The more you stabilize, the more you risk making the system brittle, so the more you really destabilize.

Sir, I refer to Paul Tucker’s “The world needs different ways of taming capital flows” October 10.

I have always, in the case of small bath-tubes placed next to the global oceans, been in favor of capital controls. And I have most specially liked what Chile used to do, namely forcing funds to park themselves for a time doing nothing, in order to show their serious intentions, before these were allowed to court beautiful Chilean daughters.

But, I have also been aware that every time you stop funds from going somewhere, those funds could remain somewhere even more dangerous.

Here Paul Tucker, a former deputy governor of the Bank of England, holds that “the objective [of capital controls] should be limited: guarding against threats to stability”

But, when regulators, with their credit risk weighted capital requirements for banks decided to create great incentives for banks not sailing risky waters, and instead stay in safe havens… they completely ignored that safe-havens can become dangerously overpopulated… in a very short time.

In other words, the more you stabilize, the more you make the system brittle, so the more you really destabilize.

“A ship in harbor is safe, but that is not what ships are for.” John Augustus Shedd, 1850-1926

No Europe! Don’t listen to FT. Your only chance is to explore more productive bays, even risking more hitting hidden rocks.

Sir, you write “Steer Europe away from hidden rocks”. November 16… and there you hold: “The tide of cheap money that is lifting all boats will soon be on the ebb. Britain and Europe should navigate their economic challenges now, or risk being beached on the same shore.”

First the tide of cheap money has not and is NOT lifting all boats. “The Risky”, like medium and small businesses, entrepreneurs and start ups, those Britain and Europe most need to get into action, are immobilized for the lack of bank credit, only because bank regulators require banks to have more capital for exposures to them.

Second you are NOT risking being beached on the same shore, you are risking dying gasping for oxygen in the same dangerously overpopulated safe havens, those to which banks can have exposures to against minimum capital.

Britain and Europe, your only chance is to explore more productive bays, even though you risk more hit hidden rocks. Future is only built upon risk-taking, never ever on risk avoidance.

A £1.000.000 house, but no job, and can’t pay the utilities

Martin Wolf warns correctly “Buyers beware of Britain’s absurd property trap” October 11.

Indeed, it would seem that the dream of politicians, government officials and bank regulators is for all us to be able to feel rich, sitting there in our houses. But unfortunately though the way they go about it will make us sit there without a job, and without being able to pay the utility bills.

But the trap is not solely related to houses, but to all assets that are perceived as “absolutely safe”, because those are the assets a bank is allowed to finance with little capital, which means lot of leverage, which means huge risk-adjusted returns on equity.

But Bbank financing to “The Risky”, the medium and small businesses, the entrepreneurs and start-ups… that is of course a NO! NO! NO!

During the IMF and World Bank meetings in Washington this week we hear more and more about the scarcity of safe assets. Of course, it can’t be any other way. If you do not take a risk on risky assets, how on earth are you to produce the safe?

Yes we need young who understand that “risk” is the Yin of the Yang “safe”.

Sir, Luke Johnson writes “Europe cannot afford to become a theme park for ageing baby boomers obsessed with nostalgia dreaming of glory day… ruled by cadres of old men who cling to power and wealth like grim death” and “We all need an infusion of youthful vigour” December 5. 

Absolutely! And where we should start is by removing those completely senile regulators in the Basel Committee who believe you can make our banks safer by avoiding what is perceived as risky, failing to understand that “risk” is the Yin of the Yang “safe”, and that for banks, what has always been most dangerous, is almost exclusively what is perceived as absolutely safe. If you really wanted to inject some vigour into Europe, think more in terms of capital requirements for banks that are higher for “The Infallible” and lower for “The Risky”. 

On what I totally disagree with Luke Johnson is on wanting “the Rolling Stones… greedy sexagenarians, to leave the stage”. In their case they are not there, except for us wanting them to be there, just like we love our well worn old warm slippers. 

PS. By the way there are some real rusted oldies in FT too, blocking ideas, and it could benefit all of us if they were to sit down and have a chat with Luke Johnson about this topic.

A 62 years old male

Europe needs to eliminate the subsidy of the “risky” to the “safe”.

Sir, Martin Wolf gives a good but incomplete analysis in “Look beyond summits forsalvation” June 27. 

Like all others intellectual prisoners of the bank regulatory pillar of capital requirements based on ex ante perceived risk, he fails to understand how all the banks are currently condemned to end up gasping for air, and capital, on the last officially deemed safe-havens in town, Bundesbank and US Treasury, more sooner than later. 

As a result he also fails to understand the artificially imposed regulatory subsidies that the “risky” European countries pay to the “safe”, by means of the much lower interest rates the latter must pay when compared to what would have been the case absent these regulations.

We´re stuck in an unsafe to be dollar safe-haven, most probably waiting for the Dollar II.

Sir Martin Wolf writes that “The rumours of the dollar´s death are much exaggerated” October 14, but the discussions have really been about who could take over some of the dollar´s job so that it would not die of a heart attack. And the dollar´s job is not an easy one, as it has the USA suffering from the curse of exporting safe-haven permits, which creates few jobs of that sort the world likes to qualify as “real sustainable” jobs, while importing products produced by real jobs abroad.

Will the dollar suffer the agony of a slow death or fade away like a soldier? Not likely, once the rumour of the safe-haven is having become dangerously overcrowded starts, death will be swift. Strangely though, as things currently stand, the most likely heir of the dollar would be the Dollar II.

The US suffers from the safe-haven curse

Though both Roger Altman “How to avoid greenback grief”, and Wolfgang Münchau “The case for a weaker dollar” October 12, are very right in their comments they are, for the time being, sorry to say, somewhat irrelevant.

The US is currently suffering from a safe-haven curse, which has the world buying dollars not really because of monetary parameters but more as parking permits to what they perceive is one of the few safe havens to whether out the storm. All of us who come from resource cursed nations, in my case Venezuela, know how difficult it is living with a curse, not least the fact that even though we know those resources are finite, and investors will wake up one morning suddenly thinking the dollar safe-haven to be unsafely overcrowded, there is little to be done until that happens. Just like no one stopped until they had chopped down the last tree on Easter Island.

But, having said that, let us not forget that, on the positive side, once the curse is lifted, a lot of new opportunities arise and so we do not necessarily have to be so pessimistic about the future of the US.

On a separate issue I would also recommend Mr. Altman that he performs a stress test on the willingness of the US tax payer to pay for the current public debt being contracted; he might find it even weaker than the current outlook for US consumer spending.