February 07, 2015

Sir FT, Your “Do whatever you can, as long as you do not allow banks to take risks” is hard to understand and forgive.

You write: “Punishing savers for hoarding cash encourages them to put their money to work” but “negative rates are a sign that authorities are failing in any attempt to stimulate the economy.”

And then you conclude in that “there are better ways. Central banks should be given more expansionary targets, such as ambitious goals for inflation or nominal growth. Monetary and fiscal authorities can combine, either by financing deficits with money or through straightforward unsterilized transfers of cash to the public.”

Now the absolute best way an ordinary saver can put his money to work is by having the banks allocate credit efficiently to the real and “risky” economy. Banks are though currently impeded to do so, because of the credit-risk-weighted equity requirements that, in these times of scarce bank equity, force them to keep to the officially deemed “safe” economy.

Sir your reluctance to advance that line of explanation is mindboggling. My blog www.TeawithFT.blogspot.com exists as a historic record of your behavior, a major financial newspaper, in times of crisis, and not of mine. I’m too small fry for that.