Mr. Martin Wolf, what do you mean, is liberalism not broken?

Sir, I refer to “Liberalism is battered but not yet broken” Martin Wolf, FT January 10, 2024.

Since 1988, with Basel I, non-elected by the citizens bank regulators, with risk weighted bank capital requirements, in the name of making our banks safe, have allowed themselves to distort the allocation of bank credit to the economy. 

Wolf opines: “What liberals share is trust in human beings to decide things for themselves.” So, Mr. Wolf, why have you been silent on this clear breach of free market liberalism?

These days, in reference to the farmer’s protests in Berlin I have tweeted/Xd: “Would now John F. Kennedy have wanted to deliver his 1963 ‘Ich bin ein Berliner’ speech? - If the Berlin Wall was still up, would Ronald Reagan now have needed to tell Putin, ‘Tear down this wall’?”

My answer in both cases is NO! US and Russia – West and East Berlin, have been too long exposed to communistic weakening. But it’s coming to an end. More and more nations now need more public debt in order to service their current public debts, and are thereby, de facto, becoming zombie nations.

I pray someone with real political standing would dare to stand up and order: “Basel Committee, tear down your regulations.” I fear that might not happen until this “wall” has crumbled on its own. Those regulations have empowered bureaucracy autocracies, and way too many want to be members or beneficiaries of it. And by the way, if they speak up, they risk not being invited to the World Economic Forums in Davos; and we would not want to risk that, would we?

Sir, how can we make sure to capitalize on the opportunity of artificial intelligence helping to empower a citizens’ democracy? I mean before AI regulators decide to send it to Gulag too.

PS. I tweeted - Xd: "If there’s anything that could help focus on what has happened in the world, and on what’s going on, that is to have a record of all those who, since 1971, have assisted World Economic Forum #WEF meetings in #Davos."

The history I’ll tell my grandchildren has little to do with Philip Stephens’ history.

Sir, Philip Stephens writes: “Twenty-five years ago… the world belonged to liberalism. Soviet communism had collapsed. Historians will record the 2008 global financial crash as… the moment western democracies suffered a potentially lethal blow. The failure of laissez-faire economics was visible before the collapse of Lehman Brothers.” “The west is the author of its own weakness” Financial Times, October 1, 2021.

The history I will be telling my grandchildren is quite different.

Thirty-three years ago, the world belonged to liberalism and Soviet communism was collapsing. Historians will record how in 1988, one year before the Berlin Wall fell, the western world’s bank regulators introduced risk weighted bank capital requirements that distorted the allocation of credit. That put an end to any laissez-faire economics. With risk weights of 0% the government and 100% citizens, as if bureaucrats know better what to do with credit than e.g., entrepreneurs, communism took over. 

The 2008 global financial crash resulted from banks being allowed to leverage their capital/equity/skin-in-the game a mind-boggling 62.5 times, with assets that human fallible credit rating agencies had assigned a AAA to AA rating.

Yes, the west is the author of its own weakness… it much renounced to the willingness to take risks that had made it great. 

Sadly though, there are way too many interested in not disclosing what really happened… and therefore our banks are still in hand of insane risk aversion. “Insane”? Yes, because those excessive exposures that could become dangerous to our bank systems, are always built-up with assets perceived as safe, never ever with assets perceived as risky.

PS. My 2019 letter to the Financial Stability Board

FT, Western liberalism might not be obsolete but it sure isn’t what it was a couple of decades ago.

Sir, with respect to Vladimir Putin’s recent claim — “that liberalism is obsolete” you opine his “triumphalism is misplaced. Not all of liberalism is under threat. The superiority of private enterprise and free markets — at least within individual nations — in creating wealth is no longer seriously challenged.” “No, Mr Putin, western liberalism is not obsolete” June 29.

You are only partly right, because nowadays-Western liberalism is not what it was. 

When regulators allow those that are perceived, decreed or concocted as safe, to be able to offer their risk-adjusted interest rates to banks leveraged many times more than those perceived as risky, as has been the case since 1988, that has absolutely nothing to do with free markets.

And assigning for the risk weighted bank capital requirements a 0% risk weight to sovereigns, and one of 100% to citizens, has nothing to do with “superiority of private enterprise” either. Those risk weights de facto imply that bureaucrats know better what to do with bank credit they are not personally liable for, than private sector entrepreneurs, and that has much more to do with statist a la Putin regimes.

@PerKurowski

Polarization profiteering trumps all efforts to bridge the divides.

Sir, Simon Kuper discussing the possibilities that “British and US liberals” (whatever that nowadays really means) could become “politically sidelined”, informs us of “Liberal NGOs raise fortunes” “Have we hit peak liberal resistance?” September 30.

