A Bureaucracy Autocracy has been constructed with stealth

Sir, below I quote from Didi Kuo’s review of Moisés Naím’s “The Revenge of Power”, “How the world has been ‘made safe for autocracy’” Washington Post, April 24.

“Today’s autocrats are savvy, with new stratagems fit for a world upended by technological change. They exploit, and sow, distrust in experts, authorities, the media. They manufacture truth, invent enemies and use legal pretexts to consolidate power.”

The regulators in the Basel Committee for Banking Supervision, launched Basel I in 1988. In order to “save” our banks from that “enemy” of excessive risk-taking, these “savvy” experts concocted risk weighted bank capital/equity requirements; and for which they decreed weights of 0% the government and 100% citizens.

That translated effectively into banks being able to leverage much more their capital/equity with  e.g., Treasuries, than with loans to citizens. That has made it much easier for banks to obtain desired risk-adjusted returns on equity with Treasuries, than with any private sector assets. That de facto implies that bureaucrats know better what to do with credit for which repayment they’re not personally responsible for, than e.g., small businesses and entrepreneurs

You don’t need to take my word on it. Paul A. Volcker, in his 2018 autobiography “Keeping at it” which he penned together with Christine Harper, valiantly confessed: “Assets for which bank capital requirements were nonexistent, were what had most political support: sovereign credits. A simple ‘leverage ratio’ discouraged holdings of low-return government securities”

Add to that central banks’ QEs, which primarily includes the purchase of government debt, and the empowernment of a non-transparent Bureaucracy Autocracy becomes evident. 

If that is not a prime example of “what Naím terms stealthocracy: a way of maintaining the architecture of liberal democracy while gutting accountability” what is?

Sir, as a Venezuelan just like Naím I too heard Hugo Chavez with concern and dislike. But, just like Venezuela’s centralized oil revenue curse has allowed truly bad autocrats to remain entrenched even when the walls are tumbling down, what I now most fear, is that world wide easy-government-money curse. 

Let me also remind you Washington Post, that none of the excessive bank exposures that resulted in major crises, or bubbles that have burst, have ever been built up with assets perceived as risky, always with what was perceived as safe.

I could go on and on, but let me end with two questions:

The Founding Fathers of the Land of the Free and the Home of the Brave, what would they have opined about the Federal Reserve decreeing risk weights of 0% the Federal Government and 100% We the People?

Where would America be today, if its immigrants centuries ago, had been met by this type of risk averse regulations?

PS. My first ever Op-Ed, in the Daily Journal of Caracas, was on the theme of bank regulations. 

PS. An example of how the Bureaucracy Autocracies work.

PS. I have recently enlisted #AI ChatGPT - OpenAI to help me fight the Bureaucracy Autocracy. "What would you opine of risk weighted bank capital requirements with risk weights assigned for political reasons?"

Here's a letter the Washington Post published August 2023. It refers to Paul Volcker’s valiant courageous and honorable confession on what happened 1988. Thanks @PostOpinions for not ignoring it.

Don’t let redistribution profiteers raise your expectations. In offshore centers there are no shining treasures, only documents.

With relation to Panama, the Mossack Fonseca affair and offshore centers in general how many articles do not begin with something like “The wealthy conceal their cash”?

That gives the impression of an Ali Baba cave where fabulous unused treasuries are stored and that if only these could be recovered from the 41 thieves everyone would live happily ever after.

What devious bullshit! What exists in those offshore caves is a load of documents that gives the holders of these the ownership of a lot of assets, almost all of these to be found onshore... for instance stocks, property in London or municipal infrastructure bonds.

Granted, the ownership of some of those assets is incorrect, since in not so few cases they should belong to the governments… but that is another issue that has little to do with the assets as such.

And many of those assets are the result of loopholes… but who can throw the first stone holding that using loopholes is an odious behavior.

If you hate loopholes, I do, fight for their removal, by for instance making tax laws simpler, better and fairer.

But in the same vein we have corporations who, egged on by smart tax-lawyers, intensely exploit the opportunities loopholes provide, let us not forget that on the opposite side, we most often find redistribution profiteers waiting to lay their hands on new business opportunities.

For instance if we want to redistribute wealth and income, the most efficient way would be through a Universal Basic Income scheme, at a cost of 2 percent tops, but that leaves many of the redistributes asking "what’s in it for me?"... and so they oppose it.

If for instance we imposed a big carbon tax and distributed its revenues equally to all as a part of Universal Basic Income then we would align beautifully the fight against inequality and climate change, but a lot of the mercenary soldiers in the wars against climate change and inequality, would also ask… what’s in it for us?

Profiteers surround all wars, no matter the cause. It is impossible to avoid them, but let us at least try to point out their theoretical existence.

And please when I refer to “profiteers” I do not only speak of those who collect their profits in cash. Much much worse are those demagogues and populists who collect their profits in political power… like the late Hugo Chavez did.

PS. An interesting question is what represents more money deposited in offshore centers: that from tax fraud and evasion or that from stealing tax revenues?