January 17, 2017

Do risk weighted capital requirements for banks promote or kill the animal spirits Lawrence Summers think important?

Sir, Lawrence Summers writes: “Animal spirits are as fickle as they are important”, “A bitter comedown from Trump’s sugar high” January 17.

Question: Does Professor Summers believe that the pillar of our bank regulations since 1988, the risk weighted capital requirements for banks, promotes or kills those animal spirits he thinks important?

As for me I have no doubts it kills it! Giving banks extra incentives to go in pursuit of the safe and abandon the risky just means that what’s decreed, concocted or perceived as safe, will get too much bank credit, at too low interests, while that which is perceived as risky, like SMEs and entrepreneurs, will get too little or in too expensive terms.

If there is any animal spirit left in the banks after that, then surely it is not those of lions but those of hyenas.

P.S. Professor Summers, you who know so much, would you on behalf of bank regulators dare advance some answers to the following questions?

@PerKurowski

Donald Trump, with a huge political bounty on his head, poses little real threat to that dry hide global trade is.

Lately, every day, I have gotten, I don’t know why, at least ten offers to be part of the bringing Donald Trump down effort, asking me of course to help pre-finance it. There’s no doubt there’s a huge bounty offered for Donald Trump’s political head.

Then in Venezuela, when referring to complex issues, we also have a saying that goes: “You step on one corner of the dry hide, and up goes the other!”

Sir, and that is why I refuse to believe Alan Beattie when he writes that “Fate of free trade depends on the whims of one man”, referring to President elect Donald Trump, January 17.

Trade is a dry hide, you save some jobs here, and you lose some there, and you need to convince some consumers to pay for it all. To then go against free trade, after globalization has brought forward so many of its offerings, and when having a huge bounty on your political head, sounds like a true mission impossible. In fact, were Trump to manage to do so; it would be difficult to ascertain whether Trump is too smart or the bounty hunters too bad.

PS. Sir, Beattie refers to a possible role of WTO. That shows he does not know how much WTO has already been left behind by trade realities. (Sorry WTO technocrats, its not my fault)

PS. In the 1870s, they did not have container-ships, or so much interdependence on the production of parts, or so many consumers shopping on the web.

PS. Are there no threats then to global trade? Oh yes, but Donald Trump's trade policies, is not one of these.

@PerKurowski

A tax on robots or similar substitutes for humans, and a Universal Basic Income, solves many of the challenges of automation.

Sir, Guy Wroble writes: “As automation will target more expensive labour first, aside from a limited number of tech jobs to service the machines, humanity would appear to be on the road to becoming the hewers of wood and the haulers of water. Jobs which pay so little that it makes no sense to automate them. “Automation may lead to humans hewing wood” January 17.

Indeed that could happen, if we do not do anything about it. But we can! Tax all what substitutes for human jobs, and have those tax revenues help fund a Universal Basic Income payable to all.

That way we would not only level the field for humans to compete with robots and similar, but we would also make sure humans do not have to offer themselves to perform the chores that are most suited for robots to do.

@PerKurowski

When will supposedly sophisticated papers like Financial Times wake up to the horrors of current bank regulations?

Sir, Ray Soifer writes: “No wonder banks’ shares generally trade at a discount to their stated book value. No one really knows what their true net asset value is — too often, not even the management.” “Picture of risks in banks’ portfolios is still fuzzy” January 17.

Of course! How could it be otherwise? Banks are currently most certainly paying more for consultants to understand their regulator’s risk/required capital management, than what they pay for the risk management of their own portfolio. Because, how is one to understand risks in banks’ portfolios when the risk weights used by regulators are, to top it up, portfolio invariant, since to do these portfolio variant would be, as they confess, too difficult for them to do?

Could it be because when something is too out of line, it is sort of easier to attribute an intelligent motive to it? Sir, again it all reminds me so much of Chance gardener a.k.a. Chauncy Gardiner

@PerKurowski

Are we supposed to be very impressed with the intellectual capacity of Davos’ besserwissers?

Sir, in Wikipedia we can read that Martin Wolf “has been a forum fellow at the annual meeting of the World Economic Forum in Davos since 1999.” If that’s true, which it does not necessarily have to mean in these days of fake-news, Mr. Wolf is as much a “Davos” man as anyone else of them.

I make a note of this because now Wolf writes: “weakening of globalisation partly reflects the exhaustion of easy opportunities for global commerce and the feeble growth of demand since the crisis. But it also reflects shifts in policy: the post-crisis re-regulation of finance has had a pronounced home bias, with reduced support for cross-border activities.” “Populism will not lead to a better world” January 17.

What? Do we now have a “pronounced home bias”? What about Basel II’s risk weights of 0% the Sovereign, 20% the AAArisktocracy, and 100% “We the People” and that are mostly still in place?

No, though I might run the risk of being be tilted a vulgar populist by Davos’ Wolf, I assure you Sir that I do not find much wrong in reducing the regulator’s pronounced risk aversion bias; that which have them favoring the lending to “safe” corporates wherever they are, or to friendly and “safe” Sovereigns, over the lending to “risky” SMEs and entrepreneurs in their own localities.

And what’s that running around like chickens, scared of some possible horrors of neo-protectionism, in a world that has been so much changed? Do the Davos intellectuals really think that Trump would be able to impose really major increased costs on the American consumers? Like telling its kids “the price of an I-phone will be 50% higher because it has to be made in America… and you must now wait one year more to have it delivered? Forget it! That would be like introducing a 50% tax on all purchases on the web, so as to defend the local mom and pop stores. The smuggling of drugs and fake goods would then be minor compared to that of the so many new entrants.

What Davos should be doing though, is to analyze the need for new solutions in a world in which, because of increased automation, there will be more and more structural unemployment; and also one in which, for sustainability reasons, perhaps some consumers’ aspirations must be reduced.

I believe a Universal Basic Income might indeed be one of the best tools available. I fret though about leaving the discussions on such beautiful and delicate solutions that can so easily be distorted into a monster, in the hands of the so many redistribution profiteers and besserwissers always present in Davos.

PS. Basel II assigned a risk weight of 20% to those rated AAA-AA; and one of 150% to those rated below BB-. Sir, are we supposed to be impressed by the intellectual capacity of the Davos group that saw nothing wrong in considering those perceived as very risky a much bigger threat to the banking system than those perceived as very safe? You tell me!

@PerKurowski

January 15, 2017

When will an Artificial Intelligence Agent declare humans too dangerous drivers and too dumb emission measurers?

Sir, I refer your “From diesel emissions to omitting the driver” January 15.

It is clear, not withstanding only one side will pay for it, that in the case of the failed carbon emission controls, both the measured and the measurers are to blame. Any regulation, if it fails in any shape or form, should bring on some consequences for the regulators… let us say a 50% salary reduction.

As is, just look at the case of bank regulators, those who set risk weights of 20% for what is AAA-rated, and 150% for what is below BB- rated. That evidenced they had (have) no clue about what they were doing; and so they caused the AAA rated securities backed with mortgages to the subprime sector crisis. But they are still going to Davos, flying business class the least, to lecture the world on what to do. 

