America, remember where you came from and set your eyes on where you need to go back to.

By having him/her promising to eliminate risk weighted bank capital/equity requirements with decreed weights: Federal Government 0% - We the People 100%, elect as president someone willing to disempower the reigning Bureaucracy Autocracy.

In America, with risk weights: Federal Government 0% - We the People 100%, its bank regulators have de facto decreed, that the public sector knows better what to do with public debts than the private sector with its.

America, Land of the Free and the Home of the Brave, understand these regulations imply the public sector knows better what to do with public debts than the private sector with its. Is that not communism/fascism?

What on earth do you think your Founding Fathers would have opined about that?

So, here some basic questions: 

#RNC If president, does Donald Trump know better what to do with Americas’ debt, for which repayment he’s not responsible for than what, as a business man, he knew (or sometimes did not) with debts he had to repay, even if sometimes only in terms of his reputation?

#DNC If president, does Kamala Harris know better what to do with Americas’ debt for which repayment she’s not responsible for than what, as an ordinary citizen, she thinks she knows with e.g., a mortgage or her credit card debts?

#INC If president, does Robert F. Kennedy know better what to do with Americas’ debt, for which repayment he’s not responsible for than what, as an ordinary citizen, he thinks he knows with e.g., a mortgage or his credit card debts?

#VPs Do JD Vance, Tim Walz or Nicole Shanahan, know better what to do with America's government debt, for which repayment they're not responsible for. than what, as ordinary citizens, they know, with e.g., their mortgages or their credit card debts?

Conclusion: If you've answered "NO!" to all these questions, you know very well, what you must demand your candidate promises to get rid off. 

And, of course, if elected president, hold him very accountable for it. 

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?

Where could we, the Western World be, if Harvard University had allowed/wanted, to really listen to Alexander Solzhenitsyn?

I searched on Google of what has been said about a “decline in courage”, and Boom! in the very first (perhaps only) place, I found Alexander Solzhenitsyn's Commencement Address given at Harvard University June 8, 1978 titled “A World Split Apart”.

https://www.solzhenitsyncenter.org/a-world-split-apart

I could not believe my eyes, what an incredibly important speech, and to be so wittingly or unwittingly incredibly ignored. It is one of ours, the Western World’s, greatest loss.

Please, please, read it all.

 

What shouted out to me the most during my first reading was:

“Harvard’s motto is ‘Veritas’… truth seldom is sweet; it is almost invariably bitter. A measure of bitter truth is included in my speech today, but I offer it as a friend, not as an adversary.”

 

“A kingdom—in this case, our Earth—divided against itself cannot stand.”

 

“A Decline in Courage:  A decline in courage may be the most striking feature that an outside observer notices in the West today. The Western world has lost its civic courage, both as a whole and separately, in each country, in each government, in each political party, and, of course, in the United Nations. Such a decline in courage is particularly noticeable among the ruling and intellectual elites, causing an impression of a loss of courage by the entire society… Must one point out that from ancient times a decline in courage has been considered the first symptom of the end?”

My comment: 

https://perkurowski.blogspot.com/2023/07/a-decline-in-courage-alexander.html]

Well-Being: One psychological detail has been overlooked: The constant desire to have still more things and a still better life and the struggle to this end imprint many Western faces with worry and even depression, though it is customary to carefully conceal such feelings.

The individual’s independence from many types of state pressure has been guaranteed; the majority of the people have been granted well-being to an extent their fathers and grandfathers could not even dream about; it has become possible to raise young people according to these ideals, preparing them for and summoning them toward physical bloom, happiness, the possession of material goods, money, and leisure, toward an almost unlimited freedom in the choice of pleasures. So who should now renounce all this, why and for the sake of what should one risk one’s precious life in defense of the common good and particularly in the nebulous case when the security of one’s nation must be defended in an as yet distant land?

Even biology tells us that a high degree of habitual well-being is not advantageous to a living organism. Today, well-being in the life of Western society has begun to take off its pernicious mask.

Legalistic Life: I have spent all my life under a Communist regime and I will tell you that a society without any objective legal scale is a terrible one indeed. But a society with no other scale but the legal one is also less than worthy of man. A society based on the letter of the law and never reaching any higher fails to take advantage of the full range of human possibilities. The letter of the law is too cold and formal to have a beneficial influence on society. Whenever the tissue of life is woven of legalistic relationships, this creates an atmosphere of spiritual mediocrity that paralyzes man’s noblest impulses.

And it will be simply impossible to bear up to the trials of this threatening century with nothing but the supports of a legalistic structure.

The Direction of Freedom: An outstanding, truly great person who has unusual and unexpected initiatives in mind does not get any chance to assert himself; dozens of traps will be set for him from the beginning. Thus, mediocrity triumphs under the guise of democratic restraints.

