July 18, 2016
Sir, Philip Delves Broughton writes: “Economists often miss all the peripheral activity that might actually answer their questions. Professor Robert Gordon, the American economist, has been arguing recently that the US is in an innovation lull… an age of innovative trivia such as Facebook and Pokémon Go. Add the headwinds of poor demographics, a fouled-up education system, debt and inequality, and America is headed for an era of low growth.” “Let facile optimism change the world”, July 16.
Indeed the economists have entirely missed the distortion in the allocation of bank credit to the real economy produced by the risk weighted capital requirements for banks. These, by favoring the access to credit of those ex ante perceived as safe, de facto discriminate against the access to bank credit of those perceived as risky, like SMEs and entrepreneur; and so they have completely overlooked one of the main causes of innovation and economic lull. How this serious oversight has happened remains a great mystery to me. But, then again, since FT has been able to ignore the thousands of letters I have send it over the years to FT on this, there might be some dark forces at work.
Delves Broughton ends with: “The problem is that you cannot write “throw yourself back into life” on a prescription pad” Yes you can! You could at least write: “Banks throw yourself back into life, don’t dangerously and uselessly overpopulate safe havens, and dare explore the risky bays that our grandchildren need explored.