Wouldn’t you agree daddy?

When I grow up, I want to be a candidate in as many elections as possible, in order to use social media creatively, including threats, and solicit donations from millions at a zero-marginal cost. 

It seems such a great business, wouldn’t you agree daddy? 

When I grow up, I’m thinking of entering the polarization business. Being as extreme as possible and using social media at a zero marginal to solicit donations from those I can convince I’m their best chance. 

It seems such a great business, wouldn’t you agree daddy? 

When I grow up, I’m thinking of becoming a redistribution profiteer. Offering to tax the wealthy the most, could create great opportunities for me, whether with the wealthy or with the poor, or perhaps with both

It seems such a great business, wouldn’t you agree daddy?

When I grow up, I’m thinking of becoming a great vote fisher. I mean one of those anglers who, as a fishing bait, offers to make other, by force, pay for their generous promises.

It seems such a great business, wouldn’t you agree daddy?

Daddy, when I grow up, I’m thinking of becoming a bank regulator or supervisor. It seems such a safe job.

Have you seen what has happened to those jobs since the global financial crisis? It sure looks as the more you fail the more jobs there are.

Absolutely son, these are so much better businesses than plastics.

https://www.youtube.com/watch?v=Dug-G9xVdVs

PS. I just remembered... becoming a price regulator is a great option too.

PS. Daddy, when I grow up, I feel I should be a public voiceful admirer of any great “wealthy and powerful transformational leader”. Is that not a great business?

PS. Daddy, when I grow up, should I not aspire to become an artificial intelligence regulator. That sure sounds like the cherry on top of the icing on a cake.

Communicating in a polarized world.

Financial communism

And when reading this, don't just take my word on it:

Paul Volcker’s statist confession… that shall not be heard.

“Assets for which capital requirements were nonexistent, were what had most political support: sovereign credits A simple ‘leverage ratio’ discouraged holdings of low-return government securities"

Is the current ultra low or even negative interest rates on sovereign debt something weird? 

Of course not: a) take away all central banks purchases of public debt with QEs, which helped to keep the saving glut intact or even increase it; b) get rid of regulations that assign the lowest risk weights and thereby the lowest capital requirements for banks to the borrowings of the sovereign monarch; c) take away liquidity requirements that have banks buying sovereign debt; d) stop making pension funds and insurers having to buy “safe” government debt irrespective of the price; and e) stop central banks from paying negative returns… and you would not see public debt bought and sold at ultra-low, much less negative rates.

What we are really suffering from is a well-disguised and utterly creative and non-transparent financial statism of monstrous proportions, which impedes the markets to signal what the undistorted interest rate on sovereign debts should be. 

The difference between the interest rates sovereigns would have to pay on their debts in absence of all above mentioned favors, and the current ultra-low or even negative interests they pay is, de facto, a well camouflaged tax, retained before the holders of those debts could earn it.

And, if ignoring the risk of inflation, one could argue sovereign debts issued in their own domestic/printable fiat currency is safer, and should therefore have lower capital requirements, but, the other side of that coin, is that it really implies that government bureaucrats would know better what to do with bank credit they're not personally responsible for, than for instance private entrepreneurs who sign their own name on bank loans to them.

So if we consider the non-transparent regulatory subsidies for sovereign debt, and the effects of central banks purchasing so much of it, as we should, the already so scary fiscal deficits are even larger than reported

I have the nagging feeling that the market value of sovereign debt much more accurately represents the real debt burden faced by those sovereigns than the par value of it. And that that market value  could currently be a scary number in relation to GDP.

And after having thereby empowered the Bureaucracy Autocracies, many of those statism profiteers shamelessly blame our difficulties on the usual scapegoat… neoliberalism

And this communist virus, Basel I, fabricated in the laboratories of the Basel Committee, was let loose in the free world 1988, one year before the Berlin Wall fell.

PS. The fact is that I could just as well titled this as "Financial fascism"

PS. 2004, in a letter published in the Financial Times I wrote: “Our 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.”

PS. The subsidized risk-free rate

PS. In the case of the Eurozone sovereigns it’s even worse as all these have been by EU/EC assigned a 0% risk weight even though they take on debt that is not denominated in their own domestic printable currency

PS. The capacity to borrow at reasonable rates is a strategic sovereign asset.

PS. Before the debt ceiling is lifted, which it must be, Congress must dare to at least pose a question.

PS. Was that’s not a valiant, courageous and honorable confession by Paul Volcker? Thanks @PostOpinions for not ignoring it.

My four long-time held principles for a good restructuring of Venezuela’s/Pdvsa’s debt.

As an introduction to what follows, you might want to start by reading here what the United Nations wrote about sovereign debts restructuring in 2012.

Here's my 2019 take on the case of Venezuela:

A restructuring to be initiated when its corrupt, inept criminal and human rights violating regime has been thrown out, and law, justice, democracy and respect for private property has returned, should consider the following:

1. Not only for Venezuela’s sake, but also for all the citizens of the world’s sake, before absolutely any restructuring takes plac, exploit Venezuela’s debt problem, in order to establish clear definitions of what should be considered bona fide credits and what odious debts/credits, and what different treatment should be given to these.

