August 23, 2016
Sir, I refer to John Authers and Robin Wigglesworth “Big Read: Pensions: Low yields, high stress” August 23.
There we read that Baroness Altmann, the former UK pensions minister, said this month “The emergency to pension schemes has been caused by Bank of England’s quantitative easing policy of buying bonds…I don’t see how it is reasonable to ask companies with pension schemes to fill a £1tn hole and put money into their businesses as well. It doesn’t add up.”
BoE officials say they recognize the problem, but Andrew Haldane, its chief economist, says the central bank’s top priority must be to stimulate the economy. “I sympathize with savers, but jobs must come first”.
I don’t think so, from what BoE and their colleagues are doing, it seems much other, like keeping the values of assets high and borrowing costs for the government low comes first.
Sir, again, for the umpteenth time, the Basel Committee, the Financial Stability Board and other frightened risk adverse bank nannies, have mandated stagnation.
When you allow banks to hold less capital when financing what’s perceived as safe than when financing the risky; banks earn higher expected risk adjusted returns on equity when financing the safe than when financing the risky; so you are de facto instructing the banks to stop financing the riskier future and keep to refinancing the safer past… something which guarantees stagnation… a failure to develop, progress or advance… something which guarantees lack of employment for the young and retirement hardships for the old.
I would prefer not to distort the allocation of bank credit but, if I had to, then I would try to ascertain that bank credit goes to where it could do the society the most good; in which case I would consider basing these on job creation ratings and environmental sustainability ratings and not on some useless credit ratings already cleared for by banks with the size of their exposures and interest rates.
PS. If you want more explanations on the statist bank regulations that are taking our Western society down here is a brief aide memoire.
PS. If you want to know whether I have any idea of what I am talking about here is a short summary of my early opinions on this since 1997.