What we have is not by a long shot economic liberalism, it is much more statism, and of the crony kind.

Sir, Martin Wolf refers to Yascha Mounk of Harvard University arguing “that undemocratic liberalism, notably economic liberalism, largely explains the rise of illiberal democracy: ‘vast swaths of policy have been cordoned off from democratic contestation’, [carried out] by international agreements created by secretive negotiations carried out inside remote institutions.” “Saving liberal democracy from the extremes” September 25.

Hold it there! The Basel Committee for Banking Regulations, with Basel I of 1998 decided, without any real public consultation, that the risk weights for those risk weighted capital requirements it itself concocted, were to be 0% the sovereign and 100% the citizens. What has to do with “economic liberalism”? Nothing! To me it is pure unabridged statism… that is unless it is derived from pure unabridged stupidity.

Ignoring that allows Wolf to opine, “What is true is that poorly managed economic liberalism helped destabilise politics… and to argue, “Elites must promote a little less liberalism” 

Again, no! Mr. Wolf (for the umpteenth time), we are not living a time of “poorly managed liberalism”, we are living thru times of expertly camouflaged statism, that which is so beneficial to the redistribution profiteers and to those of the private sector who love to engage in crony statism.

Sir, all journalists, even those considered its elite, have a duty to denounce that; less they might be accused of covering it up. I mean should not journalists be the citizens’ frontline for any “democratic contestation”? 

How many times have I asked Martin Wolf to use his influence to ask the regulators: “Why do you want bank to hold more capital against what’s perceived as risky and is therefore less dangerous to our bank system, than what is perceived as safe and that, precisely because of that, becomes so much more dangerous to it? Hundreds? Has he dared to ask it? Not that I know Sir. Though perhaps he just did not like the answer or the non-answer 

@PerKurowski

Why has the Financial Times, and other, kept silence for so long about some obvious mistakes in bank regulations?

Sir, Wolfgang Münchau now finally writes: “We should start making a distinction between the interests of the financial sector and the economy at large”, “Reform the economic system now or the populists will do it” December 19.

Of course we must. I have soon written 2.500 letters to FT, many to Wolfgang Münchau, pointing out the fact that our loony bank regulators did not find it necessary to define the purpose of the banks before regulating these. Their risk weighted capital requirements allow banks to earn higher expected risk adjusted returns on what is perceived as safe, than on what is perceived as risky. That might help bankers’ wet dreams come true, but does clearly not serve the interests of the real economy or even the long-term stability of the banks.

Münchau also writes: “We should not be surprised that people have become sceptical about experts who peddle theories that result in comically wrong predictions and that do not square with the reality they perceive.”

Indeed, why should we trust regulators who “comically” believe that what causes bank crises is what is ex ante perceived as risky?

But Sir, since lack of contestability has allowed these ludicrous regulations to survive for way too long, even after a huge crisis made its mistakes evident, we also need to understand how a qualified media like the Financial Times, and other, can be blinded, or silenced for so long on this issue.

@PerKurowski

When there is no contestability whatsoever, perhaps a disrupting referendum is the citizens' only option

Sir, as a Venezuelan it is with great interest I read Martin Wolf’s “Appeals to the will of the people threaten parliamentary democracy” December 9.

In my homeland, the majority of the vote established a de facto dictatorship but now, when that same dictatorship has lost its majority, it fights back against a recall referendum right, even though that right is imbedded in our Constitution.

But forget crazy Venezuela and let’s consider slightly less crazy countries. Does not parliamentary democracy also require a very high degree of contestability?

Sir, for more than a decade now, I have tried to get anyone even remotely related to bank regulations to answer some very basic questions, to no avail. Even influential columnists like Martin Wolf do seemingly not dare to pose those questions either.

In cases like this, what are “We the People” to do. Perhaps a referendum to recall all bank regulators is our only option? Otherwise…must we go on a hunger strike?

PS. Is it so impossible to have parliamentary dictatorships?

@PerKurowski

Governments best take big decisions, when there’s no conflict of interest, no stupid groupthink, and contestability.

Sir, I come from an country, Venezuela, where privatizations of public owned utilities were based not on who would provide us citizens the best services, but on who would provide the state with the highest upfront payment… an anticipated tax revenue for the government, to be paid later by us citizens by means of higher than needed tariffs, for decades to come. And, to top it up, that was accused of being odious neo-liberalism product of the Washington Consensus. 

That’s why when I read Martin Wolf’s “Big energy decisions are best taken by government, not the market” of September 16… I immediately reacted… “Hold it there, take it very easy!”

If government is going to take big decisions, as it should, we must make sure all its possible conflicts of interest are removed, and that the decision process is transparent and guarantees contestability, and not just the result of a small mutual admiration club of technocrats/bureaucrats.

For instance, allowing bank regulators to impose their statism of a 0% risk weight for the Sovereign and a 100% risk weight for “We the People”, was wrong.

And allowing bank regulators to impose risk weighted capital requirements for banks based on the ex ante perceived risks of bank assets, and not on the ex post risks conditioned on the ex ante perceived risks, was utterly stupid. What’s the chance of something really bad happening from something perceived as “safe”, and what is it for something “risky”?

Wolf lectures us: “Rational risk-taking by individual financial businesses will create substantial threats for others. This, too, is a spillover, or “externality”. Financial regulation has to internalise such externalities, thereby reducing the likelihood of crises and making them more manageable when they arrive. One way to do so is to raise capital requirements far above what profit-seekers would wish”

I argue that much more important than that, is to get rid of the credit-risk weighting of the capital requirements that only distorts the allocation of bank credit to the real economy while serving no bank safeness purpose, much the contrary. Wolf, in spite of hundreds of letters I have sent him over a decade on this issue, has yet to understand that.

And Wolf ends “The government must have the courage to make… difficult decisions and the wisdom to make them well.” Yeah, yeah, yeah, but what if the decision makers are dumb and we are not allowed to correct them… because so many want to suck up to them nevertheless (like in Davos)… or because some are interested in exploiting that dumbness? 

@PerKurowski ©