2. Align the incentives of the creditors so as to work for having Venezuela’s economy grow instead of extracting from is economy whatever they can. In Venezuela’s case that is quiet straightforward. Have the creditors identify and help finance who can in the shortest-term possible, increase the oil it extracts and exports.

3. In order to align the incentives that will allow such debt restructuring to take place in peaceful and sustainable terms, have all the nations’ net oil revenues to be shared out 15% to its creditors, 34% to Venezuela’s central and local governments, and 51% equally among all Venezuelans.

4. Before the three aforementioned conditions have been formalized Venezuela should thankfully, gratefully accept all humanitarian help given but should not waste one cent of all those bridge loans from here to there that it could be offered, for instance by the IMF.

That should help Venezuela’s legitimate creditors to recover their loans, its government to have to rely more on what the citizens pays it in tax so as to be held more accountable and, foremost, allow Venezuelans to live in a nation and not just in somebody else’s business.

Misunderstanding socialism

The heartbreaking Aug. 9 front-page article “Venezuela’s most vulnerable join the exodus” referred to Venezuela as a “disintegrating socialist state.” I am not a socialist but I have friends who are, and I know many of them have difficulties accepting that in reality, they were hoodwinked by criminals who, because it provided them cover, marketed themselves as socialists to lay their hands on Venezuela’s enormous centralized oil revenue, which many years represented 97 percent of all its exports.

Analysts said some European nations “consider the Venezuelan crisis, in contrast, a remote and politically driven byproduct of the standoff between the Trump administration and [President Nicolás] Maduro that is less likely to affect them.” That is part of the problem, as too many leaders in Europe still have Che Guevara T-shirts.

When the poorest 40 percent in Venezuela received less than 15 percent of what they should have had Venezuela’s net oil revenue been shared equally, as in Alaska, how can that be socialist? When gas is sold at less than one-millionth times the price of milk, how can that be socialist?

U.S. sanctions? Yes, on the margin they might make some things harder, but they would still explain much less than 1 percent of Venezuela’s sufferings.

Per Kurowski, Rockville

PS. The "[President Nicolás]" was inserted by WP, they placed it within brackets, for me Venezuela's legitimate President is currently Juan Guaidó. 

A letter published in the Washington Post August 12, 2019

Today we Venezuelans need something very solid to grasp, so as with impetus again believe in the future of our nation.

For Venezuelans to be able to eat quickly, hand PDVSA over to its creditors quickly, so they get the equipment working quickly, so they can collect something quickly, and so that they can pay the citizens, not some bandits, Venezuela’s oil royalties quickly.

Venezuela's legitimate creditors should know that their only chance of collecting anything depends on whether Venezuela manages to raise a reasonable capacity to extract oil again, at a reasonable cost. 

Anyone who arrives to have the responsibility of governing the country should know that without Venezuela being able to raise a reasonable oil extraction capacity, at a reasonable cost, and in a relatively short period, their chances of continuing to have the confidence of the people are nil. 

If most of the net oil revenues (resultas petroleras), are shared equally among all Venezuelans then they will know that, compared to having to bend before authorities to beg for a few Claps, or free gasoline, or foreign currency at preferential rates, they would be in heaven. At last they will be able to feel living in a nation and not in somebody else’s business. 

Because of the above, I am sure that to raise the soul of our Venezuela, there is nothing better than a great agreement based, for example, in the legitimate creditors during the next 25 years getting 15% of our net oil revenues, the government 34% and citizens 51%.

Impossible? No! Our current legitimate creditors would be delighted with the establishment of a repayment source directly related to the income obtained by an increased oil extractive capacity.

And I am sure that with the certainty of an institutional agreement like the previous one, it would rain offers from qualified oil companies to make the many investments that are necessary today, after PDVSA has converted its assets into junk.

And I am sure that both the World Bank and the International Monetary Fund would be delighted to transparently supervise the correct implementation of such an agreement.

The difficulty? Those hunting the oil revenues and their friends, those who always distribute our oil results to keep the best part for themselves. Again, they will argue that if they manage 34% plus 51%, our Venezuela will be better. Should we keep believing them? No way Jose!

 

The faster an agreement like this one is reached, one in which everyone will be rowing in the same direction, the easier it will be to straighten out our twisted and saddened country, in order to give it the necessary encouragement to find solutions to its many other problems. 

In addition, any restructuring of debt has, for simple humanitarian reasons, the duty to seek to provide quick and sustainable responses to the most pressing needs of Venezuelans, primarily those of its malnourished children and those of its elderly painfully abandoned adrift. Humanitarian aid and loans from multilateral institutions help in the short term, but they do not represent a sustainable source of resources.

Of course, under this redistribution distribution plan it would be much easier to end this economic crime against humanity of giving away gasoline in Venezuela, instead of selling at its opportunity value in the international market.