To get a donation one used to have to place an ad, invest in a phone call or a stamp, or make a personal visit. Now on the web, one can make a million donation requests, at zero marginal costs. 

That has empowered polarization profiteers potential profits so much that they are taking over the debates and thereby, hopefully unwittingly, taking down our society.

The more they sell themselves, or the champion they support, as the greatest champion to oppose the evilest devil they can find, the higher their donation profits… just like the most outrageous fake news attracts the largest number of ad-clicks.

As a consequence, liberals are now being politically sideline by those who, supposedly supporting them, are more interested in the short-term profits than in any other aspect of liberalism.

True liberals working for a better world, should not play along.

http://perkurowski.blogspot.com/2010/05/speakers-corner-speakers-have-moved-to.html

@PerKurowski

Political correctness is just another type of authoritarianism that can also bring on revolts.

Sir, Gideon Rachman writes, “In 1989, liberal and nationalist causes were allied in the struggle for democracy in eastern Europe. Now the two ideologies are opposed. The battle between liberalism and nationalism is being waged internationally. It is also unfolding on the streets of small towns in Germany.” “Protests in Germany echo beyond borders” September 4.

No! I do not think this is a battle between liberalism and nationalism, although that might be what polarization profiteers want us to believe. That because there are a lot of “nationalists” that are true liberals, but only wish that some outlier expressions would be somewhat more considerate to their national traditions and interests.

For instance, with respect to migration, is it wrong, for a German, a Swede or any other national, to make a difference between those migrants who believe that “When in Rome do as Romans do”, and those believing “When in Rome I do as I bloody want to do”?

I would say no, but have the moral besserwissers allowed Europeans thinking so? No!

Rachman holds: “Germany has long nurtured as a bastion of liberal values.” Again that is what those defining in the public debate what the liberal values are, wants us to believe. Some of the out of this world liberal values, do not have it in them to ever become bastions… I hope.

Sir, sincerely, I feel sorry for all those minorities who I will not name, but who have been led and egged on by political correctness profiteers into overplaying their cards. When the tide turns, many nationalists will be there for them… again within reason.

PS. Political correctness could, in the best of cases, be a type of Neo-Victorianism... but, unfortunately, it seems more to have become the Neo-Inquisition of our days.

 @PerKurowski

The political establishment fell prey to an idiotic regulatory technocracy they did not dare to question

Sir, Philip Stephens writes: “Rising populism has been fed by a political establishment in thrall to unfettered capitalism”, “Why the liberal order is worth saving” February 10.

Nonsense! The political establishment fell prey to an idiotic regulatory technocracy they did not dare to question.

Some of the Basel Committee for Banking Supervision’s risk weights used to determine the capital requirements for banks are: The Sovereign 0%; We the People 100%; AAA to AA rated 20%, below BB- 150%.

That has absolutely nothing to do with unfettered capitalism all to do with unchecked and dumb statist intervention.

The liberal order went out the kitchen door of the Basel Accord, in 1988, before in 1989 the Berlin wall felt and the “Washington Consensus” saw light.

Here are some questions that have yet to be posed by someone able to force bank regulators to answer:

@PerKurowski

Bank regulation technocrats are among the most powerful and dangerous authoritarians

Sir, Nick Pearce writes “In the year of Brexit, Donald Trump and Vladimir Putin, liberalism has been declared dead and buried”, “Reclaim liberalism from the authoritarians.” December 20.

Sir, let us not forget that authoritarians can come in many different shapes. Some of the most powerful, and most dangerous, are the bank regulation technocrats. On their own, without consulting much outside their mutual admiration club, with immense hubris, they decided they could make our banks safer by imposing risk weighted capital requirements for banks. As if the only purpose of banks in to be safe. They also smuggled in statism by declaring a 0% risk weight for the Sovereign and a 100% risk weight for the citizen.

Their regulation distorted horrendously the allocation of bank credit to the real economy. By for instance pushing those securities that obtained an AAA rating, and empowering Sovereigns like Greece to take on too much debt, they caused the 2007-08 crisis.

By making banks no longer finance the “risky” future and only refinance the safer past or present, they imposed on our economies what some have called secular stagnation.

One could easily argue that many of the difficulties of liberalism that Nick Pearce describes here, are the direct responsibility of these regulators

And their contestability is zero. That I can evidence with hundreds of letters, questions, opinions posed directly to many of them, for much more than a decade. No answers, and when they respond, it is as if they have not heard the question.

Sir, unfortunately, to enlist FT in the quest of getting some answers out of these authoritarians has proved to be impossible, this no matter how much you pride yourself with your motto “Without fear and without favor”.

@PerKurowski