Showing posts with label risk aversion. Show all posts
Showing posts with label risk aversion. Show all posts

Saturday, September 06, 2025

In words of two great Canadian singer songwriters, this is what has, and is happening, to Europe.

After the Basel Committee in 1988 decreed its risk adverse bank regulations, in words of Joni Mitchell’s Yellow Taxi, this is what has happened to Europe.

“Don't it always seem to go
That you don't know what you got 'til it's gone?
They paved paradise and put up a parking lot

Ooh, bop-bop-bop
Ooh, bop-bop-bop (na-na-na-na-na)

They took all the …. and put 'em in a …. museum
And they charged the people a dollar and a half to see them
No, no, no

Don't it always seem to go
That you don't know what you got 'til it's gone?
They paved paradise and put up a parking lot.”

And, if also Leonard Cohen could update his You want it darker, though surely in a more poetic way, it could go something like this:

If you’re the regulator, I'm out of the game
Deciding what banks need, kids will be broken and lame
If thine is the glory, theirs must be the shame
You want it darker
You killed the flame

It's written in regulations
It's not some nonsense claim
Basel Committee told banks
Keep refinancing our safer present
Don’t finance their riskier future
And that’s what our children got

You want it darker
They killed the flame




USA and Canada beware… all this goes with you too.

 

Saturday, July 22, 2023

#AI OpenAI ChatGPTI: From how far back does your training data come? Does it include the Bible? I see it does, so can you assist preparing a sermon?

I asked ChatGPT:

"You have informed the information you base your knowledge on ends September 2021, but how long back have you searched?"

ChatGPT answered: 

"As an AI language model, my knowledge is based on the data available up to September 2021. However, the training data includes a vast amount of information from the internet, books, articles, and other sources collected over several years before that date. The training process involves processing and learning patterns from this data to generate responses to queries.

While my training data goes back several years, my knowledge is effectively limited to information available up to September 2021. I don't have access to real-time data or events that occurred after that date. As a result, I may not be aware of more recent developments or changes that have taken place beyond that time frame."

I asked ChatGPT:

"Which was the earliest year from which some training data was collected?"

ChatGPT answered: 

"The specific details about the earliest year from which training data was collected to train models like ChatGPT (GPT-3.5) are not publicly disclosed by OpenAI, the organization behind the development of the GPT-3.5 architecture.

However, I can provide some general information about the history of language models like GPT-3. The techniques used in GPT-3 and earlier iterations of the GPT series (e.g., GPT-2, GPT) build upon advancements in deep learning and natural language processing that have been developed over the past decade.

The original GPT (Generative Pre-trained Transformer) model was introduced by OpenAI in June 2018. GPT-2 was released in February 2019, and GPT-3, the largest and most powerful version in the series, was released in June 2020.

The training data for these models includes a wide range of sources collected from the internet, books, articles, and other written material over several years leading up to the respective model's release. The actual data collection process and the specific years covered may vary depending on the model version and the sources used.

It's important to note that my knowledge is based on the information available up to September 2021, and I don't have access to real-time information or any updates that might have occurred after that date."


I asked ChatGPT:

"Does that data include the Bible?"

ChatGPT answered: 

"As an AI language model, I don't have direct access to my training data or know where it came from. However, I was trained on a mixture of licensed data, data created by human trainers, and publicly available data. This corpus was used to pre-train me on a range of language tasks, such as language modeling, text completion, and text classification. The training also involved large-scale datasets obtained from a variety of sources, including books, websites, and other texts, to develop a wide-ranging understanding of human language.

While I don't have access to the specifics of the individual datasets used, the training process aims to be broad and diverse, covering a wide array of topics and domains. This likely includes general knowledge from various religious texts, such as the Bible, along with information from many other sources. However, I can't guarantee that specific religious texts, like the Bible, were explicitly included in the training data."

I asked ChatGPT:

"When in 2000 Pope John Paul II, in his Apostolic Letter “Novo Millennio Ineunte”, reminded us that Jesus Christ invited the Apostle to "put out into the deep" for a catch: "Duc in Altum", can you place where that comes from in the Bible?"

