not dare to bet what they have today in order to get a better future.

What a pity Pope Francis did not in his speech to the European Parliament remind Europe of The Parable of the Talents.

November 28, 2014

While risk based capital requirements for banks remain, small companies will not have fair access to bank credit.

Sir Sarah Gordon writes: “Smaller companies [in Europe] have also been able to take advantage of easier borrowing conditions”, “Light amid the gloom”, November 28.

Yes, in absolute terms, the smaller companies might indeed currently face easier borrowing conditions but, in a competitive economy, what most matters for the correct allocation of bank credit, is not the absolute but the relative borrowing conditions. And in that respect, let me assure you that smaller companies, those primarily squeezed by the credit risk weighted capital requirements for banks, are worse of than ever, as a result of the increasing capital/equity squeeze on banks.

And Gordon also wrote: “Even the lack of access to bank lending during the financial crisis [and thereafter] has had positive effects, with small and medium-sized enterprises reducing their over reliance on banks and diversifying their funding sources.” And I am not sure what to make of it. 

Is Sarah Gordon, blaming small and medium-sized companies for their over reliance on banks? If so whoever told her it is their responsibility to achieve a diversification of their funding sources? Have they not enough problems as is, running their smaller companies’ businesses?

No, those really responsible for allowing small businesses to have fair access to bank credit are primarily the regulators, and they are not acknowledging, or much worse yet, perhaps not even understanding the fact that they do impede it… and so, sadly, there is still too much darkness amid the gloom.

Martin Wolf, stupidity is not "frighteningly near", it is already here, and it is well entrenched.

Sir, Martin Wolf, with respect to immigration, correctly argues that “the presence of hard-working and ambitious people speaking a multitude of languages and offering a diversity of culture, while fitting with the predominantly liberal culture of the UK, should surely be welcomed”, “Fear of immigration is no reason for Britain to leave Europe” November 28.

And Wolf rightly concludes “It would be folly to let a paroxysm of anxiety over immigration drive the debate on whether UK should stay in EU… unfortunately, that degree of stupidity seems frighteningly near”.

But, let me ask Martin Wolf, sort of for the umpteenth time: what’s the use of inviting immigrants who could provide much dynamism if at the same time, you are fighting against the number one source of dynamism, namely risk-taking?

The credit risk weighted capital requirements for banks, which provide banks with much more incentives to finance the “safer”, the old, the history, than the “riskier”, the new, the future, tells me stupidity has already arrived. And, observing how the debate ignores the distortions in credit allocation these regulation produce, I would venture that stupidity is firmly entrenched.

“My deflation is horrible, yours, oil, not so bad”

Sir, inflation seems to be have been identified as the number one tool to smack grandmother Europe back into fertility and force her to vibrate on the dance floor again. And though that must sound quite eerie to the poor of Europe, those who always end up being most taxed by inflation, most of you in FT clearly agree with that approach.

And that is why I was slightly surprised when I now read you categorically stating: “Weaker oil prices are a restorative that the flagging world economy needs”, “Opec members flounder in a flood of cheap oil.” November 28.

I say that because it would seem that lower oil prices are more likely to fuel deflation than inflation. But, I guess the beauty of inflation, like so much other, is also in the eye of the beholder, “my inflation is splendid, your inflation not so good”.

Sir, for the record, let me remind that though some inflation could help to put some kick back into granny again, that can only happen as long as she really wants, dares, and is allowed to do a comeback.

Unfortunately, while Europe insists on credit risk adverse regulations that effectively stop banks from lending to small businesses and entrepreneurs, that does not seem to be what the family wants for her. Currently Granny Europe is kept more into a “let me just die as painlessly as possible” mood.

PS. By the way, Opec should have invited the USA shale oil producers (extractors)

November 26, 2014

The real unusual economic ill we suffer, is that of regulators ordering our banks to be risk adverse.

Sir, Martin Wolf argues for “Radical cures for unusual economic ills” November 26.

And therein he identifies the illness as the “chronic demand deficiency syndrome”, meaning “the private sector has failed to spend enough to bring output close to its potential without inducements of ultra-aggressive monetary policies, large fiscal deficits, or both.

But “to bring output close to its potential”, is sort of a half-baked aspiration for an economy, as it always need to strive to expand its potential.

And usually that signifies also to expand the economy’s potential more than what other economies can expand theirs… unless of course you subscribe to a somewhat Piketty like thesis that we must stop doing so in order for other to have a chance to catch up.

And, expanding the potential of an economy, can only be the result of risk-taking; never of that risk aversion which has been introduced by bank regulators, by means of their portfolio invariant credit risk based capital (meaning equity) requirements for banks.

But, unfortunately, just like the geocentric experts of the past could not get their hands on the realities of a heliocentric world, Martin Wolf belongs to those who confuse the world of ex-ante perceived risks, with the world of ex-post realized dangers; and therefore cannot understand that real banking risks do not revolve around what is perceived “risky”, but always around what is perceived as “absolutely safe”.

Wolf, referring to Lord Turner’s recommendation of “nationalizing the creation of money now delegated to often irresponsible private banks”, considers that as a “probably more effective way… to create money in order to expand demand”.

What a laugh! The truly real irresponsible have been the bank regulators like Lord Turner who, with such immense hubris, thought themselves capable of being the good risk managers for the world.

And now Martin Wolf, seemingly getting a bit desperate also argues that “Unproductive savings should be discouraged” and so “tax savings instead”. So let me end here by just asking: who is going to decide what is unproductive saving and what is not… is it Martin Wolf and his bank regulating buddies? I pray, for the sake of my grandchildren, for that not to happen.

PS. Why is Lord Turner lately so often referred to only as Adair Turner? Is he ashamed of his title? If so, relieve him, and take it away.

November 25, 2014

Simon Samuels, bank regulators’ own ‘risk culture’ is as bad as it gets

Sir, Simon Samuel’s holds that “the driver of bank failure is not insufficient capital but rather a bad ‘risk culture’”, “A culture ratio is more important than a capital ratio”, November 25.

