In EU the lines separating the real responsibilities between national and local politicians, and Brussels technocrats, are way too blurry, at least for the ordinary European citizens

Sir, Simon Kuper writes: “In recent years, we have improvised our way into an EU that works for most Europeans of our generation. We now have what Charles de Gaulle called a “Europe of nations”, in which the big decisions are made not by Brussels bureaucrats, or the European Parliament, but by national leaders acting in concert.” “Why today’s Europe of nations works” May 18.

I disagree. Because of the most probably very disastrous consequences for the euro and for the EU, the single most important decision that has been taken in the EU is, for the purpose of the risk weighted bank capital requirements, assigning to all eurozone sovereigns a 0% risk weight, and this even though they all have their debt denominated in a currency that de facto is not their own domestic printable one.

Sir, what German politician would like to be asked: why did you consider that German banks needed to hold eight percent when lending to German entrepreneurs but could lend to Greek bureaucrats against no capital at all. I venture the answer to that to be, no one!

In EU, technocrats and politicians will blame each other, whenever it’s convenient for any of them, but that is usual in most places. The real difference here is that in EU, the lines separating the responsibilities between national and local politicians, and the technocrats, are as blurry as can be. To know that it suffices to follow the European Commission twitter account, and therefore receive the most amazing barrage of publicity on it doing things that nobody could ever think was their responsibility.

Sir, those supporting Brexit could wrongly suppose too much decision power rests in EU, but those supporting Remain could be just as wrong supposing too much decision power remains in Britain. Who knows? Not me, but perhaps not you either.

@PerKurowski

Any winner in a second Brexit referendum should want to make sure his would not be a Pyrrhic victory.

Sir, Simon Kuper writes: “Only voting Remain will end the stress and tedium (the national divide will remain whoever wins)”, “How Remain can win a second referendum” April 20.

Of course the national divide will remain, but the question is whether it will remain the same whoever wins the second referendum? Could the divide not increase? Who could, if winning, be more capable to set a course towards national unity, Brexiters or Remainers?

Kuper opines, “Remain needs to sound as patriotic as Leave. It must present the UK as a European power, not a sorry victim of Europe.”

Yes, of course, but have the Remainer done so? I don’t think so.

A powerful Remainer would have imposed conditions on Europe that would make it easier to convert Brexiters. Of that nothing has been seen. (A powerful Brexiteer would have looked for the same in order to convert Remainers).

A powerful Remainer might have started out for instance by questioning Michel Barnier as the European negotiator, as there were indications of him having conflicts of interest. (A powerful Brexiteer should have had to do so too).

A powerful Remainer would have asked Europe for a clear answer on how they intend to solve the problem with having assigned a 0% risk weight to all Eurozone sovereign that take on debt in a currency that de facto is not their own domestic (printable) one. I mean a powerful Remainer would not risk standing their with egg on his face having won the second referendum and then having nothing to remain in. (A powerful Brexiteer might not really have had to do so).

Kuper also opines “In a second referendum, Remainers can borrow the anti-elitist language of Leave to inveigh against privileged Brexiters.” 

Yes, that could help the Remainers to win the referendum, but that would also increase the chances of the divisions growing and they having won a Pyrrhic victory.

Sir, at the end of the day Britain’s problem is that the Brexit vs. Remain debate was taken over way too much by those wanting to profit on it by it turning it into a battle between good and evil. If you do not possess a sufficient strong elite capable of stopping such nonsense, you will pay the consequences, 

Sir, when thinking about what second referendum result would have the best possibilities over to regain some workable unit, each day that passes, makes me feel closer to have to give, a quite reluctant, “Brexit” response to that.

PS. London’s West End needs urgently an Oklahoma revival adapted to Britain. “The Brexiters and Remainers should be friends”

@PerKurowski

“Any populism yours can do, mine can do better; mine can do populism better than yours” “No he can’t!” “Yes he can, yes he can, yes he can!!!!”

Sir, Simon Kuper ends his “Secrets from the populist playbook” March 16, with “Some new politicians, notably the new Democrat congresswoman Alexandria Ocasio-Cortez, can rival Trump for engagement. To some degree, we are all populists now.” “Secrets from the populist playbook”, March 16.