ChatGPT answered: 

"The phrase "Duc in Altum," which translates to "Put out into the deep," comes from the New Testament of the Bible, specifically from the Gospel of Luke. In the context of Pope John Paul II's Apostolic Letter "Novo Millennio Ineunte," the reference is to the following Bible passage:

In Luke 5:1-11, Jesus called Simon Peter (also known as the Apostle Peter) to follow Him and become a fisher of men. After an unsuccessful night of fishing, Jesus instructs Peter to go out into the deep waters and let down his nets again. Peter initially hesitates, but he obeys Jesus' command and catches such a large number of fish that his nets begin to break. This miraculous catch leads Peter to recognize Jesus' divine power and authority, and he becomes one of Jesus' first disciples.

The relevant part of the passage is as follows (Luke 5:4-7, English Standard Version):

"And when he [Jesus] had finished speaking, he said to Simon, 'Put out into the deep and let down your nets for a catch.' And Simon answered, 'Master, we toiled all night and took nothing! But at your word, I will let down the nets.' And when they had done this, they enclosed a large number of fish, and their nets were breaking. They signaled to their partners in the other boat to come and help them. And they came and filled both the boats so that they began to sink."

This event marks an important moment in the early ministry of Jesus and demonstrates the significance of obedience and faith in following His teachings. Pope John Paul II used this biblical phrase as a call to action for the faithful to embrace the challenges and opportunities of the new millennium with courage and trust in Christ's guidance."

I asked ChatGPT:

"Your answer clearly indicates the Bible was included in the training data. How much importance do you assign to religion?"

ChatGPT answered: 

"As an AI language model, I don't have personal beliefs, opinions, or the ability to assign importance to any particular topic, including religion. My purpose is to provide accurate and unbiased information based on the data I was trained on. When users ask questions related to religion, I strive to provide factual and respectful responses without promoting any specific belief system or perspective.

Regarding the inclusion of religious texts like the Bible in the training data, it is common for AI language models to be trained on a diverse range of topics to ensure a broad understanding of human language and knowledge. Religious texts, along with other types of literature and information, are valuable resources for language models to learn about the history, culture, and beliefs of various societies.

It's essential to remember that AI language models are neutral tools, and the responses they generate are based solely on patterns in the data they were trained on. If any user feels uncomfortable with the information provided or has concerns about religious topics, they can feel free to let me know, and I will do my best to address their preferences or provide alternative information."

"Thank you!"

"You're welcome! If you have any more questions or need further assistance, feel free to ask. Have a great day!"

I asked ChatGPT:

"Going back to the questions on the Bible. If someone asks you to prepare a sermon based on the readings of a specific Sunday, can you assist him?"

ChatGPT answered: 

"As an AI language model, I can certainly help you with preparing a sermon based on specific readings from the Bible for a particular Sunday. If you provide me with the details of the readings you'd like to use and any specific themes or topics you want to focus on, I can assist you in crafting a sermon.

Please keep in mind that while I can provide information and suggestions, the content and delivery of the sermon are ultimately up to the individual delivering it. Sermons often involve personal interpretation and connection with the audience, which may require the human touch of the speaker to make it meaningful and impactful.

Feel free to share the details of the readings and any specific points you want to include, and I'll do my best to assist you with the sermon preparation!"

"Thanks again!"

"You're welcome! If you have any more questions in the future or need further assistance, don't hesitate to reach out. Have a wonderful day!"

Note: The answers are copied exactly from those given to me by ChatGPT - Grok

My comment: I’m a protestant but, I took a special interest in Pope John Paul II's encyclical, as I believe the risk aversion imbedded in current risk weighted bank capital requirements, is totally contrary to the Christian traditions of our Western World.

Sunday, July 16, 2023

A Decline in Courage: Alexander Solzhenitsyn in his Commencement Address at Harvard University, 1978.

An extract from “A World Split Apart. Please, when you can, read it all!

A Decline in Courage: 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. There remain many courageous individuals, but they have no determining influence on public life. 

Political and intellectual functionaries exhibit this depression, passivity, and perplexity in their actions and in their statements, and even more so in their self-serving rationales as to how realistic, reasonable, and intellectually and even morally justified it is to base state policies on weakness and cowardice

And the decline in courage, at times attaining what could be termed a lack of manhood, is ironically emphasized by occasional outbursts of boldness and inflexibility on the part of those same functionaries when dealing with weak governments and with countries that lack support, or with doomed currents which clearly cannot offer any resistance. But they get tongue-tied and paralyzed when they deal with powerful governments and threatening forces, with aggressors and international terrorists.


Must one point out that from ancient times a decline in courage has been considered the first symptom of the end?"