I use here the term petroleum extraction since, for decades I have consider it a disrespect to that providence that placed petroleum under Venezuelan earth, to refer to it as producers.

 

Translated from Petropolitan

@PerKurowski

My Fourth of July 2019 tweets to the United States of America

This Fourth of July 2019 here are two tweets in which I expressed, to that United States of America that I admire and that I am so grateful to, some very heartfelt concerns.

In 1988 America signed on to the Basel Accord’s risk weighted capital requirements for banks. 

These gave banks huge incentives to finance what was perceived as safe, and to stay away from the “risky”. 

It is so contrary to a Home of the Brave, opening opportunities for all.

And regulators decreed risk weights: 0% sovereign, 100% citizens

That implies bureaucrats know better what to do with credit than entrepreneurs

That has nothing to do with the Land of the Free, much more with a Vladimir Putin’s crony statist Russia

http://subprimeregulations.blogspot.com/2019/03/my-letter-to-financial-stability-board.html

PS. Why “grateful”? Had my father, a polish soldier not been rescued by American’s from a German concentration camp April 1945, I would not be.

PS. As one of those millions Venezuelan in exile, I know my country’s future much depends on America’s will to support its freedom.

I saw Netflix’ documentary on Alexandria Ocasio-Cortez

I saw Netflix’ documentary on Alexandria Ocasio-Cortez

It is a great type of Hallmark flick, made by and for anti their establishment progressive activists.

Don’t get me wrong, I love Hallmark movies, and I am quite a bit of anti establishment myself, but, sadly, it takes much more than Hallmark happy endings, to help provide real and good solutions to our many real Main Street problems

Problem: Our economy, much because of regulatory distortion of the allocation of bank credit, has over ingested an unproductive debt. How to come down from that debt high is a mindboggling challenge.

Problem: Politicians who support minimum wages support the class of working people that have a job. But what about the not-working class, the people that do not have a job or do not want to be displaced from a job by artificial intelligence or robots?

Problem: The excessive importance given to house ownership and the excessive ease of financing of house purchases so as to make these affordable have caused houses to morph from being homes into being investment assets. So what about the class with no houses?

Problem: We face serious environmental challenges but how can we afford to face these when so many are out to profit financially, politically or by just feeding their narcissism, from the fight against climate change?

Problem: Being able to feed messages of hate, envy or just fake news, at zero marginal cost on social media, is polarizing to death our societies. How do we solve that without it all of us just ending up in the hands of a Big Brother? 

Problem: Growing inequality and poverty. How can we face those challenges without causing the economy to shrink? The sole redistribution of wealth is clearly not the answer, since all after tax income that produced the wealth, is now frozen in assets 

Problem: Student debt is a great problem. But how can we solve it without the solutions, like debt forgiveness, creating moral hazards and just opening space for further increases in educational costs?

Problem: How can we be able to launch a so needed unconditional Universal Basic Income when so many redistribution profiteers will fight with tooth and nails against seeing the value of their franchise decrease? 

Problem: And if you think only America has problems just have a look at the European Union with its ticking 0% Risk-Weight Sovereign Debt Privilege bomb. That is truly scary stuff.

PS. Among AOC’s first actions was, thinking that tax cuts meant giving away money to Amazon and not just to take less money from it, to help scare away Amazon with its 25.000 well paying jobs. That was like telling New York, "The City That Never Sleeps", to take a Big Siesta. Given its shaky finances, I have a feeling that was not much appreciated by her general constituency, so there might not be a sequel to this documentary.

PS. Who can stand up better for the future of our grandchildren than we grandparents?

If I had been elected a first time EU parliamentarian

If I was a newly elected first time European Union parliamentarian, the following is what I would ask in order to leave a clean historical record of my presence there:

Fellow parliamentarians: I have heard rumors that even though all the Eurozone sovereigns take on debt denominated in a currency that de facto is not their own domestic printable one; their debts, for the purpose of the risk weighted bank capital requirements, have been assigned a 0% risk weight by European authorities. Is this true or not?

If true does that 0% risk weight, when compared to a 100% risk weight of us European citizens not translate into a subsidy of the Eurozone sovereigns’ bank borrowings or in fact of all Europe's sovereigns?

If so does that not distort the allocation of bank credit in the sense that the sovereigns might get too much credit and the citizens, like European entrepreneurs, get too little? And if so would that not signify some regulators, behind our backs, have imposed an unabridged statism on our European Union?

And if so, does that not mean that some Eurozone sovereign could run up so much debt they would be seriously tempted to abandon the euro and thereby perhaps endanger our European Union?

Finally, was Greece awarded such a 0% risk weight? If so was this monumental fault by EU authorities taken in consideration when restructuring its debts? And if not, does that not show a basic lack of solidarity with a EU member?

Who should answer these questions? The European Commission?

Oops... it seems that it was the European Parliament through a "Council on prudential requirements for credit institutions and investment firms" that concocted the  idea.

PS. In March 2015 the European Systemic Risk Board (ESRB) published a report on the regulatory treatment of sovereign exposures. In the foreword we read:

"The report argues that, from a macro-prudential point of view, the current regulatory framework may have led to excessive investment by financial institutions in government debt. 

