Even sophisticated up-in-the-fronters can fall victims to populists, like those dressed up as bank regulators.
Sir, John Lloyd correctly writes that “rising inequality, wage stagnation and workplace insecurity merge with concern about fragmenting communities, exacerbated by fear of unregulated immigration and terrorism…produces a popular energy” that can be captured by populists. “For left-behinders, populists paint a picture of a better future” August 17.
But not only left-behinders can be victims of cheap populism, those up-in-the-front too, and populism can come in all shapes of form, including camouflaged as bank regulations.
Like that populism imbedded in: “If banks avoid risks, this will keep them from failing, and we will all prosper. So more risk more capital - less risk less capital”
And what is amazing is to see the how many famed journalists, Nobel Prize winners, academicians and politicians, fell for it, ignoring that what is risky is already made safer by being perceived as risky, but made even riskier if perceived as safe.
And what is even more amazing is how, even after a crisis brought on by excessive bank exposures against too little capital to what was perceived as safe; and an economy that is stagnating and not showing increased productivity, they still can’t open their eyes to the distortions in the allocation of bank credit to the real economy caused by that grievous piece of bank regulation.
Or is it like John Kenneth Galbraith said: “If one is pretending to knowledge one does not have, one cannot ask for explanations to support possible objections.” “Money: Whence it came where it went” 1975.