A Neo-Inquisition is at work protecting mutual admiration clubs, like the Basel Committee for Banking Supervision

Sir, Ian Goldin writes “Today, the increasing depth of knowledge in any field means that greater specialisation is needed to master ideas. Yet this stifles creativity and the ability to grapple with real-world problems, whose messy complexity has less and less in common with the increasingly fragmented disciplines and professional specialisation” “Da Vinci code: what the tech age can learn from Leonardo” April 29.

Indeed, and that is most clearly evidenced by expert specialized regulators coming up, within the walls of a mutual admiration club, with risk weighted capital requirements for banks, which are based, not on the dangers bank assets could pose to the banking system, but simply on their ex ante perceived credit risk… as if bankers did not perceive these… as if bankers loved taking risks… as if not all major bank crisis had resulted from something ex ante perceived as safe turning up ex post as something very risky. 

Goldin rightly opines: “For progress to prevail, evidence-based, innovative and reasoned thinking must triumph. Genius thrived in the Renaissance because of the supportive ecosystem that aided the creation and dissemination of knowledge — which then was crushed by the fearful inquisitions. Today, tolerance and evidence-based argument are again under threat.”

Indeed those bank regulations, which blatantly failed in 1988, when AAA rating turned out wrong, and which are building up dangerous exposures to 0% risk weighted sovereigns and to 15%-35% residential mortgages, are still not discussed.

In response to a public request of comments on SMS financing, I sent a letter to the Financial Stability Board. It began this way:

“I have not found sufficient strength to sit down and formally write up my comments, because I feel I would just be like a heliocentric Galileo writing to a geocentric Inquisition.

The Basel Committee’s standardized risk weights are based on the presumption that what is ex ante perceived as risky is more dangerous to our bank system.

And I hold a totally contrarian opinion. I believe that what is perceived a safe when placed on banks balance sheets to be much more dangerous to our bank system ex post than what is perceived ex ante as risky; and this especially so if those “safe” assets go hand in hand with lower capital requirements, meaning higher leverages, meaning higher risk adjusted returns on equity for what is perceived safe than for what is perceived as risky.”

Sir, that letter managed to get nailed on FSB’s web-doors and I’m waiting to see what will be its destiny.

PS. In these days when the filthy rich are so much abhorred, there’s room to ask whether Leonardo da Vinci’s Salvator Mundi and Mona Lisa would ever have been painted if not commissioned by some filthy rich.

PS. In FT November 2004: “Basel is just mutual admiration club of firefighters seeking to avoid crisis”

@PerKurowski

A Universal Basic Income must be a hateful concept for those who profit politically or economically, or both, on conditioned redistribution

When FT at long last allows for a strong defense of a Universal Basic Income Dr. Guy Standing writes: “Most believe the BI should be clawed back from the rich in tax. This is administratively easier, more equitable and efficient than targeting by means-testing. The latter has high exclusion and inclusion errors, low take-up and poverty traps, inducing bureaucrats to use intrusive behaviour tests.” “Universal basic income would enhance freedom and cut poverty”

That is a very delicate way to express it, because, as the title of this comment states, there are also some very darkly motivated objections to a Universal Basic Income.

http://myubi.blogspot.com/2017/01/my-universal-basic-income.html

@PerKurowski

A Universal Basic Income would be a societal dividend. No one should have the power to decide which shareholders get it and which not.

Sir, in response to Ian Goldin’s “Five reasons why universal basic income is a red herring”, February 12, you today publish 3 letters that are all against the idea of Universal Basic Income. Is that really “Without Favour”?

Lesley Spencer in his “The huge cost to society of every job replaced” correctly describes some of the problems with increased automation, like humans competing disadvantageously with robots and less fiscal revenues. That clearly calls for new sources of fiscal revenues, like taxing robots or, as he writes, “the company picking up the tax shortfall when it replaces a person with a machine.”

But why that should also signify that UBI does not have an important role to play in the adjustments our society must do in order to face these chaplinesque neo modern times beats me.

And Carol Wilcox, in “Some tasks simply can’t be handed to a machine”, states that “Ian Goldin is right to call out universal basic income as snake oil”, but then supports that solely by arguing that Goldin “is wrong to believe that automation is a threat to workers”

And finally Jonathan Berry with “Why are we drawn to the most difficult solutions?”, argues for the much more complicated route of handing out stock-market participation, to some, than a societal dividend to all.

Sir, be aware that the major enemies of the UBI are the redistribution profiteers, scared to death that would diminish the value of their franchise.

But of course even between the UBI defenders there are many disagreements. I for one firmly believe that a UBI should be set at a level in which it helps you to get out of bed, but never ever, as some do, to be set on a level that allows you to stay in bed.

http://myubi.blogspot.com/2017/01/my-universal-basic-income.html

PS. Here was my letter commenting on that

@PerKurowski

Universal Basic Income is to help you get out of bed, not to allow you stay in bed

Sir, Ian Goldin first introduces many valid reasons for why we need a Universal Basic Income. But then he writes: “As shown by the OECD, by reallocating welfare payments from targeted transfers (such as unemployment, disability or housing benefits) to a generalised transfer to everyone, the amount that goes to the most deserving is lower. Billionaires get a little more.” “Five reasons why universal basic income is a red herring” February12.

No way! I come from Venezuela. The poor their, got only a fraction, perhaps less than 15%, of what they should have gotten had only the oil revenues been shared out equally to all. Who got the most? The redistribution profiteers and their friends.

And clearly since it would reduce the value of their franchise, these profiteers are the ones who most set out to attack Universal Basic Income.

Goldin bombs UBI with:

“If UBI was set at a level to provide a modest but decent standard of living it would be unaffordable and lead to ballooning deficits”

“Delinking income and work, while rewarding people for staying at home, is what lies behind social decay.”

“UBI undermines incentives to participate”

But he also writes: “There must be more part-time work, shorter weeks, and rewards for home work, creative industries and social and individual care. Forget about UBI; to reverse rising inequality and social dislocation we need to radically change the way we think about income and work.”

And that is when I understand Goldin might not have understood where many of us want the UBI level to be. We want it set at a level that helps you to get out of bed, to reach up to the gig economy, but absolutely not at a level so high that it does allow you to stay in the bed.

@PerKurowski