Absolutely, just like it is not the risk of the assets that a bank has on its books that matters, but how the bank manages those risks.

And in this respect no ‘risk culture’ has been as bad and damaging than that of bank regulators who came up with portfolio invariant ex ante perceived credit risk weighted equity requirements for banks.

With it they gave incentives for banks to accumulate dangerous high exposures against little equity in assets like loans to Greece or AAA rated securities.

And with it, by making it easier and cheaper for the “infallible” sovereigns and the AAAristocracy to access bank credit, and thereby much harder to do so for the peasants, our small businesses and entrepreneurs, they also imposed destructive financial feudalism 

Simon Samuels would do good looking at what he himself and his colleagues are up to in the Financial Stability Board, and in the Basel Committee, since only excessive hubris could explain them thinking themselves able to play risk managers for the banks of the world.

November 24, 2014

Perhaps the US shale oil producers should join Opec

Sir, in “A new chapter for Opec?” November 26, Anjli Raval and Neil Hume, describe Opec and the US shale oil-producers as competitors… and this though in many ways they share the same problem and perhaps would be better of as allies.

What problem? That the taxman, at least the Europeans taxman, needs, wants, and by means of taxes on gas (petrol consumption) gets more income per barrel of oil, than those who sacrifice that non-renewable resource forever.

What would the demand for oil be in Europe and other places if gas (petrol) was not such a handy product to collect taxes on? I don’t know how much higher it would be but, if I were one of those Opec ministers, I would certainly invite those shale oil producers for a little talk on shared strategies.

“Spaniards you will not have to pay Spain's debts, and you will not have to work too much” stinks pure cheap populism

Sir, Wolfgang Münchau writes “There is nothing controversial about the statement that if debt is unsustainable it needs to be restructured”, “The radical left is right about Europe’s debt” November 24.

Indeed, absolutely right. But then Münchau holds that Podemos of Spain “may be the one that comes closest of all those in the Eurozone to offering a consistent approach to post-crisis economic management”.

If a knowledgeable Münchau cannot differentiate between understanding the need of debt restructuring, and using that need in terms of haranguing “screw those capitalists”, in order to gain self interested power, then Europe is indeed in trouble.

Just two days ago Tobias Buck reported that Podemos’ European election manifesto included “a commitment to a 35-hour workweek, and to lowering the retirement age to 60”.

Does not “Spaniards, you will not have to pay Spain debts, and you will not have to work much” stink cheap populism?

November 23, 2014

With no ​​jobs to pay mortgages or utilities, at least we are living in great houses. Thank you bank regulators!

Sir, I refer to Tim Harford’s “Why a house-price bubble means trouble” November 22.

In it Harford writes “Booming housing markets attract bankers like jam attracts flies, sucking money away from commercial and industrial loans. Why back a company when you can lend someone half a million to buy a house that is rapidly appreciating in value?”

That is far from being the whole story.

Regulators, because they thought or wanted to think about the financing of houses as something absolutely safe, also allowed the banks to do it against very little bank capital, meaning very little equity… especially if someone managed to dress up the mortgages in AAA ratings.

And that allowed banks to earn much higher expected risk-adjusted returns on equity when financing houses than when financing the “risky” small businesses and entrepreneurs, those who could create jobs, and for which their regulators required them to hold much more equity.

And so here we now find ourselves… living in expensive houses with too few good jobs to allow us to pay the mortgages and the utilities. Is that not sort of bad planning?

November 22, 2014

Pablo Iglesia’s offer of a 35-hour workweek and a retirement age of 60 in Spain, sounds more like a “No se podrá”

Sir, I have surprised read Tobias Buck reporting that Pablo Iglesias, of Podemos (we can), suggests “a 35-hour work week and lowering the retirement age to 60”, “Spanish upstart party challenges status quo”, November 22.

Sincerely, in a so job starved Spain, that sounds to me much more like a giving up, like lets share the leftovers, like a defeatist “No-Podemos”.

If that is what Spain wants, then Spain is truly in big trouble.

I hope Spain understands that speaking engagingly, emotionally and with great empathy of the problems of a nation, has absolutely nothing to do with the capacity of solving those problems, on the contrary, these are often worsened by experts in verbal populism. (See: Venezuela)

If I was a Spaniard, and a bit similar to Churchill’s “Blood, sweat and tears”, I would now be arguing: “We can (nosotros podemos) and must get out of this sorry mess, and make Spain great again, even if that takes a 60 hours working week and forces us to work until we’re 100”.

PS. When an Executive Director of the World Bank, 2002-2004, it was a great honor for me to be sitting in the chair which represented, among others, Spain and Venezuela.

La oferta de Pablo Iglesias de 35 horas de semana laboral y 60 años para la jubilación, me suena más a un ¡No Podemos¡ 

Señor Editor, sorprendido leí a Tobias Buck informando que Pablo Iglesias, de Podemos, sugiere "una semana laboral de 35 horas y la reducción de la edad de jubilación a los 60", "partido advenedizo español desafía status quo", 22 de noviembre. 

Sinceramente, en una España tan  hambrienta de empleos, eso me suena mucho más como un abandono, como a un vayamos a compartir las migajas sobrantes, como a un derrotista "¡No-Podemos!". 

Si eso es lo que España quiere, entonces España esta realmente en serios problemas. 

Espero que España entiende que el poder cautivar hablando con gran empatía de los problemas de una nación, no tiene absolutamente nada que ver con la capacidad de resolver tales problemas, por el contrario, éstos son a menudo agravados por los expertos en populismo verbal. (Ver: Venezuela) 

Si yo fuese español, y algo similar a lo de "sangre, sudor y lágrimas" de Churchill, yo estaría ahora argumentando: "Nosotros sí podemos y tenemos que salir de nuestra triste situación, y hacer de España de nuevo grande y fuerte, incluso si esto nos obliga trabajar 60 horas por semana hasta los 100 años". 

