Any jury, given the facts on how Venezuela works, would in seconds, unanimously condemn Mr. Mauro Libi for corruption.

Sir, John Paul Rathbone writes: “As protests and violence engulf Caracas, the country is beset by shortages and endemic corruption. Amid the chaos, Mauro Libi has built a huge food business empire but his critics want to know how.” “Profits from empty shelves” FT, Big Read, Venezuela, July 14.

His critics want to know how? In a country in which a government centralizes 97% of all export revenues, and foreign currency is thereafter allotted not by free market operations but by mechanisms that require the approval of individual government bureaucrats, can there be any doubt that the fortune Libi derives from imports of food to Venezuela, as described by Rathbone, can be anything but the result of corruption?

FT, I am sure you would not dare try to justify any other possibility, and this even if the only consequence you could suffer from it was being laughed at?

Rathbone writes: “Mr Libi’s story, as he tells it, is of a resourceful businessman working against the odds… He even claims to be exporting oatmeal to the US”

Those readers of papers like FT, who can read statements like that, and do not feel like vomiting, prove themselves to be intellectual and immoral accomplices of the death of the many Venezuelans who are suffering from lack of foods and medicines. 

Western civilization world, if something like Venezuela happened in your country, would you like the world to behave as indifferent as you do?

Western civilization, “We did not know” might have worked previously, but is nowadays a completely unacceptable excuse.

@PerKurowski

If a citizen of an oil-cursed nation, like Nigeria, would you like a FT lending support to its central besserwissers?

Sir, you write “If the government were to reduce its stakes in the oil joint ventures to a minority it would not only raise some $20bn towards achieving other objectives. It would liberate the oil companies to invest, providing the country with a more realistic chance of raising production” “Nigeria’s recovery plan gives grounds for hope: A burst of reform will help Africa’s most populous nation to fly again” March 9.

Is that really so? Could it not be that its government would then just waste the $20bn obtained now against the loss of future oil revenues; and that a future populist could easier come to power exploiting a re-nationalization platform? By the way, for how long is the extraction of a non-renewable natural resource be described as “production”

Sir, you know that Nigeria, like Venezuela, are oil cursed nations in which oil exports represent 90% or more of all the exports, and the revenues governments receive from oil 70% or more of all fiscal revenues. And yet you seem to indicate that with a correct recovery plan, which means centralized government bureaucrats still calling the shots, perhaps with somewhat less ammunition, there is “grounds for hope”. 

Sir, if you were an oil-cursed citizen, I am sure you would not like a renowned international financial paper lending such support, to those powerful local oil bureaucrats, vulgar redistribution profiteers, that insist they should manage oil revenues, since they are much more experts and therefore know much better than you what good for you and your family.

Or is it perhaps that you are too beholden to all governments that do the oil-revenues spending?

@PerKurowski

C-suite experience can be just as irrelevant to real Main Street animal spirit as government bureaucracy experience.

Sir, Gillian Tett discusses the respective government and C-suite experience statistics of different government teams, and comments that those “83 years of C-suite experience” of Trump’s team and some of the policies announced, like tax cuts, “could ignite animal spirits”, “Team Trump unleashes animal spirits” January 6.

Sorry, the “animal spirit” of an extraordinarily well paid C-suite manager, the owner of a multi million dollar golden parachute, and who is invited to a great restaurant by a banker willing to discuss a billion dollar loan, might be for the purpose of repurchasing the shares of the C-suiter’s big corporation, can have as little of any real Main Street animal spirit, than any government bureaucracy lifer.

"Risky" SMEs and small time entrepreneurs, those who have their bank credit applications most often rejected, now most specially because of the risk weighted capital requirements for banks, those are the ones who really need to be present on Trump’s team, if he is ever going to have a chance to deliver on his popular populist promises.

In fact, C-suite managers could be too dangerous, since these are quite likely those who would be engaging the most in crony statism… in other words ”The Real Swamp”

PS. Came to thing about it. C-suite manager's animal spirits are more like animals in the zoo's spirits.

@PerKurowski

Martin Wolf, motorcycles are much riskier, and that’s precisely why more people die in car accidents

Sir, Martin Wolf writes: “The determinants of the secular decline in the real natural (or neutral) rate of interest are forces affecting the supply and demand for funds. These include ageing, slowing productivity growth, falling prices of investment goods, reductions in public investment, rising inequality, the “global savings glut” and shifting preferences for less risky assets” “Monetary policy in a low rate world”, September 14.

