In EU the lines separating the real responsibilities between national and local politicians, and Brussels technocrats, are way too blurry, at least for the ordinary European citizens

Sir, Simon Kuper writes: “In recent years, we have improvised our way into an EU that works for most Europeans of our generation. We now have what Charles de Gaulle called a “Europe of nations”, in which the big decisions are made not by Brussels bureaucrats, or the European Parliament, but by national leaders acting in concert.” “Why today’s Europe of nations works” May 18.

I disagree. Because of the most probably very disastrous consequences for the euro and for the EU, the single most important decision that has been taken in the EU is, for the purpose of the risk weighted bank capital requirements, assigning to all eurozone sovereigns a 0% risk weight, and this even though they all have their debt denominated in a currency that de facto is not their own domestic printable one.

Sir, what German politician would like to be asked: why did you consider that German banks needed to hold eight percent when lending to German entrepreneurs but could lend to Greek bureaucrats against no capital at all. I venture the answer to that to be, no one!

In EU, technocrats and politicians will blame each other, whenever it’s convenient for any of them, but that is usual in most places. The real difference here is that in EU, the lines separating the responsibilities between national and local politicians, and the technocrats, are as blurry as can be. To know that it suffices to follow the European Commission twitter account, and therefore receive the most amazing barrage of publicity on it doing things that nobody could ever think was their responsibility.

Sir, those supporting Brexit could wrongly suppose too much decision power rests in EU, but those supporting Remain could be just as wrong supposing too much decision power remains in Britain. Who knows? Not me, but perhaps not you either.

@PerKurowski

The one most worthy and in need of a “teachable moment” is the European Union itself.

Gideon Rachman“fears that Britain is heading towards what counsellors call a “teachable moment”, otherwise known as a traumatic experience that forces people (or nations) into a fundamental reassessment.” “Britain is poised to learn a hard Brexit lesson” September 25

To that purpose Rachman mentions, “Greece experienced not triumph but humiliation – as its government was forced to accept the bailout that it had just rejected.”

Indeed, but the one who would best have been helped by a “teachable moment”, that would be the EU itself; which could have happened if only Greek citizens had sued EC, for allowing banks to lend to the Greek sovereign against zero capital of their own, which of course doomed the Greeks to their tragedy.

Does Britain or any EU nation really want to end up like Greece? I believe not. For that not to happen all Europeans need to call out their authorities on much more, instead of silently swallowing EU’s marketing efforts; thankful for being able to freely visit each other; something that when you get down to it does not really require a European Union for it, as neither does free trading, as neither does being able to work or reside in any EU nation for that matter.

How long will techno/bureaucrats, in EU or anywhere be able to extortionate more power for themselves, or increase the value of their redistribution franchises, by offering the citizens goodies these could obtain by other simpler means?

For instance the day an unconditional Universal Basic Income is adopted, that day we will be able to rebalance much more power in favor of citizens and lessen that of those all who engage in the crony statism that is killing us slowly. 

Does a teachable Brexit moment preclude something very good coming out from it? I don’t think so; I have too much respect for the Brits. Perhaps they can even help to save EU.

@PerKurowski

Way too little has been done in 20 years to counter the Eurozone losing its foreign exchange adjustment tool.

Sir, Martin Wolf writes: “Andreas Kluth wrote in Handelsblatt Global this month: ‘A common currency was supposed to unite Europeans. Instead, it increasingly divides them.’ He is right” “The Italian challenge to the eurozone” June 20. 

Of course he is!In 1998, on the eve of the Euro, in an Op-ed titled “Burning the bridges in Europe” I wrote: 

“The Dollar is backed by a solidly unified political entity, i.e. the United States of America. The Euro, on the other hand, seems to be aimed at creating unity and cohesion. It is not the result of these.

The possibility that the European countries will subordinate their political desires to the whims of a common Central Bank that may be theirs but really isn’t, is not a certainty. Exchange rates, while not perfect, are escape valves. By eliminating this valve, European countries must make their economic adjustments in real terms. This makes these adjustments much more explosive. High unemployment will not be confronted with a devaluation of the currency which reduces the real value of salaries in an indirect manner, but rather with a direct and open reduction of salaries or with an increase of emigration to areas offering better possibilities.”

