How can expectations be high when you discriminate against the future, on account of it being riskier than the past?

Sir, John Kay writes: “It is not because interest rates are too high that eurozone consumption is sluggish but rather because expectations are so low. Fiscal austerity and the aftermath of the global crisis have dimmed the employment prospects of a generation of young Europeans. Low interest rates have as intended pushed up the prices of long-dated bonds and houses” “The twisted logic of paying for the privilege of lending”, September 10.

Frankly, how can expectations not be low, when we have regulators that order banks to hold more capital against what’s perceived as risky, the future, a job to be created; than against what is perceived as safe, the past, a house that has already been built?

And Kay writes: “There are obvious requirements for investment in the eurozone — to provide power through cleaner energy plants, to improve roads and relieve overcrowding on trains, to build houses, to accommodate tens of thousands of recent refugees and above all to fund the new businesses that will promote innovation on the continent.”

Yes, but, if so, why do we not have capital requirements for banks based on those purposes?

Mr. Kay, I tell you, it is not “dysfunctional capital markets, rather than any excessively high interest rates, that are behind an investment shortfall across Europe”. It is totally dysfunctional bank regulations.

Mr. Kay also reminds us of the “aphorism that people will lend you money so long as you can prove you do not need it”. But Sir, that is what Mark Twain told us long ago: “The banker lend us the umbrella when the sun shines and wants it back when it looks like it could rain”; and which is precisely why the Basel Committees’ risk weighted capital requirements for banks don’t make sense.

Mr. John Kay, wake up!... and you too Sir.

@PerKurowski ©

Surprisingly many of those who could observe it from a distance, still fell for Chavez’ Banana 21st Century Socialism.

Sir, I refer to Andres Schipani’s “FT Big Read: New oil order: We are terrorized by the drop in oil prices”, August 10 2015. It is a good report but I must make two points.

First it sort of supposes that a country, during an incredible oil boom with prices over ten times those which the previous government faced, and where these oil revenues represents over 96 percent of all exports, and these all go into government coffers, is a system that has a chance to function in a sustainable way. It cannot!

Second, it mentions “the world’s cheapest petrol” and it talks about “hundreds of million dollars invested on social programmes. Less than 1 US$ cent per liter is not “cheap”, it is a giveaway… and the cost of that giveaway, when calculated at the international market price of petrol, is higher than all Chavez’ and Maduro’s social programs put together.

When Schipani mentions “The ruling Socialist party”, I hear most European Socialist parties trying to make the case of that brand of socialism having nothing to do with theirs. It would have been more helpful for the Venezuelans, if they had argued so fifteen years ago.

@PerKurowski

All Europeans, one way or another, will pay dearly for The Greatest Pushing The Can Down the Road.

Sir, Martin Wolf writes: “the vast bulk of the official loans to Greece were not made for its benefit at all, but for that of its feckless private creditors. Creditors, too, have a duty to take care. If they are careless, they risk big losses. If governments want to save them, their own taxpayers should be told to pay up.”, “Divorce Greece in haste, repent at leisure”, June 17.

That is partially true. The sad fact though is that if governments, with or without consultations, decide to save private investors, its taxpayers and its citizens in general, will have to “pay up”, one way or another, whether they like it or not. By the way, by not having cleared the deck of the rubbles, so as to allow for a fresh-start, they have for some years already been paying.

Once Europe (and US) gets to understand the full implications of this The Greatest Pushing The Can Down the Road carried out by feeble technocrats during the last years, many are bound to get extremely upset… especially the young.

PS. Again Martin Wolf assigns the fecklessness in this whole Greece affair only to private creditors… leaving his friends the bank regulators out of it. These regulators, by allowing banks to lend to the Greek government against much less capital than what they needed to hold when lending to for instance Greek or German SMEs, were the prime promoters of this crisis.

@PerKurowski