June 28, 2018

If regulators, or even FT, do not questions the 0% risk weight of sovereigns, why should ordinary citizens care about public sector deficits?

Sir, Janan Ganesh writes“Americans no longer care about deficits, or at least no longer care enough. Their concern about them has waned since the mid-nineties” "How America learnt to love the budget deficit” June 28.

In 1988, with the Basel Accord, regulators introduced risk weighted capital requirements for banks and for that purpose assign risk weights to sovereigns of 0%. And European central banks assigned such 0% even to Greece, and Greece drowned in public debt, and yet no one, not even FT questions that 0% risk weight.

So Sir, why should ordinary Americans care about fiscal deficits when supposedly these can be financed with a 0% risk… because the government controls the money-printing machine?

Ganesh should not worry solely about America, with these statist bank regulators we are all being set up for a horrible crash.