Get the misguided and distortion creating regulatory risk-taking austerity out of our banks, fast!

Sir, Wolfgang Münchau writes against “blindly rushing into semi-automated austerity” and about the “perma-austerity” that he sees invading the US and Europe, “US joins Europe´s misguided pursuit of austerity” January 7. 

And again I must comment that the most dangerous austerity, in the US and in Europe, has nothing to do with fiscal or central bank accounts, and all to do with the foolish risk-taking austerity that, by means of capital requirements based on perceived risk, has been imposed on our banks. 

That austerity signifies that those in the real economy who are the most vulnerable and dependent on access to bank credit on favorable terms, “The Risky”, are currently the ones most discriminated against by bank regulators who like overly scared nannies, insist in favoring “The Infallible”, those who least need favoring. 

Before you get the regulatory distortions out of the way, the discussions, for instance of fiscal multipliers, is just a huge waste of time.

Suppose two equal deep recessions, two equal huge stimulus, but two different capital requirements for banks… same multipliers?

Sir, with respect to Wolfgang Münchau’s discussion of multipliers, “Heed the siren voices to end fixation with austerity” October15, I would like to ask him the following question: 

Suppose two countries, same deep recession, same huge stimulus but two different bank regulations. In the first capital requirements for banks when lending to The Infallible are many times smaller than when lending to The Risky. In the second the capital requirements are the same for lending to both groups. 

Does Münchau’s really expect the multipliers to be the same in both countries? 

What is this fixation on wanting to end austerity in terms of injections to the economy, and not wanting to even talk about ending the risk-taking austerity of bank regulations that nullify those injections?