It is also clear that one of the biggest challenges for the safety of driverless cars is that these might also encounter human drivers on the road. So either is the driverless-cars equipped with software that handles human-driving whims, or, sooner or later, some Artificial Intelligence Agent will take us humans off the road. Is that good or bad?

My answer to that question goes somewhat along this line. If absolutely all humanity is taken off the road, and so we all lose entirely the abilities needed to drive, so be it. But, if some humans were still allowed to drive, why would I want those to be somebody else’s grandchildren and not mine? 

PS. About driverless cars, the issue of how to tax these, so as not to lose out on the taxes we currently collect, for instance from PhDs driving taxes in New York, is also pending.

@PerKurowski

January 13, 2017

Higher import tariffs and minimum wages are superb news… for robot manufacturers

Sir, Richard Waters writes: “Pace of automation will depend on how easily workers are displaced” January 13.

And that partly depends on how much robot, driverless cars and similar automation options, will lobby the governments for higher import tariffs and higher minimum wages.

Or on if we will impose some payroll and minimum wage taxes on these, in order for the humans to compete on a more level playing field.


@PerKurowski

January 12, 2017

Regulators should not focus on those risks (weather prognosis) bankers already consider, but on the uncertainties

Sir, several prominent names write: “Last week Andy Haldane… admitted that economists had failed to predict the financial crisis, and compared the situation with that of ill-informed weather forecasting in 1987 — the “Michael Fish moment”. And the experts argue: “At the heart of the crisis would appear to sit faulty accounts and unreliable audits” and as a consequence they request more reliable accounting rules. “Clearer picture of banks’ capital is required to help avert crises” January 12.

Sir, no can argue against better accounting rules, but please, that is not what created the financial crisis.

In terms of weather forecasting what happened (and what is still happening) was that not only did the banks follow the credit forecasts to set their exposures and interest rates, but so did the regulators, when they set their risk weighted capital requirements. That meant that “weather forecasts” got to be excessively considered. The regulators role on the contrary was and is, not the management of perceived risks, but to consider the uncertainties, like weather prognosis being utterly wrong.

PS. De facto, absurdly, it meant regulators believed bankers were going to go out, especially, when the weatherman was announcing a storm. 

@PerKurowski

January 11, 2017

If regulators keep on regulating as bad as now, will it really help much to ringfence the banks?

Sir, you write: “By the start of 2019, Britain’s largest lenders will need to put their retail banking units inside a heavily capitalised subsidiary, protecting them in case the group fails.”, “Ringfencing will help in the next banking crisis”, January 10.

Do you really think that as long as government/tax-payers are not exposed to having to pay for a bank crisis, then its effects are smaller? If so, why did you not say so before lending support to governments and central banks, on behalf of unwilling or at least un-consulted taxpayers, with Tarp and QEs and similar paying out so much to alleviate the last crisis?

You refer to the Vickers Commission with admiration I do not share. In June 2015, in one of my thousands of ignored letters to you, when commenting on one of Martin Wolf articles I wrote: “The number one priority for any bank regulator, long before thinking about ring-fencing and similar “safety” devices, is to make sure the allocation of bank credit to the real economy is not distorted. To look for banks to be able to survive in shining armor in the midst of the rubbles of a destroyed economy is just insane.”

Sir, I’ve seen very little rectification coming out from bank regulators. Worse yet, the few correct movements they have done in moving towards simpler leverage ratios, because they kept in place some risk-weighting element, have in fact, on the margin, only increased the distortions in the allocation of bank credit to the real economy.

FT, in this matter of Basel’s bank regulations, you are so behind the curve. As is, I am almost tempted to say: “No ringfencing, let the banks run loose, with no supervision!”

@PerKurowski

Risk weighted capital requirements for banks caused the animal spirits of hyenas to substitute for those of lions.

Sir. We had a crisis, which resulted directly from the distorted incentives for the allocation of credit to the real economy that the risk weighted capital requirements for banks caused. If anyone doubts that, just consider that Basel II, of 2004, allowed banks to leverage equity a mindboggling 62.5 to 1 with private sector assets, as long as these assets had an AAA to AA rating. If they did not posses a credit rating then a 12.5 to 1 leverage was the max.

True, FDIC and the Fed did not allow USA’s commercial banks to follow these Basel II rules initially, but the SEC did allow the investment banks to do so, as were European banks allowed to do. That set off the most voracious appetite ever for AAA rated assets, and the markets, understandably, set out to satisfy that demand, in any which way it could, even if by means of fraudulent behavior. Because that is what markets do!

To top it up, with Basel I of 1988, the regulators had risk-weighted Sovereigns with zero percent, and consequentially banks were allowed to build up huge exposures against little capital for sovereigns such like Greece.

And then we had Central Banks, Fed, by means of QEs, injecting the mother of all liquidity in the markets, and again, by foremost buying up sovereign debt, mostly benefitting governments, and indirectly those who already owned assets like stocks.

Sir, the can of the crisis was simply kicked down the road; and the regulations that make banks earn higher risk adjusted returns on equity when financing the “safer” past and present than when financing the “riskier” future kept in place. Our grandchildren will hold us accountable for this.

Martin Wolf nonetheless gives a very positive review of Obama’s eight years of economic policy, “How Obama rebuilt the economy” January 11. How come?

The truth is that Wolf does not get it yet! Here he writes of “a broader post-crisis loss of animal spirits” without being able to understand that those risk weighted capital requirements for banks that I referred to, pre and post crisis, what they have done is to substitute the spirits of hyenas for the spirits of lions.

@PerKurowski

January 07, 2017

Our “free market capitalism” is just the frosting on a statist cake baked by bank regulators in 1988.

Sir, Yuval Noah Harari writes: “Since 1989 elites in the west have come to believe in the “end of history” narrative, according to which liberal democracy and free market capitalism have won over all rival social systems, and the world is therefore bound to become a global community managed through free markets and democratic politics.” … However, since the global financial crisis of 2008 people all over the world have lost faith in the liberal recipe.” “At last, liberals are waking from a long dream” January 7.

That is indeed the conventional version, but “The truth is, so many don’t understand what’s going on in the world.”

In 1988 and in 2004, with Basel I and Basel II, regulators introduced risk weighted capital requirements for banks which allowed banks to leverage almost limitless when lending to the Sovereign, much, like 60 to 1, when lending to the safe AAArisktocracy, and only about 12 to 1 when lending to the “risky” We the People, like to SMEs and entrepreneurs.

Harari opines “the coming years might well be characterised by intense soul-searching and by attempts to formulate new social and political visions. Indeed, liberalism might yet reinvent itself”

If that is to happen, then the first order of the day for those aspiring to qualify as elite, is to understand how they so completely missed out on how these regulations would distort the allocation of bank credit to the real economy, foremost favoring governments.

Elite, where do you think the western world would be had these regulations been applied to banks during the 600 years before the Basel Accord?

