Martin Wolf, bank regulators ordered trust to crumble, so the west is already falling. Your silence is complicit

Sir, Martin Wolf lashes out at the possibilities of Donald Trump being elected president of US and on its consequences. I agree though I would not go to such extreme as arguing that “It would, for example, end efforts to manage the threat of climate change, possibly forever”. "If trust crumbles, the west is lost" September 28. 

But I also believe that the possibilities of the US, among democrats, republicans and We the People, to put a stop to most potential Trump lunacy is very big… almost a certainty.

But in my firm opinion the west is already crumbling thanks to those statist and risk adverse regulations that were introduced in 1988 with Basel I and that really exploded in 2004 with Basel II.

The credit risk weighted capital requirements with their risk weights of 0% for the sovereign, 20% for the AAArisktocracy, 35% for residential houses, 100% for We the (unrated) People and 150% for the below BB-rated outcasts, has completely distorted the allocation of bank credit to the real economy. The west was not built with such regulations but the west is certainly doomed to gloom with it.

Unfortunately, the world of top experts, renowned academicians and famed journalists, which includes Martin Wolf, have not been able to even bring up Basel’s distortion of bank credit into discussions. And the testers of bank stress keep on looking only at what is on the balance sheets and without caring a iota about what does not, like sufficient loans to SMEs and entrepreneurs.

If the west had to choose between Donald Trump and the Basel Committee, I know who I would vote for, again of course counting on a lot of support to reign in his worst excesses.

PS. Here are two questions that if a moderator of the US candidates for president debate I would ask:

Donald Trump, how much damage would the republicans and democrats allow Hillary Clinton to do if she is elected president?

Hillary Clinton, how much damage would the democrats and republicans allow Donald Trump to do if he is elected president?

@PerKurowski ©

Mario Draghi, you should be ashamed, as a bank regulator, you helped to leave behind, those left behind

Sir, Claire Jones and Alex Barker write that Mario Draghi, the president of the European Central Bank, Donald Tusk, the president of the European Council, and Christine Lagarde, the head of the International Monetary Fund…issued separate pleas yesterday to address the plight of those “left behind” by globalization”, “Draghi makes appeal for those ‘left behind’” September 14.

The fact is though that Mario Draghi, the former chair of the Financial Stability Board, and the current Chair of Governors and Heads of Supervision of the Basel Committee on Banking Supervision, is fully supporting the pillar of current bank regulations, namely the risk weighted capital requirements for banks.

That regulation has given a risk weight of 0% to the Sovereign, 20% to the AAArisktocracy, and 100% to We the People, like the SMEs and entrepreneurs.

John Kenneth Galbraith in his “Money: Whence it came where it went”, 1975, wrote: “The function of credit in a simple society is, in fact, remarkably egalitarian. It allows the man with energy and no money to participate in the economy more or less on a par with the man who has capital of his own. And the more casual the conditions under which credit is granted and hence the more impecunious those accommodated, the more egalitarian credit is”.

And so, with their discrimination against “The Risky”, regulators, like Mario Draghi, decreed inequality. And so they have no right to try to bullshit us now with some deep-felt concerns with those left behind.

And to top it up, with his QEs, Draghi has mostly helped those who already had assets.

@PerKurowski ©