What the world needs is to introduce true diversity in its financial architecture.
@PerKurowski
As a former Executive Director of the World Bank I know that the columnists of the Financial Times have more voice than what I ever had, and therefore they might need some checks-and-balances. For more see "A Blog is Born" at the very bottom.
Would a child shouting out “the Emperor is naked” have his observation published in FT? Would he now need a PhD for that to happen?
http://subprimeregulations.blogspot.com/2004/11/some-of-my-early-public-opinions-on.html
@PerKurowski
In "Britain needs a growth strategy" Martin Wolf mentions the UK has for too long settled for managing stagnation.
Sir, I refer to John Plender’s “The virtues of public debt to protect citizens” FT February 7, 2022.
Sir, as a grandfather I do fear debt burdens we might impose on future generations, but I’m absolutely not an austerity moralist. I know public debt is of great use if used right but also that the capacity to borrow it a reasonable interest rates (or the seigniorage when printing money), is a very valuable strategic sovereign asset, especially when dangers like war or a pandemic appear, and which should therefore not be irresponsibly squandered away.
In 2004, when I just finished my two-year term as an Executive Director of the World Bank, you published a letter in which I wrote “Our bank supervisors in Basel are unwittingly controlling the capital flows in the world. How many Basel propositions will it take before they start realizing the damage, they are doing by favoring so much bank lending to the public sector?”
1988 Basel I’s risk weighted bank capital requirements decreed weights of 0% the government and 100% citizens. It translates into banks being allowed to hold much less capital - being able to leverage much more, with loans to the government than with other assets.
Of course, governments, when their debts are denominated in the currency they issue, are, at least in the short-term and medium term, and in real terms before inflation might kick in, less risky credits. But de facto that also implies bureaucrats/ politicians/apparatchiks know better how to use taxpayer’s credit for which repayment they are not personally responsible for than e.g., small businesses and entrepreneurs. And Sir, that I do not believe, and I hope neither you nor John Plender do that.
Such pro-government biased bank regulations, especially when going hand in hand with generous central bank QE liquidity injections, subsidizes the “risk-free” rate, hiding the real costs of public debt. In crude-truth terms, the difference between the interest rates sovereigns would have to pay on their debts in absence of all above mentioned favors, and the current ultra-low or even negative interests they pay is, de facto, a well camouflaged tax, retained before the holders of those debts could earn it.
But of course, they are beneficiaries of all this distortion, and therefore many are enthusiastically hanging on to MMT’s type Love Potion Number Nine promises.
@PerKurowski
Some very few regulators thinking they were capable of managing the bank risks of the world, caused and are still causing immense sufferings, and you Sir are refusing to help holding them accountable for that.
Bank regulators, dare to debate with me the silliness or the wisdom of your regulations... come on don't be shy
On October 1 2009, the Economist Forum gave me some FT voice again publishing "Free us from imprudent risk-aversion"
And I very much appreciate it.
And on July 12 2012 Wolf also wrote that when "setting bank equity requirements, it is essential to recognise that so-called “risk-weighted” assets can and will be gamed by both banks and regulators. As Per Kurowski, a former executive director of the World Bank, reminds me regularly, crises occur when what was thought to be low risk turns out to be very high risk."
And that is something that I of course also appreciate, but that yet makes me curious on why Wolf does not follow up on it.
English is not my mother language so bear with me and you’ll probably note when my letter has been published in FT by its correctness. Swedish is my mother language but I have not written anything serious in it for about 40 years and last time I tried, they just laughed their hearts out because of my démodés. Polish is my father language but, unfortunately, I do not speak a word of Polish, much less write it. Yes Spanish is my language, as I am from Venezuela and although I trust I write in it with great flair, I would still never dream of publishing an article in Spanish without having it edited by my wife.
And so friends here is my Tea with FT blog with my old and new letters to the editor. I hope you will share them with me now and again, and then again and again.
Welcome, and cheers, as I believe they say over there.
Per
PS. Just so that FT does not get too cocky and believe it is my only window to the world, I will now and again publish a letter sent to the editor of another publication.