Elite, what do you think Medici and many other bankers would have thought about 0 percent risk weight assigned to the Sovereign?

Elite, do you think the subprime or the Greek mess would have happened if banks were required to hold, for instance, 10 percent in capital against all assets? 

Elite, do you understand how this regulation decrees inequality?

Elite, as is don’t you think crony statism is a more clear definition than crony capitalism?

Elite, why do you think I cannot get an answer from regulators on some very basic questions?

Elite, why do you think the Financial Times will not publish this letter?

@PerKurowski

January 06, 2017

C-suite experience can be just as irrelevant to real Main Street animal spirit as government bureaucracy experience.

Sir, Gillian Tett discusses the respective government and C-suite experience statistics of different government teams, and comments that those “83 years of C-suite experience” of Trump’s team and some of the policies announced, like tax cuts, “could ignite animal spirits”, “Team Trump unleashes animal spirits” January 6.

Sorry, the “animal spirit” of an extraordinarily well paid C-suite manager, the owner of a multi million dollar golden parachute, and who is invited to a great restaurant by a banker willing to discuss a billion dollar loan, might be for the purpose of repurchasing the shares of the C-suiter’s big corporation, can have as little of any real Main Street animal spirit, than any government bureaucracy lifer.

"Risky" SMEs and small time entrepreneurs, those who have their bank credit applications most often rejected, now most specially because of the risk weighted capital requirements for banks, those are the ones who really need to be present on Trump’s team, if he is ever going to have a chance to deliver on his popular populist promises.

In fact, C-suite managers could be too dangerous, since these are quite likely those who would be engaging the most in crony statism… in other words ”The Real Swamp”

PS. Came to thing about it. C-suite manager's animal spirits are more like animals in the zoo's spirits.

@PerKurowski

January 05, 2017

Risk weighted capital requirements for banks, is a false solution that is destroying the western world

Sir, Martin Wolf writes: “By succumbing to the lure of false solutions, born of disillusion and rage, the west might even destroy the intellectual and institutional pillars on which the postwar global economic and political order has rested.”, “The march to world disorder” January 6.

Again Wolf prefers to ignore the perhaps most destructive false solution that has affected us.

Before 1988, bank credit, except for when criminal activity was involved, was allocated to what produced banks the highest expected risk adjusted return on equity.

But then, in order to make our banks safer, the regulators, with Basel I 1988 and Basel II 2004, imposed portfolio invariant risk weighted capital requirements for banks. Bank credit was thereafter allocated to what produced banks the highest expected risk and capital-requirement adjusted return on equity.


For a starter with risk weights of 0% for the Sovereign, and 100% for We the People, it introduced runaway regulatory statism, just while communism was disintegrating,

It also caused a dangerous risk aversion, which has bankers no longer financing the riskier future but only refinancing the safer past and present, something which of course is a driver of inequality.

How could it have happened? Six major factors stand out.

First, although hard to believe, bank regulators never defined what the purpose of banks is before regulating these. “A ship in harbor is safe, but that is not what ships are for.” John A Shedd, 1850-1926

Second, equally hard to believe, the regulators never researched what had caused bank crisis in the past; namely unexpected events, criminal doings and what were ex ante perceived as very safe but that ex post turned out very risky. What is perceived as very risky is, precisely because of that perception, what is least dangerous to the system. “May God defend me from my friends, I can defend myself from my enemies” Voltaire

Third, regulators completely missed out on that any risk, even if perfectly perceived, causes the wrong actions, if excessively considered, and doubled down on the ex ante perceived risks.


Fifth, not understanding that, as regulators, they could be introducing serious systemic risks.

Sixth, a general Groupthink, that which results from allowing experts to isolate themselves in a mutual admiration club.

The saddest part of the history though is how after so much evident failure, and evident waste of stimulus like QEs, the risk weighted capital requirements for banks is still discussed as part of a solution. To that we have many silencers, like you Sir and like Martin Wolf to thank for.

Sir, where would the western world have been if since Medici banks had used risk weighted capital requirements for banks

@PerKurowski

The real winners of President Trump’s animosity towards cars built in Mexico could be robot manufacturers.

Sir, Peter Campbell and Jude Webber refer to “Mr Trump’s ire on Tuesday, when he tweeted that GM should face a “big border tax” for importing cars from Mexico.” “Trump to give Mexican cartrade a bumpy ride”, January 5.

I have no idea of President Trump’s financial holdings, but should he own shares in robot manufacturers he should be careful about a conflict of interest, as leashing out against Mexican car jobs is a great and direct way to increase the demand for robots in the USA.

PS. Anyone who argues in favor of minimum wages should, for the same reason, also be required to disclose any personal interest in the robot industry.

PS. Off the cuff formula: Jobs lost in Mexico minus jobs gained in USA equals new sale of robots.

January 04, 2017

Draghi, the more confidence we have in risk weighted capital requirements for banks, the dumber and more fooled we are

Sir, Caroline Binham and Emma Dunkley quote Michael Lever, head of prudential regulation at AFME, which represents the biggest banks and other markets participants, with: “It is important to take the time to create a framework that is capable of accurately measuring the risks that banks are assuming” “Banks win Basel reforms reprieve” January 4.

Hold it there! The problem is not only in measuring risks. The problem is also in assigning the relative importance to the risks measured.

The current capital requirements for banks are based on ex ante perceived risks that should be cleared for by bankers, by means of interest rates and size of exposures. The result is that ex ante perceived risks are excessively considered. Therefore that causes a wrong allocation of bank credit; and this even if the perceived risks are perfectly accurately measured.

This regulation now causes that what is perceived as “safe”, like AAA rated or Sovereigns, get too much credit at too low rates, which is dangerous for the banks; and that what is perceived as “risky”, like SMEs and entrepreneurs, receive too little or too expensive credit, which is very dangerous for the real economy

Mario Draghi, president of the European Central Bank, who chairs the Basel committee supervisory board, is here quoted with: “Completing Basel III is an important step towards restoring confidence in banks’ risk-weighted capital ratios, and we remain committed to that goal.”

To that my only one answer, for the umpteenth time, is “No!” The more confidence in something that is so rotten to its core the worse.


@PerKurowski

January 03, 2017

According to FT’s research, how much do minimum wages and absence of payroll taxes favour robots?

Sir, Vanessa Houlder writes: “When you book an Airbnb room in London, around a third of the $100 saving you make over the price of an average hotel room is due to tax advantages which favour Airbnb’s business model, according to research by the Financial Times” “Airbnb makes most of legal wiggle room to beat hotels” January 3.

Houlder goes on with: “Research from Morgan reported a higher than expected “cannibalisation of traditional hotels” over the past year, citing survey findings that 49 per cent of Airbnb users in the US, UK, France, and Germany had replaced a hotel stay with a stay booked through the online group.”