Not a word about the risk weighted capital requirements for banks. These have created regulatory incentives for banks to avoid, much more than usual, any riskier assets, like loans to SMEs and entrepreneurs, and to concentrate, much more that usual, on assets that are perceived, decreed or concocted as safe, like loans to the Sovereign and to the AAArisktocracy. And that has to slow the growth of productivity and cause the real economy to stall and fall.

That motorcycling is perceived as much more riskier, and that precisely because of that, more people die in car accidents, is a reality that neither our current bank regulators nor Martin Wolf can seem to understand, confused as they are by what is ex ante and what is ex post risks.

Like Lawrence Summers Wolf opines “Today’s remarkably low real interest rates mean that a big push on public investment has never been more opportune.”

Yeah, yeah trust more in government bureaucrats than in the “risky” private sector, and leave the bill to future generations.

@PerKurowski ©

FT, get off my cloud! Stop betting our future on technocrats and bureaucrats, instead of on SMEs and entrepreneurs

Sir you write: “Mr Draghi is justified in claiming that the ECB’s stimulus is working…[though] growth remains well below the level needed to drive sustained improvements in living standards.” So you basically egg Draghi on, just as you egg on governments to spend more of what they don’t have. “Draghi’s fight to uphold the ECB’s credibility”

Come on, the ECB has now after 18 months of aggressive bond buying, injected 1 trillion euros in cash into the economy… about 10% of the Eurozone’s GDP, and yet very little real sturdy sustainable economic growth has resulted. Don’t the technocrats ask themselves why?

Seemingly not; perhaps because that would require them to face that nightmarish possibility that the risk weighted capital requirements for banks, that regulation to which so many of them are closely associated to, is exactly as stupid as I have been telling them for way over a decade.

Mario Draghi is the chair of the Group of Governors and Heads of Supervision of the Basel Committee, and was the Chair of the Financial Stability Board. It is clear he would see his professional reputation severely tarnished by having to recognize publicly such simple facts of life that what is perceived as risky is, most often, much less dangerous than what is perceived as safe... and that therefore the Basel Committee’s bank regulation pillar, makes absolutely no sense.

The current credit risk weighting of the capital requirements for banks, hinders monetary and fiscal stimulus from reaching the risky SMEs and entrepreneurs, those who most could want and need the resources, those who most could do some real growth with those resources.

Sir, no matter how much runaway statists insist, it is just not true that the zero percent risk weighted sovereign bureaucrats know better how to deploy bank credit efficiently, than our 100% risk weighted private sector SMEs and entrepreneurs. Get off my cloud!

@PerKurowski ©

It would be nice, and fair, to see technocrats, like Margrethe Vestager, directly affected by what they decide.

Sir, I refer to John Gapper’s “Apple, keep your cool over global tax” September 1 in order to ask one question.

If Margrethe Vestager had her future pensions defined by the medium pension paid out in her constituency, would she do what she is doing with Apple. She might and she might not, but it sure would be nice to see her personally affected by what she decides.

I truly believe that no government bureaucrat/technocrat should receive a pension over the median pension paid in their country.

And that includes Prime Minister and Presidents and similar big shots.

@PerKurowski ©

Martin Wolf, the government’s favorable borrowing terms come at extremely high costs, especially for our young.

Sir, Martin Wolf insists again in that the government should take advantage of very “favourable terms” to borrow so as to invest [in infrastructure]. "The same destination but a gentler route" November 26.

Again Wolf simply cannot understand (or does and turns a blind eye to it) that those “favorable terms” do not come cheap. 

The low interest rates result much from favoring the government’s access to bank credit over that of the private sectors, and especially over that of those perceived as risky, like SMEs and entrepreneurs. Therefore its cost is a road littered by private initiatives that never got the bank credit these needed to be tried out. Our young, who forever will see their employment opportunities seriously diminished by this, will, when they discover what has been done, not look favorably on those responsible for it, and on those silencing it. 

To think, as Martin Wolf obviously must do, that a government bureaucrat is more capable of efficiently using bank credit that he is not personally responsible to repay than citizens, can only be explained from an ideological point of view. He surely must be a statist, one of those who want austerity to be imposed on banks, but decries it when it touches the government.