So clearly “All of this was predicted” Yes, but why has so little been done about it? Why have EU technocrats instead wasted their time on so many other minutiae?

What I did not foresee though, really because I had no idea of it, was that with the risk weighted capital requirements for banks, that which assigned a risk weight of 0% to sovereigns and 100% to citizens, fatal distortions in the allocation of bank credit were introduced, causing “high level of public debt” and making it all so much harder on the eurozone.

@PerKurowski

A major difficulty for EU is that what caused the last crisis, and attempts against its economic dynamism, shall not be named

Sir, Judy Dempsey writes that Merkel’s “conservative bloc would not buy into an agreement that would require Germany to spend more to bail out badly run economies” “Macron and Merkel will struggle to present a united front” June 19.

Have Merkel’s “conservative bloc” been told that their bank regulators assigned a risk weight of 0% to Greece and so that therefore Greece got way too much money?

Have Merkel’s “conservative bloc” been told that their regulators require banks to hold more capital against loans to German unrated entrepreneurs, than against loans to any EU sovereign?

Sir, I am sure that if central bankers and regulators were hauled in front of some really independent authority, and asked to comprehensibly explain so much of the crazy things their risk weighted capital requirements for banks entail, that would help clear the air and lead to much more constructive discussions in the EU about its future.

Who knows, perhaps such real discussions that would at long last hold some EU technocrats accountable, could even tempt a reversal of Brexit.

http://perkurowski.blogspot.com/2016/04/here-are-17-reasons-for-why-i-believe.html

@PerKurowski

“Co-operate more” is often argued by multilateral technocrats only for them to interfere more

Sir, Martin Wolf writes: “Countries that contain substantial populations in relative domestic decline are consumed by the politics of rage. Yet, if progress is to be sustained and the dangers are to be managed, peaceful co-operation is necessary” and he ends with “Am I optimistic that the world will rise to the challenge? The answer is: No”, “The world’s progress brings new challenges” May 30.

I am not optimistic either. In 1998 in an Op-Ed: “History is full of examples of where the State, by meddling to avoid damages, caused infinite larger damages”, and in 1999: what “scares me the most, is [what] could happen the day those genius bank regulators in Basel, playing Gods, manage to introduce a systemic error in the financial system, which will cause its collapse”. 

And with the risk weighted capital requirements that distorts the allocation of bank credit to the real economy, the peacefully cooperating regulators in the Basel Committee realized my worst fears.

And that horrendous mistake, which included assigning risk weights of 0% to sovereigns, like Greece and Italy, and which brought us the 2007/08 crisis, and that is to blame for much of the stagnation in productivity, is not yet even discussed. There’s a total lack of transparency and accountability among those that Yanis Varoufakis rightly holds belong to a network of insiders.

Why? As Varoufakis explains in his “Adults in the room” journalists, I would argue like Martin Wolf, are also “appended, however unconsciously, to a network of insiders… [and] This is how networks of power control the flow of information.”

Wolf also refers to Kishore Mahbubani, the author of “Has the West Lost It?” arguing: “The lesson the west — above all, the US — must learn is… to interfere far less and co-operate far more [with] multilateral rules and agreements. It cannot run the world. It needs to stop its arrogant and usually foolish interventionism.” 

But again: The worst “arrogant and foolish interventionism”, that which really has the West really losing it, as it put banker’s risk aversion on steroids, is what was concocted by the Basel Committee for Banking Supervision. And its interference is like a cancer tumor that keeps on growing thousand of pages a year.

A call to “co-operate more” is always justified but, when cooperating, let us not ignore that is precisely what multilateral technocrats often ask for, only in order for them to do more besserwisser interference.

