Here are some proposals to help our children and grandchildren have a better future than what is painted for them now.

First of all, we need to get rid of the credit risk weighted capital requirements for banks. 

These allow banks to hold less capital against what is ex ante perceived, decreed or concocted to be safe than against what is perceived as risky; which allows banks to leverage much more with “the safe” than with “the risky”; which allows banks to earn higher risk adjusted returns with “the safe” than with “the risky”; which means the banks will lend too much to “the safe” and too little to “the risky”; which means the banks are not any longer financing sufficiently the riskier future, they are only refinancing the for the short time being, safer past.

If we are to distort the allocation of bank credit to the real economy, let us at least do that with a good social purpose. In this respect we might benefit from introducing pro-SDGs and pro job-creation capital requirements for banks.

And since I believe that any redistribution of income and wealth managed by governments, becomes just too expensive because of all the redistribution profiteers involved, we should launch, as soon as possible, a Universal Basic Income scheme... a Societal Dividend. 

That would be great: for the wealthy, as they would need to distribute less or at least get more bang for each buck handed over; for the poor, since they will get more much more net result of any redistribution; and for fiscal transparency, since it will help separate the redistribution functions from the ordinary tasks of government.

And finally, if we also fund such Universal Basic Income scheme with carbon taxes, then we will beautifully align the incentives in the fight against inequality with those of climate change.

What are we waiting for?

Helicopter money? Why should we trust the pilots?

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.