PD. Cuando fui un Director Ejecutivo del Banco Mundial, 2002-2004, fue un gran honor para mi estar sentado en la silla que representaba, entre otros, a España y a Venezuela. 

Has ECB and Draghi read Piketty and now want to impose a wealth tax on Europe’s piggy-banks?

Sir, Claire Jones reports Mario Draghi said that the ECB would “do what we must to raise inflation and inflation expectations as fast as possible, “Dovish Draghi raises hopes for more ECB stimulus” November 22.

And since the ECB is aiming at 2 percent inflation that would be equivalent to a 2 percent wealth tax on all the piggy-banks in Europe. Has ECB and Draghi understood Piketty a bit too much?

Frankly, in a Europe with such problems like that banks are effectively restrained by crazy regulators from lending to medium and small businesses, entrepreneurs and start-ups, those tough risky risk-takers that Europe so urgently need to get going, to then hear all this talk about inflation as an overriding minimal requisite for a solution, should make all a bit nervous… specially the poor (and the piggy-banks) who always end being those most taxed by inflation.

November 21, 2014

The problem with the Nordic model is that bank regulators have tampered with it

I refer to Richard Milne’s “Nordic model starts to creak under pressure” November 21.

Sir, suppose you were a development minister of a country like Sweden that has thrived on entrepreneurship, much of it financed by banks.

And then your bank regulator, Stefan Ingves, tells you that, in order to make the Swedish banks safer, he and his colleagues in the Basel Committee, is now going to allow banks to earn much higher risk-adjusted returns on equity when lending to those perceived as “absolutely safe”, than when lending to those perceived as “risky”.

What would you do? What should you do?

You should of course shout: “No! Over my dead body! Favoring in such a way what seems ex ante to be very safe, means that medium and small businesses, entrepreneurs and start-ups, “the risky”, will no longer have fair access to bank credit… and that is too dangerous… even for the banks.”

Unfortunately, those responsible for the economic development of most countries have not yet understood the consequences of the credit risk weighted capital (meaning equity) requirements for banks.

And so before Sweden remembers that risk-taking is the spark that ignites all development and keeps the economy moving forward, it will be stalling and falling.

And that goes of course for all countries that find themselves under the thumb of senseless bank regulators.

November 20, 2014

The response to monetary stimulus must be different in totally different banking systems

Sir, we have had two complete different worlds of banking.

One when banks decided to whom they would lend to and at what interest rates and what terms, based on what they perceived the credit risks to be.

The other word, the quite recent one, is one in which regulators intrude and distort the allocation of bank credit by declaring that also the bank capital, meaning equity, banks were required to hold should also be based on perceived credit risks.

And that of course increased the risk-adjusted returns on equity for banks when lending to the “absolutely safe” making lending to the risky, like small businesses and entrepreneurs, something much less attractive.

To think that the economy would respond in the same fashion to various economic stimuli with such different bank systems is quite idiotic.

And Sir, that is why, when reading Richard Milne’s “Stockholm syndrome”, November 20, about the Swedish Riksbank’s crisis-fighting measures, and where there is even a reference to 1937, I find that discussion to be so completely out of context.

It states: “‘Sadomonetarist’ rate rises led to a toxic bout of deflation and criticism from economists.”

If anything, in that respect, what we really have is sadistic risk adverse regulations.

November 19, 2014

ECB’s Peter Praet, seemingly solidary with deep-rooted pessimists, has no moral right to speak out against pessimism.

Claire Jones reports that Peter Praet, the member of the ECB’s top-ranking executive board responsible for economics said: “what worries me the most is that you have a sort of longer-term growth pessimism filtering through to expectations, and authorities in general have to be very attentive to this”, “ECB warns of ‘pessimism’ threat” November 18.

Frankly, are not capital requirements for banks based on perceived credit risks, and which are designed to make banks avoid taking risks on the “risky” and limiting themselves to financing the “absolutely safe”, an expression of profound pessimism? Of course it is. Optimism is equivalent to let’s go for it, even if its risky. And that is what Europe needs.

But, the problem Praet might have is that it must be difficult to discuss the distortions in credit allocation that that bank regulation causes, if your boss, Mario Draghi, as the previous chairman of the Financial Stability Board, is one of the most responsible for it.

My answer to Praet would be: You have to decide whether the future of your children and grandchildren is more important than yours. It is as easy (and as hard) as that!

The Parable of the Talents and the self inflicted curse of excessive regulatory risk aversion.

Sir, we live in a world where those who are perceived as “risky” from a credit point of view; those who always include small businesses and entrepreneurs; those who with their dynamism help to seed the future of an economy, are negated fair access to bank credit. And that is done by means of regressive and distorting bank regulations that allow banks to hold much less capital, meaning equity, against assets perceived as absolutely safe.

And tragically, that is not deemed to be a problem, like we can for instance see when reading Martin Wolf’s “The curse of weak global demand” of November 18. In it, as usual, this central problem is not even mentioned

Of course the world has many problems but since risk-taking is the oxygen of any development, one of the most serious one is the self-inflicted curse of excessive regulatory risk aversion.

I was recently reminded of “The Parable of the Talents”, Matthew 25:14-30 and we would all be well served if regulators read it and understood it. We the taxpayers are underwriting many of the risks in banking, “the Talents”, which we hand over to regulators to manage, and we do not do that just in order for banks to obtain higher returns on equity or to only lend to those perceived as absolutely safe. We do that so that banks can allocate credit efficiently, and daringly, to the real economy.

November 18, 2014

The Fed’s regressive bank regulations, makes it a biased source of information

Sir, Tom Braithwaite’s writes that “stock and bond prices for the banks would be more accurate if [the market] knew what the Fed thought about the strength of these banks and their management”, “Smoke needs to clear over Fed supervision of US banking system”, November 17.