Indeed, since it is a human owner of an apartment eating up the opportunity from a human owner of a hotel room, it could be described as “cannibalization”. But, how should we describe when for instance a robot or a driverless car takes away a job opportunity from humans? If, for instance, that happens only because of minimum wages and absence of payroll taxes, is that more like human-offerings at the altar of automation and technology?

@PerKurowski

Our younger generations have much more valid reasons than savers and bankers to profoundly resent bank regulators

Sir, Patrick Jenkins reports that the world’s savers and bankers have every reason to resent the posse of policymakers, one of the most powerful quangos in the world, the Group of Central Bank Governors and Heads of Supervision — GHOS for short, and that will meet on January 8”, “Time for GHOS train to leave the shadows and reconnect” January 3.

At the meeting the group will discuss “the future direction of global financial regulation” the “system of risk-weighting the assets on banks’ books” and “the riskiness of banks’ mortgages and SME lending”

Well no. Those who most should resent GHOS (and the Basel Committee for Banking Supervision) are the young.

These irresponsible bank experts, without considering the purpose of banks, and without any empirical studies on what causes bank crises, decided that it was much better and safer for banks to finance “safe” houses than to finance “riskier” SMEs.

That translated into bank financing more the basements where unemployed young can live with their parents, than financing the job creation that can allow the young to be able to afford becoming parents too.

To top it up, they also decided that it was much safer to lend to the governments than to the private sector.

I have for more than a decade and in more than 2.500 letters tried to convince FT to help me to ask these “bizarrely secretive” regulators some very basic questions. Unfortunately until now I have had no such luck.

@PerKurowski

January 01, 2017

The Basel Committee’s risk weighted capital requirements for banks, put the 2007/2008 “Minsky Moment” on steroids.

Sir, John Authers writes: “The greatest dangers to us are not from things we perceive to be high-risk, because we generally treat them carefully. Trouble arises from that which we perceive to be low-risk.”, “Unnatural calm sparks visions of a ‘Minsky Moment’” December 31.

Sir, you know I have written more than a thousand letters to FT over the last decade pointing out exactly that. For instance in July 2012 Martin Wolf wrote: “Per Kurowski, a former executive director of the World Bank, reminds me regularly, crises occur when what was thought to be low risk turns out to be very high risk."

Unfortunately FT has refused to accept the complete implications of this truth.

Authers, as if it suffices as an explanation now writes: “The crisis that came to a head in 2008 revolved around securities that the rating agencies had given the maximum rating of triple A — it would not have happened if they had been considered speculative”.

No! The full truth is that not only did markets and bankers consider and acted as if those AAA rated securities were safe. Regulators did too. With Basel II of 2004 they assigned what was AAA to AA rated, a risk weight of only 20 percent. Thereby they allowed banks to leverage 62.5 times to 1 their equity with these securities. Had banks been allowed to only leverage 12.5 times to 1, as they were limited to with loans to “risky” SMEs and entrepreneurs, that crisis might not even have been identified as a “Minsky Moment”.

Sir below is a link to the full explanation to what really happened with the AAA rated securities backed with mortgages to the USA subprime sector. Do you have it in you to share it with your readers?


@PerKurowski

It is only the bankers’ responsibility to clear for risks. The regulators should only prepare banks for uncertainty.

Gillian Tett writes that Axel Weber, the chairman of UBS, “suggests investors urgently need to think about the difference between ‘risk’ and ‘uncertainty’: the former refers to events that can be predicted with a certain probability; the latter refers to unknown future shocks.” “Emerging markets offer clues for investors in 2017: Extraordinary political events have upended western assumptions about risk and uncertainty” January 1.

Let us see if this distinction helps Ms Tett to see that with risk weighted capital requirements for banks, both bankers and regulators are clearing for risk. The result is that “risk” is excessively considered while “uncertainty” plays a secondary role. Seemingly it is too hard for regulators and anthropologists to understand the simple truth that any risk, even if perfectly perceived, causes the wrong actions if excessively considered.

To subject banks to this double counting of risk means banks will lend too much to what is ex ante perceived, decreed or concocted as “safe” like AAA rated securities and sovereigns like Greece, and too little to what is perceived “risky” like SMEs and entrepreneurs.

Only the exclusive use of a leverage ratio, which represents a capital requirement that has nothing to do with perceived risk, is what could help banks prepare for uncertainty, without distorting the allocation of bank credit to the real economy.

@PerKurowski

December 31, 2016

The dangers posed by hackers are much too dangerous and merit much more serious responses than expelling diplomats

Sir, when you consider the potentially so much more dangerous threats hackers can pose than hacking some Democratic National Committee files, like for instance hitting nuclear energy facilities, how can you argue “expelling 35 Russian “spies”, closing two properties and imposing sanctions on Russian agencies” represents a smart and “A sharp US riposte to Moscow’s cyber breach” December 31.

Why does this type of hacking get so much front road attention? Could it be because I fact it has little to do with hacking and more with other issues?

Daily I get about 30 emails from all over the US political spectrum asking for contributions. Since I am not a US citizen, I have ignored them all. But perhaps the possibilities that behind any of these solicitations could be a Russian hacker might be even a stronger reason for me to not contribute to anyone. 

I trust, or at least I pray, that beneath the surface of this public discourse, much more important measures are taken to defend us from malevolent hackers, here, there and everywhere.

@PerKurowski

December 29, 2016

Record labels and Social Media, negotiate copyright issues among you, but please don’t endanger our heartfelt covers

Sir, Anna Nicolaou writes: “The big record labels are pressing the world’s largest social media network… to tackle copyright for cover songs and other content that fans post to their newsfeeds” “Record labels press Facebook to face the music over breaches of copyright” December 29.

That saddens me. On my 60th birthday, thinking about what I could give myself, I came up with the idea of recording and posting on YouTube one cover of a song I have liked in my life, for each day during the whole next year, and so I did, 365 songs! Phew, was I relieved it was not a leap year! Can you imagine how I would feel seeing all that effort and memories just vanishing? http://mynoisyvoice.blogspot.com

If my modest covers generate some ad-revenues, the record labels and the social media should come to an agreement on how to share these… but under no circumstances should it affect all of us who want to express admiration in this way for the songs in our life.

By the way I can’t imagine how any of my covers would impede a single sale of a record containing it; in fact, by reminding people of its existence, it could even generate some new sales. I was indeed moved when one of my covers received the following comment: “Thank you for interpreting so well the song of my grandfather…. I am proud that the memory of his work is not erased over time, and that by disseminating it, do not let it die, an affectionate greeting from….”

If there were one reason I could though understand for the owner of a copyright to take down my YouTube cover, it would be that the song’s original composer expressed horror over how I might be murdering it. Sir, I pray not too many will. 

PS. On my http://ayearofsongs.blogspot.com, with respect to copyrights I actually wrote:

“One is always worried about issues such as copyrights, as one does not want to end up in a slammer at any age, even if voicing some of these beautiful songs could perhaps be worth it.

What I will try to do is to check out on the web if someone else has been doing a cover of the song or any other one by I believe is of the same composer and, if so, I will presume it is ok for me to do it too.