Some of my many comments on this theme:

By favoring banks to hold assets perceived (or decreed) as safe over assets perceived risky, the regulators introduced a risk aversion anathema to what made our Western World great.

Risk aversion, lack of courage, produced credit risk weighted bank capital requirements.
In America, the Home of the Brave, these favor the refinancing of parents’ “safer” present over the financing of children’s’ “riskier” future.

The too frightened response to the Covid-19 pandemic, quietly accepted by a too frightened and docile herd, is causing anintergenerational conflict of monstrous proportions.

“Risk aversion comes at a cost - the other side of the Basel [Committee’s regulatory risk weighted capital requirements] coin might be many, many developing opportunities foregone." http://subprimeregulations.blogspot.com/2003/03/financial-sector-assessments-program.html

What would you think of a military high command that ordered a testosterone reducer to be fed to the soldiers, so they would expose themselves less to risks, and so fewer of them would die? A guaranteed defeat?

#AI ChatGPT - OpenAI: With risk weighted bank capital requirements, did regulators impose a lousy diet with way too much carbs and way too little proteins?

The Western World was built-up with massive amounts of risk taking.
The Basel Committee for Banking Supervision, 1988 introduced in it, massive risk aversion.
1964: Nikita Khrushchev, First Secretary of the Communist Party of the Soviet Union; Tage Erlander, Swedish Prime Minister; (translator)

50 years later.

2014: David Cameron British Prime Minister; Angela Merkel German Chancellor; Fredrik Reinfeldt Swedish Prime Minister; Mark Rutte Dutch Prime Minister 





Tuesday, July 11, 2023

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.”


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

Friday, June 08, 2018

Was Sofia Goggia singing her national anthem with such fervor just being another Italian populist? NO!

I refer here to Nobel Laureate Michael Spence’s “The Italian Economy’s Moment of Truth” Project Syndicate July 7.

Spence writes:“Italian banks currently holding considerable amounts of government debt would suffer substantial balance-sheet damage.” 

Why is that? Is it perhaps because bank regulators allow banks to hold Italian debt against the least capital, meaning they can leverage it the most, meaning they can earn the highest expected risk adjusted returns on equity on it? Yes!

Then Spence writes: “Moreover, Italy needs to develop the entrepreneurial ecosystems that underpin dynamism and innovation. As matters stand, the financial sector is too closed, and it provides too little funding and support for new ventures.” 

Why is that? Could it be because regulators require banks to for instance hold more capital against loans to entreprenuers than against residential mortgages? Yes!

Spence writes: “Italy has enormous economic potential. But the challenge lies in unlocking it, which will require several things to happen.”

One reason for that is that the option to restore competitiveness by means of devaluing its currency was closed when the Euro was adopted, and the EU authorities have been too busy with other minutia over the last 20 years so as to concentrate on how to solve the immense challenge with creating a union by pushing a common currency instead of a common currency resulting from a union.

The best of the Winter Olympics 2018 for me was seeing Sofia Goggia singing her Italian national anthem with such enthusiasm. But there was not one bit of Europe present in her voice… and that is an indication Europe is not going in a European direction. Was she a populist?

Let’s face it. Americans dream they are American. Few if no Europeans, dream they are Europeans.


PS. The euro has done nothing to solve the challenges posed by the use of the euro, and in many ways, like what it did to Greece, it has behaved more as a Banana Union.

PS. “We will safeguard your bank system with our risk weighted capital requirements for banks”, as if they the regulators in the Basel Committee really knew what those risks were, is a hubris fed dangerous technocratic besserwisser populism of the worst kind. 


PS. Just in case you are curious, the worst for me at the WO-2018 was to suffer with Egvenia Medvedeva when not winning gold.

Monday, February 05, 2018

World Bank, more than a “Knowledge” bank, a “Besserwisser” bank, be the “Wisdom” bank I know you could be; or, if that sounds too haughty, at least aspire to be “The Common Sense” bank.

A “Knowledge” bank might think that assets perceived as risky could be risky for banks. A “Wisdom” bank understands that what could be especially risky for banks, and for bank systems, is what is perceived as safe.

A “Knowledge” bank might think that it is great for banks to avoid taking risks.

A “Wisdom” bank knows that the most important function for banks is to take intelligent risks on behalf of society.

A “Knowledge” bank might agree with the Basel Committee’s bank capital requirements based on perceived risks.