The best multilateral agreement we now could have with respect of our banks, is to set one capital requirement against all assets, a one pager regulation, and then carefully manage the process of getting the banks from here to there, while minimizing the hurting.

http://perkurowski.blogspot.com/2016/04/here-are-17-reasons-for-why-i-believe.html

PS. The best way to fight pollution, climate change [and inequality], is by means of a carbon tax with all its revenues shared out to citizens. But, since that does not allow for interesting profit opportunities that could be captured, and that could be ruled, the intervention profiteers much prefer the Paris accord on climate change.

@PerKurowski

In not listening sufficiently to the European people, which includes the British, resides great risks for the two technocrats negotiating Brexit

Sir I refer to George Parker and Alex Barker discussing Michel Barnier and David Davis, “Meet the Brexit negotiators” March 17.

For me the best of the Winter Olympics 2018 was seeing Sofia Goggia singing her Italian national anthem with such an enthusiasm. I am sure Europe has not been able to remotely capture the hearts of Europeans in such a way; and the reason for that must foremost be the technocratic haughtiness of Brussels.

I have not the faintest idea if it rests on some real event, it most probably doesn’t, but the most powerful moment depicted in “The darkest hour”, was when Churchill journeyed the London Underground to hear the voice of regular people in the subway.

And that is what I have a feeling neither Davis nor Barnett have done enough of. Whatever the result of Brexit, they might be in for a great surprise, because, much more than arteries and veins are at stake for Europe, including Britain, it is the heart that has to be nurtured and cared for.

What if for instance to Sofia Goggia the relation Italy-Britain is much more important than the relation Italy-EU-Britain?

I have no doubt those who voted for Brexit really wanted more out of Brussels than out of Europe... because that I can understand.

Sir, you don’t have to go underground and travel subways to know what people might want. Some well designed, not biased, public opinion research on the wished and not wished for outcomes of Brexit, in all countries involved, would be the minimum I would have required before any first Brexit meeting.

PS. Just in case you are curious, the worst for me of the Winter Olympics 2018, was having to suffer with Egvenia Medvedeva when not winning her gold.

@PerKurowski

While Brexit is only in the Limbo circle, Martin Wolf seems already convinced that all ye who entered there should shed all illusion and abandon all hope.

Sir, again Martin Wolf writes as if being convinced there’s no life, at least no good life for Britain, after Brexit. “Britain has more illusions to shed on Brexit” December 15.

Why? Of course Brexit is challenging, but not only for Britain. I have always thought of Britain as glue that helps holds the European Union together, so I am sure Brexit must be very challenging to EU too.

What should be done? I would just go for it! Massive government tweeting: “Brexit is not about Britain not wanting to have anything to do with Europe. It has all to do with Britain not being comfortable with the decisions of the EU technocracy.”

And then tweet: If Britain is willing to pay such a large fine for being able to get out of the EU club, should you, as members of that same club not be concerned with that?

And incite the Europeans to take the Brexit opportunity for together with Britain redefining a better Europe.

Sir, I argue this as I am convinced that if you’ve already mentally surrendered, and think you must accept any conditions offered by a Neo-Versailles treaty, then you are really lost. And for many reasons I do not like that to happen to Britain.

Or as Violet Crawley would say, don't be so defeatist, it’s so middle class. 

Okay, I might have gone bonkers on this (too), but let me assure you that Martin Wolf is no Winston Churchill either.

PS. Freshening up on Dante’s “Inferno” I read that some sinners endure lesser torments than do “those consigned for committing acts of violence and fraud”. The latter, according to Dorothy L. Sayers’ translation, were guilty of "abuse of the specifically human faculty of reason". Oops, could that include bank regulators who require banks to hold more capital against what is perceived risky, when in fact it is when something perceived safe ends up being risky, that we all most need our banks to hold that?

Sorry, just asking, I have no intention of wanting to send for instance Mario Draghi to hell. Parading him down our main avenues wearing a dunce cap would suffice.

@PerKurowski

Anyone jumping ship on the delusion that risk-weighted capital requirements make banks safer and economies better, has a better chance to survive

Sir, Wolfgang Münchau discusses many delusions held by both Brexiters and Remainers, and argues correctly: “To make the best of Brexit, the UK will need to embrace a more entrepreneurial and innovative economy” “An old-fashioned economy heads towards a downfall” November 20.

