May 15, 2016

The 1988 Basel Accord decided on these risk weights: sovereign 0% and citizens 100%... and so bye, bye liberalism!

Sir, Tony Barber writes that “Illiberalism takes root in Europe’s fertile centre” May 14.

Forget it! True liberalism has been long gone in Europe, and in most of the western world.

That is because liberalism is totally incompatible with regulations that hold that for the purposes of setting the capital requirements for banks, the sovereign has a zero percent risk weight while the citizen, he who gives the sovereign its strength, has a 100 percent risk weight… that is unless he is are rated below BB-, because then his risk weight is 150 percent.

And that dangerously dumb bit of regulation, with its so single minded nanny like credit-risk aversion; which have banks no longer financing the risky future but only refinancing the “safer” past, little by little saps the strength of the real economy… little by little creates a climate in which anything can happen.

Just for a starter it provided all the incentives for banks lending too much to Greece, but that is not even discussed, we can’t have ordinary citizens doubting technocrats… can we?

@PerKurowski ©