The defense of individual rights has reached such extremes as to make society as a whole defenseless against certain individuals. It is time, in the West, to defend not so much human rights as human obligations.

Destructive and irresponsible freedom has been granted boundless space. Society has turned out to have scarce defense against the abyss of human decadence, for example against the misuse of liberty for moral violence against young people, such as motion pictures full of pornography, crime, and horror.

Life organized legalistically has thus shown its inability to defend itself against the corrosion of evil.

This tilt of freedom toward evil has come about gradually, but it evidently stems from a humanistic and benevolent concept according to which man—the master of this world—does not bear any evil within himself, and all the defects of life are caused by misguided social systems, which must therefore be corrected. 

The Direction of the Press: The press, too, of course, enjoys the widest freedom. (I shall be using the word “press” to include all the media.) But what use does it make of it?

There is no true moral responsibility for distortion or disproportion. What sort of responsibility does a journalist or a newspaper have to the readership or to history?

Because instant and credible information is required, it becomes necessary to resort to guesswork, rumors, and suppositions to fill in the voids, and none of them will ever be refuted; they settle into the readers’ memory.

In the Communist East, a journalist is frankly appointed as a state official. But who has voted Western journalists into their positions of power, for how long a time, and with what prerogatives?

Unrestrained freedom exists for the press, but not for the readership, because newspapers mostly transmit in a forceful and emphatic way those opinions which do not too openly contradict their own and that general trend.

A Fashion in Thinking: Without any censorship in the West, fashionable trends of thought and ideas are fastidiously separated from those that are not fashionable, and the latter, without ever being forbidden, have little chance of finding their way into periodicals or books or being heard in colleges. Scholars are free in the legal sense, but they are hemmed in by the idols of the prevailing fad. A selection dictated by fashion and the need to accommodate mass standards gives rise to dangerous herd instincts that block successful development.

This gives birth to strong mass prejudices, to a blindness which is perilous in our dynamic era.

Socialism: Many people living in the West are dissatisfied with their own society. They despise it or accuse it of no longer being up to the level of maturity attained by mankind. And this causes many to sway toward socialism, which is a false and dangerous current.

Socialism of any type and shade leads to a total destruction of the human spirit and to a leveling of mankind into death.

My comment: 

By much favoring banks to hold government debt over lending to the private sector the regulators, in 1988, one year before the fall of the Berlin Wall, introduced a version of Marxism or Fascism that has empowered a Bureaucracy Autocracy.

http://subprimeregulations.blogspot.com/2015/07/just-before-fall-of-berlin-wall.html

Not a Model: A fact which cannot be disputed is the weakening of human personality in the West while in the East it has become firmer and stronger…. There are telltale symptoms by which history gives warning to a threatened or perishing society. Such are, for instance, a decline of the arts or a lack of great statesmen. Indeed, sometimes the warnings are quite explicit and concrete. The center of your democracy and of your culture is left without electric power for a few hours only, and all of a sudden crowds of American citizens start looting and creating havoc. The smooth surface film must be very thin, then, the social system quite unstable and unhealthy… But the fight for our planet, physical and spiritual, a fight of cosmic proportions, is not a vague matter of the future; it has already started. The forces of Evil have begun their decisive offensive.

Loss of Will: No weapons, no matter how powerful, can help the West until it overcomes its loss of willpower. In a state of psychological weakness, weapons even become a burden for the capitulating side. To defend oneself, one must also be ready to die; there is little such readiness in a society raised in the cult of material well-being. Nothing is left, in this case, but concessions, attempts to gain time, and betrayal. Western thinking has become conservative: The world situation must stay as it is at any cost; there must be no changes. This debilitating dream of a status quo is the symptom of a society that has ceased to develop.

My comment:

The fearful response to Covid was another occasion in which the holy intergenerational contract Edmund Burke wrote about was violated.

https://perkurowski.blogspot.com/2020/10/all-we-are-saying-is-give-herd-immunity.html

Humanism and Its Consequences: How did the West decline from its triumphal march to its present debility? … we recoiled from the spirit and embraced all that is material, excessively and incommensurately… gaps were left open for evil, and its drafts blow freely today…  a total emancipation occurred from the moral heritage of Christian centuries with their great reserves of mercy and sacrifice… becoming ever more materialistic… man’s sense of responsibility to God and society has grown dimmer and dimmer.