But when he writes: “For Brexit to succeed the UK will end up becoming more — dare I say it — European”, I disagree.

That because when Münchau holds that Britain “has an entrepreneurial culture to build on”, that is unfortunately no longer the case. No country with an active “entrepreneurial culture” would ever have allowed the de facto anti entrepreneurial risk-weighted capital requirements for banks.

Sir, if I had to choose between a Britain that did not hold back its risk takers, and one that was comfortably living off a larger European market then, if thinking about my grandchildren, I would without any doubt prefer the first one.

As I see it the European Union, governed by unelected risk adverse technocrats, who like old soviet central planners paint from their desks roads to the future, is doomed to fail… and that no matter how much “Universities… work more closely with industry”. In that Europe, the faster you jump ships the better.

If I were a British citizen I would instead be calling out to Europe proposing a different EU. Who knows what answer I would get from Poland, Italy, Spain, Portugal and others? Why for instance should they stay with those who most benefit from a Euro made weaker by the weaker?

PS. For those who do not know me in the context of any European Union and Euro debate, perhaps the following Op-Ed could help as an introduction. 

https://perkurowski.blogspot.com/1998/11/burning-bridges-in-europe.html

@PerKurowski

Having experienced Saudi-Venezuela’s Plan, I know Saudi Arabia’s “National Transformation Program” will fail

Sir, Jason Bordoff writes about Saudi Arabia’s “National Transformation Program, a bundle of targets and initiatives designed to deliver the “Vision 2030” plan to diversify the country’s economy and reduce its reliance on oil revenue… head-spinning 543 initiatives and 346 targets… laudable focus on concrete targets, measurable outcomes, transparency and accountability, along with a strong focus on boosting the education and skill levels of Saudis.” “Saudi Arabia’s reform slowdown reveals its painful dilemma” September 12.

That sounds so much like Venezuela’s ambitious plan of how to deploy the booming oil revenues, plus all that indebtedness that oil riches stimulated, during Carlos Andres Perez first presidency, 1974-79, a time that even became known as that of Saudi-Venezuela.

That plan provided clearly insufficient results, something that later helped clear the road to power for populist Chavez. Chavez and Maduro, in about 15 years, then managed to turn an even greater oil boom into the current pure minuses.

What amazes me is that Bordoff seems to imply that there is a possibility that the NTP could work. It does not! Centralized oil revenues, topped up with “$100bn for a public investment fund”, all managed by “a complex government bureaucracy” is a recipe for disaster. And if by any chance they got something right, that could be so easily wiped out by new generation of besserwisser government technocrats.

Before my two years as an Executive Director of the World Bank, 2002 2004, my only experience with the government sector was as the first Diversification Manager at the Venezuelan Investment Fund set up in 1974. That gig lasted me only two weeks because, when pressured by politicians for a fast approval (one week) of a US$ 2 billion pet project (Plan IV Sidor), I knew the system would not work and, as I told the Fund’s board members when I resigned, I was too young to risk being hanged if that or other projects failed.

@PerKurowski

Britain, don’t let all your hard and well-earned goodwill in Europe go to waste with dumb Brexit negotiations

Sir, Josef Joffe describes well the kind of goodwill Britain has in Europe. That goodwill is being horribly wasted in the Brexit proceedings, among other by those Remainders that want to get Brexit failures, in order to argue their petty “I told you so” “Brexit Britain has displaced Germany as the land of dreamers” August 16.

Had I been a citizen of Britain wanting decent Brexit negotiations, or one wanting to remain in EU, I would have reached out to all the millions of Josef Josses in Europe with the message of: “The Brexit vote indicates not all is well in EU, what can we do, and how can you help us to convince our fellow country men of not leaving?”

And if that had not opened up new roads, then my minimum minimorum plea would be: “Europeans, make sure your relations with Britain are mot harmed more than necessary by means of leaving Brexit negotiations, unsupervised, in the hands of EU-technocrats who have suffered a love spat or want to show off as though macho negotiators.

@PerKurowski

Brexit should be an affair between Europeans, not between some EU technocrats resenting a love spat.

