While central bankers ponder moving their targets, we should ponder the need of moving them out.

Sir, I refer to your “Central bankers ponder moving the goalposts” August 26.

Stock and bond markets are important but the banks are most often the financiers of the first stages of growth. So while regulators, with their risk weighted capital requirements, insist in distorting the allocation of bank credit to the real economy; impeding sufficient flows to what has been deemed as risky, like SMEs and entrepreneurs, there is no chance in hell that QEs, negative interests or whatever else central bankers might concoct will work.

Some want to make up for the regulatory risk aversion by designing special financing facilities, for instance to SMEs. That’s would be the wrong way, that would just make everything more complicated and even less transparent.

Frankly, when I read about what options central bankers are pondering, it all sounds like a Lilliput and Blefuscus debate, 2% or 4%, break the egg on the larger or on the smaller end. Perhaps, if they cannot get their act together, and before they take us further up the huge mountain of debts they talk down as quasi-debts, we should seriously ponder the need to move them out. 

Inflation targets, nominal value of GDP and such, means little for most on Main Street. For instance, as a grandfather, I would welcome some central bankers that would target future employment rates, in decent jobs of course; and were willing to index their respective retirement plans to my grandchildren’s success, and to the value of the pension and retirement plans of those of their generation.

Sir, the independence of central bankers, cannot signify they are not to be held accountable for what they do.

@PerKurowski ©

Alan Greenspan, silently fade away, please

Sir, Alan Greenspan writes “Had banks and other financial entities maintained adequate equity capital-to-asset ratios before the 2008 crash, then by definition no defaults or contagion would have occurred as the housing bubble deflated…. Bank management, currently repairing their flawed risk management paradigm…”, “Regulators must risk more to push growth” July 27. What on earth is Greenspan talking about? 

If the regulators, like Greenspan, had not decided that the capital requirements for the banks were to be set in accordance to the perceived risk of default of each individual asset, then those triple-A rated securities backed with lousily awarded mortgages to the subprime sector, and which in essence became to coffin of the housing bubble, would not even have existed. 

Of course any safety buffer comes at a cost, but also, if that cost is not shared equally, the final real cost could go up exponentially. In this case the regulators, by discriminating against those perceived as “risky”, like the small businesses and entrepreneurs, have, just like the Lilliputians tied up Gulliver, effectively tied up the Western World in an arbitrary and defeatist risk-adverseness, and that we must urgently break away from. 

Greenspan, as the other regulators, after what they´ve done and in much are still doing, have no right to sermon anyone about the need of risk-taking. He, for his own good, should just do as old soldier are said to do… silently fade away, instead of hanging around trying to impose on history their version of their Basel-Waterloo. I hold this because in order to understand the real need for risks, you have to be able to understand the real dangers of risk-aversion.

PS. Our loony malfunctioning bank regulations explained in an apolitical red and blue!