My comment: 

“The Western World was built-up with lots of risk-taking resulting from its Christian heritage.”

https://subprimeregulations.blogspot.com/2010/10/god-make-us-daring.html

My comment: 

“Peter L. Bernstein wrote that the boundary between the modern times and the past is the mastery of risk, since for those who believe that everything was in God’s hands, risk management, probability, and statistics, must have seemed quite irrelevant. I myself cannot but speculate on whether we’re not leaving out God’s hand, just a little bit too much.

https://subprimeregulations.blogspot.com/2008/10/we-need-brand-new-bank-regulations.html

An Unexpected Kinship: The current of materialism which is farthest to the left, and is hence the most consistent, always proves to be stronger, more attractive, and victorious. Humanism which has lost its Christian heritage cannot prevail in this competition. The Communist regime in the East could endure and grow due to the enthusiastic support from an enormous number of Western intellectuals who (feeling the kinship!) refused to see communism’s crimes, and when they no longer could do so, they tried to justify these crimes… In our Eastern countries, communism has suffered a complete ideological defeat; it is zero and less than zero. And yet Western intellectuals still look at it with considerable interest and empathy, and this is precisely what makes it so immensely difficult for the West to withstand the East.

My comment:  

“I automatically learned to classify all that is repugnant as an »inheritance from the past», and all that is attractive as the »seed of the future». With the aid of this automatic classification, it was still possible for a European in 1932 to visit Russia and continue to be a communist.” Arthur Koestler, “The Invisible Writing” 1954.

https://perkurowski.blogspot.com/1999/05/all-bureaucrats-should-be-created-equal.html

Before the Turn: There is a disaster which is already very much with us. I am referring to the calamity of an autonomous, irreligious humanistic consciousness.

On the way from the Renaissance to our days we have enriched our experience, but we have lost the concept of a Supreme Complete Entity which used to restrain our passions and our irresponsibility. We have placed too much hope in politics and social reforms, only to find out that we were being deprived of our most precious possession: our spiritual life.

It is not possible that assessment of the president’s performance should be reduced to the question of how much money one makes or to the availability of gasoline.

Today it would be retrogressive to hold on to the ossified formulas of the Enlightenment. Such social dogmatism leaves us helpless before the trials of our times.

We cannot avoid reassessing the fundamental definitions of human life and human society. Is it true that man is above everything? Is there no Superior Spirit above him?

If the world has not approached its end, it has reached a major watershed in history, equal in importance to the turn from the Middle Ages to the Renaissance. It will demand from us a spiritual blaze; we shall have to rise to a new height of vision, to a new level of life, where our physical nature will not be cursed, as in the Middle Ages, but even more importantly, our spiritual being will not be trampled upon, as in the Modern Era.

My comment: 

In Geocentric and Heliocentric terms, do risks to bank systems revolve around what’s perceived as risky or what’s perceived as safe? Could I be silenced by the Neo-Inquisition?

http://subprimeregulations.blogspot.com/2023/04/in-my-heliocentric-fight-against.html

"This ascension is similar to climbing onto the next anthropological stage. No one on earth has any other way left but—upward."

[Amen]

Where do I come from? 

http://subprimeregulations.blogspot.com/2004/11/some-of-my-early-public-opinions-on.html

Did you know the banks are regulated by means of an ideology?

In 2004 I wrote in the Financial Times: "Bank supervisors in Basel are unwittingly controlling the capital flows in the world. How many Basel propositions will it take before they start realizing the damage they are doing by favoring so much bank lending to the public sector (sovereigns)?

In May 2014, in the Brookings Institute in Washington, while discussing the book by Jean Pisani-Ferry "The euro crisis and its consequences", Jörg Decressin, the deputy director of the European Department of the International Monetary Fund (IMF), dared to put forward an explanation...finally! ... God bless him.

My question: “In Sweden there is a psalm that prays ‘God make us daring’. And risk-taking risks has been critical to get Europe to where it is. However, in June 2004, the Basel Committee introduced bank capital requirements based on perceived risks, which subsidizes risk-aversion and taxes risk-taking.

For example, a German bank, when lending to a German businessman should keep 8 percent of shareholders’ capital (equity) but, if lending to its government, or to Greece, it could do so without having to hold any capital. That distorts allocation of bank credit in Europe. The book does not mention that problem. Do you have any comments?"

His response: "You raise a very good question and an answer to this revolves around: 

Do you believe that governments have a stabilizing function in the economy?

Do you believe that government is fundamentally something good to have around?

If that is what you believe then it does not make sense necessarily to ask for capital requirements on purchases of government debt, because you believe that the government in the end has to have the ability to act as a stabilizer, when the private sector is taking flight from risk, that is when the government has to be able to step in and the last thing we want is then for people also to dump government debt and basically I do not know what they would do, basically like buy gold. 

If on the other hand your view is that the government is the problem then you would want a capital requirement, so it depends on where you stand [ideologically]. 

