February 26, 2018

Rana Foroohar. Please ask yourself a question and, if you cannot answer it, do ponder why.

Sir, I refer to Rana Foroohar’s “Three questions for the Fed’s Powell” February 26.

Ms. Foroohar (and you too Sir) should ask herself: why do regulators want banks to hold more capital against what, by being perceived as risky, has been made quite innocous, than against what, because it is perceived as safe, is so much more dangerous?

And if could not come up with a truly convincing answer, then that should give her a clue on that something very strange is going on in the field of bank regulations.

And if she had gotten to that point, then it should not be too hard for her to begin to understand how those different capital requirements, which allows for some assets to be leveraged much more than others, might distort the allocation of credit to the real economy… and thereby affect its “real non-financialised growth”

And at that point she would surely add, that same question she could not answer, to those three she proposes to ask Powell.

Foroohar also references companies “buying up the higher-yielding bonds of riskier companies at a favourable spread and holding those assets offshore [and that now after] President Donald Trump’s new tax rules… They will simply be able to move their money wherever they want, whenever they want, in cash.”

“Cash”? In order to become cash, all those assets the companies have bought and held offshore must be sold. Would that not have any consequences?