The more qualified experts become, like the Fed’s, the more in awe will too many be of their inscrutable mumbo jumbo.

Sir, Sebastian Mallaby writes: “By toggling short-term rates, the Fed hopes to guide the more important long-term ones that matters to homebuyers and businesses, but the transmission mechanism is unstable” “Whether they raise or hold, central bankers are due a fall” September 12.

But the transmission mechanism has been also made more unstable than usual by means of very faulty bank regulations that have been imposed on banks.

Mallaby writes: “Gone are the days when the Fed was a holding pen for cronies and chancers… modern bankers have become more scientific and sophisticated [but] there is a danger in pushing this reverence too far”

Indeed, Edward Dolnick in his “The forger’s spell” wrote about Daniel Moynihan opining “There are some mistakes it takes a Ph.D. to make” and also quoted George Orwell, from “Notes on Nationalism”, with: “one has to belong to the intelligentsia to believe things like that: no ordinary man could be such a fool.”

And the pillar of current bank regulations, the portfolio invariant credit-risk weighted capital requirements for banks, is a truly great example of the kind of mumbo-jumbo that can be produced by experts.

John Kenneth Galbraith wrote in his “Money: Whence it came, where it went” 1975: “If one is pretending to knowledge one does not have, one cannot ask for explanations to support possible objections.” And one of the great dangers of these times of ample access to information is that the number of those pretending knowledge is increasing exponentially.

@PerKurowski

Gauging the level of understanding of Fed statements assumes, kindly, Fed understands what it writes. Does it?

Sir, Tracy Alloway tackles the issue of “Why Fed statements have become literally harder to read” November 29, which generously assumes that the Fed understands what it writes. Can we be so sure of that?

One of the most important documents of our time is the Explanatory Note on the Basel II IRB Risk-Weight Functions issued by the Basel Committee; as with it the regulators try to explain what they are betting all of our banking system on. And, that document is such a mumbo jumbo, that the only thing I can conclude is that none of the experts and not-experts who read it understood one iota of it, and therefore did not dare to question it.

And so seemingly the rule is that the more complicated a document is, the less the chances it will be questioned. And the add-on to that would be, the more expert an expert think he is, the less likely he will confess not understanding something.

Therefore friends, given that FOMC statements currently “require reading grade levels of 18 to 19 to understand” hold on to your hats, someone might want to hide something, and we might soon be in to suffer the Chinese curse, I refer of course to that of “May you live in interesting times!”

Basel Committee and Financial Stability Board: “Beware, beware, walk with care, care for what you do, or Mumbo-Jumbo is going to hoo-doo you, or Mumbo-Jumbo is going to hoo-doo you, boom le boom le boom le boom!”… and hoo-doo our banks, and hoo-doo us. Please, we are NOT expendable!