A Universal Basic Income is a prime free market oriented “instrument of national togetherness”

Sir, Janan Ganesh writes about how the fact that “America has a large, complex and redistributive state…with some public assent”, has moved the floor for many traditional republicans, and has favored Trump”, “The end of the Republican free-market ticket”, August 2.

If you are a democrat or a republican who do not belong to the establishment, and who do not like the idea of having to court bureaucrats for any assistance that might be needed more and more, how do you deal with that?

As a Venezuelan, nauseated from seeing how its government has handled centralized oil revenues, I pray for all citizens to be in their own hands, using the free markets to decide what to do, than for them to be in the hands of odious redistribution profiteers. And so I do favor a Universal Basic Income.

And I believe an UBI could also signify a very important unifying bridge sorely needed in a world with so much polarization.

Of course since redistribution profiteering or the exploitation of crony statism exist in all political camps, we should expect all its enemies to circle their wagons and do what they can to stop UBI from reducing the value of their franchise. One of their first lines of defense, is helping to push an UBI into promising way too much, so that it clearly become fiscally unsustainable. Another one is arguing that would exacerbate social laziness.

I have no idea where long-term a UBI would lead us, but I wish we could start with one small enough to help everyone to get out of bed, but not so large so as to allow anyone to stay in bed. Around the corner, or probably in many ways even here, we will need decent and worthy unemployments, and UBI must surely be part of the toolbox for that. 

As a UBI does in fact represent a Societal Dividend, it should appeal to both those who want more free markets and those who focus more on social responsibilities. That sounds very much like an instrument for the centre-left-right to embrace the free market and “the state as an instrument of national togetherness”.

http://myubi.blogspot.com/2017/01/my-universal-basic-income.html

@PerKurowski

If Martin Wolf wants to help the poor at the bottom, why does he not help me arguing for getting rid of the risk weighted capital requirements for banks?

Sir, Martin Wolf, morphing into an activist, describes the Republican tax plan as “a determined effort to shift resources from the bottom, middle and even upper middle of the US income distribution towards the very top, combined with big increases in economic insecurity for the great majority”, “The Republican tax plan built for plutocrats”, November 22.

But, since Wolf refuses to discuss the distortions caused by bank regulators, let me here ask him, in quite similar terms: What is the risk weighted capital requirements for banks if not something that stops the “risky” bottom, middle and even upper middle of the US income distribution, from accessing those opportunities of bank credit that could help to propel them upwards?

Day-by-day it is becoming clearer to me that Martin Wolf is just another statist that thinks it is just great that sovereigns are 0% risk weighted and unrated citizens 100%.

I agree of course with Wolf in that “the reductions in corporation tax will [not] lead to a big rise in business investment”. But that, among others, is precisely because the regulators have seriously damaged one of the primary transmission channels of freed resources, namely bank credit.

What is not clear to me though is to what Wolf refers to when arguing that the rich will benefit more from tax cuts. Does he mean in paid US$ in taxes? Because if so I would say it is quite natural that anyone who is paying more $ taxes will pay less taxes when taxes are cut.

We read: “In the more cautious Senate version, households with incomes below $75,000 would be worse off.” Does Wolf want to imply these would now have to pay more in taxes? If so, I am totally on his side on this issue… but I sort of doubt that. $75,000 sounds like a quite normal civil service salary, and you usually don’t go after you own, on any side of the aisle.

@PerKurowski

Professor Summers. Keeping mum on how sovereign public borrowings are currently subsidized is cheating on the future

Sir, Lawrence Summers writes: “Borrowing to pay for tax cuts is a way of deferring, not avoiding, pain. Ultimately the power of compound interest makes even larger tax increases or spending cuts necessary. But in the meantime debt-financed tax cuts raise the trade deficit, and reduce investment thereby cheating the future.” “A Republican tax plan that would help the rich and harm growth” November 6.

Sir, Prof Summers is entirely correct in that “Borrowing to pay for tax cuts is a way of deferring, not avoiding, pain”. But, one major reason for why such borrowing can occur is that it is currently contracted at artificially low rates.

With the regulatory subsidy imbedded in the capital requirements for banks’ 0% risk weighting of sovereign debt; and with the stimuli provided by the Fed with its low interest policy and huge quantitative easing programs, America’s current government’s borrowing costs do not reflect the real undistorted rates.

Without these non-transparent help from their statist colleagues, there is no doubt the interest rates would be higher, the current fiscal deficit higher, and the adjustments needed much clearer.

Sir, since Professor Summers has been consistently ignoring this, he is willing or unwittingly helping to cheat the future too.

