July 19, 2018

Where would America be today had not bank regulators distorted credit and central bankers kicked the crisis can forward?

Martin Wolf, expressing concerns we all deeply share asks, “Who lost “our” America?” and he answers: “The American elite, especially the Republican elite… They sowed the wind; the world is reaping the whirlwind. “How we lost America to greed and envy” July 16.

I respectfully (nowadays not too much so) absolutely disagree. That because supposedly independent technocrats generated the two following events:

First, in 1988 regulators with their so sweet sounding risk weighted capital requirements, promised the world a safer bank system, but then proceeded to design these around the loony notion that what was perceived as risky was more dangerous than what was perceived as safe. That distorted the allocation of bank credits in favor of the "safer" present and against the "riskier" future. That must have stopped much of any ordinary social and economic mobility.

Then in 2007/08, instead of allowing the crisis to do its natural clean up, central bankers, starting with the Fed but soon to be eagerly followed by ECB and other central banks, just kicked the can forward, favoring sovereigns and existing assets. Just as an example, with their repurchase of the failed securities backed with mortgages to the subprime sector, they saved the asses of many investors and banks (many European) while very little of that sacrifice flowed back to those who, in the process, had been saddled with hard to serve mortgages.

Martin Wolf, and you too Sir, would benefit immensely in trying to imagine how the world would be looking now, without that unelected and inept technocratic interference! What had specifically Republicans, or Democrats, to do with that interference?

As I see it if that had not have happened Trump would not even have been thinking of running as a candidate.