Indeed, that sounds extremely rational but, unfortunately, if the views of the Fed are biased, the signals it sends out will of course make it worse for the economy as a whole.

I say this because it is clear that the Fed agrees with regressive regulations which much favors bank lending to the infallible, in detriment of lending to the risky, and so opining based on such mistaken criteria cannot lead to anything good.

Just look at the “Camels” ratings that Braithwaite refers to and that many want to be disclosed. These cover “capital adequacy, asset quality, management, earnings, liquidity and sensitivity to market risk”; with no indicator for what is most important for the real economy, and thereby implicitly in the medium and long run is also vital for the banks, namely if the bank allocates credit efficiently to the real economy.

And so, even if in the land of the free and the home of the brave, the Fed would rate much higher a bank that exclusively lends to the sovereign and the AAAristocracy, than a bank that dares lending to “risky” citizens and their small businesses. And if that helps anyone, that might be those very elderly in want of short-term safety, and clearly not the young who need banks to take risks in order to have a future.

And what is really hard to understand is when Braithwaite refers to Jose Lopez, an economist at the Federal Reserve Bank of San Francisco, opining in 1999 that the disclosure of Fed’s Camels ratings “could benefit supervisors by improving the pricing of bank securities and increasing the efficiency of the market discipline brought to bear on banks”. Does the Fed need the market to reassure it by reaffirming the Fed’s own biases? Is it not doing enough damage as is?

November 17, 2014

I agree 100 percent with Christian Clausen of Nordea, in his description of 50 percent of the problem with SMEs and bank capital/equity.

In there Christian Clausen, chief executive of Nordea and president of the European Banking Federation, is quoted saying: “Ever-increasing capital demands of regulators meant banks needed to charge a margin of 6-7 percentage points to small and medium-sized enterprises (SMEs), companies which are often seen as the backbone of the EU economy. Show me an SME that can do a business case on opening a new factory or doing an investment where they can start by absorbing 600-700 basis points on margin. In this environment, it’s not possible."

And Clausen asks: "Don’t you want to allocate risk capital to the young entrepreneurs and the companies that can grow and export and create jobs? We have gone too far. Why on earth as a politician do you want to allocate the limited amount of risk capital in your society more than necessary to the banking sector? Don’t you want to allocate risk capital to the young entrepreneurs and the companies that can grow and export and create jobs? We will not create more jobs by piling up more capital, we will create negative growth because our lending costs will go up.”

Absolutely, Clausen is 100 percent correct, but unfortunately that is only in 50 percent of the story.

The other 50 percent is: Why would bank regulators require banks to have more capital when lending to SME’s, the backbone of the economy, than when lending to for instance those who possess an AAA rating or lending to an “infallible sovereign”.

Is it not so that much of the higher margin banks now need to charge SME is a direct result of the low margins they charge when lending to the “absolutely safe” because these are subsidized by the very low capital requirements that then apply?

My rephrased Clausen questions would be: Why on earth as a politician do you want banks to consume more of the limited amount of bank risk capital in your society when lending to the risky that when lending to the safe? Do you really want to discriminate against the fair access to bank credit of the young entrepreneurs and the companies that can grow and export and create jobs?

​Do you really want your banks financing the riskier future settling instead for refinancing the safer-past?

Sir, for the real economy, a stress test of banks, which analyzes only what is on the banks’ balance sheets, and ignores what should have been on these, is a useless test.

PS. Yesterday in church I was reminded of the “The Parable of the Talents”. It would do us much good if bank regulators read Matthew 25:14-30

The mission statement for our banks as decreed by its regulators does not make any sense.

Sir, Sebastian Mallaby writes: “Banks are underwritten by taxpayers via deposit insurance as well as the too-big-to-fail safety net; they need to be reined in, and if they shrink, so be it”, “Stringent rules for hedge funds make the financial system fragile” November 17.

Indeed but, why are banks underwritten by taxpayers? What are banks supposed to deliver in return?

The current mission statement imposed by regulators on banks, by means of credit risk weighted capital requirements, seems to be that of lending more and cheaper than normal to all those perceived as “absolutely safe”, and to stay away from lending to the “risky”. Is that what we want? I don’t think so. If it were, there would be no reason for us to underwrite anything.

For example the: “We the people underwrite the banks so that these can lend more and cheaper to our "infallible" sovereigns… in the hope that doing so we don’t have to pay taxes”… sounds more like underwriting the sovereign than underwriting the banks.

No, I believe we taxpayers agreed on underwriting the banks so that these would be better equipped to take on the risks of lending to all those risky small business and entrepreneurs we all know should get credit, so that the economy grows and as a result we all are better off. That was the quid pro quo!

And Mallaby also writes: “Regulators need to remember that financial risk will not go away… there will be difficult judgments about how capital should be allocated. So there has to be a theory of where this risk can best be housed. If hedge funds are part of the answer, regulators make the world less safe by clamping down on them.”

Absolutely, if not the banks, then who is going to house the risk-taking we support and that most of the world, not understanding the regulations, still think is housed in the banks?

November 16, 2014

To hinder what‘s senseless and insensible to trend, we need strong globalized social sanctioning

Sir, Gillian Tett asks: “Can sensible ever ‘trend’?”, “The battle for political sense and sensibility”, November 15.

In these days of information overload, when no one has time to digest what they hear, read and see, and only have time to file it in black or white, or right or wrong cabinets, that is indeed an extremely important question.

Unfortunately, for the time being, it has to be answered with an “on its own, without assistance No!”

With respect to justice I have for long argued that more than fighting for justice, which places us on the route to something infinite, where we never really know where we find ourselves, it is much more effective to fight against the injustices, which are easier to define.

In the same vein, instead of trying for sense or sensibility to trend, let us at least start by making sure that what’s senseless and insensible cannot trend.

As a minimum it behooves the world to find credible instruments that can shame out some of the complete senseless and insensible falsehoods that, floating around on the web, causes real idiots to believe they have confirmed grounds to believe in their idiocies, and give them instruments to advance these, and so create legions of fools.

