A KeynesKeynesKeynes economic plan?

Sir Benn Steil is both correct and timely with his “Keynes and the triumph of hope over economics” February 6. But, just as well, he could have titled it “Keynes and the triumph of the shortcut over the real way”.

When we ser how many use Keynes to back up any call for stimulus, no matter how big, without even looking at what is going on at street level, like the enormous interest rates currently charge by the credit card companies to finance and refinance, it only reminds us how the credit ratings got their AAA ratings so wrong.

Indeed we must not try to avert crises; we must make them more manageable

Sir Benn Steil in “We need a safe-fail approach to avert new crises”, November 20, argues for “interventions that recognize that institutional failure will continue to occur and that focus on limiting the systemic damage after they do”. He is absolutely correct and in this respect I have argued for a progressive tax on our financial institutions based on the bigger you are the bigger it will hurt us when you fall concept, which could help us to contain the size of the damages.

We need to be very aware that this crisis is turning out to be one of the worst ever just because our regulators in their sincere but silly efforts to avert a crisis, introduced some minimum capital requirements for banks based on what they wished to understand as risks and empowered the credit rating agencies as their global risk surveyors. These man-made artificialities created and leveraged some awful systemic risks.

Of course, like Benn Steil mentions, we also need some basic operative “fail-save” solutions, like adequate clearing houses that can safely assure us that our expected small net exposures are not turned into irreconcilable monsters.

A bailout in the dark?

Sir Mark Fish and Benn Steil in "Root out bad debt or more pain will follow" December 21 make clear the problem that the government has in helping out the subprime mortgage mess namely that the whole securitization process with its slicing and dicing has made it difficult to see where the final losses really lie, and therefore, while reaching out in the dark to help you might mess it up even more. Fish and Steil recommend the purchase of the underlying mortgages at deep discounts while I would prefer buying the houses where a real bona-fide debtor lives at a discount and arranging for a lease and sale back contract that makes sense for the taxpayer and the current owner. Anyhow whatever route is taken one needs at least to be sure that the underlying problem is cleared once and for all since experience says that there is nothing more expensive that keeping a problem pending in the sole expectation of losing less

On trusting and hacking

Sir, Benn Steil’s “Digital gold and a flawed global order”, January 5, serves quite well in reminding us about not digging too deep into the reasons for this extraordinary trust that a generally very suspicious world has shown most of their politicians over the last few decades by being willing to accept their printed money against the sole backing of the imprint of a “In God we trust” and, to top it up, this in days were fever people seem to trust God, at least by church going standards. The other thing the article does is of course to alert us to the significant retooling those old Fort Knox plunders have to do in order to be able to hack themselves into the vaults of digital gold.

Steil gold trust