November 12, 2016

Compared to the Basel Committee’s statism and dangerous risk-aversion, Trump seems like a minor threat

Sir, John Kay discussing the election of Trump writes: “The post-cold war settlement that Francis Fukuyama characterised as the end of history — the combination of lightly regulated capitalism and liberal democracy — carried the seeds of its own destruction. The hubris that legitimized greed and proclaimed the primacy of shareholder value led to the global financial crisis of 2008 and, more generally, undermined the legitimacy of capitalist organization. “At last, the post-crisis political reckoning” November 12.

No! I hold instead that because of the Basel Accord of 1988, one year before the fall of the Berlin Wall, and which for the purpose of the capital requirements for banks set the risk weight for the sovereign at 0%, and for us We the People at 100%; the world has nothing to do with “lightly regulated capitalism and liberal democracy”; and all to do with “hubris [and ideology] that legitimized the greed and proclaimed the primacy [not of] shareholders" but of government bureaucrats, of the AAArisktocracy, and in this case of some naturally willing partners, the banks.

If the financial crisis of 2008 should have undermined anything, that is the statism and the risk aversion that resulted from allowing biased and inept technocrats to regulate.

We now live in a world in which the financing of basements, where unemployed youth can live with parents, is much favored over the financing of SMEs and entrepreneurs, those who could better generate the future jobs our young need to also afford becoming parents.

Sir, I fully agree that the election of Donald Trump as president of the USA, because of many of his utterances during the elections, raises some very serious concerns. That said I find it very hard to believe that he will be allowed to impact the world so negatively during the next four year, as the bank regulators have done during now soon three decades.

Risk-taking is the oxygen of any development. If you hinder it, the economy is bound to stall and fall.