Is that easy, or even possible? That is an irrelevant question, it has to be tried.

Would that be censorship? No, much more like social sanctioning… on a global scale.

November 14, 2014

Regulators frightened by innocuous credit risks are concerned with banks worrying about dealing with money launderers.

Sir, Martin Arnold reports on “growing concern among regulators and politicians about increased risk aversion by banks, which have reacted to a regulatory crackdown and a string of big fines for misconduct by severing links with riskier clients”, “Financial task force warns on banks’ approach to de-risking”, November 14.

Sounds like a cruel joke. Regulators who demonstrate huge risk-adverseness based solely on credit risk perceptions, are now expressing concerns with that banks might be to risk adverse when dealings with clients who could fit the profile of money launderers and terrorist financiers.

The bank regulatory risk weights explain much of a growing lack of productivity.

Sir, I refer to Martin Wolf’s “Hope for the best on productivity, but prepare for the worst” November 14.

Here is a list of risk weights applied by bank regulators apply, even though banks already adjust for perceived credit risk by means of interest rates, size of exposure and other contractual terms.

Infallible sovereigns: 0 percent.

Members of the AAAristocracy: 20 percent

Financing of houses: around 30 percent

Medium and small businesses, entrepreneurs and start-ups: 100 percent.

Sir, do you think that risk weighting is compatible with a banking sector that can effectively help to finance increased productivity? I don’t. Martin Wolf seems to think there is no linkage.

Regulators are negating our descendants the freedom of risk taking by banks that brought us to where we all find ourselves. That is shameful... and useless. Lending to medium and small businesses, entrepreneurs and start-ups have never been the direct cause of any real large bank crisis.

November 13, 2014

With Portfolio Invariant Perceived Credit Risk Weighted Equity Requirements for Banks, Europe, the whole G20, is doomed.

Sir I refer to the reports and warning about Europe’s economy, November 13.

As long as regulators insist on using Portfolio Invariant Perceived Credit Risk Weighted Equity Requirements for Banks, Europe, in fact the whole G20, is doomed.

What more can I say that I have not already explained to you in more than a 1600 letters about what these regulations with their misguided credit risk aversion cause, and that you prefer to ignore?

November 12, 2014

The environmental problems of our planet are too serious to be allowed being sequestered by unethical vulgar politics

Sir, Martin Wolf’s “An unethical bet in the climate casino” of November 12, exemplifies exactly the main obstacle for the world to start tackling in real problems related to climate change, or, if you wish, problems related with just bad handling of our environment. And that is that the to do or not to do so, is always politicized.

Just read: “The Republican victory in the midterm elections was a triumph for its strategy of sustained vilification of the president and obstruction of his policies. The most important consequence of this election may therefore be to bury what little hope remained of getting to grips with the risk of dangerous climate change.”

I know that when my grandchildren would ask me “Grandfather why did you not do anything” this article of Wolf will, with much sorrow, come in handy.

“Many Republicans seem to have concluded man-made climate change is a hoax.” Does Wolf really think they have concluded that… and not just concluded something political?

“Yet, fascinatingly, the very same people who consider the costs of mitigation excessive wish to lighten financial regulation and so increase the risk of a repetition of the recent calamity… It is no accident that believers in laisser faire are the fiercest climate sceptics. The wish is father to the denial.”

Hold it there! I just know that if the tackling of climate change was to fall into the hands of something like the Basel Committee for Banking Supervision, and the Financial Stability Board, which with their portfolio invariant credit risk weighted capital/equity requirements for banks caused the current crisis… then our planet would be definitely toast L

FT, McKinsey should it not be: Piketty “Winner of the 2014 Book Business of the Year Award”?

Sir, you, FT states that: “The prize will go to the book that is judged to have provided the most compelling and enjoyable insight into modern business issues.”

Sir, even though during 15 years I was a columnist at Venezuela’s most important paper, until I was expelled by the new pro-government owners, I never considered myself to be a journalist, so I would not know what to do as an FT journalist, if seeing FT approving of Thomas Piketty’s “Capital in the Twenty-First Century” as the “Winner of the 2014 Business Book of the Year Award”.

But, as a consultant, and if a consultant of McKinsey & Company, I would feel much ashamed and would most certainly resign, immediately.

Of course unless all was just a monumental typo and what was really intended was: “Winner of the 2014 Book Business of the Year Award”… with that price I could agree since it must have made Thomas Piketty a quite rich man.

PS. Enjoyable? From what I hear, in number of pages not read by its buyers, this book might go for a Guinness record... hardly something compatible with enjoyable.

November 11, 2014

Lord Turner, if a helicopter is to drop money, then drop it on the citizens, who are those who will have to pay for it.

Sir, not only does Bank of England buy huge amounts of government bonds; and banks do not need to hold any equity against these bonds, so they are also big buyers; and new bank liquidity requirements will also favor them holding sovereign instruments.

But now Lord Turner, to top it up, also wants to make a Friedman helicopter drop of money, on the government, on its bureaucrats, to finance a special one shot deficit, “Print money to fund the deficit – that is the fastest way to raise rates” November 11. He really must adore government!

I have no problem with the concept of a helicopter drop (I have a gold hedge) but, if something goes terribly wrong, and run inflation results, it will be the poor who suffer the most. And so I would suggest dropping that money directly on the British citizens.

Lord Turner explains the “current mess” in terms of “excessive private sector credit growth”. Indeed, but let us not forget that, as a bank regulators, by allowing the outright stupid credit-risk-weighted capital/equity requirements for banks, was himself much guilty of that. 

That regulation caused banks to leverage their equity to the skies; completely distorted the allocation of bank credit in the real economy, and, by favoring “the infallible” and discriminating against “the risky” is also a driver of growing inequality. 

And we are to trust them?

PS. If we know that inflation is primarily a tax on the poor, then why is deflation so bad for the poor?

