The Basel Committee by favoring the safe old hurts the chances of the risky new economy to germinate.

Sir, John Authers writes: “That so many public companies are choosing to pay out cash rather than reinvest it is therefore disquieting… Companies are getting less cash than they used to, they are not optimistic that they can invest it productively and so they are choosing to deploy it in a way that weakens the chances of sales growth in the future. Not encouraging.” “Follow the cash trail for clues to the growth outlook of companies” November 7.

Disquieting indeed but is it so much worse. Public companies, though many will surely and hopefully be around for many decades or even centuries, do still represent the old economy. The new economy, that is to be born out of the efforts of new entrepreneurs and SMEs, those who might yet not even be dreaming about a public level.

And so that bank regulators, by requiring higher capital requirements when lending to the risky new than when lending to the safer old, hinders the nascent new economy fair access to bank credit, is truly tragic and unpardonable.

When have bank crises resulted from many seeds failing to germinate? These have all resulted from what was thought of as solid trees suddenly falling down. The Basel Committee is treating new grass as bad weed.

Sir I am sorry if I sound like Chauncey Gardiner again.

@PerKurowski ©