To those who argued Geocentrism, Heliocentrism would have represented fake news.

Sir, Timothy Garton Ash writes: “The real challenge for the craft and business of journalism is to bring those facts to people who have fallen prey to emotionally appealing populist narratives — and may not even be interested in learning the boring truth.” “What to do when the truth is found to be lies” December 24.

Indeed, Garton Ash is right, but let us not forget that quite often there are also those very interested in that the truth is not learned.

For instance in apportioning the blame for the 2007-08 crisis, how much has been laid on bankers and how much on regulators, 95% - 5%? What would then happen to a post that argues, as I truthfully do, that regulators, by setting up irresistible temptations, were more to blame than bankers? Would it be banned as fake-news? Of course you could argue that is an opinion, not news, but the frontier between these is not that clear.

Sir, trying to sort between truth and falsehood, puts us on a slippery road, but must of course anyhow be tried. One possibility would be to ask social media to refrain from linking to any news not signed by a real person; or to any site that specializes in obvious scandalous news. But to ask much more from social media would be naïve, since these derive a lot of their income precisely from generating ad-clicks. I mean just as naïve as when bank regulators allowed banks to calculated their own risk-weighted capital requirements.

@PerKurowski

Europe - Eurozone stands no chance against the regulatory manipulation of how bank credit is allocated to its real economy.

Sir, Timothy Garton Ash opines “that rushing into a deeply flawed monetary union — bad design, too large and diverse a membership — was the biggest single mistake in the history of European integration”, “The fading of Europe is a result of both its failures and successes” June 11.

Few weeks before the launch of the euro I wrote an Op-Ed in Caracas titled “Burning the bridges in Europe”. I believe its content should have earned me a right to opine on what then has happened.

But what I had no idea about, since I then had nothing to do with it, was of the route bank regulators had initiated with their Basel Accord of 1988 (Basel I). In it the concept of risk-weighted capital requirements was introduced, and the risk weight for the sovereign (the government) was set at zero percent while that of the citizen was fixed at 100 percent.

Risk weighted capital requirements for banks might sound reasonable as making banks safer… though they really don’t! But, since they allow bank equity to be leveraged differently with different assets, these absolutely distort the allocation of bank credit to the real economy… and that distortion was completely ignored… and still is.

In essence it meant that since banks could leverage equity more with loans to the governments than with loans to the citizens, they would therefore earn higher expected risk adjusted returns on equity on loans to the government than on loans to the citizens. And that meant that the government bureaucrats were de-facto deemed to use bank credit more efficiently than the private sector.

And of course, such statism, introduced by the bathroom window, had to condemn Europe (and the rest), with or without the euro.

In a letter published by FT in November 2004 I asked: “How many Basel propositions will it take before they start realizing the damage they are doing by favoring so much bank lending to the public sector?

And in June 2004, with Basel II, and though in that case I had been able to protest strongly but uselessly against it, the regulators also introduced risk weighting for the private sector. The risk weights ranged from 20% to 150%, depending on credit ratings; which discriminated in favor of “the safe” privates against “the risky” privates.

And of course, such credit risk aversion, introduced by the bathroom window, had to condemn Europe (and the rest), with or without the euro.

In November 2011 I explained it all in much more detail in “Who did the Eurozone in?”

But, for instance the absolute silence of FT about my many warnings about the regulatory distortion of the allocation of bank credit to the real economy, seems to indicate this issue is of little interest… I wonder why?

For me the risk aversion of Basel regulations, which implies not daring to climb higher because of being afraid of losing what its got, means that Europe (and the rest) have capitulated… and that is a mistake that at least is going to cost all our young ones much more than the possible euro mistake.

@PerKurowski ©

The Basel Committee blocks Machievelli´s historical fortunas, while making our mis-fortunas worse.

Sir, Timothy Garton Ash makes reference to “!historical luck, the fortuna that Niccolὸ Machiavelli calls the arbiter of half of the things we do” "States are born by accident but sustained by ardour”, March 8.

That applies directly to what I have in vain been trying to explain to FT for so many years now about what is wrong with current bank regulations.

Capital requirements which allow banks to earn higher risk-adjusted returns on equity when lending to the “safe” than when lending to the “risky”, effectively blocks the access of bank credit to the fortunas the real economy needs to grow and remain sturdy, while at the same time guaranteeing that if a huge mis-fortuna happens, like when an “absolutely safe” suddenly turns out very risky, banks will not have the capital to defend themselves with.

I am sure future historians will write about the period when the Basel Committee castrated our banks and with that our economies, and the elite like the Financial Times kept mum about it.

God make us daring!