Of course if someone protests loudly, not only for a copyright infringement but also because the composer feels I am destroying or in any other sense behaving disrespectfully towards his baby, I will ipso facto take it down and replace it with another song.”

@PerKurowski

December 28, 2016

Populist bank regulators ‘like them’ commandeered a historical triumph of emotions over facts

Sir, Sebastian Payne writes that Keith Craig “defined 2016 as the year ‘People Like Us’ — those who have been filled with despair and disbelief about populist uprisings — lost control…[to ‘People Like Them’]” Payne then describes PLT as “the folks who act on gut not reason. Emotion, not facts.” “The year People Like Them take control from People Like Us” December 28.

Payne, praising the work of PLU accepts these are also to blame for, among other, the financial crash and its after effects. In this he is wrong.

If Payne’s description of PLT applies, then at least with respect to banking, PLU lost control in 1988, when with the Basel Accord the concept of risk weighted capital requirements for banks was introduced.

This because ‘more risk more capital – less risk less capital’ is a pure guts no reason, just emotions and no facts, concept.

Why? Bank crises always result from unexpected events like devaluations, criminal behavior or excessive exposures to something ex ante perceived as safe but that ex post turned out to be very risky. What is ex ante perceived as risky never generates that kind of exposures that could endanger the banking system.

In 2004, with Basel II, the regulators doubled down on their emotions and their lack of facts. Its risk weight of 20% for what is rated AAA, and 150% for what’s rated below BB-, represents a historical triumph of emotions over fact.

That had the banks crashing with little capital into AAA rated securities and sovereigns like Greece, and that has banks impeding growth by staying away from “risky” SMEs and entrepreneurs.

With regulators ‘like them’ ‘People like us’ are toast, most especially if we, like FT, behave ‘like them’ and keep mum on what the regulators are doing.

@PerKurowski

December 26, 2016

To those who argued Geocentrism, Heliocentrism would have represented fake news.

Sir, Timothy Garton Ash writes: “The real challenge for the craft and business of journalism is to bring those facts to people who have fallen prey to emotionally appealing populist narratives — and may not even be interested in learning the boring truth.” “What to do when the truth is found to be lies” December 24.

Indeed, Garton Ash is right, but let us not forget that quite often there are also those very interested in that the truth is not learned.

For instance in apportioning the blame for the 2007-08 crisis, how much has been laid on bankers and how much on regulators, 95% - 5%? What would then happen to a post that argues, as I truthfully do, that regulators, by setting up irresistible temptations, were more to blame than bankers? Would it be banned as fake-news? Of course you could argue that is an opinion, not news, but the frontier between these is not that clear.

Sir, trying to sort between truth and falsehood, puts us on a slippery road, but must of course anyhow be tried. One possibility would be to ask social media to refrain from linking to any news not signed by a real person; or to any site that specializes in obvious scandalous news. But to ask much more from social media would be naïve, since these derive a lot of their income precisely from generating ad-clicks. I mean just as naïve as when bank regulators allowed banks to calculated their own risk-weighted capital requirements.

@PerKurowski

December 24, 2016

Regulators placed delicious cookies on the table and only banks are being punished for falling for the temptation

Sir, again, December 24, we read on your front page about banks being hit with penalties for the subprime mess, and still not a word about the responsibility of regulators creating the temptations they should have known that, sooner or later, some would not resist.

Here are four factors that explain the subprime mess, or at least 99.99% of it.

Securitization: The profits for those involved in securitization are a function of the betterment in risk perceptions and the duration of the underlying debts being securitized. The worse we put in the sausage – and the better it looks - the higher the profits. Packaging a $300.000, 11%, 30 year mortgage, and selling it off for US$ 510.000 yielding 6% produces and immediate profit of $210.000 to be shared among those involved in the process.

Credit ratings: Too much power to measure risks was concentrated in the hands of some very few human fallible credit rating agencies. The systemic risk with using credit ratings so much should have been anticipated by regulators.

Borrowers: As always there were many financially uneducated borrowers with needs and big dreams that were easy prey for strongly motivated salesmen, of the sort that can sell a lousy time-share to a very sophisticated banker. 

Capital requirements for banks: Basel II, June 2004, brought down the risk weight for residential mortgages from 50% to 35%. Additionally, it set a risk weight of only 20% for whatever was rated AAA to AA. The latter, given a basic 8%, translated into an effective 1.6% capital requirement, which meant bank equity could be leveraged 62.5 times to 1.

So, clearly the temptations became too much to resist for many of those involved.

The banks, like the Europeans, thinking that if they could make a 1% net margin they could obtain returns on equity of over 60% per year, went nuts demanding more and more of these securities; and the mortgage producers and packagers were more than happy to oblige, signing up lousier and lousier mortgages and increasing the pressure on credit rating agencies.

Of course it had to end bad... and it did… in sort of less than 3 years.

Financial Times, is this a version of the real truth that is not to be named?

PS. “DoJ penalties hit $58bn. If banks leverage 12 to 1, that means $696bn in credit capacity. Why do they not collect these fines in bank shares?

@PerKurowski

December 23, 2016

The worst we could do, is to treat a structural unemployment as a temporal one.

Sir, Gillian Tett writes: “If there is one thing on which almost all economists agree, it is that digital technologies are performing many jobs once done by humans… [and so there’s an] urgent need for a bigger policy debate about how to prepare workers for this new world”, “How robots make humans indispensable”, December 23.

Absolutely, but in this respect, if we face structural and not temporal unemployment then, as I wrote in an Op-Ed in 2012, “We need worthy and decent unemployments”.

For that we must rid ourselves of the negative bias that current unemployment benefits carry. The best alternative in town seems to be a Universal Basic Income, namely the unconditional payout of a fixed amount per month to all citizens, whether unemployed or not. That would help the economy by keeping up consumer demand, and signify a good stepladder for everyone who wants to reach up to a temporary job, a.k.a. a gig job.

How to fund it? There are many alternatives but, in the context of this article, a payroll tax on robots, driverless cars and similar substitutes for humans, seems the way to go, since that would also create a more level playing field when competing for jobs.

Who will be against it? Naturally the redistribution profiteers as that decreases the value of their franchise.

PS. In my homeland I have for decades wanted my nation's net oil revenues to fund such UBI, in this case a variable one, so as to help free us citizens from living under that servitude that 97% of all the nation’s exports going to central government signifies.


PS. Ask Trump, what’s worse losing your job opportunity to outsourcing, migrants or robots? If robots, where does he suggest we build the wall and who’s going to pay for it?

@PerKurowski

Martin Wolf, concerned about our young’s future, praises risk-taking culture. Is this change of mind permanent?

Sir, Martin Wolf writes: “With an ageing population, power is over-concentrated in the hands of the old… The solution is to give parents votes on behalf of minor children.” “Ageing Big Ben’s timely reminder that our political system needs repair” December 23.