I think the issue of the governments being the problem was very much a story of the 1970s, and to some extent of the 1980s. The problems we are dealing with now are more problems in the private sector, we are dealing with excesses in private lending and borrowing and it proves very hard for us to get a handle on this. We have hopes for macro prudential instruments but they are untested, and only the future will show how we deal with them when new credit booms evolve.” End of quote

Jean Pisanny-Ferry… said he agreed and left it at that. 

No Decressin! It is not about the government or the private, it is about the balance between the two, that which is broken.

And I had no chance to ask: Are you arguing that we should support the government’s borrowing ex ante, so that the government can help us better ex post? Would that not result in that when the government is truly needed it might not be able to help because it would already be too indebted… like Greece?

Who authorize regulators to regulate the banks with THEIR ideology?

And what about those who argue that the IMF is a bastion of neoliberalism?... Is it just a Potemkin facade?

Europeans, the structural reform most necessary for Europe to grow, is to get rid of its current bank regulators with their foolish risk aversion and their pro-government and anti-citizen ideology.

Translated from El Universal

All bureaucrats should be created equal

In the second volume of his autobiography titled “The Invisible Writing”, the European intellectual Arthur Koestler (1905-1983) writes about the time during the early thirties when a primitive town, in the area of Pamir in the south of Central Asia, received the visit of a Russian patrol unit mounted on bicycles. 

The local folk ran away in total terror. During their lives they had seen many airplanes, but never a bicycle. The planes were seen to be simple machines and so they seemed quite normal. 

However, the fact that a person could glide along on two wheels without touching the ground could only be explained by the intervention of Satan himself.

Thirty years have gone by since I read about this incident which I believe illustrates in a curious way a less than harmonious development. 

Since then, I have been repeatedly reminded of this by living in a country such as ours, where the modern lives together with the antiquated without any complex whatsoever. Obviously, our public administration has been a fertile area in this sense.

Last year I had the opportunity to visit both the recently created Banco de Comercio Exterior (Bancoex) as well as the National Institute for Minors (INAM). Without going into which of the two entities is of more importance for the country, the differences between the two were so great that they seemed abominable to me.

I cannot faithfully express the magnitude of the surrealism, but it should be sufficient to say that Bancoex has modern offices, systems employing the latest technologies and an organization with staff selected with the assistance of an international advisory firm while the INAM, accessible only by means of a rickety elevator which takes of every half an hour towards the 42nd floor of one of the towers of Parque Central, has papered its walls with wall to wall Oslo type files labeled with things like “Invoices – Meat Purchases Month of February 1994”.

If a government determines that it must assume the direct responsibility of fulfilling two specific functions, whichever they may be, it should at least try to do both with the same enthusiasm and with the same service standards. 

We are constantly harping about the fact that we should fight to narrow the social gap in income distribution that creates first class and second class citizens. 

Likewise, it is equally as important to avoid creating first class bureaucrats and second class bureaucrats. Sometimes I believe we even have third class bureaucrats.

This does not mean I am promoting automatic and irrational equality as far as salaries of public officials is concerned. It has much more to do with the identification of the role and the social support given each public servant in order to stimulate his or her pride. 

He who thinks or feels that other believe his work is not important, or who is actually doing work that is indeed not important and should therefore be eliminated is as incapacitated emotionally as a baseball player who has lost his arms.

In the same way, as we head towards the Constituent Assembly which initiates the debate on the role of the State it is of utmost importance to establish the norms and regulations that require the State to comply with its current responsibilities before it is permitted to accept new ones. 

Should we not do this, we should not be surprised about the capacity of certain sectors to negotiate resources that allow them to incur in new initiatives that normally possess noteworthy or glamorous characteristics at the expense of other that, although no less important, require quiet dedication, day after day, from 9 to 5.

I now wish to share with my readers a nightmare I have over and over again. During the last decades, the Venezuelan State has frittered away an immense amount of resources. 

Thank God that in spite of this, most of the spending occurred in public service sectors and that therefore it did actually leave something, however small, for posterity. Does this mean that if the State actually goes full tilt into privatizing public services (at the behest of ourselves) without having previously negotiated a corresponding reduction in their income, 100% of public spending will be wasted?

The town folk in Pamir did not bat an eyelash when airplanes roared overhead. They did not know that human beings were strapped inside at the controls.

Had they known this, the panic would have been absolute. I sometimes think about the high expectations we have of the privatization processes in Venezuela. Are we by chance also ignorant of the fact that there are human beings in these private companies?

I cannot resist finalizing with a quote that I underlined almost thirty years ago in the before above mentioned book by Koestler. 

“I automatically learned to classify all that is repugnant as an »inheritance from the past», and all that is attractive as the »seed of the future». With the aid of this automatic classification, it was still possible for a European in 1932 to visit Russia and continue to be a communist.”

Daily Journal, Caracas, May 7, 1999