June 22, 2016
Sir, Patrick Jenkins writes “The funding gap facing— anyone with the dream of a decent pension income — illustrates the broader truths about a slow burn financial crisis that threatens to engulf the globe over the next decade or two.” June 22.
But Jenkins argues all over the place without referring to the biggest threat, namely the state of the real economy, when all those pensions are to be paid out. Because it really doesn’t matter how much you save up, if the economy tanks precisely when you want to convert your savings into real purchase power of goods and services.
And the real crisis that will engulf our pension funds, is the direct result of all that essential risk-taking that has been denied the real economy, because of the credit risk based capital requirements for banks.
Had capital requirements not discriminated against what is ex ante perceived as risky, and in favor of what is perceived, decreed or concocted as safe, during more than a decade, then millions of small loans would have been given to SMEs and entrepreneurs, and the economy would have been much more dynamic and prepared to take care both of the jobs our young need, and the retirement needs of our older.
Truth is the world has been let down by bank regulators so loony so as to believe that what is below BB- rated pose greater dangers to the bank system that what is AAA rated.
Truth is the world has been let down by bank regulators so statist so as to believe that government bureaucrats can make better use of bank credit than the private sector.