In February 2007, in a letter responding to an article in FT by Christopher Caldwell titled “Why the ‘right of the children’ is a juvenile concept”, and based on an Op-Ed I published in Venezuela, I wrote: “If the average life length of a person in UK were 80 and our democracies had anything to do with representation of interests, as in companies, then a new born should have 80 votes, a middle age 56 year old like me 24 votes and someone over eighty should count his blessings if he is allowed to keep his single vote. Of course the previous is clearly just an exaggeration, but it serves to argue in favor of the one-child-one-vote concept, in which the votes of the children are to be exercised by their mother, father or older siblings.”

Wolf, in praise of Big Ben and those responsible for it “George Airy, astronomer royal, [and] Edmund Beckett Denison (later Baron Grimthorpe) also writes: “For an amateur to have won such an important commission tells us much about the risk-taking culture of the high Victorians, as does the innovative nature of his unprecedentedly accurate clock.”

What is this? Martin Wolf suddenly thinking of empowering the young and praising a “risk-taking culture”? I ask because for too long Wolf has refused to support my argument that current risk adverse bank regulations, with their risk weighted capital requirements, has the banks only refinancing the “safer” past and present, and not the “riskier” future our young ones need to be financed, so that they don’t have to stay in their parents’ basements, until these pass away.


PS. I am not really sure about: “The future of a country managed for the benefit of the past, cannot be not bright.” Is it my English that is lacking, a typo or just a Freudian slip? Per Kurowski

@PerKurowski

December 21, 2016

Martin Wolf, what do we call those who exploit elites’ intellectual laziness? Aren’t they also demagogues?

Sir, I refer to Martin Wolf’s “Democrats, demagogues and despots”, December 21.

If a demagogue is “a leader in a democracy who gains popularity by exploiting prejudice and ignorance among the common people, whipping up the passions of the crowd and shutting down reasoned deliberation”, what do we call those that though with more discretion and elegance, do the same among the elite?

In this case I refer directly to those who promise: “We will make the banks safe, because we will force these to hold more capital against what is perceived as risky than against what is perceived as safe”, and are then believed, by for instance many prestigious columnists.

Is that not exploiting a prejudice against those who anyhow, precisely because they are perceived ex ante as risky, already find it harder and more expensive to access bank credit, and therefore pose no major risks ex post to banks?

Is that not exploiting a prejudice in favor of those who anyhow, precisely because they are perceived ex ante as safe, already find it easier and less expensive to access bank credit, and could therefore really pose major risks ex post to banks?

Is that not exploiting the ignorance or naiveté of those who believe regulators could make banks safe without affecting their social purpose of allocating credit efficiently to the real economy?

Of course technocratic demagogues do not operate within any type of democracy, far from it, most often mumbo jumbo and research papers suffices to impress. And of course they are no despots, at least not wittingly.

Like Martin Wolf I do feel very uncomfortable with recent developments. Clearly Brexit needed not to be, and Trump does not fit the profile of what we have grown accustomed to at least hope for as that of a president in the USA.

But the elite must accept it is very much responsible for what is happening. Just for a starter it has allowed many technocratic tribes, like in Brussels and Basel, to operate unencumbered for way too long. It would seem the “elite” has relinquished its responsibilities and now prefers to live in the comfort of blissful ignorance.

If in doubt, just see the difficulties I have had trying to get straight answers to some very basic questions.

The world is under the siege by growing environmental problems, by robots taking jobs, by fake news because truth is not competitive enough, by terrorism and growing violence, by crony statism, by facing excessive debts everywhere… and by much more. Sir, where is your elite?

@PerKurowski

December 20, 2016

Bank regulation technocrats are among the most powerful and dangerous authoritarians

Sir, Nick Pearce writes “In the year of Brexit, Donald Trump and Vladimir Putin, liberalism has been declared dead and buried”, “Reclaim liberalism from the authoritarians.” December 20.

Sir, let us not forget that authoritarians can come in many different shapes. Some of the most powerful, and most dangerous, are the bank regulation technocrats. On their own, without consulting much outside their mutual admiration club, with immense hubris, they decided they could make our banks safer by imposing risk weighted capital requirements for banks. As if the only purpose of banks in to be safe. They also smuggled in statism by declaring a 0% risk weight for the Sovereign and a 100% risk weight for the citizen.

Their regulation distorted horrendously the allocation of bank credit to the real economy. By for instance pushing those securities that obtained an AAA rating, and empowering Sovereigns like Greece to take on too much debt, they caused the 2007-08 crisis.

By making banks no longer finance the “risky” future and only refinance the safer past or present, they imposed on our economies what some have called secular stagnation.

One could easily argue that many of the difficulties of liberalism that Nick Pearce describes here, are the direct responsibility of these regulators

And their contestability is zero. That I can evidence with hundreds of letters, questions, opinions posed directly to many of them, for much more than a decade. No answers, and when they respond, it is as if they have not heard the question.

Sir, unfortunately, to enlist FT in the quest of getting some answers out of these authoritarians has proved to be impossible, this no matter how much you pride yourself with your motto “Without fear and without favor”.

@PerKurowski

December 19, 2016

Why has the Financial Times, and other, kept silence for so long about some obvious mistakes in bank regulations?

Sir, Wolfgang Münchau now finally writes: “We should start making a distinction between the interests of the financial sector and the economy at large”, “Reform the economic system now or the populists will do it” December 19.

Of course we must. I have soon written 2.500 letters to FT, many to Wolfgang Münchau, pointing out the fact that our loony bank regulators did not find it necessary to define the purpose of the banks before regulating these. Their risk weighted capital requirements allow banks to earn higher expected risk adjusted returns on what is perceived as safe, than on what is perceived as risky. That might help bankers’ wet dreams come true, but does clearly not serve the interests of the real economy or even the long-term stability of the banks.

Münchau also writes: “We should not be surprised that people have become sceptical about experts who peddle theories that result in comically wrong predictions and that do not square with the reality they perceive.”

Indeed, why should we trust regulators who “comically” believe that what causes bank crises is what is ex ante perceived as risky?

But Sir, since lack of contestability has allowed these ludicrous regulations to survive for way too long, even after a huge crisis made its mistakes evident, we also need to understand how a qualified media like the Financial Times, and other, can be blinded, or silenced for so long on this issue.

@PerKurowski

December 17, 2016

Animal spirits yes, but of lions, hyenas or pussycats? Do we have irrational exuberance, or rational fright?

Sir, John Authers commenting on how the Dow Jones Industrial Average can top the 20,000 mark for the first time writes: “Animal spirits are back. The enthusiasm is palpable, and is on a scale unseen since the height of the tech boom”, “Echoes of exuberance as the Dow stirs animal spirits” December 17.

Authers, with “markets… were in a very different state” would seem to agree with that we are not talking of the spirits of the same animals. The tech boom had lions with great illusion and too much optimism and bravery pursuing a brand new future. The current boom, resulting from low interests, QEs and excessive public debts everywhere, seems more one of pussycats taking refuge in whatever is offered. Of course, as always, hyenas are present in order to feast on the many cadavers any heightened volatility causes.

