Does Martin Wolf’s “The tragedy of two failing superpowers” conform with FT’s beautiful motto of “without favour”?

Wolf opines about Donald Trump in terms of “a malevolent incompetent” and for this looks for the support of that totally unbiased Jeffrey Sachs who writes about “devastatingly of the ill will and ineffectiveness on display”. “The tragedy of two failing superpowers” April 1.

Sir, if this is what it comes down to, let me be clear that I much prefer the support of a highly incompetent but more principled Donald Trump, against our evidently thousand times more malevolent incompetents, like Hugo Chavez and Nicolas Maduro, than the support given to them by “extremely competent” Barack Obama and Jeffrey Sachs.

Wolf then writes: “For those of us who believe in liberal democracy” Really? Are we to believe that anyone who, for purposes of bank capital requirements, agrees with assigning a risk weight of 0% to his sovereign’s debt and 100% to fellow citizen’s debts, something which de facto implies that bureaucrats knows better what to do with credits for which’s repayment they're not personally responsible for than for example entrepreneurs, could be defined as a believer in a liberal democracy? I don’t think so, to me he would just be a disguised communist.

@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

Contrary to Gordon Brown, current bank regulators do not dare to take questions, they might not be able to answer

Sir, as truly responsible elite should behave, Lucy Kellaway takes society at task with her “There is nothing cute about innumeracy” May 8.

In it Kellaway refers to how a kid, almost 20 years ago, asked Gordon Brown, then Chancellor of the Exchequer, “what is 13 squared?” and got a correct answer.

I argue that the current risk weighted capital requirements for banks are dangerously nonsensical, and that is why I have been asking bank regulators many questions about these, during about 20 years too. I have not had that kid’s luck.

For instance, when I ask why they give what is AAA rated, that we know banks could be building up dangerous exposures to, a risk weight of only 20%, while the so innocuous below BB-, that which bankers would not touch with a ten foot pole, is handed a 150%, their eyes go blank, and they nod to each other either “what the hell is he talking about?” or “does he not understand that risky is risky and safe is safe?”

If I ask them how much they feel authorized to distort the allocation of bank credit to the real economy in pursue of an elusive financial stability, then they ignore me completely.

Frankly, how can a society allow its banks to be regulated by those that, knowing as they should that bank capital is to be there to cover for the unexpected, are so dumb so as to base their capital requirements on what’s expected?

Here follows a link to some of my many questions that have never received an answer.

http://subprimeregulations.blogspot.com/2016/12/must-one-go-on-hunger-strike-to-have.html

How is it that “Without fear” FT, contrary to that young kid who asked Gordon Brown, does not dare to ask bank regulators these questions?

@PerKurowski

Instead of for known unknowns or unknown unknowns, regulators require banks to hold capital against believed knowns

Sir, Ray Soifer writes: “Dennis Kelleher (Letters, April 19) is right that we do not really know how much capital is necessary to prevent catastrophic bank failures. Indeed, we will never know, because not all the risks faced by financial institutions are “known unknowns”. Some of them will always be “unknown unknowns” until after the fact. Thus, there will always be need for effective supervision and market discipline: the other two legs of Basel’s “three-legged stool”.” “Unknown risks explain need for bank oversight” April 22.

But our bank regulators came up with the brilliant idea that banks should hold capital against what could be seen as perceived known knowns. With their risk weighted capital requirements they doubled down on those perceptions of risk that already influenced decisions on the amount of exposure the bank wanted to hold, and the interest rate to be charged.

So what is perceived safe, which can then be held with less capital, now signals even more safety; and what is perceived as risky, which requires more capital, signals even more riskiness.

Sir if you make the “safer” safer and the “riskier” riskier, do you really think the banks will allocate credit efficiently to the real economy? Of course not!

The “safe” like sovereigns, AAA-risktocracy and housing will get too much access to bank credit; and the “risky” like SMEs and entrepreneurs too little.

“Need for effective supervision” By whom, those who do not understand the distortions they are causing?

“Need for market discipline” What market, that who is now so utterly confused by the risk weighing?

The craziness of this capital requirement regulation is unbelievably large… and therein lays the major obstacle. I hear you: “They can’t be so dumb”. Yes Sir, don’t doubt it, they can!