@PerKurowski

To better help the environment and fight inequality, get rid of the profiteers, and give the citizens the incentives

Sir, after a price increase of 6.000% last year, gasoline is currently being sold a US$ 1 cent per liter in Venezuela, a country in which people are dying because of lack of food and medicines. Can you imagine how much better it would be to sell that gasoline at international prices, and perhaps even adding some carbon taxes to it, and then share out the new revenues obtained among all Venezuelans? I have been fighting for such a solution for soon two decades.

That is why I jump of joy reading Ed Crooks’ report about a proposal in the US for “a tax on carbon dioxide emissions, starting at $40 per tonne, with all the revenue recycled in dividends paid back to the public.” It is being introduced by the "Climate Leadership Council" “Republican grandees propose carbon tax” February 9.

In May 2016 you also kindly published a letter of mine in which I proposed something similar as a tool to fight pollution in Mexico. 

I pray the referred to proposal gets to be approved in the US. It would set up a great example for the world on how one can effectively align the fights against environmental damages and against inequality. It would serve as a great appetizer for a Universal Basic Income scheme.

That said we could reasonably assume that, since it reduces the value of their franchises, the usual green movements and redistribution profiteers will fight it tooth and nail.

PS. Venezuela’s domestic gasoline prices should in fact be considered a violation of economic human rights, but I have found little interest, for instance in OAS, for pursuing such matter.

@PerKurowski

A good slogan for any candidate would be: “Make the Land of the Free and the Home of the Brave, Free and Brave again”

Sir, I refer to Gillian Tett’s discussion on the importance in politics of good slogans “Make slogans great again” October 1.

I do not consider myself a slogan maker, but I sure know that the much more than a slogan slogan I would most like to see, is “Make the Land of the Free and the Home of the Brave, Free and Brave again”

That is because bank regulators, with their dangerously stupid risk weighted capital requirements for banks attacked the very core of the American spirit, namely the willingness to take risks and the equal access to opportunities for all.

Sir, after hundreds of letter on this I do not feel the need to expand more on it… some aide memoires should suffice.

@PerKurowski ©

Do you think Trump wants to lose big? To risk hearing “You’re fired!”? What if he first negotiates with GOP and then quits?

Sir, I refer to Philip Delves Broughton’s article on the candidature of Donald Trump, “The nominee whose tactics make history irrelevant” August 13.

It is incomplete because, there more than 80 days until November 8, a very long time in these times when things can turn around in seconds, and it does presuppose that Trump would be willing to accept a very significant loss, having to hear “You’re fired!”, without considering the possibility he negotiates with the GOP, and quits, and thereby quite possibly allow an alternative republican candidate to win the elections. He is a businessman after all... or not?

And what of the Democrat party if Clinton loses? Would not Obama for instance then hold on to much more influence in it? Will Michelle run someday? Sir, you see there are plenty of questions in the air. 

@PerKurowski ©

It looks like America’s libertarians are in dire need of an Establishment. Hi, Hi, Hi.

Sir, I refer to Jacob Weisberg “A missed opportunity for America’s libertarians” June 4.

When it would look that more American’s would prefer a none-of-the above than the candidates presented by the Republicans and Democrats, it is clear that both these organization’s establishments have failed. And so it would seem that even though it is anathema to them, if the libertarians had the benefit of some type of functional establishment, they could represent an important alternative in upcoming elections. Or is libertarian establishment too much of a contradiction in terms?

But then on another issue, Jacob Weisberg writes: “Libertarians… regard the failure of policies they support, such as the self-regulation of financial markets in the 2008 crisis, as evidence that government still managed to play some corrupting role. When facts come into conflict with theory, they reject the facts.”. And to that I must most strongly object.

For purposes of setting the capital requirements for banks, the regulators set risk weights of zero percent for friendly governments, 20% for members of the AAA-aristocracy, 35% when financing residential housing, and 100 percent when financing not rated SMEs, entrepreneurs and citizens in general. And Sir, that is corruption with a big C. That allowed banks to earn much higher risk adjusted returns on what is ex ante perceived, decreed or concocted as safe, than on what is perceived as risky.

What was the 2008 crisis made off? The stuff all major bank crises are always made of, namely excessive exposures to something ex ante perceived safe but that ex post turns out not to be.

Sir, again, the question of rigor: With what can banks build up dangerously large exposures that could threaten the system, with prime AAA rated or with speculative and worse below BB- rated? And having answered that reflect again on that the AAA rated were assigned a 20% risk weight while the below BB- an astounding 150%. Does this sound like the regulators have any idea of what they are up to? And so, if there are some who have really rejected the facts when these come into conflict with their “theories”, that is the whole bank regulatory community, that which has been frantically circling the wagons against any attack.