Indeed but the populists must also be measured with respect to the success they have when selling their populism.

For instance, our current bank regulators must be some of the most successful populists ever. Just think how they have managed to convince the world (most or all in FT included) that by imposing risk weighted capital requirements for banks, they are reducing the risks for our bank system. With that they have distorted the allocation of bank credit all over the world, weakening the economies and increasing the dangers of a systemic meltdown of our banks. 

Sir, I am from Venezuela, and so unfortunately I know too much about populists, but, when compared to the Basel Committee on Banking Supervision’s and the Financial Stability Board’s populism, Hugo Chavez was just a quite gifted amateur.

@PerKurowski

PS. My 2019 letter to the Financial Stability Board (FSB)

Lie Detectors, many journalists would also benefit from lessons on fake news.

Sir, Simon Kuper describes the experiences of Belgian journalist Valentin Dauchot when dispatched to discuss fake news with classes of 10 and 11-years-old in Europe. Lie Detectors, a Brussels-based NGO that sends journalists to do that, finds that “children are often internet-savvier than teachers, and probably more so than old people”. “A lesson in fake news”, February 2.

Sir, I wonder how those children would classify the following information:

“Since your teachers have decided that dark forests are much more dangerous for all of you to enter, than staying out playing in an open field, anyone of you who enters the darkness of such forest, will be forced to eat broccoli and spinach for a full month. Anyone of you staying in the sunlight of the open field, will be rewarded with chocolate cake and ice cream each day for a whole month”. True or fake?

The children would respond: “Of course we wish it was true of course but, unfortunately, it has to be fake. Who would give us chocolate and ice cream for staying where we want to be, and spinach and broccoli for not entering what we already find to be scary?

Correspondingly, how would adults respond when they hear that regulators have risk weighted the capital requirements for banks, allowing these to hold much less of it against safe assets than against risky assets?

Most adults would say surely “True” “Great!”, and this even if anyone who has read anything about bank crises know well that the worst of these always result from excessive exposures to something ex ante perceived as very safe but that, ex post, turns out to be very risky, e.g. AAA rated securities.

Of course bankers, in this case being the children, cannot believe their luck with such fake regulations being decreed true by the Basel Committee. Imagine, earning the highest risk adjusted returns on equity on what’s perceived as safe! Imagine being able to hold much less equity against what we most love to hold, which of course leaves much more for bonuses to us!

Sir, how could Lie detectors help the adults, including of course journalists, like many in FT, to be more alert to the truthfulness of news and regulations? A good place to start would be with a full explanation of confirmation bias… that here resulting from most loving much too much the populist message of: “We have risk weighted the bank capital requirements for you so as to make these safer” 

@PerKurowski

EU, when imposing armistice conditions on your capitulating eurozone sovereign debtors, remember the Versailles Treaty.

Sir, Simon Kuper referring to historical events like the Versailles Treaty writes, “In international relations, treat even your opponents like long-term business partners. You will meet again, and if you hurt them for short-term gain, they won’t forget.” “Lessons from 1918 for today’s world leaders”, November 3.

And Kuper follows it up with, “Peace in the region cannot remain the EU’s selling point. Precisely because Europeans have come to take peace for granted, they now (rightly) ask: ‘What have you done for me lately?’ ”

Sir, if I were a Greek citizen, and perhaps this would soon apply to an Italian too, I would ask and tell the European Union authorities, the European Commission, the following: 

“Why on earth did you assign our sovereign, who you must know that in terms of fiscal sustainability and efficient governing is not the brightest star by far, an absolute zero percent credit risk? That allowed banks all over Europe to lend to our sovereign against no capital at all, something that caused our sovereign to get hold of more and more easy money… until it could no more.

But besides this, what I really want to know is: Even though you have provided some cash flow easing, which helps of course, as it was partly or even mostly your fault, why did you force on us Greeks all that debt and did not ask European banks to share more in the losses? Thanks much to your mistake and your armistice terms, we are now saddled with about €345.000 million of debt, more than €30.000 million for each Greek, and it is all denominated in a currency which de facto is not entirely our domestic currency.

