Sunday, August 21, 2016
We have many central banks purchasing public debt in outrageous amounts, and thereby manipulating and distorting all interest rates yield curves in favor of their governments.
And the regulators, with their risk-weighted capital requirements, allow banks to leverage much differently their equity, depending on the ex ante perceived or decreed risk; something which distorts entirely the allocation of bank credit to the real economy.
And since the risk weight of the Sovereign has been decreed 0%, while that of We the People has been set at 100%, most of that regulatory manipulation is in favor of the government.
And then time after time we hear experts, like Nobel Prize winner Professor Joseph Stiglitz, attributing most of our current problems to neo-liberalism and market fundamentalism; and often suggesting that the solution lies in increased government spending. What free markets are they referring to? In Stiglitz case, could it be he is only a statist nobelist creatively adapting the facts to his storyline?
PS. I have not read Stiglitz’ “The Euro” yet but, from what I hear he does not link Euro’s troubles in any way to loony bank regulations. The Euro did indeed present challenges but, when in Venezuela I wrote my “Burning the bridges in Europe”, I had no idea it would also have to face such statist and distorting regulations.
PS. When utilities were being privatized in South America, I often heard accusations in terms of savage neo-liberalism. Since these utilities were not adjudicated to whoever offered to serve us citizens the best and the cheapest, but to whoever offered to pay the government the most, a tax advance that left us with a huge bill to pay at private investment rates of return, to me those privatizations were more an expression sadist statism.