Sir, I refer to Robert Shrimsley’s ironizing “Your country needs you: Brexit’s patriot act” July 15. There he writes: “Fox has said some journalists would rather see Britain fail than Brexit succeed”.

Well so do I! When I read so many opinions in FT stating categorically that Britain EU has much more to lose from Brexit than EU without acknowledging EU’s huge and delicate Brexit problems; when I see no one trying to capture the support of Britain that undoubtedly exists among Europeans; when I see no one wanting to go out and ask what kind of punishment they want the not so popular, the not elected by vote executioner Barnier to enforce on Britain, I do feel that most of you have an existential necessity of the Brexit affair turning out real bad for your country… or a shameful lack of willingness to defend what is yours, meaning not only Britain but also Britain’s future relation with Europe.

Can you imagine Britain during World War II communicating solely with the Vichy government of France and not reaching out to La Résistance?

The Brexit morning after do you think Europeans want to see Britain gone for good? I doubt that, Britain is much more part of the glue that holds EU together than you seem to want to know.

PS. Just yesterday https://teawithft.blogspot.com/2017/07/european-citizens-must-solve-brexit.html

Per Kurowski

A Venezuelan but also a Polish citizen, and therefore a European who is strongly in favor of Britain… though I admit the last could just be the result of not being up to date.

@PerKurowski

Brexit should not be a humiliating capitulation process, so as to fit the remainders’ wish to say, “I told you so!”

Sir, Carl Bildt writes “The essential and unavoidable fact is that Britain will not be in the room when EU summits are called on all the different issues that are certain to emerge in these increasingly uncertain times… For all its public ambivalence, there is little doubt that on the inside Britain has been very powerful in shaping the evolution of the EU... Many have seen the UK as a necessary counterweight to other countries keen on a more closed approach, both political and economic” “Europe’s political landscape starts to shift” June 20.

Absolutely! And this is a fact that Britain should make abundantly clear, reaching out to its so many European friends, bypassing completely those Brussels technocrats that have had their weak egos hurt, because of the Brexit rejection.

Instead, many of your columnists have been arguing for a sort of humiliating Versailles type capitulation treaty, most of them in order to be able to tell their readers “I told you so!” Well, shame on them!

What would I do if a British citizen? First I would carry out an opinion poll in all EU countries asking their citizens whether they want Britain to be castigated for leaving EU, or whether they prefer EU to live as closely and friendly as possible with Britain after Brexit.

Then, with those results in hands, which I am sure would favor the second option, I would ask whether they would like to leave the Brexit negotiations on behalf of EU, in the hands of Michel Barnier, someone who has clearly a tendency to want to show off as a strong man, as a macho man.

Sir, and you know this is not the first time I so opine… but of course, since I am censored by FT, just like I was censored in my Venezuela, I must be silenced.

@PerKurowski

Since Brussels technocrats took EU members too much for granted, Brexit could perhaps turn into a better deal for UK.

Sir, Martin Wolf in reference to Theresa May’s Brexit “No deal is better than a bad deal” asks, “Why, after all, would the EU offer better terms to a non-member?” “Trade realities expose the absurdity of a ‘no deal’ option” June 2.

That is true; except for if the current membership deals are based on technocrats taking EU members too much for granted; and now waking up to the Brexit fact they should perhaps not do so.

Also, would these technocrats dare to further weaken their not too strong position by declaring a war on Britain, a war that most of the Europeans probably do not wish? Do Brussels generals really have that kind of credibility? I don’t think so.

Wolf writes: “Now Brexiters imagine the UK can refuse the EU’s terms for an amicable divorce and yet still count upon active and enthusiastic co-operation in ensuring the smooth flow of trade.”

Why can someone who like Wolf has attacked growing trumpist trade protectionism in the US, arguing it primarily hurts the Americans, yet be willing to accept the thought that trade protectionism from EU towards UK, would not hurt the Europeans too?

That is what Wolf should be informing Europeans of, so that they help to keep their hurt-egos technocrats from enforcing some stupid vengeance plans. But no, Wolf seems determined to want that UK should just take its well deserved punishment for not listening to his advice, and then shut up.