Do you think that newborn Greeks, when they grow up and find out, are going to keep a cool head about all this and be able to sing the EU’s anthem “Ode to Joy” with enthusiasm?”

Sir, in short European “world leaders gathering in Paris next week to commemorate 1918” should reflect on what they might be doing today when imposing unrealistic armistice conditions on those who have to capitulate on not being able to service their sovereign debt.

PS. Sir, as a Venezuelan I can assure you that those looking to bailout those of theirs financial profiteers who provided finance to our corrupt human right’s violating regime, will not find us Venezuelans accepting that without a fight.

@PerKurowski

How naïve were we when regulators told us “We will risk weigh the capital requirements for banks to make these safer for you”?

Sir, Simon Kuper in reference to Brexit writes “It’s hard now to fathom how naive we were in 2016. I thought…you couldn’t just stick a false slogan on your campaign bus, could you? “Trust, lies and videotape” October 20.

Sure you could! Like when or bank regulators told the world that what’s perceived as risky is more dangerous to our bank systems than what’s perceived as safe, and the world, including Simon Kuper, and the Financial Times, believed that to be true.

Kuper holds the popular gold standard of truth being, “I saw it with my own eyes.” Well not in this case! 100% of the assets that caused the 2007-08 crisis were assets that because these were perceived as safe, allowed banks to hold especially little capital, and that has yet to even be formally noticed.

Kuper quotes Umberto Ecco: “The genuine problem . . . does not consist of proving something false but in proving that the authentic object is authentic.”

Yes, like the problem I have had surpassing that seemingly unsormountable barrier of “what is risky is risky”, in order to warn regulators that what is “safe”, is even more dangerous… at least to our bank systems.

@PerKurowski

Instead of working on a Brexit, Britain should do all Europeans a favor and negotiate a very tough EU Remainer

Sir, Simon Kuper, in a back and forth discussion on Brexit, ends upcontemplating “a soft Brexit or Brino, in which Britain becomes a poorer Norway, accepting all European rules including freedom of movement to keep trade and travel flowing.” “Why there won’t be a no-deal Brexit” October 4.

As a reason for that Kuper opines “Few European officials want the UK back now, anyway”. Indeed I can understand that EU’s Brussels bureaucrats feeling rejected and questioned want to spank the Brits for Brexit, but do Europeans want that too? I don’t think so.

Sir, as I see it, and as I have been writing to you for some time, the best way out is a tough Remainder offer in which Britain lays clear what it wants the EU to do, in order to want to remain a member of it.

I am not a Brit, and I do not live in Europe, but my list of request would include:

1. EU needs to solve the challenges that the euro poses to it and about which they have done little to nothing in the twenty years since its inception. If they do not do that, the EU has no future. And don’t let them tell you those challenges were not known.

2. EU must make sure never again treat one of its members like it treated Greece, which for the risk weighted capital requirement it assigned a risk weight of 0%, and thereby doomed it to tragic excessive indebtedness, only to later put the whole blame, and costs of that, mistake on Greece.

3. Understand that Europe has no future with risk adverse risk weighted capital requirements for banks that distort the allocation of credit to the real economy, and sets it up to a financial crisis of monstrous proportions, by means of incentivizing dangerous excessive bank exposures to something considered especially safe, against especially little capital. 

4. That EU stops behaving like a Banana Union getting involved into such issues as regulating the entry fees to Romanian monasteries.

Sir, if those requests would come to fruition, many Europeans would be immensely thankful to Britain… again.

@PerKurowski

Polarization profiteering trumps all efforts to bridge the divides.

Sir, Simon Kuper discussing the possibilities that “British and US liberals” (whatever that nowadays really means) could become “politically sidelined”, informs us of “Liberal NGOs raise fortunes” “Have we hit peak liberal resistance?” September 30.

To get a donation one used to have to place an ad, invest in a phone call or a stamp, or make a personal visit. Now on the web, one can make a million donation requests, at zero marginal costs. 

That has empowered polarization profiteers potential profits so much that they are taking over the debates and thereby, hopefully unwittingly, taking down our society.