What brought all this on? Sir, as you know I think, but you do clearly not want the rest of the world to think, that this is the natural result of regulators taming, or castrating, the animal spirits of banks. That they did with their capital requirements based on ex-ante perceived risks, precisely those risks that were often already being cleared for too much by the ex-ante-risk-adverse bankers Mark Twain referred to.

Authers now writes: “Trump’s deregulatory agenda could delight markets.”

That’s a new view I very much welcome. Over the last decades, public opinion has almost exclusively been fed the notion that all of its troubles were only the result of financial deregulation.

The problem though is that Trump, even though he himself has been a bank borrower, does not really understand that without removing the odious regulatory discriminations against the “risky”, like SMEs and entrepreneurs like Trump, his stimulus plans, that which includes tax cuts, has not a fair chance to work.

@PerKurowski

December 15, 2016

The Basel Committee for Banking Supervision is the stupidest and most failed oracle of our times

Dan McCrum writes about predictions, “How to grab hold of the conversation with a bold prediction” December 16.

Sir, I just want to notice, for the record, for the umpteenth time, that the risk weighted capital requirements for banks, more risk more capital – less risk less capital, are de facto a prediction by the regulators based on what they believe is the most dangerous for our banking system.

As is, from their desks, they predicted that what is ex ante perceived as risky, is risky ex post. Clearly that must be one of the stupidest and senseless predictions of our times.

Anyone with the slightest understanding of what happens on Main Street, would know that what poses dangers to the banking system is unexpected events, like devaluations, criminal behavior, or excessive exposures to what was ex ante perceived as safe but that ex post turned out very risky.

Sir, I’m sorry but I have to ask, since you seem to have swallowed that prediction hook, line and sinker, has anyone in FT’s establishment ever walked on Main Street?

Sir, you doubt it? Then dare ask the regulators the following questions and observe their silence.

@PerKurowski

FT establishment, accept that getting rid of a bank regulation that decrees inequality would also help the worst off

Sir, Chris Giles argues that Mark Carney did not live up to his own admonition last week about that the time has come for frank talk about the downsides of globalisation “Frank talk, not warm words, will help the worst off” December 15.

Indeed, Mark Carney, besides being the governor of the Bank of England, is the current chair of the Financial Stability Board, and so presumably well versed in bank regulations. Nonetheless Carney has refused to be frank about the fact that the current risk weighted capital requirements for banks, distorts horrendously the allocation of bank credit to the real economy, hurting growth and job creation; and all this for no purpose at all as major bank crises are never caused by excessive exposures to something ex ante perceived as risky. That regulation de facto decrees inequality.

But with respect to that FT also decided to ignore my soon 2.500 letters sent over the last decade on the subject of “subprime banking regulations”. One of these days, when all truth about the risk weighing really unravels; FT will need to be frank on its reasons for silencing a voice of criticism.

PS. Here are some simple questions that the “without fear” FT establishment has not dared to ask the bank regulation establishment. Or might it be that the “without favour” part of FT’s motto has its exceptions.

@PerKurowski

December 14, 2016

Because of distortive bank regulations, current tax cuts will deliver much less growth than what could be expected.

Sir, I refer to George Magnus’ “New regime’s growth pledge poses challenge for the US central bank” December 14.

In it, like many other commentators, Magnus draws comparisons between current Trump/Steven Mnuchin economic plans, with the lowering of taxes, and the Reagan years. He find several differences, though again like most or perhaps all commentators, he ignores the fact that during Reagan years, there was no such thing as risk weighted capital requirements for banks that distorted the allocation of credit.

That regulation stops us from getting the most bang out for any stimulus, be it tax cuts, QEs, fiscal deficits, low interest rates, etc.

If adjusted for it, the Committee for a Responsible Federal Budget’s already worrying estimates would even seem too optimistic.

What is truly harrowing though, is that those distortions are not even discussed, as if these did not exist, as if these should not be named.

For instance I have been unable for more than a decade to get straight answers from the regulators to some very basic questions, zero contestability; and Sir, FT’s Establishment has also refused to ignore these questions, notwithstanding my soon 2.500 letters to you on “subprime bank regulations”

@PerKurowski

Mark Carney, as bank regulator, has no right to talk about an “unprecedented desire for safety”

Chris Giles writes: Mark Carney, governor of the Bank of England, talks about an “unprecedented desire for safety”. “Fed faces dilemma over how high rates should go” December 14.

Hah! Mark Carney is one of those regulators who set the capital requirements for banks based on ex ante perceived risks, and if that’s not an unprecedented run amok desire for safety, what is? Current bank regulators have not failed somewhat, they have failed in such a fundamental way that they should never ever be allowed to even get close to banks again.

Bankers perceive risk, and the more risk they see, the less they lend, and the higher the interest they charge… and yet regulators, if they also perceived more risk, also wanted banks to hold more capital… and so the ex ante perceived risks became excessively considered.

With the Basel Committee’s goggles, the safe seems safer, the risky riskier and the allocation of bank credit to the real economy goes bananas.

@PerKurowski

Why is obvious crony statism referred to as crony capitalism?

Sir, I refer to Martin Wolf’s “Why Xi cannot succeed with his reforms” December 14.

In it, Wolf quotes the following from Minxin Pei’s “China’s Crony Capitalism”: “The emergence and entrenchment of crony capitalism in China’s political economy, in retrospect, is the logical outcome of Deng Xiaoping’s authoritarian model of economic modernisation… because elites in control of unconstrained power cannot resist using it to loot the wealth generated by economic growth.”

But “Capitalism” (at least according to Wikipedia), “is an economic system based on private ownership of the means of production and their operation for profit. Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets. In a capitalist market economy, decision-making and investment is determined by the owners of the factors of production in financial and capital markets, and prices and the distribution of goods are mainly determined by competition in the market.”

Sir, so why does it refer to “crony capitalism” when it is clearly much more a case of “crony statism”? Could it be that the “unconstrained power of the elites” also cover the terminology we are to use? Like for instance when references are made to our economies being under the yoke of “neo-liberalism”, all while bank regulators gladly risk-weigh Sovereigns with 0%, and We the People with 100%. Or like when intrusive and complex bank regulations are mentioned to have happened in a period of "deregulation". 

@PerKurowski

December 13, 2016

When in a peace process you cannot award both sides a Nobel Prize, you should know you should refrain entirely

Sir, Andres Schipani writes: “coming to Oslo represented a closing chapter for me too. I stood as the victims of the conflict Mr Santos had brought with him received thunderous applause. Oddly, there was no Farc presence. Instead, there was Ingrid Betancourt, a former hostage who has acquired celebrity status” “A Nobel Prize and the struggle for peace in Colombia” December 13. 

Let me be clear. I wish for peace in Colombia as much as anyone else, but the current peace proposal, and this Nobel Prize, represents too little of a closing chapter for many Colombians than what it could represent for irrelevant outsiders, like Schipani and me.

