John Plender, unfortunately, we are caught in more than a double bind on public debt.

Sir, I agree with everything John Plender argues in “Why governments are caught in a double bind over public debt” of May 18. 

That said I am amazed he leaves out the fact that, on top of it all, courtesy of the Basel Committee, banks currently need to hold especially little capital against that public debt... for which “the issue of solvency would resurface”

And all that because unilaterally the regulators, in 1988, with the Basel Accord suddenly decided that sovereigns posed no credit risk, and no one protested the statism that was thereby de facto introduced.

To workout our banks out of such bind, will take huge amounts of fresh bank capital and very specialized knowledge, or intuition on how to go about it, without disastrously affecting the bank lending to the rest of the economy.

@PerKurowski ©