The report recognises the difficulty in reforming the existing framework without generating potential instability in sovereign debt markets. 

I trust that the report will help to foster a discussion which, in my view, is long overdue. Mario Draghi, ESRB Chair"

So Mario Draghi, as president of the European Central Bank since 2011, what have you done about it, or is it your intention to leave that very hot potato to your successor?

PS. In that ESRB report there are references to "domestic" currency but not to the fact that the euro is not really a domestic currency of any of the eurozone sovereigns. 

I have some ideas about what could compete with Facebook/Twitter

Chris Hughes, a co-founder of Facebook, a co-chairman of the Economic Security Project and a senior adviser at the Roosevelt Institute opines in the New York Times:

“No one knows exactly what Facebook’s competitors would offer to differentiate themselves.”

I have some ideas (most apply to Twitter too):

1. That it guarantees that I am always messaging or receiving messages from parties that I can clearly and absolutely accurately identify, with ease.

2. That I am targeted in an at least a 95% perfect way, so that my already way too scarce attention span is not being further wasted away by irrelevant/useless advertising/information.

3. That it shares with the participants 50-50 all advertising revenues generated by exploiting their data. Either to each one his respective production quota, or by means of helping to fund a universal basic income.

4. That it does it utmost to keep out all those redistribution or polarization profiteers whom, with their messages of hate or envy, can destroy our societies.

5. That it swears never ever to form any type of joint venture, with any type of Big Brother.

PS. Should we at least, as a minimum-minimorum, not require all social media with over a million followers, to openly publish the algorithms they use to maximize their ad revenues?

https://perkurowski.blogspot.com/2017/11/those-bothering-us-and-wasting-our.html

A brief comment on Joseph E. Stiglitz “The EURO: How a common currency threatens the future of Europe”

Professor Stiglitz correctly describes many of the challenges the Euro poses, most of which were known from get-go twenty years ago, like the problem derived from having fixed exchange rates within the Eurozone.

In the introduction to the paperback edition, Stiglitz also briefly brings forward something that should have been understood but seems to have been much ignored. That is that although the Euro is for most purposes the domestic currency in the Eurozone, it is de facto not a truly domestic currency for any of its sovereigns, since none of these have the right to individually print the Euros it wants or needs. Without that right, the Eurozone’s sovereigns’ debts are all, de facto, denominated in a quasi-foreign currency.

But what the book does not mention, is what came afterwards, I do not know exactly where and when; something that here and there is referred to, in hush voices, as Sovereign Debt Privileges. These translate into that the EU authorities (European Commission?), for the purpose of the risk weighted capital requirements for banks, assigned all Eurozone nations an insane 0% risk weight. 

That distortion in favor of Eurozone’s sovereign’s accesses to bank credit has impeded the markets from sending the correct market signals with respect to the interest rates for each sovereign.

One of the consequences of this has been the tragedy of Greece. Especially since Greece was then forced up to pay up basically on its own for this EU mistake, so as to bail out German, French and other Eurozone banks. What a Banana Union!

As for Professors Stiglitz opinions on Brexit I might resume those I my own words as “If there's a Remain there might not be a EU in which to remain”, something that would be very sad as EU was, and still can be, a very beautiful dream.

But let me be clear. I do not hold the EU authorities as solely responsible for the consequences of their 0% risk weighing of the Eurozone Sovereigns. Already in 2011, in a post titled “Who did the Eurozone in?” I argued that the extraordinary low risk weights that the Basel Committee assigned to sovereign debt when compared to what it assigned to the private sectors would end in tears. (And that goes not only for the Eurozone)

Three tweets on the Greek Tragedy

What if Alexis Tsipras and Yanis Varoufakis, while negotiating the debt of Greece with the Troika of the European Commission, the European Central Bank and the IMF, had brought up EU’s “Sovereign Debt Privileges”, and then argued: 

Though our debt is in a currency that de facto is not a domestic printable one, you assigned Greece 0% risk weight. That meant European banks could lend to us against zero capital. You expected our governments to resist the temptations of too easy credit 

http://blogs.reuters.com/hugo-dixon/2013/10/07/bundesbank-right-to-focus-on-doom-loop/

And now you want our children and grandchildren to pay for all the need of bailing out your banks? Have you no shame? 

Shall we take you to court? Shall we inform your constituency about your insane 0% risk weighting of Greece? Or shall we renegotiate?

https://teawithft.blogspot.com/2018/09/in-case-of-greece-eu-violated.html

My tweet on IMF loans to Venezuela

If IMF and friends would give loans around $60bn to Venezuela to help it recover, a big chunk of it, about 35%, should go in cash to all its citizens, e.g. $60 per month each, allowing the markets freely respond to their needs, without any bureaucratic intermediation from above

Si FMI y amigos diesen préstamos tipo $60 mil millones a Venezuela para su recuperación, gran parte, aprox. 35%, debería ir en efectivo a sus ciudadanos, p. ej. $60 por mes c/u, permitiendo que los mercados libremente respondan a sus necesidades, sin intermediación burocrática

There are two de facto class wars, which seemingly shall not be named

One between those working with salaries defined by minimum wages, and those looking for any job.

