If central banks offered “unimpeachably safe liquid assets” to all, how much negative interests would these pay?

Sir, George Hatjoullis writes: “Only the central bank can provide unimpeachably safe liquid assets…[so] allow individuals and corporate entities to hold deposit accounts with the central bank… The banking system would be free to pursue its risky credit provision role and individual entities would have their safe liquid haven”, “Allow deposit accounts within central banks” September 25.

That is based on two false premises. The first one is that central banks really are riskless. Though they can always print money, there’s no guarantee they won’t print too much money, and therefore repay with money worth less.

The other is that you could provide some with “unimpeachably safe liquid assets… a safe liquid haven” at no costs. The opportunity cost of that, is not sharing into the benefits of risk taking.

When it comes down to risk management I always start by asking: “What risk is it that you can least afford not to take?” That is because the worst certainty comes hand in hand with the avoidance of all risks.

Sir, to allow some to have access to unimpeachably safe liquid assets, while others take the risks, just guarantees putting inequality on steroids. The society should not do that! An adequate bank system allows everyone to share, at least ever so slightly; in the risk-taking the society needs to move forward.

@PerKurowski