The more they sell themselves, or the champion they support, as the greatest champion to oppose the evilest devil they can find, the higher their donation profits… just like the most outrageous fake news attracts the largest number of ad-clicks.

As a consequence, liberals are now being politically sideline by those who, supposedly supporting them, are more interested in the short-term profits than in any other aspect of liberalism.

True liberals working for a better world, should not play along.

http://perkurowski.blogspot.com/2010/05/speakers-corner-speakers-have-moved-to.html

@PerKurowski

How long will regulators believe that unrated entrepreneurs pose more danger to banks than investment graded companies?

Sir, Brooke Masters writes that “a group of banks collectively lent €1.6bn to a South African billionaire. At the time, these “margin loans” looked like really safe bets because the lending was secured by 628m Steinhoff shares worth €3.2bn and the company had an investment-grade rating” and now they “were sitting on paper losses of €1.2bn” “Beware of top execs who depend on share-backed loans”, December 16.

Sir, this just another evidence of that what is really dangerous for banks is not what is perceived risky but what could erroneously be perceived as safe. And therefore that the current risk weighted capital requirements for banks makes absolutely no sense?

Sir, why is it so hard for you to ask regulators: “Is it not when banks perceive something as safe that we would like for these to hold the most capital?”

Are you afraid they will give you a convincing answer and leave you standing there as a fool? Don’t you think that if they had had an answer they would have shut me up decades ago?

Simon Kuper in today’s FT writes about how America an Britain have fallen into the hands of incompetent amateurish well-off baby boomer politicians, born between 1946 and 1964, “Brexit, Trump and a generation of incompetents”.

Sir why could that not also be applicable to baby boomer regulators, like for instance Mario Draghi, Stefan Ingves or Mark Carney?

PS. We should note though that it was a pre-baby-boomer generation’s Paul Volcker and Robin Leigh-Pemberton who were responsible for the origins of this monumental regulatory faux pas.

@PerKurowski

On Main Street what’s perceived ultra risky, is de facto much less dangerous than what’s perceived ultra safe.

Sir, Simon Kuper writes: “The Republican plan to strip health insurance from 22m Americans (including 18m adults), it would kill about 32,700 adults annually (using the mid-range estimate). That’s gruesome. But boring old obesity kills far more.”, “How to solve the obesity epidemic” July 29.

That presents a perfect opportunity to explain again, for the umpteenth time, what regulators did wrong with their risk weighted capital requirements for banks.

They would have assigned a higher risk weight to the Republican plan, because even though it might kill less it is perceived (or decreed) as riskier, than what they would assign to what though more dangerous for society, obesity, is perceived as safer.

In Basel II, the ultra dangerous ultra safe AAA rated got a 20% risk weight, while the totally innocuous ultra risky below BB- rated got a 150% risk weight. 

PS. Cars and motorcycles.

@PerKurowski

Higher import tariffs and minimum wages are superb news… for robot manufacturers

Sir, Richard Waters writes: “Pace of automation will depend on how easily workers are displaced” January 13.

And that partly depends on how much robot, driverless cars and similar automation options, will lobby the governments for higher import tariffs and higher minimum wages.

Or on if we will impose some payroll and minimum wage taxes on these, in order for the humans to compete on a more level playing field.

PS. http://teawithft.blogspot.com/2016/10/let-robots-make-us-offer-we-cant-refuse.html

@PerKurowski

Let robots make us an offer we can’t refuse, for us to allow them to supplant us; perhaps a Universal Basic Income?

Sir, Simon Kuper writes about “How to cope when robots take your job” October 9.

Before I got censored, there too, in 2012, in an Op-Ed in Venezuela titled “We need worthy and decent unemployments” I wrote: “What politician does not speak up for the need to create decent and well paid jobs for young people? But, if that's not possible, and the economy is not able to deliver that on its own ... What on earth are we to do?” 

And I followed that up with “The power of a nation, and the productivity of its economy, which so far has depended primarily on the quality of its employees may, in the future, also depend on the quality of its unemployed, as a minimum in the sense of these not interrupting those working.”

