Warning! Big Tech might be drawn into a too close too dangerous for us relation with Big Brother.

Sir, Ms. Rana Foroohar writes: “Whatever their size, the winning companies will be those that are profitable. That may sound obvious, but it hasn’t been for the past decade, as easy money has dulled investor senses.” “Activist’s critique of M&A is right” September 16.

But where did that “easy money” come from? Was it not central banks injecting immense amounts of money, and which effects were much distorted by the risk weighted bank capital requirements, which low capital requirements allowed that liquidity to multiply manifold? Has Ms. Foroohar tried to put the breaks on such easy money, or the contrary has she not been egging it on? 

And Ms. Foroohar concludes: “Meanwhile their Big Tech competitors are already being circled by regulators… Attorneys-general from 50 US states and territories in the US have launched an antitrust investigation into Google’s dominance of search and advertising, while New York is leading a probe of Facebook’s monopoly power… in Europe, the EU competition commissioner Margrethe Vestager… has been given a broader remit that includes digital policy.”

Should we cheer that? Absolutely not! For two reasons:

First that it might lead to Big Tech entering into too close too dangerous relation with Big Brother.

Second we, whose personal data is being exploited by Google, Facebook and similar, should be compensated long before redistribution profiteers and neo-ambulance chasers… for instance by having 50% of their ad-revenues to help fund an unconditional universal basic income.

@PerKurowski

Whoever thinks banks are now better regulated for sure, must surely be too easily impressed by complexity

Sir, Martin Wolf “argues against premature monetary tightening. Let us establish strong forward momentum first”, “Risks remain amid the global recovery” July 5. 

I would heartily agree, if only all that easy money was flowing more towards investments in the future. It is not! The current risk weighted capital requirements give great incentives for that not to happen.

And when Wolf opines “the core western financial system is far better regulated and capitalised than it was in 2007”, how on earth does he know that?

When regulators regulate based on the same risks bankers perceive, and not based on the possibility that those risk are badly perceived or badly managed, or on unexpected events, we have no firm basis for opining something like that. That is unless we are in awe, like Martin Wolf must be, of any increased regulatory sophistication and complexity; like that reflected in Basel Committee’s “Minimum capital requirements for market risk” of January 2016, and that are now, June 2017, the subject of consultative document titled “Simplified alternative to the standardised approach to market risk capital requirements”.

Sir, the world urgently needs bank regulators who are not solely fixated on avoiding crisis but who also understand the vital importance of good banking between the crises.

As is, the time bankers should allocate to ask that all-important question of “What do you intend to do with the money if we lend it to you?”, will be taken up more and more with trying to understand and fill out regulatory material.

And what has easy money done to equity markets? Corporations engaged in short termism have taken on debt in order to pay out dividends and repurchase shares. Is that something good?

Wolf writes: “The BIS talks, sensibly, of building resilience. A part of this lies in ensuring that growth becomes less dependent on debt.” Yet by treating it only as one task of many, Wolf sort of diminishes its relative importance. Debt finances much anticipation of demand, when that debt hits the wall of having to be repaid, future demand will fall.

Sir, as I see it, never ever has a generation used up so much public and private borrowing capacity for its own short-term benefits. Social security and pension plans, sold by governments on the basis of an expected 7% real return, are by the minute taking on more characteristics of Ponzi schemes, using fresh money from future retirees to pay out benefits of the current.

http://subprimeregulations.blogspot.com/2016/08/statist-baby-boomers-want-us-to-extract.html

@PerKurowski