Sir, if there are two great flags that libertarians could fly, though I also welcome democrats and republicans to waive these, those are: getting rid of the distortions produced by current bank regulations in the allocation of bank credit to the real economy, and the use of a well funded, no funny money, Universal Basic Income, a Societal Dividend, to fight inequality and stimulate the economy, while keeping the redistribution profiteers at bay.

@PerKurowski ©

Ending bank regulatory stupidity in the US (and Europe), is a vital non-partisan issue

Sir, I refer to Conrad Black´s, “The Republicans can end 15 years of US stupidity” August 30. I would sure like to ask Mr. Black the following question: 

Suppose there was the potential of issuing trillions of dollars in “worthless real estate-backed paper certified as investment grade by the palsied lions of Wall Street”. 

What would the possibility be of that issue finding buyers if banks needed to hold 8 percent in capital against these, meaning being able to leverage their equity 12.5 to 1, instead of the 1.6 percent that was authorized by the bank regulators in Basel II, and which allowed banks to leverage 62.5 to 1? 

My answer to it would of course be: “That issue would have been almost totally unsubscribed!” That it was a tragic success, was only the result of sheer regulatory stupidity. 

If there is one thing that WMR and Mr. Ryan, or President Obama for that matter, or republicans and democrats alike, need urgently understand, is that capital requirements for banks based on perceived risk, does not only produce dangerous distortions in the markets, but is also something completely incompatible with a “Home of the Brave” (and with a Western world built with risk-taking).

Oops! Is this why Martin Wolf launches a visceral attack on Paul Ryan?

So now Martin Wolf has entered the American political debate, by basically calling Paul Ryan an impostor lacking of integrity, “Paul Ryan does not offer a credible plan for America” August 18. 

Why Wolf does it this way, I sincerely do not know nor understand. What purpose does it serve? Could it be because Wolf believes Ryan’s opponents are offering a more credible plan? If so, it would be really interesting to see him following up with an article on that. 

Personally, I feel that neither democrats nor republicans got it right, or even have a chance to get it right, before some fundamental changes in bank regulations occur. Currently the capital requirements for banks overly discriminate in favor of what is officially perceived as not-risky, prominently the State, the infallible sovereign, and against what is officially perceived as risky, prominently the citizens, like small businesses and entrepreneurs, and with that, there’s nothing to do… America, as a nation, as the “Home of the bBrave”, is going down! (Europe likewise) 

But those capital requirement with their discriminations based on officially perceived risks, managed by mean of risk-weights set by regulation bureaucrats, playing the risk-managers of the world, have never seem to bother Martin Wolf. He is perfectly comfortable with the fact that a Basel II, or a Basel III, allows the banks to give loans to “infallible sovereigns” against almost no capital at all. The only explanation for that must be Wolf fundamentally believes in the superior capability of government bureaucrats to wisely spend any funds advanced by future tax-payers. Oops! perhaps that is why he hits at Ryan?

PS. In reference to this comment someone wrote me: 

“Nobody who is serious about cutting huge deficits starts by slashing taxes on the wealthiest, very partially offset by slashing spending on health for the poorest. It is a fraud AND a reverse Robin Hood tax, on a spectacular scale.” 

And I answered: 

When if phrased that way, yes! But then someone, who by means of risk-weights which determine the capital requirements for banks, favors the officially not risky, most likely the rich, and thereby discriminates against the officially "risky", most likely the poor…should also qualify as most definitely a fraud and a reverse Robin Hood, on a quite spectacular scale.

Bank regulators, allow America to be the Home of the Brave

Sir, Jeffrey Sachs in “The US has already lost the battle over government” August 16, writes “ Mr. Ryan’s budget is nothing short of heartless in the face of the dire crisis facing America’s poor”. 

Hold it there Professor Sachs! I get too nervous about the poor, when someone recurs to arguing considerations based on the heart in order to service their needs. What was much worse for them than any heartlessness was the senselessness of bank regulators, that which caused the current crisis. 

By allowing banks to hold minimal capital when lending or investing in what was officially perceived as not-risky, regulators effectively discriminated against those perceived as “risky”, like small businesses and entrepreneurs, and doomed the banks to useless and obese exposures to what was or is still officially perceived as not risky. 

If there is anything that Republicans and Democrats should offer, as Americans, that is to wipe away the regulatory discrimination against what is perceived as risky and allow the US to fully be “the Home of the Brave” again… and that by the way would also do Europe a lot of good. 

And, if your bank regulator absolutely must mess around with market signals, so that they feel they have earned their salary, then why do you not ask them to base their capital requirements for banks on job creation and environmental sustainability ratings instead? That way they would at least serve a purpose.