Aren’t all nations, one way or another, tarred with a similar brush of nationalism?

Sir, Harriet Agnew and David Keohane report that, on the centenary of the end of the First World War, Emmanuel Macron railed against nationalism as a “betrayal of patriotism”, in an implicit rebuke to his US counterpart. “Macron attacks nationalism in Armistice Day rebuke to Trump” November 12.

Macron said: “By saying ‘Our interests first. Who cares about the others?’ we erase what a nation holds dearest, what gives it life, what makes it great, and what is essential: its moral values.” Is that not beautiful? Of course it is!

My problem though is that precisely these days I have been writing that the ending of the First World War, and the Versailles treaty, should provide an opportunity to reflect on the armistice conditions that are imposed on sovereigns, when they have to capitulate because of excessive loads of public debts. This especially because it is usually not only the defeated sovereign’s fault. 

If we look behind most odious debts, we will find surely find odious credits. In the case of eurozone sovereigns, like Greece, odiously dumb regulations too. Assigning a zero risk, as the European Commission did to a nation that is much indebted in a currency like the euro, which is not really its domestic (printable) currency, made absolutely no sense. That meant for instance that German and French banks could lend to Greece against no capital at all, and so, naturally, these banks could not resist the temptation of offering Greece too much credit, and Greece could not resist the temptation of taking on too much debt.

But what happened? The recent armistice conditions imposed by EU authorities required Greece to take on debt, much of it in order to repay German and French banks, leaving it with about a €345 billion debt, more than €30.000 per each Greek, in a currency that as I mentioned is de facto not their own. 

Sir, so I ask is that not just another Carthaginian peace? Viewed this way, no matter how right what Macron preaches is, does he really have the right to throw the first stone on “moral values”? Aren’t all nations, one way or another, tarred with a similar brush of nationalism?

Sir, this is no minor issue. Since Italy would most probably not walk the plank like Greece, the future of the Euro, and of the European Union is at stake… and that is something that those who might rightly defend the Remain against the Brexit, should at least out of pure precaution consider.

@PerKurowski

For sturdy returns on equity, banks must abandon their dangerous road of maximizing returns by minimizing equity.

Harriet Agnew and Patrick Jenkins write: “This manner of doing business in which a handful of influential individuals could orchestrate the markets [1986]… In today’s terms would be completely illegal” “Big Bang II What’s next for the city?”

What? A handful of individuals orchestrated the markets more than ever when, for instance with Basel I in 1988, for the purpose of setting the capital requirements for banks, they decreed the risk weights of the Sovereign to be 0% and that of 100% We the People 100%.

And the authors quote Pierre-Henri Flamand with: “Brexit may mean a reverse Big Bang for the UK’s relationship with Europe… But it could mean Big Bang II for its relationship with the rest of the world. Brexit could improve the City’s prospects of doing business in parts of the world such as Asia and Africa where the growth is”

And on that I agree, but only if the banks go back to being banks making returns on equity by means of reasonably audacious banking, abandoning that dead-end road of maximizing returns by minimizing equity.

If they don’t then I guess we will have to endure other types of Big Bangs, like the on I was referring to when in 1999 I wrote: “The possible Big Bang that scares me the most is the one that could happen the day those genius bank regulators in Basel, playing Gods, manage to introduce a systemic error in the financial system, which will cause the death of the last financial dinosaur that survives at that moment.”

Since they introduced that systemic risk, risk weighted capital requirements for banks, and even after the 2007-08 crisis insist on keeping it, I still fear that a truly Bad Big Bang is closer than any Big Bang II.

In short, if the City wants to maintain or even gained competitiveness, then it must recreate itself in a non-distorted way. Escaping the the influence of the Basel Committee is much more important for Britain and its banks (and for all other nations) than any Brexit or no Brexit.

@PerKurowski ©

Why do financial regulatory authorities, while preaching the value of diversification, act in favor of concentration?

Sir I refer to Harriet Agnew’s “FT BIG READ. Professional Services: Accounting for change” August 28.

In November 1999, in an Op-Ed in Caracas Venezuela, this is what I had to say on what is discussed there:

“I recently heard that SEC was establishing higher capital requirements for stockbroker firms, arguing that . . . ‘the weak have to merge to remain. We have to get rid of the rotten apples so that we can renew the trust in the system.’ As I read it, it establishes a very dangerous relationship between weak and rotten. In fact, the financially weakest stockbroker in the system could be providing the most honest services while the big ones, just because of their size, can also bring down the whole world. It has always surprised me how the financial regulatory authorities, while preaching the value of diversification, act in favor of concentration.

The SEC should not substitute the need for capital in place of the need for ethics, nor should it allow that fraudulent behavior hides amid the anonymity of huge firms. In this respect, let us not forget that the risk of social sanctions should be one of the most fundamental tools in controlling financial activities.

Currently market forces favors the larger the entity is, be it banks, law firms, auditing firms, brokers, etc. Perhaps one of the things that the authorities could do, in order to diversify risks, is to create a tax on size.”

@PerKurowski