If 1988’s Basel I had been imposed thirty years earlier, would the Berlin Wall have needed to fall?

1988, with Basel I, a Global Statist Revolution was launched. It was not to be acknowledged, much less televised.

Here's a very brief but yet 99% description of it:

It imposed risk weighted bank capital/equity requirements explained by the following decreed weights:

Central government debt: 0% 

Residential montages: 50%

Loans to e.g., small businesses and entrepreneurs: 100%

With the basic 8% capital requirement imposed, that translated into following capital/equity requirements:

Central government debt: 0% 

Residential montages: 4%

Loans to e.g., small businesses and entrepreneurs: 8%

That allowed the following bank capital/equity leverages:

Central government debt: unlimited

Residential montages: 25 times to one

Loans to e.g., small businesses and entrepreneurs: 12.5 times to one.

And all that translates, de facto, into:

Bureaucrats and politicians knowing better what to do with bank credit for which repayment they’re not personally responsible for, than small businesses and entrepreneurs. 

Residential mortgages being more important for the economy than loans to small businesses and entrepreneurs.

End of explanation.... and you do not need to take my word for it:

Paul Volcker, in his autobiography "Keeping at it" of 2018, penned together with Christine Harper confessed:“The assets assigned the lowest risk, for which capital requirements were therefore low or nonexistent, were those that had the most political support: sovereign credits and home mortgages. The American ‘overall leverage’ approach had a disadvantage as well in the eyes of shareholders and executives focused on return on capital; it seemed to discourage holdings of the safest assets, in particular low-return US government securities."

Later, without much altering Basel I’s rulings, 2004 Basel II introduced risk weights much dependent on credit ratings; a systemic risk. Again, in words of Paul Volcker “Ironically, losses on sovereign credits and home mortgages would fuel the global crisis in 2008 and a subsequent European crisis in 2011.” 

Currently: Basel III, yet not fully decided or implemented, diminishes the differences in allowed leverages but, on the margin, there were it all counts, the favoring of “safe” assets over “risky” ones, still reign supreme.

And that’s what has, in much of the world, generated extremely high levels of central government debts and residential mortgages. It would be hard to argue that the economy has grown sufficiently strong and resilient, so as to be able to service those levels of debt. If you doubt me, ask ChatGPT. 

Summing up; decreed risk weights: 0% Federal Government – 100% We the People introduced financial communism, which is the reason for the question of this brief note.

Sadly, if Basel I had been implemented three decades earlier, both Russia and America, West and East Germany, would then all have become so weakly alike.

Would then John F. Kennedy have delivered his 1963 speech "Ich bin ein Berliner" in 1989? No! Not the John F. Kennedy we knew.

Would then Ronald Reagan have told Mr. Gorbachev in 1987 “Tear down this wall!”? No! Not the Ronald Reagan we knew.

Would the Berlin Wall then have fallen? 

Why would that then have been necessary? That wall had simply become a useless Maginot Line.

In summary,  by means of bank regulations the virus of communism contaminated the Western Free Market World. And, incredibly, so many still opines it's living under the "weight" of neoliberalism.

Why have universities, especially its professors in economic and finance, kept conspicuous silence on this? Is it because they all want to be members or beneficiaries of the so empowered reigning Bureaucracy Autocracy?

I would now ask any East Berliner old enough to remember his life before 1988: 

When now seeing the farmers striking and suffering electricity shortages, do you not experience some Deja vu?