Another between those who own houses as investment assets, and those who just want to be able to afford a home.

On these where do you stand? Do you take a side, or do you prefer to conveniently ignore it?

Redistribution profiteers have a vested interest in hindering people from reaching the pot they promise will be there waiting for them, at the end of their Marxists rainbow.

"From each according to his ability, to each according to his needs"

In the Marxist view, such an arrangement will be made possible by the abundance of goods and services that a developed communist system will produce; the idea is that, with the full development of socialism and unfettered productive forces, there will be enough to satisfy everyone's needs

I do not agree.  First and foremost because I believe that free markets (capitalism) has by far the greatest capacity to extract the most from the citizens’ abilities. 

But also because, while traveling on such Marxist route, some few would have to redistribute any production of goods and services that is insufficient to satisfy the demand. And those taking the decisions fall too much in love with the political and financial profits such redistribution franchise can produce. As a consequence, the redistribution profiteers will never want to let loose of their power and their interference will never allow the production of abundance.

That said, as a citizen, I can nonetheless see the need for some redistribution of income and wealth to occur, not only in order to keep our society at peace but also out of simple plain need of social justice. For that I firmly believe the redistribution should primarily be done, not top down, but bottom up. 

An unconditional universal basic income would do so and it would also be the best way of keeping the distortion of the productive forces of a free market at minimum. 

That societal dividend would have to absolutely meet two criteria:

Be large enough to help you out of bed but never large enough to allow you stay in bed.

Be 100% fiscally sustainable, nothing of having our grandchildren pay for our income today. 

It should be easy to understand why the redistribution profiteers abhor the UBI… and one of their arguments against are precisely: that it will inspire laziness and keep people in bed; and proposing that it should be so big so as to guarantee its fiscal unsustainability, so that they will have to be kept in their role as redistributors.

There are many funding sources for an UBI. In an oil exporting country obviously those oil revenues should be a prime source, as already done in Alaska.

Though in Spanish, below is a short YouTube in which three important members of the Chavez/Maduro Bolivarian Revolution, confess their need of keeping the poor poor: 

Tareck El Aissami, former Vice President and current Minister of Industries and National Production: “The poorer people are, the more loyal to the revolutionary project they are, and the more love for Chávez they have"

Héctor Rodríguez, a former Minister of Education and currently the Governor of Miranda: "It is not that we are going to lift people out of poverty into the middle class so that they later aspire to be scrawny (a derogatory term used for the opposition)"

Jorge Giordani, four times Minister of Planning, “Our political strength is given to us by the poor, they are the one who votes for us and that’s why our discourse of defending the poor. The poor will have to remain poor, we need them so.”

Here’s the moment it struck me that if Brexit falls apart, there might not be a EU for Britain to remain in.

It’s now twenty years since the Euro was introduced, more in order to strengthen a union than the result of a union. As I wrote in an Op-Ed at that time, it brought on important challenges to its 19 sovereigns. First it meant giving up the escape valve of being able to adjust their currency to their individual economic needs and realities, and second, much less noticed, also by me, was that they would hence be taking on debts in a currency that de facto was not denominated in their own domestic (printable) currency.

To face those challenges required the Eurozone to extend much more the Euro mutuality to other areas, like to monetary and fiscal policies. In that respect there’s no doubt that way to little has been done.

For more than a decade I thought the Eurozone applied Basel Committee’s Basel II standardized credit rating dependent risk weights in order to set the capital requirements for banks, when lending to sovereigns. I never approved of that because I considered those risk weight way too statist, tilting bank-lending way too much in favor of the sovereign and against the citizen... and that should do the Eurozone in. 

But then, by mid 2017, I found out that it was all so much worse. EU authorities, most probably the European Commission, I really do not know who and when, assigned all Eurozone sovereigns a 0% risk weight, even though none of these can print euros on their own.

I could not believe it. That meant that European banks could hold sovereign debt, of for instance Greece, against no capital at all. How could something crazy like that happen? That basically doomed the Euro. What would have happened with USA if it had done the same thing with its 50 states?

How on earth can it now get out of that corner it has been painted into, especially when Europeans sing their national anthems with so much more emotion than EU’s anthem, Beethoven’s Schiller’s “Ode to Joy”

And that’s the moment it struck me that if Brexit falls apart, there might not be a EU for Britain to remain in.

My November 1998 Op-Ed "Burning the bridges in Europe"

PS. When Greece fell into the trap then EU authorities had it sign a Versailles type treaty.

We citizens need a clear global definition on what constitutes odious credits to sovereigns.

A letter to the Washington Post (not published)

I refer to Washington Post’s “Jaw-dropping corruption” recounting illicit investment relations between China and Malaysia, January 12.

It shows that though there have been discussions on odious debts, odious credits merits perhaps even more attention.

