November 18, 2015

The most important investors for the economy of tomorrow, are those who act on its margin, like SMEs and entrepreneurs.

Sir, Martin Wolf writes: “Because corporations are responsible for such a large share of investment, they are also, in aggregate, the largest users of available savings”. And he lashes out at corporations for not doing enough investments. “The corporate contribution to the savings glut” November 18.

Yes, corporations are the largest users of available savings, but that does not mean they are those who move the investments on the margin. Those most important, on the margin investors, are those tough risky risk-takers we need to get going when the going gets tough. And those are the ones who have their fair access to bank credit blocked by the credit risk weighted capital requirements for banks… since banks will always preferentially access to assets against which it has to put the least of its own equity for… especially in times of scarce regulatory bank capital.

I know that Martin Wolf does not understand or does not want to admit the distortions in the allocation of bank credit that credit-risk weighting regulation does, but that does not make it one iota less distortive.

PS. Amazing. Martin Wolf even suggests we should think about taxing retained earnings to force corporations to invest and not of getting rid of those regulations that block the access to bank credit for investments. Much of that corporate cash is in banks and in the unproductive "safe havens"

@PerKurowski ©