Sir, “Without fear and without favour” dare ask regulators the following questions:

http://subprimeregulations.blogspot.com/2016/12/must-one-go-on-hunger-strike-to-have.html

@PerKurowski

Let’s see if Ms Tett’s recent enlightenment will now allow her to see the monstrosities of current bank regulations

Sir, Gilian Tett writes: “when the 2008 financial crisis hit, I decided that the only way for a country to avoid a massive banking crisis was to have regular, small bank failures. Frequent, tiny failures are perhaps the only thing that really stop regulators and bankers from getting too complacent.” “A vision of life through a dirty lens”, October 15.

In 2003, as an ED of the World Bank, in a workshop for regulators I argued:

“There is a thesis that holds that the old agricultural traditions of burning a little each year, thereby getting rid of some of the combustible materials, was much wiser than today’s no burning at all, that only allows for the buildup of more incendiary materials, thereby guaranteeing disaster and scorched earth, when fire finally breaks out, as it does, sooner or later.

Therefore a regulation that regulates less, but is more active and trigger-happy, and treats a bank failure as something normal, as it should be, could be a much more effective regulation. The avoidance of a crisis, by any means, might strangely lead us to the one and only bank, therefore setting us up for the mother of all moral hazards—just to proceed later to the mother of all bank crises.”

It would seem there is some coincidence between what I said then and with what Ms Tett later opines.

Yet, over the last decade, in about a hundred of letters commenting on articles by Ms Tett, I have warned her, and you Sir, about the horrendous distortions that the risk weighted capital requirements for banks produce in the allocation of credit to the real economy; and of that all that distortion fulfilled no stability purpose at all.

But Ms Tett, and you Sir, has steadfastly refused to even acknowledge the problem. Perhaps it is my fault. Perhaps my arguments need to be presented with much more ego stroking than what I thought necessary when communicated with experienced and famous journalists/columnists, or with newspapers, especially one that proclaims “Without fear and without favour”.

So I am curious now to see if Ms Tett’s self declared enlightening experience at some “bars in Hamilton County”, will now allow her to apply what she learnt in the anthropology classes at university, in order to allow her to clean up her glasses on the monstrosities of current bank regulations.

@PerKurowski ©

It is way overdue FT stops thinking of Brexit solely as a disastrous defeat, and starts exploring its opportunities

Sir, I refer to Wolfgang Münchau’s “The shock that will shift a nation’s business model” October 10.

Indeed it is long way overdue that at least some of you in FT stop the crying and begin thinking about Brexit not as an unqualified defeat/disaster, but as an opportunity.

But let me be clear. When Münchau mentions the need for “a shift in the direction of the UK economy away from transactional capitalism towards a more inclusive version of a free-market economy”, that begins precisely by throwing out the Basel Committee’s risk weighted capital requirements for banks.

That single piece of regulation, which turned banks away from maximizing returns on equity by means of banking, into doing so by means of capital (equity) minimization; and all based on avoiding ex ante perceived, decreed or concocted risks, has been about as damaging to the real economy as anything I can think of.

But Sir, to recognize that after ignoring the literally thousands of letter I have sent you on that subject, would of course require FT to eat loads of humble pie. Are you without fear and without favour enough to do that?

@PerKurowski ©

FT, “Without fear and without favour”, stand up to a bank regulation “strongman” like Mario Draghi.

Sir, Gideon Rachman writes of “a global trend: the return of the ‘strongman’ leader in international politics” “Trump, Putin and the lure of the strongman” May 17.

Yes it is a worrying trend, but perhaps the Financial Times should also look at the existence of typical “strongman” in the current financial system, for instance Mario Draghi.

As I recall you have only expressed admiration for Draghi’s macho man’s “Whatever it takes” growls, without questioning much whether he has the right to do the “whatever”.

Of course, Draghi has also been able to “trade on feelings of insecurity, fear and frustration” but one should be able to expect a media that prides itself with the “Without fear and without favour” motto, to stand up a bit more against a "strongman".

And especially when there are all reasons to suspect that Draghi, the former chair of the Financial Stability Board and the current chair of the Group of Governors and Heads of Supervision of the Basel Committee, has little idea about what he is doing, at least when it comes to bank regulations.

Rachman writes of a “mutual admiration society”. Clearly only such a society would have been able to generate risk weights of 150% for the below BB- rated assets and only 20% for what is rated AAA. In any other society, someone would have posed the question I make over and over again, namely: Is not what is ex ante perceived as safe not riskier ex post for the banking system, than what is ex ante perceived as risky?

FT stop admiring so much strongman Draghi, and start to ask him and his colleagues the many questions that are pending. Like: Why do they base the requirements for that capital that should be there in case of unexpected losses, on the most already cleared for bank risk, the expected credit losses?

This aide memoire might give you a clue for many additional questions.

@PerKurowski ©