Does that mean I disapprove governments investing and financing infrastructure? No! But, when evaluating projects, governments should not use the currently subsidized public borrowing rate as their reference.

PS: http://teawithft.blogspot.com/2015/11/tim-harford-non-transparent-taxes.html

@PerKurowski ©

The best Sovereign Debt Restructuring Mechanism (SDRM) is the one that most reduces the need for it.

Sir I refer to your discussions about a “holy grail… a sovereign debt restructuring mechanism (SDRM) — a bankruptcy procedure for states.” “To err is human, to forgive is statesmanlike”. July 27

Even though I agree with the need for a SDRM, we citizens need to be very alert to how it is designed. Bank regulation’s bureaucrats/technocrats, behind our backs, have already given public borrowings an enormous unearned/undue advantage, by allowing banks to hold much less capital against public debt than what they are required to hold against private sector debt. 

If on top of that we now also make it easier for government bureaucrats/technocrats, hiding behind the mantle of “sovereignty”, to get out of the debt they contracted, then we have really messed things up for ourselves.

In this respect I believe any acceptable SDRM should begin with:

First and foremost by eliminating all incentives that can help governments contract too much debt.

And then by defining clearly what, when compared to ordinary credit to the public sector, should be  deemed as odious credit. For instance, credit not awarded in a transparent way, or awarded when it was clear that the resulting debt might not be sustainable, and was therefore of speculative nature, should not receive the same treatment in a SDRM, as public credit awarded transparently and when there was no doubt about the sovereigns capacity to serve it.

Let us be very clear about that the best SDRM is the one that reduces the need for it.

And of course it is human to err… but that does not mean that bank regulators should not admit their mistakes and be held accountable for it. Pseudo-statesmen forgiving behind curtains their own mistakes... really?

How can you ask creditors, or taxpayers, to take a hit on Greece, while pardoning, even promoting, bank regulators?

@PerKurowski

Sovereign rights should refer to the nation rights of citizens, and not to the nation rights of government bureaucrats.

Sir Gideon Rachman, in his very clear-eyed and straight talking “Germany’s conditional surrender”, July 14, mentions: “Much of the comment about the loss of Greek sovereignty, in the outline deal just agreed”

“Greek sovereignty”? As I see it “Inalienable sovereign rights" have lately just become a convenient wording for what government bureaucrats consider to be their rights… or statist ideologues consider to be the rights of ever more powerful governments.

The day sovereign rights refers more to the nation rights of the citizens, than to the nation rights of governments, that’s when sovereignty has a chance to get on a real track.

Meanwhile bank regulations that assign a risk weight of zero to government debt, and 100 percent or more to private sector debt, has absolutely nothing to do with any justifiable sovereign rights… much the contrary it has only to do with government bureaucrats' clientelism.

@PerKurowski

Greece’s “NO!”, to be useful, must foremost be a “NO!” to the Basel Committee’s pro-government biased bank regulations.

Sir, Nick Malkoutzis writes: “Greeks…need to hear something more hopeful than talk of more spending cuts and tax rises.” “Greeks deserve more than threats of further hardship” July 6.

Spending cuts and tax rises can indeed strengthen the finances of a government, but, if it does not go hand in hand with the strengthening of its private sector economy, which is what supplies its sustainability, it all becomes a exercise in futility.

How did Greece get into the hole? By European bank regulators telling the banks they were required to hold much less capital when lending to the Greek government than when lending to the Greek private sector… and so the banks duly responded and, in relative terms, lent much too much to the Greek government and too little to the Greek SMEs and entrepreneurs.

And so now Greece must wake up to the fact that, no matter what dumb self-serving Euro/Basel technocrats believe, the private sector makes better use of bank credit than government bureaucrats. And so the “NO!”, if it is going to be useful, must foremost be a “NO!” to the Basel Committee’s pro-government biased bank regulations.

And if the ECB really wants to help, they should device a plan to recapitalize Greek banks… after all one of its super-technocrats, is Mario Draghi who, as former chair of the Financial Stability Board, is co-responsible for the mess Greek and other banks are in, after lending so much to governments against so little capital (equity).

@PerKurowski

Less trust in the Greek government has a great silver lining we can only hope lasts long enough.

Sir, Peter Spiegel writes: “Trust is so broken several eurozone officials say even if Greeks defy Mr Tsipras and vote Yes tomorrow, they may be unwilling to deal with his government to negotiate a new bailout.” “Trust evaporates after bewildering week” July 4.

