Bank regulators have placed a reverse mortgage on our economies that extracts all present value and builds no future.

Sir, Martin Wolf writes about the growth of fiscal spending in health and other “predominantly age-related areas” and about “a conflict between the young and old and between the successful and less so”, “This year’s election will decide the future of the British state” February 20.

It is much worse than that. Regulators, with their equity requirements based on credit risks, de facto ordered banks to function as if they were the portfolio managers of retiree… “Don’t finance the future, that’s too risky… refinance the past, that’s safer.” And that has meant something like placing a reversed mortgage on our economies… extract maximum present value and leave no inheritance to those coming after.

And anyone that thinks that the fiscal deficits of tomorrow could be compensated by higher taxes only… and that if growth is needed then it suffices with governments proceeding with some infrastructure investments has no idea of the workings of the economy.

Those valves that control the flow of bank credit to “risky” SMEs and entrepreneurs are closed shut. They need to be open… as they always were… before my me-and-only-me baby-boomer generation outsourced bank regulations to an après nous le deluge Basel Committee.