September 04, 2017

The risk-aversion in risk-weighted capital requirements for banks’ dooms our economies to a slow but certain decline

Janan Ganesh writes: “There is such a thing as bad stability. Gradual decline is its most insidious form… It is the toll paid in decades, not moments, that promises the worst”, “Britain faces a stable path of relative decline”, September 5.

Sir, what can I say? Except for… that does not apply exclusively to Britain.

I have sent you literally thousands of letters reminding you of that risk-taking is the oxygen of any development… and that we in the Western world progressed, among other, because we knew that in our churches we had to implore “God make us daring!

As well as literally thousand of letters explaining how current risk weighted capital requirements stops banks from financing the riskier future, keeping these to only refinancing the safer present.

Just as an example, in Martin Wolf’s Economist Forum, on October 9, 2009, I published an article titled “Please free us from imprudent risk-aversion and give us some prudent risk-taking” It ended with:

“Dear baby-boomers, there is a world out there that needs a whole lot of risk-taking in order to stand a chance of a better future; a world which does not want to lay down and die in tranquility, just yet.”

Sir, when will you, without fear and without favor, dare to recognize this?