The US might be an SOB of a superpower, but it is our (or at least mine) SOB superpower.

Sir, Martin Wolf writes: “China is, not the real threat. The threat is the decadence of the west, very much including the US — the prevalence of rent extraction as a way of economic life, the indifference to the fate of much of its citizenry, the corrupting role of money in politics, the indifference to the truth, and the sacrifice of long-term investment to private and public consumption. It is indeed a tragedy that the best way we could find to escape from a financial crisis was via monetary policies that risked promoting new bubbles. We could be better than this.” “The rivalry that will shape the 21st century” April 11.

On the “sacrifice of long-term investment to private and public consumption” I could not agree more. But that is precisely why I have been attacking, day and night, obsessively, the risk weighted capital requirements for banks. These make our banks favor way too much the financing of the present “safer” consumption (houses-governments) and stay away, way too much, from financing the “riskier” future production (entreprenuers). Unfortunately too many, Martin Wolf included, have been indifferent to that truth.

But, that said, on the first part “the prevalence of rent extraction as a way of economic life, the indifference to the fate of much of its citizenry, the corrupting role of money in politics, the indifference to the truth”, is China really better than the west or the US? 

I don’t think so, but even if it was so, when push comes to show, there comes a point when you have to decide what superpower you prefer. I have no doubt preferring the west, the US… though Graham Allison of Harvard seems to harbor some doubts on that arguing that “China rivals the US in…ideology”.

In what I entirely agree with Wolf is when, explaining it so well, he states “The idea that intellectual property is sacrosanct is wrong. It is innovation that is sacrosanct. Intellectual property rights both help and hurt that effort. A balance has to be struck between rights that are too tight and too loose”

Yes, and for years I have suggested that balancing could start by taxing the profits obtained when competing protected by intellectual property rights, at a higher rate than profits derived from competing naked in the market. And since what becomes protected with IPRs is the last leg of our human heritage inventiveness, those taxes should perhaps also help to fund a Universal Basic Income, something which would be a de facto social dividend.

PS. That said, when Wolf says “the US can huff and puff about Chinese theft of intellectual property” then I am not sure really which SOB is Wolf’s favorite superpower.

PS. For full disclose, had it not been for the US, I would certainly not be around.

PS. All morphed faces look ugly but, in reference to Times’ recent cover, if faces have to morph, what faces would you prefer to see morphing, Trump-Putin, Trump-Xi Jinping or Putin Xi-Jinping?

@PerKurowski

The Basel Accord 1988 guaranteed hysteresis, economic Alzheimer. Was it because of regulators’ memory loss or ideology?

Hysteresis can be described as a permanent weakening of the capacity to respond as a consequence of memory loss… a sort of an economic Alzheimer illness.

Sir, Claire Jones mentions that, “Hysteresis’s first brush with economic fame was in 1986, when it was used by Mr Blanchard and Lawrence Summers to explain Europe’s last brush with high joblessness”, “Hysteresis’ returns to Europe as central bank frets over recovery” May 25.

In1988, with the Basel Accord (Basel I), regulators adopted the use of credit-risk-weighted capital (equity) requirements for banks and set the following risk weights: Lending to the government = Zero percent risk weight; and lending to the citizens’ SMEs and entrepreneurs = 100 percent risk weight.

Sir, with regulators displaying such a total loss of memory about the importance of the private sector; or ideologically engaging in such obnoxious manipulation and distortion of the bank-credit markets in favor of the public sector… of course hysteresis had to follow.

The consequences of such hysteresis are indeed nefarious. For instance, in 2012, it already caused me to have to write an Op-Ed titled “We need worthy and decent unemployments”.

But, to have the slightest chance to regain our economies’ memory and vitality, we need to denounce what happened and to remove those who block such efforts… whether for reasons of mental sickness or sick ideology.

@PerKurowski

If banks in Greece are prohibited to hold foreign assets against less equity than holding Greek assets… is it ideology?

Sir, you describe a list of “pragmatic concessions” issued by Greece’s Syriza government to the eurogroup of finance ministers as “wrapped in the language of ideology”, “Syriza and Europe must be patient and pragmatic” March 1.

I have a question. If I was a finance minister in Greece, and required all banks that operated in Greece to hold the same equity against all assets, because that made sense to Greece, would that be an ideological stance?

Because as is, to allow banks operating in Greece to hold less equity against assets located outside of Greece, only because these asset are perceived as safer from a credit point of view… sound to me like outright ideological nonsense.