For decades I have begged for the establishment of clear and defined international rules that, either because of corruption or too nonchalant credit analysis or due diligence, should declare credits as odious, and therefore null, or at least not enforceable through normal channels.

In 2004 I published an Op-Ed titled “Odious Credit” in El Universal, Caracas. Can you imagine how much odious financing Venezuela could have avoided to contract with China, had such regulations been in place?

There’s way too much global camaraderie between governments all interested in taking on debt. We need much more global camaraderie between citizens interested in their governments not contracting odious debts. 

PS. A Public Sector Lending Charter is needed

The Chavez/Maduro Bolivarian Revolution, has confessed its need of keeping the poor poor

Though in Spanish, below is a short YouTube in which three important members of the Chavez/Maduro Bolivarian Revolution, confess their need of keeping the poor poor: 

Tareck El Aissami, former Vice President and current Minister of Industries and National Production: “The poorer people are, the more loyal to the revolutionary project they are, and the more love for Chávez they have"

Héctor Rodríguez, a former Minister of Education and currently the Governor of Miranda: "It is not that we are going to lift people out of poverty into the middle class so that they later aspire to be scrawny (a derogatory term used for the opposition)"

Jorge Giordani, four times Minister of Planning, “Our political strength is given to us by the poor, they are the one who votes for us and that’s why our discourse of defending the poor. The poor will have to remain poor; we need them so.”

PS. So that the riskier small businesses and entrepreneurs who need credit, will need us more, and therefore vote for us more, we, the regulators of the Bureaucracy Autocracy, must set the risk weighted bank capital requirements especially high on loans to them.

The statist Basel Accord should be anathema to the American Constitution.

Charles Krauthammer once wrote the American Constitution “stands for the pillars that define a limited government with enumerated powers, whose mission is to preserve liberty and individual rights”, “The enduring miracle of the American Constitution”, Washington Post, November 30.

In 1988, one year before the Berlin wall fell and so many thought the world had freed itself from communism, America, and much of the developed world, signed up on the Basel Accord. That accord, for the purpose of its risk weighted capital requirements for banks, awarded the sovereign a 0% risk weight, while imposing one of 100% on unrated citizens.

If Krauthammer is right when he wrote of a reverence for the Constitution “so deeply ingrained that we don’t even see it; we just think it’s in the air that we breathe”, I cannot understand the American silence on what clearly is a statist concoction; which I believe goes against everything America and its Constitution stands for.

That seriously distorted the allocation of bank credit in favor of governments and has now painted America into a very dangerous corner; in 1988 America’s public debt was about $2.6 trillions, now it owes around $21.7 trillions and still has a 0% risk weight.

@PerKurowski

PD. Here is what AI, in 2025, thought about what the Founding Fathers would opine.

“Just as an identity card is not a man, a credit rating is not a country”

Leonard Cohen, minute 3:50, in his the most ever amazing emotional and respectful thank you speech, in this case for Spain’s “Príncipe de Asturias” prize.

Jeff Fairburn’s £75m bonus is nothing when compared to the real problem with house prices.

Aditya Chakrabortty holds that “Jeff Fairburn’s £75m bonus has sharpened focus on the vast windfalls generated by help to buy” “Let’s stop lining housebuilders’ pockets and tax them instead” The Guardian, November 9, 2018.

No, it clearly has not! By focusing on that bonus, which naturally stirs up some envy into all of us, he misses the real issue, namely how much helping houses to be affordable for some, makes these even more unaffordable to others.

So first, let us all shake off that Jeff Fairburn’s £75m bonus. To begin with just take it as if life had dealt him a lottery jackpot. He has most certainly paid much more taxes on it than the taxes that would be paid had that £75m bonus been shared out equally among us all. And I would bet that more than 99% of what purchase power he had left over, has already been returned to the real economy by him buying assets or services.

That “the five biggest British housebuilders together paid out £4.4bn in dividends to shareholders between 2014 (the first full year of help to buy) and 2017” is totally irrelevant when compared to the magnitude of the real problem with houses.

That problem has to do with how much house prices have been inflated by this scheme and so many other distortions; especially like regulations that allow banks to hold much less capital when financing the purchase of houses than when lending to entrepreneurs… those who could be the ones who create the jobs so that house buyers will be able to afford to pay their mortgages and utilities.

Aditya Chakrabortty laments “Without that money from you and me, Persimmon would simply not have made that many sales, nor made that much profit– and its outgoing boss probably wouldn’t have got such a large bonus.” He should look at himself first.

Does Aditya Chakrabortty own a house? Then he should reflect on how much his house has gone up in value because of all the political kindness awarded house buyers. Should he not pay high taxes on that? House builders at least built. What have house owners done to enrich themselves so?

Does Aditya Chakrabortty not own a house? Then he should reflect on how much all the political kindness awarded house buyers has made houses even more unaffordable to him.

Houses are no longer homes; as a consequence of all regulatory and political kindness these have become investments assets too. The day too many house-owners will want to cash in their investment, for instance to pay some retirement costs… will the buyers be there for them? 

