We are better off with free market vigilantes

Sir, George Soros plan to save the eurozone, October 25, includes for the banks “to take instructions from the ECB on behalf of governments” and “installing inspectors to control risks banks take for their own account”… so that “markets will be impressed”. 

Has Soros gone mad or is he just a communist? Are we supposed to be impressed by our banks being supervised by those who authorized these to leverage their equity more than 60 to 1 when lending to Greece… and now complain about the downgrading of the credit ratings of sovereign? 

Oh no, I think we are much better off with free market vigilantes.

PS. If you have not seen it, here´s a video that explains a fraction of the stupidity of our bank regulations, in an apolitical red and blue! http://bit.ly/mQIHoi

Openness is just a placebo when lifting a real resource-curse

Sir, whenever a government receives in net resource revenues more than 5% of GDP, 15% of its exports, or 25% of all tax revenues received from the citizens, the balance of power has been fundamentally altered and real democracy cannot breath. In these cases the transparency of which George Soros speaks of in “Openness can help lift the curse of resources” March 4, is just a placebo. In fact transparency there amounts to little more than allowing the tortured seeing the pliers that is to be used to extract his fingernails.

That Extractive Industries Transparency Initiative, EITI, and that Soros speaks so highly of is without any doubt well-intentioned, but they have no idea of what the real oil-curse is all about. Anyone who did would not, as EITI does, proclaim the principle: “We affirm that management of natural resource wealth for the benefit of a country’s citizens is in the domain of sovereign governments to be exercised in the interests of their national development.”

That principle supports keeping on concentrating oil-wealth in hands like Gaddafi’s, while the only means of breaking an oil-curse of that size is handing over the oil revenues directly to the citizens. But what would a George Soros or an EITI know about that? … at the end of the day they are not really oil-cursed citizens.

PS. I’m from Venezuela. There the government, by means of oil revenues, has come to receive 97 percent of all national export revenues. In such cases you do not live in a nation, you live in somebody else’s business.

Why should George Soros be licensed to kill and not the bankers?

Sir George Soros in “America must face up to the dangers of derivatives” April 23 describes these as “a licence to kill” and he is wrong.

Just as a gun a derivative can do good or bad depending on who pulls the trigger on what and with what accuracy. In this respect, and given that in matters of investment George Soros could also readily qualify as just another gunslinger perhaps he should hand in his licence to kill too.

Does Soros want to eliminate private banks?

Sir I try to find something new and important in George Soros “My three steps to financial reform” June 17, but frankly the only think I find, though it is indeed surprising, is when Soros argues that “banks should not be allowed to speculate for their own account with other people’s money”. Is he now making a case for abolishing private banks?

Is George Soros long on oil from Texas?

Sir George Soros in “The game changer” January 29, instead for advocating for a tax on the gas at the pump so that the gas is used less and other energy sources can compete better, he argues for an outright protectionist duty on oil “to keep the domestic price above, say, $70 per barrel.” Is George Soros long on oil from Texas?

The government needs to provide venture capital for new banks.

Sir George Soros discusses “The right and wrong way to bail out the banks” January 23, as if bailing out the banks was our problem. We need to bail out our economy and if doing so we happen to bail-out the banks, great, if not hard luck.

At this moment we have a regulatory system for the banks that by means of the minimum capital requirements prioritizes risk avoidance. What we need instead is a regulatory system that helps us assure that the banks prioritize what is most needed.

In this respect, with government funds, I would create many new banks, with a fix capital requirement for any credit, for instance 6 per cent, and I would nominate a series of management groups to run these banks giving them the incentive of a generous purchase option for the bank in a couple of years, and asking for a secured indemnity in case of any particularly irresponsible act committed by any of these manager.

Also if these banks want to buy “toxic assets”, because they believe it is in their interest to do so, the better.

Sir I guess that it most probably must have been a very long time since George Soros walked down any Main Street.

But first make real sure reserves are worth something, when needed.

Sir George Soros, October 29, writes that “America must lead a rescue of emerging economies” and of course he is right. Who else could? Who else would?

Having said though when Soros then writes about the possible assistance the IMF might give a country like Brazil in terms of “$15bn, a pittance when compared with Brazil’s own foreign currency reserves of more that $200bn” he reminds us that the rescue efforts also includes making sure those $200bn are to be worth the same $200bn when Brazil might need to use them, and that by itself will require immense efforts, primarily, by the American taxpayer.

In God… and in the American taxpayer we trust!

Regulatory outsourcing creates confusion

Sir George Soros in “The false belief at the heart of the financial turmoil”, April 3 though he sees some trees that the regulator’s do not, he completely misses the forest just the same.

Soros accuses the regulators of beeing misguided by a market fundamentalism arguing that they believe markets are self-correcting without being able to grasp that the markets are indeed self correcting, though in a quite violent way grant you, to what should be considered the mother of all regulatory fundamentalisms, the excessive empowerment of the credit rating agencies.

If the credit rating agents had been working for a government institution all hell would have broken out, long ago, but since they work for private companies, they get confused with being a part of the market. Indeed regulatory outsourcing creates confusion.

Who suckered who is the wrong debate

Sir George Soros writing about “The worst market crisis in 60 years” January 23, is right to say that resulting political tensions…may disrupt the global economy and plunge the world into recession or worse. Unfortunately he then adds coal to that fire when he speaks with venom about how “Globalization allowed the US to suck up the savings of the rest of the world”, knowing perfectly well this was mostly because of the immense reserve accumulations of dollars voluntarily made by governments, mostly to keep exchange rates artificially low in order to, in Soros phraseology, suck up jobs. Who suckered who is not the debate the world now needs.

That the US should have ignored the financing offers they received from the world and behaved with more discipline not one doubts, but neither would then other countries have been able to strengthen so much so that they now can perhaps take over some of the pulling responsibilities of a bit tired US economic locomotive. How that can best be done is what we should be debating.