And since Schipani brings up Dylan, again I must speculate on the possibility of secretarial errors at the Nobel Committees in Oslo and Stockholm. Perhaps Dylan was more worthy of the Peace prize, while Santos the literature one. The latter because for Santos to have presented to his people a 297 pages long document for referendum, must surely represent an outstanding moment in required reading. Would anyone in Britain have dared to do such thing? I doubt it.

That said, I do not agree with the Nobel committee’s prize to Santos, for the very simple reason that if in a peace process, you do not find yourself capable of giving both sides the same prize, then you should know that you should better abstain altogether.

Besides even if one could argue that had he proposal won the referendum, Santos would have been worthy of the prize... now, going "fast-track", over the peoples heads, clearly puts the whole process in a much less favorable light. 

And, if the prize was a sort of domestic consolation for the role Norway played as an observer in the negotiation, then it could have been more transparent to give that prize directly to Norway. Why not? Do observers not very often have to play the most difficult role of total neutrality while utterly disliking one or the other side, or both?

@PerKurowski

Italy would have been far from as troubled as it is, if regulators had not distorted bank credit.

Sir, Mariana Mazzucato writes: “Increasing investment is essential to Italy’s future, as is fundamentally changing public-private relationships to make them less focused on favours and subsidies, and more on transformational opportunities”, “Italy’s future growth hinges on new ways of doing business” December 13.

Let us be clear. Most true “transformational opportunities” arrive by means of the market, and many “transformational opportunities” is just a code word for crony-statism profiteering.

There is one major fact that is being constantly evaded in the debate about Italy’s and most other economies. That is the distortion the risk weighted capital requirements for banks cause in the allotment of credit to the real economy.

Italy would never have accumulated so much public debt, had it not been for the false market signals that resulted when the Basel Committee decided to assign a zero risk weight to the sovereign and one of 100% to We the People, that which includes SMEs and entrepreneurs.

De facto those risk weights translate into a belief by regulators that government bureaucrats know better what to do with bank credit than the private sector… something that unless you are a runaway statist, make no sense at all.

Even at this point, according to Basel II’s standardized risk weights that are still being applied, the weight given to the Italian public sector debt is lower than that of most participants in that real economy that represents Italy’s best chance for the future. Especially when bank capital is very scarce, like now, any little difference in capital requirements means a lot.

Italy and all other have no chance of regaining some rationality in the allocation of bank credit, unless this lugubrious piece of regulations is eliminated.

Obviously, you cannot make the changes all at once, without severely affecting bank credit. But grandfathering previous capital requirements for existing assets, on the margin, for all new bank assets that regulatory discrimination must stop.

PS. Let’s stop talking about crony capitalism when obviously, what is happening, is crony statism.

@PerKurowski

To who should productivity of robots belong? Why not tax it and share it out with a Universal Basic Income scheme?

Sir, I refer to Carl Benedikt Frey’s “Make technology work for the many not the few” December 13.

In 2012, in an Op-Ed titled “We need worthy and decent unemployments” I wrote: “The power of a nation, and the productivity of its economy, which so far has depended primarily on the quality of its employees may, in the future, also depend on the quality of its unemployed, as a minimum in the sense of these not interrupting those working.” And I feel that statement is becoming truer day by day.

What to do about it? Day by day I am becoming surer that in some sort of Universal Basic Income lies the answer. Let us put some payroll taxes on robots. That would not only allow many humans to compete better for jobs but, if the robots win, then those taxes could help fund a Universal Basic Income.

In Trump terminology: Let us build a wall against robots and have these pay for it!

@PerKurowski

PS. Canada

December 10, 2016

If government monopoly profiteers de-cash society, in order to impose negative interests, is that not also a crime?

Sir, Kenneth Rogoff writes:“[In] advanced economies, the idea of recalibrating the use of cash is an entirely reasonable one. While paper currency has many virtues that will continue into the distant future (including privacy…) the vast bulk is held in large denomination notes such as the US $100 and the €500 that have little significance in most retail transactions. A broad array of evidence suggests that high-denomination notes… mainly serve to facilitate tax evasion and crime.” “India’s cash bonfire is too much, too soon” December 10.

I have two questions: 

First: Is not the US $100 and the €500 the most effective tools for privacy?

Second: Is not cash, one of the last resources you could use to defend yourself against negative interests?

In future presidential electoral debates anywhere, a citizens obligatory question could be: "Sir, do you want to screw us getting rid of cash, so as to make it easier for you to pay off government debts with negative interests?"

@PerKurowski

When are regulators grilling Citi to be grilled on their own responsibilities for causing the 2007-08 crisis?

Sir, Katie Martin reports: “Regulators to grill Citi over role in sterling flash crash” December 10.

That’s OK. Grill Citi! But when are regulators going to be grilled on the crisis they caused by allowing banks to leverage over 60 times to 1 their equity when investing in AAA to AA rated securities; or almost limitless when lending to sovereigns like Greece?

And when are they going to be grilled on how their nonsensical risk aversion impedes satisfying the credit needs of the real economy?

I say. Grill Regulators Too!

I suggest that grilling could begin with the following questions that regulators have steadfastly refused to answer me… because I am no one to have the right to ask them questions (and FT has refused to help me)

@PerKurowski

President Trump. Bankers have already way too much representation. Give the much-needed “risky” borrowers more voice

Sir, I refer to Sam Fleming’s and Alistair Gray’s “Bank’s president is latest alumnus to be tapped for a senior White House job” December 10.

Current bank regulations overtly favor banks earning much higher expected risk adjusted returns on equity when lending to something perceived as safe, than when lending to something perceived as risky, like to SMEs and entrepreneurs.

That of course delights bankers but the other side of the coin, is that the real economy is not getting its credit needs efficiently satisfied.

Therefore Trump would do a lot better assuring the perspective of “borrowers” is more represented in his government, than the clearly overrepresented perspective of bank lenders.

PS. I would love for Trump to convene the regulators and ask them a set of questions that they refuse to answer to someone as powerless as me… that is unless perhaps I threaten them with going on a hunger-strike.

@PerKurowski

December 09, 2016

When there is no contestability whatsoever, perhaps a disrupting referendum is the citizens' only option

Sir, as a Venezuelan it is with great interest I read Martin Wolf’s “Appeals to the will of the people threaten parliamentary democracy” December 9.

In my homeland, the majority of the vote established a de facto dictatorship but now, when that same dictatorship has lost its majority, it fights back against a recall referendum right, even though that right is imbedded in our Constitution.

But forget crazy Venezuela and let’s consider slightly less crazy countries. Does not parliamentary democracy also require a very high degree of contestability?

Sir, for more than a decade now, I have tried to get anyone even remotely related to bank regulations to answer some very basic questions, to no avail. Even influential columnists like Martin Wolf do seemingly not dare to pose those questions either.

In cases like this, what are “We the People” to do. Perhaps a referendum to recall all bank regulators is our only option? Otherwise…must we go on a hunger strike?

PS. Is it so impossible to have parliamentary dictatorships?

@PerKurowski