Martin Wolf writes that Jan Zielonka, in “Counter-Revolution”, holds that “liberal democracy and neo-liberal economics, migration and a multicultural society, historical ‘truths’ and political correctness, moderate political parties and mainstream media, cultural tolerance and religious neutrality…is under attack” and that he “is particularly critical of the EU, a “prototype of a non-majoritarian institution led by ‘enlightened’ experts”. “
Project backlash”, February 3.
“Enlightened experts”? Absolutely! In 1988, without any real meaningful consultations, without thinking about the purpose of the banks, and without thinking thru its possible consequences, G10’s central bankers and regulators introduced risk weighted capital requirements for banks.
The Basel Committee then favored the sovereign with the outrageously statist risk weight of 0%; and, in 2004, the AAArisktocracy with 20% and the financing of residential houses with 35%; while disfavoring loans to unrated citizens, SMEs and entrepreneurs with a 100% risk weight.
Did those regulators ever explain why they should want to favor with lower capital requirements for banks that which is already favored by being perceived as safe, and thereby discriminate against that which is already disfavored by being perceived as risky? No. They are such besserwissers they don’t even hear the question.
These regulations seriously distorted the allocation of bank credit to the real economy by stimulating the banks to finance much more the “safer” present consumption than the future “riskier” production… something that truly constitutes a shameful intergenerational treason.
Besides a slowing economy, the only thing the risk weighting guarantees is that when banks systems really find themselves in trouble, which is when something perceived as very safe turns out to be very risky, banks will stand there with especially little capital. Brilliant eh?
Martin Wolf ends with “We can see the crisis of liberal democracy most clearly in the fact that so ardent, yet disappointed, a proponent offers not much more.”
Mr. Wolf what about your duty of “without fear and without favor” using your throne of influence to force the Basel Committee regulators to answer the questions that I have posed in thousand of letter to FT, and mostly to you?
Per Kurowski
Source:
http://teawithft.blogspot.com/2018/02/jan-zielonka-yes-enlightened-and-not.html
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