@PerKurowski

Why should technocrats seemingly be exempt from U-turn requirements, even in the face of horrendous mistakes?

Sir, Tim Harford writes: “For many government policies, it’s important to have an emergency stop to prevent bad ideas getting worse”, “In praise of changing one’s mind” May 27.

The worst idea, of the last century at least, has been that of, in order to make the banks safe, one needs to distort the allocation of bank credit by favoring, as if that was needed, banks’ exposures to what is perceived safe over those to what is perceived risky.

That meant that when the ex ante perceptions of risk, of especially large exposures, ex post turned out to be very wrong, that banks would stand there with especially little capital.

That meant that those rightly perceived as risky, like SMEs and entrepreneurs, those so vital for conserving the dynamism of the economy, would find their access to bank credit much harder than usual.

The 2007/08 crisis caused by excessive exposures to what was perceived or decreed as safe, 2007/08, AAA-rated, Greece, and the economies lack of response to outrageous stimulus thereafter clearly evidences the above.

But nevertheless, the concept of risk weighted capital requirements for banks, although somewhat diluted, still survives distorting on the margin as much, and in some cases even more than before.

When one reads Basel II’s risk weight of 20% for what is AAA rated and 150% for what is below BB- rated, the only conclusion one who has walked on Main Street could come to, is that a 180 degree turn into the directions of the risk-weighting would seem to make more sense.

Sir, why is it so easy for journalists to mock changes of minds of public political figures like Trump and May, and not the lack of change of mind of for instance the technocrats of the Basel Committee, the Financial Stability Board, BoE, ECB, IMF, Fed and so on?

Could it be because the latter “experts” tend to find themselves more in the journalists’ networks? Or could it be because of NUIMBY, no U-turn, no changing my mind, never ever in my own back yard. 

Sovereigns were handed a 0% risk weight! Why do we have to keep on reading references to deregulation or light-touch regulations, in the face of one of the heaviest handed statist regulations ever? Could it be because most journalists are also runaway statists at heart?

Why do "daring" journalists not dare to even pose the questions that must be asked?

@PerKurowski

No Martin Wolf! You do not get good results, for all, with Brexit negotiations, arguing that the UK holds a weak hand.

Sir, Martin Wolf, with respect to Brexit negotiations writes: “Theresa May should have realised, above all, that she holds a weak hand: the costs of no deal would be far bigger for the UK than the EU.” “Britain has the chance to secure a smooth Brexit transition” May 5.

What? Weak hand? EU has more to lose from Brexit than UK. EU gets stuck with the Euro, and so many other unresolved differences, languages included, without having Britain as a calming unofficial arbitrator. How many EU countries does Wolf think that will be glad seeing UK leave, and would settle with a high indemnity payment?

That is the only starting point that can lead to a continuous amicable and useful for all Britain and EU relation.

The more all European citizens send that message to those dummkopfs in Brussels who want to play macho men, in order to get back at those who showed so much disdain for them that they wanted to leave, the better for all in Europe.

The local European governments should be especially alert and not allow some few technocrats in Brussels to decide their future relations with Britain. It is they who will pay the costs.

Everyone might be helped by an ad campaign along the lines of: "EU, Brussels’s technocrats share blame for Brexit. If you Europeans want an amiable separation, help keep them in check"

Britain, of course, do not let these arguments I make go to your head either. It’s all a quid pro quo.

@PerKurowski

Is it so impossible that something really better could come out from Brexit, for all? Is EU that strong or good?

“We have considerable scope to see things as we prefer to see them” writes Tim Harford, a sensitive liberal internationalist, and then goes on to comment on Brexit with “The EU would benefit from a deal, but the UK needs one desperately.” “Beware the ostriches pursuing a pact” April 1.

That is an argument, in different wordings that I read repeatedly in the Financial Times. It much reminds me of the anti-Trumpists; they have too much vested emotional interest in things turning out bad. They can’t wait for that impeachment that will allow them a definite “we told you so”… and what sufferings is produced on that route is of secondary order.

