July 11, 2012

It takes bungee jumping to get us out of this, so please let those wanting to risk it jump!

Sir, I refer to Martin Wolf’s “We still have that sinking feeling” July 11. 

That is nothing to be surprised about, in an economy where governments and central banks pour fiscal deficits and liquidity on it, while simultaneously bank regulators impede bank lending to basic economic engines like small businesses and entrepreneurs, just on account of these being perceived as “risky”. Containing the indispensable risk-taking is pure and unabridged assisted suicide of the economy. 

And Wolf comments again on deleveraging, but seems not able to understand the fact that the economy is more underleveraged than ever on what is originally perceived as risky, something which is of course quite different from an over-leverage to what was perceived as absolutely not risky but then turned into risky. 

Stop wasting time on important but completely secondary issues, like manipulative Libor settings, excessive bonuses and what have you, and start acting urgently on allowing the risk-takers take the risks we all depend on.

If you temporarily lower the capital requirements for banks when lending to small businesses and entrepreneurs, by for instance 50 percent, the banks will NOT build up excessive exposures to these, because bankers never do so to something they perceive as risky, then you would at least allow some of the willing risky risk-takers to start helping us risk-adverse citizens.