Between June 2004 and November 2009, with Basel II, the regulators in the Basel Committee allowed banks to lend to the Government of Greece against only 1.6 percent in capital, which implies an authorized leverage of over 60 to 1 when lending to Greece… and if that is not an outrageously excessive trust what is?

And since banks were required to hold more capital when lending to the Greek private sector that also implied regulators believed Greek government bureaucrats could use bank credit more efficiently than the private sector… and if that is not complete lunacy what is?

The excessive trusting of Greek governments caused the current tragedy… and so less trust in its government cannot really be too bad. Let us hope that distrust lasts long enough for the Greek citizens to have a chance to rebuild their own country.

That said, the citizens of all other countries must also beware when Basel Committee brings gifts to their own government bureaucrats.

Capital controls imposed by bank regulators caused the problem that threatens to push Greece out of the Eurozone.

Sir, Ferdinando Giugliano writes: “Greek authorities have imposed sweeping capital controls to prevent a collapse of the banking system that threatens to push Athens out of the Eurozone. But with economic activity grinding to a near halt and the country’s banks still bleeding deposits, the price of these extraordinary measures is becoming apparent… The downturn is bound to curtail tax revenues, worsening the Greek government’s dire finances”, “Capital controls squeeze a suffocating economy” July 3.

That, though entirely correct, does not tell the whole story. It was when regulators introduced credit-risk-weighted capital requirements for banks, which distorted the allocation of credit to the real economy, that an inconspicuous and dangerous form of capital controls was introduced. And since the lowest risk-weights were assigned to sovereigns (governments), the greatest beneficiaries of such controls were statist ideologues and government bureaucrats, which was a very inconspicuous form of clientelism too.

For instance, although admittedly it must be hard to believe, between June 2004 and October 2009, European banks were allowed to leverage their capital 62.5 times to 1 when lending to the Greek government. And of course that caused the banks to lend too much to a government that found it too hard to say no to credit.

But now many governments, like Greece, need to build up their tax-base, something that requires allowing ordinary SMEs and entrepreneurs to have fair access to bank credit. And this has created a conflict for those statist ideologues and government bureaucrats who feel they still have room to benefit from these regulatory advantages. How are they supposed to recommend their less lucky-colleagues to give up, what they had all considered to be entitlements gained for their class written in stone?

I refuse to believe in the Basel Committee’s nonsense of government bureaucrats using bank credit better than SMEs

Sir, you hold that “Bankers need to demonstrate that they know right from wrong”, “Regulation alone will not restore faith in markets”, May 27.

If you set the weight for the capital (equity) requirements for banks when lending to government at 0%, and at 100% when lending to SMEs, that means that banks will lend more and at lower relative rates to the government than to the SMEs. And that means de facto you believe that government bureaucrats are more productive using bank credit than SMEs.

Well, I refuse to believe that. I believe that if you believe something like that, you are either extremely dumb or a communist.

And I do believe that good non-distortive regulation alone will go a long way to restoring faith in markets.

But if you in FT insist on keeping mum on the fact that regulators are distorting and are manipulating the bank credit markets… I must ask: Sir Financial Times, do you know right from wrong?

@PerKurowski

FT, do you really think credit-risk-weighted capital requirements for banks do not cause lower productivity?

Sir, Sam Fleming and Chris Giles ask: “what can be done to restore the productivity levels needed to boost living standards…?” “The waiting game”, May 26.

But even though they point out “Investment is too low”, they do not even mention the effect that credit-risk-weighted capital (equity) requirements can have on that and on productivity.

The Basel Committee’ credit-risk-weight of governments is 0% while the weight of SMEs and entrepreneurs is 100%.

And that is something quite discussable, especially in these days when governments announce they need to use financial repression in order to impose informal haircuts on their obligations.

But that also translates de facto into the Basel Committee stating that the risk weight for bank credit not being used productively is 0% for government bureaucrats, and 100% for SMEs and entrepreneurs.

And only communists could think that has no negative effect on productivity.

Are you communists FT? If you’re not then it is high time you help me to ask regulators about the concept of productivity weighted capital requirements for banks? I mean something that gives our banks a more elevated societal purpose, than just being safe-mattresses, and housing or government financiers.

Have not our children and grandchildren waited enough for that?

@PerKurowski