Well if we prohibit all political kindness awarded house buyers… as we in fact should so as not to blow the bubble larger, then many if the current buyers will definitely not be there... but then those that do not own houses may begin to find these affordable.

It all makes me remember Alan Price’s “Oh my, my, my, my, my, my, my, it makes you wanna cry. This is the house that Jack built, baby, and it reaches up into the sky”

Redistributing wealth is not as straightforward as redistribution profiteers want us to think.

I posted a thread with 8 tweets 

Louis XII could be the filthy rich who gave up main-street purchase power to commission Leonardo da Vinci to paint Salvator Mundi. 500 years later another filthy rich freezes $450 million of his own purchase capacity, hanging that painting on a wall. Bad or great? 

Why are just the "filthy rich", like Louis XII and the buyer of Leonardo da Vinci’s Salvator Mundi cursed? Why not Leonardo da Vinci, or the current vendor of Salvator Mundi? Could they‘ve not just as well used money they got from filthy rich for something “more worthwhile”?

Does it all boil down to that Louis XII should not have commissioned Leonardo da Vinci’s Salvator Mundi and instead have bought food for the poor? I guess that would then depend on what the food suppliers did with that money, farming... or drink more gin. Life ain’t easy.

We can just pray that something of that main-street-purchasing-power comes into the hands of the few risk-taking entrepreneurs who, with luck, help catapult our world forward. Sadly, with risk weighted capital requirements for banks, regulators have made that less possible.

Yes, life isn’t easy. So let us all beware of all those redistribution profiteers out to make money or gain political power and who tell us “Let us just redistribute the wealth of the filthy rich, and you will all live in Nirvana. Venezuela, Nirvana? My …!!!

If Louis XX commissioned Leonardo da Vinci to paint Salvator Mundi, would that not allow a great history book to  be written in order to trace how that money flowed, perhaps to a Bill Gates, generating wealth so that someone could freeze $450 million on a wall, and keep the human development ball rolling? 

 

These ramblings about how the “filthy rich” convert their main-street-purchasing-power into assets and services, some that would never have existed without them started when seeing a totally useless shield in the Louvre in Paris.

Just in case, this is not a point blank defense of the “filthy rich”. It refers strictly to how their purchase power morphs into assets and services. Many “filthy rich” do become so in unjust and corrupt ways, quite often highly detrimental to development.

PS. A tweet: "A tax on wealth? Ok! But please, what assets should the wealthy sell to whom, in order to raise the money to pay it? And what would the buyers otherwise have done with the money they also must raise? And so on, and on, in the circle of the economy’s life."

PS. A tweet: "A conundrum. How to structure a tax on wealth without reducing the wealth that is taxed?"

PS. This of course does not mean that I am not in favor of reducing inequality. For that I strongly believe in the need for an unconditional universal basic income, a Societal Dividend

PS. When it comes to wealth, yachts are often depicted… but rarely do we see any interest in what those yacht-builders did with the money they received.

PS. Let’s hope taxpayers will not be surprised finding out they now have to pick up huge bills for maintaining some Russian oligarchs confiscated super yachts.

PS. Legend holds that when 1974’s Carnation Revolution’s, chief strategist Otelo Saraiva de Carvalho told Sweden’s Olof Palme in Lisbon: “In Portugal we want to get rid of the rich”, Palme replied, “how curious, in Sweden we only aspire to get rid of the poor”

Five tweets and four PS: When shares and houses will want or need to transition from here to there, what will happen?

Huge QE, large fiscal deficits, and generous bank credit pushed on by very low capital requirements, injected huge amounts of liquidity that, among others, caused the price of shares, and the price of houses that morphed from homes into investment assets, to increase immensely.

Soon many of the elderly owners of shares and houses, will want to reconvert these assets again into main-street purchase capacity, whether voluntarily, in order to cover for their retirement costs, or involuntary, by having these assets becoming part of an inheritance.

The sale of shares and houses will then face: An extremely indebted economy that includes huge unfunded social obligations. Gig jobs, robots that tend to hold down wages, and pension funds and insurance companies also needing to sell assets in order to meet their own commitments.

How is all that going to play out? Since there are no possibilities of reenacting Troubled Asset Relief Program (TARP), or placing all shares and houses on central bank’s balances, it has me very troubled and finding very little that could bring me, a grandfather, some relief.

Is someone somewhere preparing financial or economic counter measures that could alleviate the problems brewing in the horizon? I really doubt it! As Einstein said, “We can't solve problems by using the same kind of thinking we used when we created them.”

PS. All this could be further much complicated by social tensions caused by lack of employment. Therefore I would ignore all the redistribution profiteers’ natural objections, and immediately enact an Unconditional Universal Basic Income. Even $100 per month would do for a start.

PS. That UBI could be partially funded by a high tax on carbon emissions. That would allow us to use market signaling more, in order to avoid that whatever little resources we might have available for fighting climate change, are captured by green-profiteers.