The bank regulatory assassination of the real economy and of opportunities, is about to get much worse with FSB’s TLAC

The Financial Stability Board announced that: “the basic total loss-absorbing capacity requirement (TLAC) would be in the range of 16-20 percent of a bank’s risk weighted assets.”

That means that when lending to for instance one of the AAAristocracy who carries a risk weight of 20%, the bank will need to hold 4% in TLAC.

But, when lending to a small business, which carries a risk weight of 100%, then the bank will need to hold 20% in TLAC.

This will of course mean that banks will lend too much to “the infallible” at too low interest rates; and will stop lending to small businesses and other “risky”, unless at extremely high relative compensatory interest rates.

And that means in effect the regulatory assassination of the real economy will worsen.

Mark Carney, the FSB chair, holds that this will help to avoid the need for taxpayers to pay out in the case of any bailout. Perhaps, but way before taxpayers pay, perhaps inflation willing they even never will pay, others are paying.

Mark Carney mentions the subsidy in that “the public purse backstops these banks” Indeed…so let him answer us… who gets the most of that subsidy… “the infallible” or “the risky”?

In case of the need for a bailout, that which most often happens when some huge exposures to something perceived as absolutely safe turn risky, why should those perceived as “the risky” have had to pay for the cost of 20 percent of TLAC while “the infallible” only pay 4 percent of it?

And the worse cost of all, to be paid primarily by the future generations of unemployed, are all the opportunities that will never be realized because of lack of bank credit. And that will of course only increase inequalities.

I must say it… Damn these bank regulators who clearly only care about the short term health of banks, and do not give one iota about the real economy.

How can bank regulators deny their children the risk-taking by banks that benefitted them?

PS. And of course, the zero risk weighted infallible sovereigns are the biggest beneficiaries of the public purse backstop of banks subsidy, because, in their case, the required TLAC is zero! How can our bank regulators be so shameless?

November 10, 2014

Economic stagnation is doomed to happen as a consequence of credit-risk-weighted capital/equity requirements for banks.

Sir, Wolfgang Münchau holds that secular stagnation in the Eurozone is very probable “The euro is in greater peril today than at the height of the crisis” November 10.

It is worse than that, stagnation is doomed to happen, as a result of credit-risk-weighted capital requirements for banks that impede the access to bank credit of many who though “risky” would provide the new sources of growth Europe needs to move forward.

Frankly, where does Wolfgang Münchau believe his Europe would be had these risk-adverse regulations been adopted some two hundred years ago?

Again: Europe is denying its children the risk taking it took for the European parents to prosper. Shame on it!

November 09, 2014

Would you really want to survive in a world if that requires you acts that are inhuman beyond description?

I am not a Jew, but my father, as a polish soldier was on the first train of prisoners to Auschwitz, where he spent years having to photograph many horrors. And my father, after the war, was also able to arrive to Sweden, about or even the same day as Rosenberg’s father… and where he met my mother. And I recently read this book in Swedish, and was equally moved by it.

But for me, the most nerve-wracking part of the book is the description of how in the Polish ghettos a Jewish Council had to wrestle with the decision to elaborate or not, a list with names of thousand of children and grandparents to be delivered to the Nazis, to certain death, in order for some to have a chance to survive. In the Lodz ghetto they did that, and Rosenberg and many other survived. “Would you really want to survive in a world that can require you do that?” is a haunting question that will stay with you.

Tim Harford, where would Britain be if since Jane Austen’s days equity requirements for banks had been risk-weighted?

Sir I refer to Tim Harford’s "A passport to privilege" November 8. 

It is an extraordinary article that brings a new perspective to the important discussion on inequality. And Harford limits it clearly and adequately to “financial inequality” because, in terms of inequality of privileges, I have always thought of that much more a local issue so as to be comparable on a global scale. 

For example the even temporarily inequality of privileges I felt when young, and it was my brother’s birthday, and he got celebrated, was not much diminished by the fact I was given a consolation gift and I knew my own birthday was less than two months ago.

But that said, as usual, mono-thematically, let me return to my concerns about current bank regulations.

I suspect that the referenced FT personalities, Gillian Tett, Simon Kuper and Tim Harford himself, have incomes in a range comparable to that of Mr Elizabeth Bennet and Mr. Darcy, and so let me ask them the following:

How much passport derived privilege do you think you would have today if Britain, during Jane Austen’s days had adopted bank regulations that were based on subsidizing bank lending to what then was perceived as absolutely safe… and with that creating a toll on bank lending to those perceived as risky”? Regulations that among others stipulated banks needed zero equity when lending to “Infallible” King George III :-)

Are you really not aware you are negating your children the rights to all that risk-taking that brought you to where you are today... passport-wise?

November 08, 2014

Is Commerzbank earning more on small and medium sized companies because of more lending or higher interests?

Sir, I refer to Alice Ross’ “Commerzbank buoyed by rise in core lending” November 7.

I was pleasantly surprised when reading of “a rise in operating profits… in the core bank, which includes lending to private customers and Germany’s small and medium-sized companies, the Mittelstand.”

But, since I do not understand how banks can lend to that type of clients, as that requires them to hold more equity, perhaps that does not signify more lending but rather that these borrowers are more desperate for credit, and therefore accept paying interest rates which are higher than their riskiness merits.

It would be great if Ross takes this opportunity to deepen an analysis of what really is happening with the access to credit of these "risky" bank clients.

November 07, 2014

Europe, having ECB injecting liquidity instead of banks, is indeed a real recipe for disaster or waste.

Sir I refer to Claire Jones’ “Draghi’s go-it-alone style off the menu” November 7.

ECB “has announced that four private sector asset managers will begin buying asset backed securities on its behalf starting this month.”

Why does ECB trust more that will inject liquidity better in Europe’s economy than banks allowed to do so freely without regulatory distortions?

