It looks like America’s libertarians are in dire need of an Establishment. Hi, Hi, Hi.

Sir, I refer to Jacob Weisberg “A missed opportunity for America’s libertarians” June 4.

When it would look that more American’s would prefer a none-of-the above than the candidates presented by the Republicans and Democrats, it is clear that both these organization’s establishments have failed. And so it would seem that even though it is anathema to them, if the libertarians had the benefit of some type of functional establishment, they could represent an important alternative in upcoming elections. Or is libertarian establishment too much of a contradiction in terms?

But then on another issue, Jacob Weisberg writes: “Libertarians… regard the failure of policies they support, such as the self-regulation of financial markets in the 2008 crisis, as evidence that government still managed to play some corrupting role. When facts come into conflict with theory, they reject the facts.”. And to that I must most strongly object.

For purposes of setting the capital requirements for banks, the regulators set risk weights of zero percent for friendly governments, 20% for members of the AAA-aristocracy, 35% when financing residential housing, and 100 percent when financing not rated SMEs, entrepreneurs and citizens in general. And Sir, that is corruption with a big C. That allowed banks to earn much higher risk adjusted returns on what is ex ante perceived, decreed or concocted as safe, than on what is perceived as risky.

What was the 2008 crisis made off? The stuff all major bank crises are always made of, namely excessive exposures to something ex ante perceived safe but that ex post turns out not to be.

Sir, again, the question of rigor: With what can banks build up dangerously large exposures that could threaten the system, with prime AAA rated or with speculative and worse below BB- rated? And having answered that reflect again on that the AAA rated were assigned a 20% risk weight while the below BB- an astounding 150%. Does this sound like the regulators have any idea of what they are up to? And so, if there are some who have really rejected the facts when these come into conflict with their “theories”, that is the whole bank regulatory community, that which has been frantically circling the wagons against any attack.

Sir, if there are two great flags that libertarians could fly, though I also welcome democrats and republicans to waive these, those are: getting rid of the distortions produced by current bank regulations in the allocation of bank credit to the real economy, and the use of a well funded, no funny money, Universal Basic Income, a Societal Dividend, to fight inequality and stimulate the economy, while keeping the redistribution profiteers at bay.

@PerKurowski ©