Good global economic governance also depends on the Financial Times of the world doing their duty by questioning diligently.

Sir, you write “The world economy is in good health. Global economic governance is not. The first remains acutely vulnerable to the second… Davos produced few ideas on compensating for US destructiveness” “The gaping hole in global economic governance” January 27.

No! The world economy is not in good health. Just look at all current world debt contracted to kick the 2007/08 crisis can forward, to finance current consumption and to inflate stock markets with excessive dividend payments and buy backs; and then compare it to how little of that debt has been used to finance future production.

And whatever US destructiveness you want to identify, it would pale when compared to the destructiveness caused by bank regulators with their risk weighted capital requirements for banks.

Sir, in a world were sleaziness abounds everywhere and for so many reasons, you find it more worthy of the Financial Times to launch a full-fledged investigation “without fear and without favor” of an all male-charity dinner; than daring for years to ask bank regulators some basic questions like:

Why do you want banks to hold more capital against what has been made innocous by being perceived as risky, than against what is dangerous because it is perceived as safe? Is that not setting us up for too big to manage crises?

What went through your mind (what did you smoke) of the Basel Committee allowing with Basel II banks to leverage a mindboggling 62.5 times their capital only because an AAA to AA rating issued by human fallible rating agencies was present?

Is being a safe mattress under which to stash away our savings a more important objective for our banks than allocating credit efficiently to the real economy? “A ship in harbor is safe, but that is not what ships are for.” John A Shedd

Why should you, as a regulator, want with lower capital requirements favor bank credit to what’s already favored by being perceived as safe, and thereby cutoff more the credit to what is already disfavored by being perceived as risky?

Why did you assign a 0% risk weight to sovereigns? Is that not runaway statism? If it is because sovereigns can always print money to pay back their loans, don’t you know that is precisely one of the real and worst risks with sovereigns?

As is, don’t you know you are dooming our economies to subprime performance and our banks to end up gasping for oxygen in some overpopulated safe-havens?

And that’s just for starters:

FT is as much at fault as anyone for the absurdness of current global governance of banks. Sir, this could also be referred to as sleazy journalism.

http://perkurowski.blogspot.com/2016/04/here-are-17-reasons-for-why-i-believe.html

@PerKurowski

Will Davos 2018, again ignore the financial weapon of mass destruction concocted by the Basel Committee populists?

Sir, Gillian Tett when commenting the concerns that will be expressed at the 2018 Davos meetings writes “The biggest perceived danger of 2018, in terms of impact, is that somebody uses weapons of mass destruction”, Holy moly! and ends with: “keep a close eye on what Davos is not worrying about enough this year: that pesky matter of global finance, particularly in places such as China.” “Populist swing alarms financial titans” January 19.

My concern though is that the technocratic and hubristic populism, proclaimed by the Basel Committee will again not be denounced in Davos, perhaps because doing so might be deemed ungentlemanly or ungentlewomanly behavior in such fine surroundings.

I refer of course to their promise that distorting bank credit with risk weighted capital requirements for banks will make our banks safer.

Higher capital requirements for what’s “risky”, has caused among other that millions of entrepreneurs, those on which so much of our economic future depends, have seen their credit applications rejected or not even received by banks.

Lower capital requirements for what’s “safe”, has among other, helped to fuel house prices which has overloaded that sector with mortgages that, within a future subprime economy, seem impossible to service.

And let’s not even talk about what the 0% risk weight awarded to sovereigns has done in terms of statism and of blurring the risk free rates.

Sir, no doubt about it, the risk weighted capital requirements for banks, is a weapon of financial mass destruction.

Did we not see it explode with AAA rated securities that banks were allowed to leverage 62.5 times with?

Did we not see it explode in Greece with sovereign debt that European regulators allowed their banks to hold against no capital at all?

If a regulator is incapable to provide a clear answer to: “Why do you want banks to hold more capital against what has been made innocous by being perceived as risky, than against what is dangerous because it is perceived as safe?” should he not be fired Sir?

http://theaaa-bomb.blogspot.com

http://perkurowski.blogspot.com/2016/04/here-are-17-reasons-for-why-i-believe.html

PS. On the same page Philip Stephens writes:” The World Economic Forum and the Davos crowd pride themselves on their globalism has set itself the fearsome task of mapping “a shared future in a fractured world”. “Trump, Davos and the special relationship”. The risk weighted capital requirements, which favor refinancing of the “safer” present over financing the “riskier” future, is fracturing the world and causing the future to produce less and less of what could be shared.

@PerKurowski