The US might be an SOB of a superpower, but it is our (or at least mine) SOB superpower.

Sir, Martin Wolf writes: “China is, not the real threat. The threat is the decadence of the west, very much including the US — the prevalence of rent extraction as a way of economic life, the indifference to the fate of much of its citizenry, the corrupting role of money in politics, the indifference to the truth, and the sacrifice of long-term investment to private and public consumption. It is indeed a tragedy that the best way we could find to escape from a financial crisis was via monetary policies that risked promoting new bubbles. We could be better than this.” “The rivalry that will shape the 21st century” April 11.

On the “sacrifice of long-term investment to private and public consumption” I could not agree more. But that is precisely why I have been attacking, day and night, obsessively, the risk weighted capital requirements for banks. These make our banks favor way too much the financing of the present “safer” consumption (houses-governments) and stay away, way too much, from financing the “riskier” future production (entreprenuers). Unfortunately too many, Martin Wolf included, have been indifferent to that truth.

But, that said, on the first part “the prevalence of rent extraction as a way of economic life, the indifference to the fate of much of its citizenry, the corrupting role of money in politics, the indifference to the truth”, is China really better than the west or the US? 

I don’t think so, but even if it was so, when push comes to show, there comes a point when you have to decide what superpower you prefer. I have no doubt preferring the west, the US… though Graham Allison of Harvard seems to harbor some doubts on that arguing that “China rivals the US in…ideology”.

In what I entirely agree with Wolf is when, explaining it so well, he states “The idea that intellectual property is sacrosanct is wrong. It is innovation that is sacrosanct. Intellectual property rights both help and hurt that effort. A balance has to be struck between rights that are too tight and too loose”

Yes, and for years I have suggested that balancing could start by taxing the profits obtained when competing protected by intellectual property rights, at a higher rate than profits derived from competing naked in the market. And since what becomes protected with IPRs is the last leg of our human heritage inventiveness, those taxes should perhaps also help to fund a Universal Basic Income, something which would be a de facto social dividend.

PS. That said, when Wolf says “the US can huff and puff about Chinese theft of intellectual property” then I am not sure really which SOB is Wolf’s favorite superpower.

PS. For full disclose, had it not been for the US, I would certainly not be around.

PS. All morphed faces look ugly but, in reference to Times’ recent cover, if faces have to morph, what faces would you prefer to see morphing, Trump-Putin, Trump-Xi Jinping or Putin Xi-Jinping?

@PerKurowski

A “Council of Historical Advisers” should advice the Council of Economic Advisers, on the origins of bank crises

Sir, Gillian Tett discussing Afghanistan’ Gandamak writes about the importance of knowing where you come from to know where you would want to go. “History lessons would be good for the White House” September 3.

Indeed, and I sure hope the “Council of Historical Advisers” comes to fruition, since the Council of Economic Advisers, and the Basel Committee, sure need some history lessons about the origins of bank crises.

Currently the pillar of bank regulations, is the risk weighted capital requirements for banks; more perceived risk more capital – less risk less capital.

And there is absolutely nothing in history that points to a banking crisis ever having resulted from what was, ex ante, when incorporated in their balance sheets, perceived as risky.

These have only resulted from unexpected events, or from the accumulation of excessive financial exposures to something erroneously perceived as safe. In fact the safer something is perceived, the worse the unexpected consequences that could result. Motorcycles are correctly viewed as much riskier than cars… and therefore much more people die in car accidents than in motorcycle accidents.

To sum it up, the risk weighted capital requirements for banks, dangerously distort the allocation of bank credit to the real economy, for no good reason at all. 

@PerKurowski ©