And so perhaps not only journalists but all other who end up unemployed because of robots too, should require those employing robots to pay a out a Universal Basic Income, as a quid-pro-quo for us allowing these to supplant us. Or if they have better ideas, let the robots themselves make us an offer we can’t refuse.

Ideally that could allow many to operate on the fringe margins of earnings, allowing them to keep busy with what they most like to do.

For journalists the alternative could be to get really creative so as to obtain some ad income from a story that goes viral. Sadly, in that case, the temptations of sacrificing truth in order to gain virality might prove to hard to resist… as we already see happening more and more, here and there and everywhere.

PS. Look at it this way. If robots send us into early retirement, should not robots pay taxes too? Should not the employers of robots have to pay payroll taxes for these? That could help to fund our Universal Basic Income. And that could also help us humans to compete with the robots for jobs on a more level playing ground. 

PS. A Universal Basic Income is a step-ladder that will allow us to reach up easier to the gig-economy.

PS. If then taxing robots funds our living by means of a Universal Basic Income, could we all become a robots owning gentry,  reading and writing poetry like Jane Austen’s landed gentry?

PS. Where does Donald Trump suggest we build the wall against the robots who threaten American jobs, and who is going to pay for it?

P.S. How many jobs have robots taken from humans only because robots are not subject to minimum wages and payroll taxes?

PS. Soon unemployed PhD’s will not even be able to drive taxis in New York, as driverless cars will be deemed safer.

PS. I have been concerned with growing structural unemployment for a long time, like to the point of suggesting It's time to just scratch each other's backs.

PS. By the way, in all statistics on employment, where can we find information on how many robots gained employment, for instance in the USA during the last quarter of 2016?

PS. When playing the employment game, humans & robots face same par salary, but robots count with extra payroll tax handicap strokes

PS. Grandparents, can you imagine the horrors if your grandchildren come to depend on dumb artificial intelligence and on 3rd class robots?

PS. I anställning spelet, har både mänskor och robotar samma par lön, men robotar har 31,34% extra arbetsgivaravgift slag.

PS. Here some disorderly lose cannon questions about life in the just around the corner Robot/Automation La-La-Land

PS. Dwindling workforces puts the International Labour Organization (ILO) at a crossroad: To unionize unemployed or robots?

PS. At what rate should we tax robots? A very high one in order to make us humans more competitive, or a fairly low one to allow robots to do as much heavy lifting as possible for us in our economy?

@PerKurowski ©

More safer drones now- less risky feet on the ground. That’s great for now… but what about tomorrow?

Sir, Simon Kuper writes: “Every society tries to make the trade-off between security and freedom… According to Google, mentions of “freedom” exceeded mentions of “security” in English-language books every year from about 1830 through to 1985. In 1985, mentions of “security” surpassed “freedom” in books… We entered an era of compulsory seatbelts, bans on public smoking and laws against drink-driving.” “Safety first: the new parenting” October 1.

To which I would add that we also entered into the era of the risk weighted capital requirements for banks (1988 Basel I); with which regulators cared more about the short term safety of banks than about the long term safety of economy.

So when Kuper writes: “Every society tries to make the trade-off between security and freedom”, I would hold that de facto more often that represents a trade-off between short and long term security. That is because unfortunately, c'est la vie, security weakens and freedom strengthens. Simon Kuper, having cycled alone to school at age of eight, and comparing that to his daughter’s (perhaps even supervised) walk of one block to the bakery, knows what I mean.

And one major security issue is that security measures are not all equally applied. Out there, in the real world, there are still “savages” living in strengthening freedom, while we subject our young to suffer debilitating security. What that is going to mean to their future no one really knows… but while our kids are more comfortable [and “safer”] in their rooms socializing on computers, the “abandoned” are perhaps getting stronger and making the streets ever more insecure.

Don’t we wish we had the strength to allow our kids to be more savages? That strength can only come out of fully understanding and accepting the implications… we must allow them to take more risks. But it is so hard to gain acceptance for the concept that there’s nothing as risky as excessive risk aversion… especially when so many nannies are in charge.

Here we are, soon 10 years after a crisis that should have laid bare the stupidity of bank regulations that only lead to dangerous overpopulation of some safe havens (AAA rated securities and Greece) and equally dangerous under-exploration of risky bays (SMEs and entrepreneurs)… and the issue of the distortions it produces in the allocation of bank credit is not even discussed.