That question reveals the real dilemma. The credit-risk-weighted capital/equity requirements for banks, impede these to allocate credit efficiently and so bureaucrats, whether outsourced or not, who put absolutely no money at risk, have to step in and do the lending.

Europe, that is indeed a real recipe for disaster. In this case it is better for you that ECB sends a small check to each European, for a loan at .1% interest, payable in 20-30 years. Who knows, ECB might even recover more of its money doing so… at least in nominal terms.

November 06, 2014

FT why do you not care for who really pays for current bank regulation presents?

Sir, LEX writes “previous banking conflagrations show that in good times regional banks like to pile on leverage almost as much as big ones”, “Bank regulation: no presents yet”, November 6.

But of course! I can understand that comment being made by a small local paper but… by FT? Is it not self evident that the duty of any bank manager is to provide the highest risk adjusted returns for their shareholders (and for their own bonuses)?

And does he not achieve that by piling up on assets like those perceived as “absolutely safe”, and which regulators have blessed with ultra-low capital/equity requirements, meaning ultra-high leverages?

And talking about regulatory presents to banks… why Sir, is FT seemingly not at all concerned with who really pays for those presents?

The high risk adjusted returns on bank equity are directly paid for by those perceived as “risky” borrowers, by means of higher relative interest rates or much less access to bank credit and, in the final count, by the economy, and by the young who as a consequence will face unemployment. Is that too difficult for you to understand?

And don’t give us that b.s. of the taxpayer paying… what he needs to pay for are for the excessive bank exposures created to something ex ante perceived as “absolutely safe” and that ex post turns up to be very risky.

November 05, 2014

What would Luke Johnson, Richard Branson, President Reagan and Lord Keynes say about Basel Committee’s risk aversion?

Sir Luke Johnson refers to that if entrepreneurs such as the Virgin founder, Richard Branson “did not take big gambles, society as a whole would be worse off” “The Virgin Galactic crash and the need for risk-takers” November 5.

And Johnson also writes: “pride and arrogance are required if the status quo is to be challenged with radical new ideas; after all, weak characters give up too soon – harried by regulators, safety obsessives and the overcautious. Change is never easy, but it must be embraced unless we want a life of stagnation and retreat.”

And he quotes President Reagan in that: “The future doesn’t belong to the fainthearted; it belongs to the brave”, and John Maynard Keynes in that: “If the animal spirits are dimmed and the spontaneous optimism falters, leaving us to depend on nothing but a mathematical expectation, enterprise will fade and die.”

Well contrast all that to the fact that current bank regulators, with their credit-risk-weighted equity requirements, are telling the banks that if they lend to what is perceived as absolutely safe, then they will be able to earn much higher risk adjusted returns on equity than if lending to what is perceived as risky.

I am doing what I can, but FT, how is it that you cannot find it in yourselves to protest regulations that slowly but surely, creating artificial risk-aversion, are killing our economies and perhaps even our civilization?

For some of us the gold of Venezuela, in Venezuela, even though worth less, is pure profit

Sir FastFT refers to the losses derived from that “Hugo Chávez… no fan of what he called the “dictatorship of the dollar”, and forced the central bank to hold most of its reserves in bullion rather than greenbacks.”, “Venezuela faces double blow as gold and oil prices slide” November 5.

But what the report misses is that Hugo Chávez forced the central bank to hold most of that gold… in Venezuela! That made these reserves much less operative, much less negotiable… something many of us who despair to see so many resources being dilapidated in our country, find not all that bad.

In February 2012, in an article published in El Universal I wrote: "I must express great satisfaction with the arrival of our gold to Venezuela, at least what came was saved, at least for the time being. Where that gold was stored it could easily disappear, in a flash, with the government just writing a check."

PS. After writing for El Universal for 14 years in July 2014 I was one of the first four censored by the new pro-government owners. (So you see FT is not alone in its opinions of me :-))

November 04, 2014

Bank nannies decided banks should avoid risk and solely play it safe, and thought nothing bad would come of that

Sir, I refer to John Stroughair’s letter “Stress test assumptions were not particularly stressful” November 4. In it he writes:

“The current weights enshrined in the Basel formula, which give preferential treatment to sovereign debt and residential mortgages [to which I would add the AAAristocracy], may make sense at the individual bank level. But at the level of the banking system they lead to a gross misallocation of credit, in particular to the excessive holdings by banks of supposed risk-free sovereign debt and to the fact that less than 10 per cent of the loans made by UK banks support productive businesses.

What is needed is a genuine debate regarding how we can move forward to regulation that will mitigate systemic risk and possibly even nudge the industry to support gross domestic product growth rather than house price bubbles.”

As you understand from my more than 1.000 letters to you about precisely this issue and this concern, I wholeheartedly agree with Stroughair.

One day it is going to be clear for all what our bank regulators, with their risk aversion did to our economies and to our society

In real terms they acted similar to as if educators decided to evaluate children better for dedicating themselves to playing piano, only because they think that is safe, than for engaging in sports they perceive as risky… and thinking that our society would be better for that.

Fed needs to make up its mind fast, because now it is really creating confusion about the banks.

Sir, I refer to Gina Chon’s and Tom Braithwaite’s “US and European lenders raise fears over ‘living will’ cash reserve demands” November 4.

In it is reported that banks that face a liquidity crunch can currently tap the discount window as part of the Federal Reserve’s lender of last resort programs, but, that in the process of preparing their ‘living-wills’, they have been told not to assume continued access to it.

What? The Fed now allows banks a 5% leverage ratio, which implies a mind-boggling 20 to 1 authorized leverage of equity… and yet now they want to retire their lender of last resort support? It better makes up its mind fast… because now all we others are becoming really confused. If we are not able to count on big strong Fed to help out, then there is no way we small weaklings can allow banks to leverage that much.

November 03, 2014

Forget the liquidity trap, Europe is mostly trapped in a regulatory trap.

Sir, Martin Sandbu opines that “we should take issue with the idea monetary policy has done as much as it can”, “Central bankers are ensnared in a trap of their own imagination” November 3.

