September 16, 2016

Free market capitalism with regulatory controls on the free flow of bank credit, is an oxymoron

Sir, I am not discussing here Margrethe Vestager’s, the European Commission’s competition chief decision to order Apple to pay €13bn in back taxes to the Irish government. But, titling as Philip Stephens does his September 16 article, “How to save capitalism from capitalists” seems to me topsy-turvy.

What now most hinders free-market capitalism from delivering its full potential, is not capitalists, but inept and statist bank regulators.

Currently, for the purposes of the risk weighted capital requirements for banks, “The Risky”, like SMEs and entrepreneur, those who cannot even afford a credit rating, are given a risk weight of 100%, while the government bureaucrats who are going to spend the tax revenues, or the public indebtedness, are risk weighted at 0%.

That translates into that government borrowings are subsidized, a fiscal revenue, with the subsidies, the taxes, paid by those “risky” that as a result have less access to bank credit.

So the real question should be: how to save free-market capitalism from state capitalists.

As is we really need a Robin Hood to come and rescue us from Sheriffs of Nottingham disguised as expert bank regulators.

But it is even worse, because those yet unpaid €13bn of Apple are not allowed to flow freely as bank credit even within the private sector; and that is because “The Safe”, the AAArisktocracy, have also been given a much lower risk weight, one of only 20%.

Sir, and if only those who rightly pressure taxpayers to correctly pay up, would also try to pressure with the same vehemence, the tax revenue spenders to correctly spend.

@PerKurowski ©

Nowadays they are much more sophisticated