Monday, September 28, 2015

UN’s Sustainable Development Goals, SDGs, against the backdrop of the Credit Risk Weighted Capital Requirements for Banks

The fact is that current bank regulations, by allowing for lower capital requirements, allow banks to earn higher risk adjusted returns on equity when lending to what is perceived as safe than when lending to what is perceived as risky. 

That’s it! Just avoid taking credit risks and you earn more. Not a word about a purpose for banks; like helping to generate jobs for the young or making the planet more sustainable. So we have a banking system that no longer finances the future, it now only refinances the past.

And to top it up, the regulators assigned a risk weight of zero percent to the sovereigns (governments) and of 100 percent to the citizens and private sectors on which that sovereign depends. Which means they believe government bureaucrats can use bank credit more efficiently than SMEs and entrepreneurs.

And of course those regulations completely distort the allocation of bank credit to the real economy and, by diminishing the opportunities of the risky to gain access to bank credit, increases existing inequalities. 

And of course those purposeless bank regulations are also dangerously useless. We know that major bank crisis never occur because of excessive financing of what is perceived as risky; they always result from excessive financing of something erroneously believed to be very safe 

And not one iota about this is being discussed in the UN, IMF or elsewhere

Can you imagine if by allowing banks to hold less somewhat less equity when lending to what finances SDGs, we made banks earn higher returns on equity when financing SDGs?  

And so I am sorry, against this backdrop, the announcement of the Sustainable Development Goals, the SDGs, might suggest the term Pollyannaish should henceforth be spelled as PollyUNnaish.

PS. Volkswagen should have rudely reminded UN bureaucrats that there is a real world waiting out there to game their SDGs.

Tuesday, September 22, 2015

Taxes should be collected, paid and used, only as a result of a harmonious relation between citizens and governments.

If we are to develop for systems that “Protect and increase tax revenues by implementing multilateral automatic information exchange”, these should go hand in hand with equally automatic systems that make certain that the way government spends such tax revenues, is in agreement with what was promised to the tax-payers. Otherwise we might run into deadly efficient Sheriffs of Nottingham collecting taxes for obnoxious King Johns, without even having a Sherwood Forest where to hide.

I repeat nothing works better against tax havens than tax heavens. And if we do not get those heavens we better keep some havens.

Tax evasion is often described in terms of countries losing money. That is not entirely correct. It is the government of a country that loses the right to administer the evaded tax funds… and sometimes that is not all bad.

There are cases in which it would seem it should be a civic duty to escape the payment of taxes, so that those resources are not dilapidated and can be better used defending the country.

In Venezuela its government gives away in free gas more than all its health, education and social spending put together. Has not a government that does that forfeited its right to tax the citizens?

Irresponsible governments should not have guaranteed access to any type of information about their subjects.

Let us be careful with any Tax Collector's Unite call... they might all belong to a small mutual admiration club, with mutual interests and an overpowering group solidarity.