A “Wisdom” bank would think much more in terms of not distorting credit allocation, and, if that’s not possible, in terms of capital requirements for banks with a purpose, like on perceived chances of fostering human and natural capital wealth

A “Knowledge” bank, if it has to distort the allocation of bank credit, might agree with bank capital requirements against sovereigns based on credit ratings.

A “Wisdom” bank, in such a case, would much more prefer to base the bank capital requirements on a good governance index.

A “Knowledge” bank might say: “We know it all”. A “Wisdom” bank, would understand “We know Jack shit!”

Or, if aspiring to becoming the “Wisdom bank” sounds too haughty, the World Bank it should at least aspire to be “The Common Sense” bank.




Friday, January 20, 2017

President Trump, here is a conflict of interest on which many would appreciate you acted on in your own future self-interest.

President Trump. 

I am not an American, so I did not vote. But had I been I must confess I would most likely have voted for the Gary Johnson escape-valve. Congrats anyhow!

Mr. President, you have all your life been an entrepreneur, of one sort or another. As such we could easily presume you have quite often needed to have access to bank credit. Once you are back to civil life in some years, I also assume you would like to reassume your life as entrepreneur, since once one, forever one, and therefore to again have access to bank credit.

Now President Trump, you might not be much aware of it, few really are, and there are of course those interested in it not to be known, or at least not understood but, since 1988, with the Basel Accord, for purposes of determining how much capital banks should hold, the risk weighted for ordinary citizen borrowers was set at 100%, while if it was the central government doing the borrower, then the risk weight was 0%. Yes, you read right… 0%!

That has introduced a disastrous discrimination against all SMEs, start-ups and entrepreneurs when accessing bank credit. The risk aversion that regulation signifies banks no longer finance the riskier future our children need to be financed, they mostly just refinance the “safer” past and present.

A ship in harbor is safe, but that is not what ships are for.” John A Shedd, 1850-1926

To top it up, regulators have not been able to realize that all this does not make the banking sector any safer. All major bank crises have only resulted from unexpected events, criminal behavior or excessive exposures to what ex ante was perceived as very safe but that ex post turned out very risky. No major bank crises ever was the result of excessive exposures to something ex ante perceived risky.

May God defend me from my friends, I can defend myself from my enemies” Voltaire

So President Trump, please help America, and the rest of the world ,to banish forever this dangerous nonsense of the risk-weighted capital requirements for banks.

I have tried to inform, for instance your Consumer Financial Protection Bureau CFPB and so many others about this, but they have not been interested. You as an Entrepreneur President do surely stand a better chance to catch their attentions.

PS. When it comes to bank regulations that could destroy the economy of your country, is that not also an issue for Homeland Security?

PS. What poses a bigger threat to American jobs, Mexicans, Canadians or robots?

Saturday, October 22, 2016

The Basel Committee’s risk weighted capital requirements for banks, is one cultural genocide of the western world

Frequently we read about how the destruction of monuments amounts to cultural genocides. But are monuments all there is about cultural heritages? No! Also such heritages as a cultural willingness to take risks.

In 1988, with the Basel Accord, Basel I, regulators introduced risk based capital requirements for banks; which were further amplified in 2004 with Basel II.

That regulation allows banks to earn higher risk adjusted returns on equity when holding “safe” assets, than when holding “risky” assets.

The layer of regulatory risk aversion it introduced, made banks abandon financing the riskier future, in order to just refinance the safer past and present.

The willingness to take risks is part of the cultural heritage of my western world, in churches we sang a psalm that prayed for “God make us daring”.

The willingness to risk making mistakes, has provided the western economies with the raw material necessary for the successes that helped to buildup its economy.

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

But now: “If God can’t make our bankers sufficiently coward, then we have to!” Bank regulators

In short, the Basel Committee for Banking Supervision’s regulatory imposed risk aversion, constitutes a destruction of a cultural heritage of our western world.

And all for nothing! The regulators justified it with that it would make our banks safer. What nonsense! Major bank crises never ever result from excessive exposures to something ex ante perceived as risky; these always result from either unexpected events, or excessive exposures to what was ex ante perceived as very safe, but that ex post turned out to be very risky.

May God defend me from my friends, I can defend myself from my enemies” Voltaire

PS. Actual risk weights: AAA to AA rated 20%, Below BB- 150%. Can it be more loony than that?