And Sandbu believes ECB must “buy anything – but whatever you do, buy something” in order to get inflation going, in order to make real interest rates negative… “if that is what the economy needs fully to employ its resources”.

That sounds desperate and extremely dangerous… because that sounds like a recipe not necessarily for getting inflation going, but for the markets to lose their trust in the ECB, but more importantly so in the Euro.

But of course central bankers are ensnared in a trap, not even of their own imagination, but of their own doing.

Forget about liquidity trap when the real problem is a regulatory trap that stops liquidity from going to where it should be going in the absence of the trap… and current credit-risk-weighted capital requirements for banks do just that.

Sandbu writes that ECB “typically changes the money supply by offering loans to banks rather than buying financial assets – making monetary expansion dependent on banks’ willingness to take up the offer.”

So? Why does not ECB better push regulators into using a simple non-distortive leverage equity ratio for all banks independent of their assets… and then inject billions in preferred shares into the European banks? Those shares could have a clause making them redeemable in 30 years time.

That way, the day after, banks could at least again lend to the medium and small businesses, entrepreneurs and start-ups, something they cannot currently do because of an outright stupid suicidal bank regulation.

November 02, 2014

One might need rats to smell out the rat in bank regulations.

Sir, Tim Harford refers to a paper published by Ben Vermaercke of the University of Leuven and four colleagues titled “More complex brains are not always better”, which “showed that rats were better than humans at distinguishing certain kinds of striped patterns from others”, “Trading places – with a rat” November 1.

So would Vermaercke and colleagues think that rats could be better than bankers at clearing that Basel Committee fog made up by credit-risk-weighted equity requirements for banks and which makes it so hard to navigate the financial valleys? 

If they were to ask trader-rats trainer Michael Marcovici, he might say no. That because his training method requires financial data to be converted into piano music, and the distortions of such bank regulations might cause just a bit too much dissonance.

But, then again, who knows, perhaps one might need rats to smell out the rat in bank regulations.

If we want debt to earn the credit it merits, we need to get rid of current bank regulators.

Sir, I refer to Nigel Dodd’s, a professor at LSE, “Cast aside the moral judgment and give debt the credit it deserves”, November 1.

Unfortunately it seems that professor Dodd has not heard about the arguments against odious and stupid bank regulatory discrimination based on perceived credit risks. Had he done so, I believe his article would have taken a different form.

I say this, especially when reading his conclusion: “Credit is morally neutral. As an institution, it is neither good nor bad; and it is a grievous error to confuse creditworthiness with moral probity. Credit should be available to those who need it most. The price should be reasonable, and it should entail neither stigma nor penury.”

Indeed, professor Dodd, but one of the most important reasons for why this is not so, is the bank regulations that have been in place for about three decades; most especially since Basel II was approved in June 2004.

Those regulations order the banks to hold much more equity when lending to those perceived as “safe” than when lending to those perceived as “risky”; which of course allows banks to earn much higher risk-adjusted returns on equity when lending to the safe, than when lending to the risky.

And that means that regulators, on their own, without our approval, decided that bank credit should primarily be available to what from a credit risk point of view was perceived as “safe”, like financing house purchases, or lending to “the infallible sovereigns” or to the members of the AAAristocracy.

And which also means that anyone perceived as “risky”, would have to pay even more risk premiums, or have even less access to bank credit.

And that means denying fair access to bank credit to those we, who depend the most on the real economy, most need and want should have fair access to it, like the medium and small businesses, the entrepreneurs and the start-ups.

If we want debt to get the credit it deserves, we need to get rid of these regulators.

November 01, 2014

The Fed, with QEs, helped some kids to have a merry Christmas. Now we’ll have to see how all parents pay for it.

Sir, I am amazed that on November 1, 2014, you can title your editorial “Farewell to the Fed’s QE3, a monetary job well done”, all as if its entire job has been done.

Yes the Fed, with its QEs, like a Santa Claus brought some children a lot of gifts paid for by parents’ credit cards, and helped to keep up the Christmas spirit.

But now it is up the parents to pay for those gifts, and to see what to do with the kids who did not receive much or any of these… and, if all that goes well, then that would be the the time to thank the Fed/Santa Claus… not one second before!

You hold “QE was exactly the right thing to try in reviving the US economy”. And I say absolutely “No!” to that.

Before any QE could be really productive, the US (and Europe) needed to remove those credit-risk-weighted equity requirements for banks that cause so much distortion in the allocation of bank credit to the real economy. Those dumb risk adverse regulations caused the crisis and stopped the recovery.

How the improvement of public finances is achieved, must be made a part of that “moral challenge”.

Sir, Martin Wolf correctly holds that “Improving public finances is a moral challenge”, since “Morality requires a balance between meeting legitimate demands upon the state and the cost of taxation. October 31.

Absolutely, but let us never forget that, in order to make the state more accountable to its citizens, avoiding forging a separate power, the how that fiscal balance is met, is also an issue of morality, not only a question of numbers balancing.

A government which receives its revenues mostly from citizens, by means of personal income and property tax will probably feel, one way or another, to be held much more accountable for its action, than a government which receives its income mostly from corporate taxes, sales taxes, and, in some extreme cases, like that of my poor Venezuela, from revenues like oil that governments believes to be rightfully theirs.

As a former Executive Director of the World Bank, I often toy with the idea of having WB evaluating how much governments around the world are revenue-wise accountable to its citizens, but, since the shareholders of the WB are governments and not citizens, perhaps that would just be too much to ask of it. Nonetheless, someone, on behalf us citizens, should be doing just that.

That way perhaps concepts like allowing governments to pay off their debts through inflation (financial repression) would be more understood as something immoral than as something financially savvy.

PS. And of course, while on this issue of morality, and though very few are concerned with it, let me remind you that for regulators to regulate banks without distorting the access to bank credit, favoring some and discriminating against others, should be a moral challenge too.