John Kay, how can you justify the risk weight of the sovereign being zero percent? Are you a runaway statist?

Sir, John Kay holds “When real interest rates on 50-year maturities for sovereign bonds are roughly zero, there is little reason to worry about the fresh debt this imposes on our children. I am sure they would rather have houses to live in and be able to cross bridges that will outlive their parents.” “Smoke, mirrors and helicopter money” May 17.

Of course the children would, but only if they had the jobs that give them the income needed to pay for the mortgages and utilities of those houses, and only if those bridges took them somewhere they wanted or needed to go to.

And besides that real interest rates at roughly zero, should make the children think about from where is that income to pay for the parents pensions going to come, and so that they won’t have to help their loved parents survive.

Again, for the umpteenth time, if we as a society are not willing to take the risks of opening up new roads for our economy, our children’s future and ours is blocked.

And that is why I fight against the risk weighted capital requirements for banks that de the facto block these from financing the riskier future and keep them solely refinancing the for the time being safer past.

And Kay refers to “the belief that central banks can never be insolvent because they can always print money and that bank notes are not exchangeable for anything but another bank note”, but accepts that “if the central bank prints enough of them they lose their value.”

And so again I ask: If so, how can you then justify regulators setting the risk weight for so many sovereigns at zero percent? That helps the real interest rates on sovereign bonds to be low! That is a regulatory subsidy for government debt! A subsidy paid by all the "risky" that because of that are denied fair access to bank credit.

Also assigning the government a risk weight that is lower than the one given to the citizens, those who give the government its final strength, signifies, de facto, a belief that government bureaucrats know better what to do with bank credit than citizens. That is pure and unabridged statism!

@PerKurowski ©