I of course am not at all pleased with the concept of Brexit (or a Trump presidency) but, as a Venezuelan, I have seen how a puritan opposition can only make things worse.

Do not allow technocratic thugs to take over Brexit negotiations. If there is one message a sensitive British liberal internationalist should at least continuously be asking EU’s sensitive liberal internationalists is: After Brexit, do you want to become a better EU, or is that really indifferent to you?

That Sir because, as I have told you before, I believe Britain will be able to manage any major sacrifices that might result from Brexit, much better than EU any minor sacrifices without Britain.

Harford writes: when “cringing [scared] behind the nearest piece of furniture, trouble lies ahead. Indeed that ostrich effect will simply allow technocratic thugs to take over Brexit negotiations… and Sir that is truly scary… where it not for them there would be no Brexit to begin with.

PS. “terrifying parts of Doctor Who”. Out in the real world it is important to be sure about what really should terrify you. For instance, bank regulators think of what is perceived as risky as something terrifying, ignoring that the really scary parts always turn up among what has been perceived as very safe. As a result they got their risk weighted capital requirements for banks all wrong… and they have still not been able to reconcile their fears… and we’re all paying for it. That is really terrifying, for real.

PS. Do Financial Times journalists need their editor’s permission to ask banks regulators these questions?

@PerKurowski

Let us not allow group-thinking unaccountable technocrats operating in mutual admiration clubs decide for us voters

Sir, Tim Harford explains many reasons why a normal voter cannot be duly informed about all matters. Though that weakens democracy, it is a fact of life, and so he opines: “The workaround for voter ignorance is to delegate the details to expert technocrats.” “The man in Whitehall sometimes does know best” March 18.

I agree, except that I would have to add the caveat: As long as those technocrats operate transparently and can be openly questioned by any normal voter who happens to be interested in the subject.

And I say that out of experience. I consider the risk weighted capital requirements for banks that have come out of the Basel Committee to be about the most damaging and useless regulations ever; and I have a long list of questions that I have never been able to get a response to. Like for instance:

Why did the regulators not look at all empirical evidence that exists on what has caused all major bank crises? In that case they would not have assigned a risk weight of only 20% to what is so dangerous for the banking system as what is AAA rated, and one of 150% to the totally innocuous below BB- rated.

Why did the regulators not define the purpose of the banks before regulating these? In that case they would not have ignored the distortions in the allocation of bank credit this regulation causes?

Of course journalists, like those in the Financial Times, could play a vital role going between technocrats and voters… but what when they don’t want to do that for their own particular reasons?

PS. Harford writes “Better a flawed expert than a flawed amateur” Yes, but let us keep a watchful eye on the experts; let us never forget George Orwell’s comment, in “Notes on Nationalism”, “one has to belong to the intelligentsia to believe things like that: no ordinary man could be such a fool” or references to Patrick Moynihan opining “There are some mistakes it takes a Ph.D. to make”.

@PerKurowski

Brexit contains more true catastrophic risks for the EU and the Euro than it does for Britain

Sir, I refer to Martin Wolf’s “Britain’s leap into the unknown” February 8.

Do I disagree with him? No, if I look at Brexit as Wolf does with a microscope focused solely on Britain. But, from a wider perspective, looking at so many other unknowns, his Brexit concerns takes on some Lilliput against Blefuscu war characteristics.

Why? Many would probably start by mentioning the environmental problems of the earth and overpopulation. But setting these aside there are many other challenges that needs to be considered so as to weigh correctly what could be coming with Brexit. Let me just briefly mention the following three.

First, I have the impression that Brexit carries with it more risk of true catastrophes for EU and the Euro than what it has for Britain. This is not a case Britain leaving a happy family behind. It is more like running away from a very messy dam full of repressed feelings of discontent, ready to burst at the urgings of any able populist, and to which its comfortable and full of themselves technocracy is unable to respond to adequately.

Second the banking system. Its regulators, with their risk weighted capital requirements, manipulated and distorted the system in such a way that the real economy is not being fed the nourishment it needs; and the banks themselves are bound to collapse, as would collapse any casino that had its roulette table equally manipulated.