Sir, I do fret we, as a society, are slowly drowning ourselves in oceans of imagined security. Even our war capabilities are security driven… more safe drones - less risky feet on the ground. That’s great now… but what about tomorrow?

If our sons are not allowed to lose themselves, how on earth will they learn how to find themselves?

PS. I just refer to “sons” as I had only daughters, and both my grandchildren are girls, and you know it is not easy to live as you preach.

@PerKurowski ©

Amazing! Simon Kuper calls a zero risk weight of government and a 100 % for the private, a “right’s cult of free markets”

Sir, Simon Kuper writes: “the right’s cult of free markets was the last surviving big idea. Then the financial crisis of 2008 killed it off almost everywhere outside the US Republican party.” “Small ideas are better than big ones” October 24.

That is simply not true. If we are going to talk about the biggest current idea, and that has been applied on a global scale, I would say that is the credit-risk weighted capital requirements for banks, an idea concocted by the Basel Committee. And its origin, the Basel Accord in 1988, set the risk weights for loans to governments at zero percent while the risk weight for loans to the private sector were set at 100 percent.

That BIG IDEA, discriminating with regulations against the citizen and in favor of the state, has survived the financial crisis, and is still up and running strong in Basel III 

If anything, the Basel bank regulations should be called, the product of a “left’s cult of controlled markets”.

PS. Of course small ideas are always better than big dumb ideas. 

@PerKurowski ©

In finance the structurally discriminated are those perceived as “risky”, the SMEs and entrepreneurs

Sir, Gillian Tett refers to an almost all female conference on economic and finance to ask: “whether it is time to organize an all-black or all-Hispanic financial policy-making event of this sort?” “The power of role models” May 9.

And referencing Simon Kuper’s article “How to tackle structural racism” she reflects: “And, if that occurred, would it help to combat that structural discrimination”.

That is off target. In matters of banking, financial reforms and the future of global finance and economics, the truly structurally discriminated, the “all-black or all-Hispanics”, are those perceived as “risky”, like SMEs and entrepreneurs, while the structurally favored, the “all white males”, are “the safe”, like sovereigns and AAArisktocrats.

So we need more a conference with large representation of those perceives as risky. It would be so interesting if Senator Elizabeth Warren who has exposed “constant criticism of Wall Street and of America’s wealthy elite” were also present there. Can you imagine a small entrepreneur asking Senator Warren the following?

“From a credit point of view I am perceived as risky. I therefore face many difficulties to borrow that umbrella from bankers they only want to lend out when the sun shines. I accept that as a natural fact of life. But why must the regulators make it even harder for me to access bank credit, by allowing banks to have much less equity when lending to “the infallible” than when lending to me?

That results in that banks can leverage their equity, and the implicit or explicit support taxpayers give them, much more with the risk-adjusted net margin dollars paid by “the infallible” than when those same dollars are paid by me.

We the “risky” entrepreneurs and SMEs, we hear we are good for the economy, that we generate growth and jobs and, as far as I know, lending to us has never detonated a major bank crisis… so Senator Warren, can you explain to me why is there such an odious regulatory discrimination against us?

There exists an Equal Credit Opportunity Act (Regulation B) and so I must also ask: Senator Warren why does its benefits not extend to us?

@PerKurowski

​

Tim Harford, where would Britain be if since Jane Austen’s days equity requirements for banks had been risk-weighted?

Sir I refer to Tim Harford’s "A passport to privilege" November 8. 

It is an extraordinary article that brings a new perspective to the important discussion on inequality. And Harford limits it clearly and adequately to “financial inequality” because, in terms of inequality of privileges, I have always thought of that much more a local issue so as to be comparable on a global scale. 

For example the even temporarily inequality of privileges I felt when young, and it was my brother’s birthday, and he got celebrated, was not much diminished by the fact I was given a consolation gift and I knew my own birthday was less than two months ago.

But that said, as usual, mono-thematically, let me return to my concerns about current bank regulations.

