September 10, 2012

An essential part of the narrative on the eurozone crisis is withheld, among others, by FT

Sir, Wolfgang Münchau, in “Why Weidmann is winning the debate on policy”, September 10, writes the following: “The German public has bought into the narrative that the crisis was caused by profligate southern European and consumers who had wasted the first decade of their membership of the eurozone indulging in a debt financed housing and consumption boom. It is a false morality tale, mostly devoid of economic reasoning. But this has not stopped it from becoming the dominant narrative. Not enough politicians, certainly not enough journalists and commentators are pushing against this narrative” 

And I ask again why is it that FT resists to present my argument of that this crisis was doomed by the regulators, some of them Germans, to happen? The fact is that for instance a German bank, was allowed to lend to a Greece holding only 1.6 percent in capital, making it possible for it to leverage its equity 62.5 to 1 with Greece´s risk-adjusted returns, while, when lending to a German small business or entrepreneur, it was required to hold 8 percent in capital, meaning it could only leverage its equity with those risk-adjusted returns, 12.5 to 1. If you do not think that this fact is an essential part of the real narrative of what has gone wrong, I just do not understand you. 

(Would it really hurt the FT´s ego so much acknowledging that little me, who has written hundreds of letters to you about it, was correct, and so that you prefer to shut up about it? Poor Europe... with friends like that)