Friday, July 14, 2017

I believe my one line health sector reform to be better than those long ones proposed by democrats or republicans

You, all suppliers of medicines or health services, thou shall not discriminate [with more than perhaps 5%] in the prices offered to those who pay for those insured against the prices demanded from those uninsured.

Saturday, July 08, 2017

When regulators, to bankers’ lack of testosterone added their own lack of it, the Western civilization started its descent

Fact: Major bank crises result from unexpected events, criminal behavior, or excessive exposures to something ex ante perceived as safe, but that ex post turned out to be risky.

Fact: No major bank crisis ever has resulted from excessive exposures to something that was perceived as risky when placed on banks’ balance sheets.

Mark Twain with his supposedly: “A banker is one who lends you the umbrella when the sun is out and wants it back as soon as it looks it could rain” would attest to that.

Fact: Nonetheless bank regulators scared witless by the same perceived risks, imposed larger capital requirements for what is ex ante perceived as risky, than for what is ex ante perceived as safe.

That means bank can now leverage more their equity with “the safe” than with “the risky” 

That means bank can now earn higher expected risk adjusted returns on equity on “the safe than on the risky.”

Consequence 1: That day banks finds that excessive exposures to what was perceived, decreed or concocted as safe turns out risky, something that happens sooner or later, like with the AAA rated securities or sovereigns like Greece, the banks will stand their more naked than usual.

As Voltaire said: “May God defend me from my friends, I can defend myself from my enemies

Consequence 2: Bank stop financing the "riskier" future the next generations need to be financed, like SMEs and entrepreneurs; in favor of refinancing the "safer" present.

As John A Shedd said: “A ship in harbor is safe, but that is not what ships are for”.

Our current regulators had no clue of what they were doing. In order to hang on to their jobs and hide their mistake, they are clouding the whole issue with more and more complexity.

They must be stopped, remembering of course Einstein’s: “No problem can be solved from the same level of consciousness that created it”.