Third, the growing structural unemployment caused by robots and automation. The only reasonable response to that seems to be some sort of Universal Basic Income floor, and that is something that must be much easier to develop within a nation. Just thinking of some EU Commissioners having to agree to a uniform Universal Basic Income policy applicable to Germany and Greece is too challenging.

Of course Brexit represents difficulties… but like all difficulties it also encompasses some opportunity. My dear English friends think of it like this. You are now sailing back to your homeland and soon, for good or for bad, you will at least be able to see the white cliffs of Dover again. 

@PerKurowski

PS. And of course you want to be as far away as possible when the Eurozone's debt bomb explodes

Martin Wolf, what do we call those who exploit elites’ intellectual laziness? Aren’t they also demagogues?

Sir, I refer to Martin Wolf’s “Democrats, demagogues and despots”, December 21.

If a demagogue is “a leader in a democracy who gains popularity by exploiting prejudice and ignorance among the common people, whipping up the passions of the crowd and shutting down reasoned deliberation”, what do we call those that though with more discretion and elegance, do the same among the elite?

In this case I refer directly to those who promise: “We will make the banks safe, because we will force these to hold more capital against what is perceived as risky than against what is perceived as safe”, and are then believed, by for instance many prestigious columnists.

Is that not exploiting a prejudice against those who anyhow, precisely because they are perceived ex ante as risky, already find it harder and more expensive to access bank credit, and therefore pose no major risks ex post to banks?

Is that not exploiting a prejudice in favor of those who anyhow, precisely because they are perceived ex ante as safe, already find it easier and less expensive to access bank credit, and could therefore really pose major risks ex post to banks?

Is that not exploiting the ignorance or naiveté of those who believe regulators could make banks safe without affecting their social purpose of allocating credit efficiently to the real economy?

Of course technocratic demagogues do not operate within any type of democracy, far from it, most often mumbo jumbo and research papers suffices to impress. And of course they are no despots, at least not wittingly.

Like Martin Wolf I do feel very uncomfortable with recent developments. Clearly Brexit needed not to be, and Trump does not fit the profile of what we have grown accustomed to at least hope for as that of a president in the USA.

But the elite must accept it is very much responsible for what is happening. Just for a starter it has allowed many technocratic tribes, like in Brussels and Basel, to operate unencumbered for way too long. It would seem the “elite” has relinquished its responsibilities and now prefers to live in the comfort of blissful ignorance.

If in doubt, just see the difficulties I have had trying to get straight answers to some very basic questions.

The world is under the siege by growing environmental problems, by robots taking jobs, by fake news because truth is not competitive enough, by terrorism and growing violence, by crony statism, by facing excessive debts everywhere… and by much more. Sir, where is your elite?

@PerKurowski

How do politicians stand such failed technocrats as those in the Basel Committee and Financial Stability Board?

Sir, you quote BoE’s Mark Carney saying: “The objectives are what are set by the politicians. The policies are done by technocrats,” “Carney’s gentle reminder about BoE independence” October 17.

So let us assume that having banks perform the allocation of bank credit to the real economy as efficiently as possible, while at the same time ascertaining the stability of the banking sector, would be a reasonable objective set by the politicians. In fact I challenge you to find a politician who would dare to disagree with that objective.

But now let’s see what policies the technocrats, like Mark Carney, the current chairman of the G20s Financial Stability Board, and his colleagues on the Basel Committee have come up with.

They have imposed risk weighted capital requirements for banks that, allowing banks to leverage their equity and the implicit support these receive from society differently, based on ex ante perceived risks already cleared for, utterly distort the allocation of bank credit to the real economy.

And they designed that regulation based on the premise that what is ex ante perceived as risky is risky for the bank system, thereby completely ignoring all empirical evidences that clearly show that what’s really dangerous to the bank systems, is unexpected events and excessive exposures to what was ex ante perceived as safe but that ex post turned out to be very risky.

So the real question Sir would be: How do politician stand for such lousy technocrats?

@PerKurowski ©