I suspect that the referenced FT personalities, Gillian Tett, Simon Kuper and Tim Harford himself, have incomes in a range comparable to that of Mr Elizabeth Bennet and Mr. Darcy, and so let me ask them the following:

How much passport derived privilege do you think you would have today if Britain, during Jane Austen’s days had adopted bank regulations that were based on subsidizing bank lending to what then was perceived as absolutely safe… and with that creating a toll on bank lending to those perceived as risky”? Regulations that among others stipulated banks needed zero equity when lending to “Infallible” King George III :-)

Are you really not aware you are negating your children the rights to all that risk-taking that brought you to where you are today... passport-wise?

Believing too much in “the power of peace” can be hazardous to the health of your nation.

Sir, I refer to Simon Kuper’s “The surprising power of peace”, March 29.

It is always better to be skeptical and pleasantly surprised by “the power of peace” than naïve and unpleasantly surprised by its weakness. Most Venezuelans, including most of those who strongly protested the previous ways of Venezuela, and thereby perhaps unwittingly helped to open the way for Hugo Chavez, stand today in utter disbelief watching how everything has degenerated. I cannot but reflect on how much better off we could have been if we had believed much much less in “the power of peace”.

And I say this also in reference to George Osborne and Wolfgang Schäuble now recommending a “balanced and proportionate” response to Russia. That sounds a bit like believing too much in “the power of peace”.

The risk based capital requirements for banks represent a tragic crossroad of history

Sir, I refer to Simon Kuper’s great description of the assassination in Sarajevo which initiated World War I, “The crossroads of history”, March22. He writes that “you want to shout at Franz Ferdinand across history ‘Get out of town!’“ That was the kind o warning that some of us were shouting out when we saw what was coming at us in Basel II.

Really that day when someone came up with the suggestion that banks would be safer by means of capital requirements based on risks, more risk more capital, less risk less capital, and no one in the inner circle that mattered objected strongly enough … that day the world, especially the Western World, took the wrong path at the crossroads of history.

Not only would this regulation severely distort the allocation of credit to the real economy, but it would also make the bank system much riskier, since we know that all major crises have always resulted from, excessive exposures to what was ex ante considered as “absolutely safe”.

It was bad enough having already allowed banks to hold less capital when lending to the housing sector, since this ignored the fact that a house that comes without a job is really sort of a second class house… but then, allowing banks to earn higher risk adjusted returns on equity on what is perceived as “safe” than on what is perceived as “risky”, that really turned it into an outright criminal history changing event.

Kuper with respect to the Bosniche Post’s late edition “You sense a small local paper struggling to cope with the news story of the century”… and I sense the struggle of the Financial Times to ignore the financial story of the millennium!

Kuper also mentions that one of the two assassins who survived jail, Vaso Cubrilovic, has stated “It wasn’t our intentions to cause a world war”. But, Sir, the amazing fact is that those who were responsible for the Basel II AAA-bomb, those who of course had no intentions of causing us a bank crisis in the world, are still allowed to freely shoot down the prospects of jobs for our youth with their “improved” Basel III.

I did not take Simon Kuper for a baby-boomer.

Sir, I have admired many of Simon Kuper articles, and there is no doubt he is a rising star that could help to rejuvenate your paper. That said his “Smile if you live in Europe” May 4, left me a bit surprised, as I did not take him for a baby-boomer content with being able to obtain a certainly splendid caffé macchiato at a very good price.

I say that because when you are young, more than where you find yourself, is where you are heading that matters… and Europe, for the time being at least, is heading down, down, down.

And as I have explained to you Sir some couple of hundred times, that is much a result of silly bank regulations which allow banks to obtain a much larger expected returns on their equity when lending to The Infallible than when lending to The Risky.

And as you must certainly be aware of, the value of any portfolio which does not include a hefty dose of risk-taking, is destined to wither away, and therefore, although quite appropriate for oldies with few years left of living according to actuarial tables, is something highly inappropriate for the young. 

In fact had a certified financial advisor proposed a portfolio to a young person with the ingredients regulators establish for their banks, he would have his certification immediately removed. So no, if in Europe, and if young, don´t smile but kick out the current batch of bank regulators… as fast as you can.