If Peter Clarke is right, Keynes would be outraged about capital requirements for banks based on perceived risk.

Sir I do not know enough of economic history, or of Lord Keynes, to know whether Peter Clarke is correct when he says that Keynes “would have recognised the long gradual deterioration in income equality, and its consequences. He would also have been concerned about the redistributive effects of today’s extreme monetary policy. He would have recognised that today’s financial system is ineffective at channelling savings towards long-term productive investment and is configured more towards rent extraction”, “Reach of Keynes’ thinking deserves to be appreciated” October 2.

But, if that is what Keynes would opine, then I can swear he would be as outraged as I am, about the stupid capital requirements for banks based on ex ante perceived risk, and which allow for much higher risk adjusted returns on bank equity when lending to “The Infallible”, like sovereigns, housing and AAAristocracy, than when lending to “The Risky”, like the medium and small businesses, the entrepreneurs and the startups.

Indeed what would Keynes be saying?

Sir we must be grateful for Peter Clarke’s very enjoyable “In the long run we are all dependent on Keynes” January 8, not the least for the timely reminder that “the General Theory had advocated regulating economy through investment, not consumption”.

It would be interesting to speculate about whether Keynes would have repeated his “I was the only non-Keynesian there” if witnessing how his name is now used to support the build-up of US public debt in order to create bailouts and stimulus packages to save the world from a monstrous depression, given the extremely high stake of said debt becoming so unsustainably large to cause the mother of all meltdowns.