February 02, 2016

But what if the elite does not possess the necessary qualifications to function as an elite?

Sir, it is interesting how Martin Wolf, as FT`s leading economic commentator a part of the elite, is able to distance himself from the elite in order to recommend to the elite what to do. “Bring the elites closer to the people” February 3.

Wolf suggest for example: “capitalism must be kept competitive… One response is to promote competition ruthlessly. This will require determined action”.

Indeed, but yet Wolf has steadfastly refused to object current bank regulations that clearly curtail, more than what is usual, the capacity of those perceived as “risky”, like SMEs and entrepreneurs, to compete for bank credit in fair terms.

During soon three decades the pillar of bank regulations have been the risk weighted capital requirements for banks. What kind of crazy elite could feel so empowered so as to dare introduce regulations that utterly distort the allocation of bank credit to the real economy? And, to top it up, base it on one of the few risks that are already cleared for by banks? And, to top it up, base it on the risk of the assets of the banks, and not on the risks that banks cannot manage the risk of their assets?

The regulators, in Basel II, set the risk weight for ‘prime’ AAA rated assets at 20 percent, and at 150 percent for ‘highly speculative’ below BB- rated assets. I just ask again, for the umpteenth time, what have we done to deserve regulators who believe that what is ex ante perceived as so risky is more dangerous to banks than what is perceived as so safe?

In Basel I they set the risk weight of sovereign at zero percent and that of the private sector at 100 percent. And I just ask again, for the umpteenth time, what have we done to deserve regulators who impose such statism through the backdoor?

Wolf writes: “The governance of complex modern societies requires technical knowledge” — and he mentions that a Republican candidate has been described as a “mountebank”. I don’t know about that but “mountebank”… charlatan, is a term quite applicable to the members of the bank regulatory elite… and to their little helpers and defenders.

Sir, an elite that acts like members of a mutual admiration club, is a totally useless elite. The elite, in order to fulfill its functions, needs to be able to socially sanction its members.

PS. At this moment, when clearly it is important to find ways to fight growing inequality, it is also the responsibility of the elite to make sure that endeavor is not commanded and carried out by some redistribution profiteers… which would just make it all much worse… as we Venezuelans can testify.

@PerKurowski ©