October 26, 2015

Compared to the misallocation of bank credit in Europe, Brobdingnagian inflation concerns sounds truly Lilliputian

Sir, Wolfgang Münchau writes: “Central bankers are conservative types. But they should have a rational interest in preventing a loss of their credibility.” I ask, should not Wolfgang Münchau also have a rational interest in that? “Draghi must be more unconventional to boost the euro” October 26.

This data is found on the web:
The fatality rate per 100 million vehicle miles traveled in motorcycles is 21.45
The fatality rate per 100 million vehicle miles traveled in cars is 1.14
In 2011 in the US, 4,612 persons died in motorcycle accidents
In 2011 in the US, 32,479 persons died in vehicle accidents

And so, even though travelling by motorcycle is about 20 times riskier than cars, cars cause about 7 times more deaths than motorcyclists. That is of course because the riskier something is perceived, the more care is taken to avoid the risk.

And yet Wolfgang Münchau, finds nothing wrong with bank regulators having decided on higher capital requirements for banks when lending “the risky” motorcyclist of the economy, SMEs and entrepreneurs, than when lending to “the safe” car drivers, sovereigns and corporations with high ratings… even though clearly dangerous excessive lending to the latter is much more likely to occur.

Sincerely, against the fact that Europe’s bank are not allocating credit efficiently, and this is murdering Europe’s chances for a strong economic revival; Münchau’s and Draghi’s 0.63 per cent, 0.88 percent, 0.9 per cent and 2 percent Brobdingnagian inflation worries, sounds as Lilliputian as it comes.

@PerKurowski ©