PS. Bank regulators messed it up for us. Their risk-weighted capital requirements only guarantee banks building up especially large exposures, to what’s perceived as especially safe, against especially little capital, dooming bank systems to especially large crises

PS. If our descendants are to stand a chance they must understand that risk-taking is the oxygen of any development, and so they must be wary of any loony runaway risk aversion, imposed by expert besserwisser nannies. God make us daring!

Investors want to promote the use of the products they have invested billions in; and that goes for cannabis-marijuana-marihuana-pot too.

My grandchildren are Canadian. 

So when I read in the Globe and Mail that “Investment banks reap rewards with $2.8-billion in cannabis equity deals” and the head of a Canadian bank’s Canadian equity capital-markets investments saying “Without cannabis new issue activity, our volumes would be down substantially more… it has certainly offset the declines in energy and power and utilities”, I really got nervous, mad, and began tweeting out everywhere.

"Is nobody concerned with those billions in equity invested in the legal production of cannabis-marijuana-marihuana-pot in Canada? That equity will search for good returns by promoting its intensive use. Have the pushers now moved to Wall Street?

I am not an absolutist against legalization of cannabis. I thought one of the best reasons for it was to fight the illegal business involved with its distribution… but what I now see seems more related to taking over that business L

Having fallen so low, Venezuela should take that golden opportunity to try reach the stars.

Moisés Naím and Francisco Toro describe well the utter current horrors of Venezuela in “Venezuela’s suicide: Lessons from a failed state” Foreign Affairs, December 2018.  But they conclude in that: 

“Even if opposition forces—or a U.S.-led armed attack—somehow managed to replace Maduro with an entirely new government, the agenda would be daunting. 

A successor regime would need to reduce the enormous role the military plays in all areas of the public sector. It would have to start from scratch in restoring basic services in health care, education, and law enforcement. 

It would have to rebuild the oil industry and stimulate growth in other economic sectors. It would need to get rid of the drug dealers, prison racketeers, predatory miners, wealthy criminal financiers, and extortionists who have latched on to every part of the state. 

And it would have to make all these changes in the context of a toxic, anarchic political environment and a grave economic crisis.”

That mission impossible sounding reads like placing all responsibility on the government to fix it all by going back and repeat, this time differently, all that got Venezuela to where it is today.

That to me is unacceptable. After all the blood, sweat and tears Venezuela has had to spill during the last decades, it really deserves a brand new future.

Here are eight tweets that imbed my action plan and dreams for my country.

"So Venezuelans can eat, quickly, PDVSA must be handed over in payment in full to all Venezuela’s creditors quickly, so they put that junk to work quickly, so they can recover some money quickly, and so as to pay us citizens, not the government, royalties quickly"

“Let then the government tax those oil revenues received by the citizens (like with 10%), so that those in government are clear about who they work for, and let what the citizens have left, then flow through the market and help oil the economy of Venezuela.”

“The result will be a different and better Venezuela, freed from those oil revenue distributing profiteers that have always found ways to keep more for themselves or their crony friends. No longer will Venezuelans have to live in somebody else’s business”

“New government debt should be contracted only to help pay for investments needed by its core infrastructure; Guri’s hydroelectric dams and central transmission lines. Privatizations should be designed to provide good and low priced services to the public ” 

“Expropriated properties should be returned to original owners, and all efforts made to recover what has been stolen the last 20 years, including by paying a bounty on any money recovered.”

“The government employees should be reduced to a fraction of their current number. With their individual share of oil revenues, and not having to go to work, most of them would anyhow be better off than today”

“The government’s initially ultra low revenues should be used almost exclusively for law enforcement (not military spending). Make Venezuela’s streets safe again, and Venezuela’s citizens, including returning migrants, will take care of the rest”.

“The best way to eradicate forever that economic human rights violation of giving away gasoline domestically, would be to have all citizens to participate in the revenues generated by the sale in Venezuela of gasoline at international prices”

These tweets are not just based on current realities. In 1974, as a 24 years old recently graduated MBA, I was appointed to be the first diversification manager in the Venezuelan Investment Fund that was being created to manage the oil revenues from the oil boom of those days. I resigned after only two weeks, the same day my desk arrived, already convinced by outside pressures exerted, that oil revenues redistribution profiteers would never allow the Fund to have the independence needed.

Three decades later, as an Executive Director of the World Bank 2002-04, a chair that Moisés Naím had also occupied before me, during and after the Iraq war I tried to push for an oil revenue sharing scheme as best I could. No luck, the crony statism interest of concentrating these revenues in the hands governments, were they could be more easily exploited, proved much too strong for me. 

Now Venezuela has a golden opportunity to free itself from the most malignant part of its oil curse, the excessive concentration of power in its government. I pray it is able to keep away any neo-redistribution profiteers. Let us make sure that having fallen this low we Venezuelans will aim for the stars… that way we will, as the Chinese saying goes, at least reach higher than if aiming at something seemingly more reachable.

“Venezuela would need to get rid of [all] who have latched on to every part of the state.”  What better way than assuring there is much less to latch on?

Here are some of the articles I've written and that relate to my desires about Venezuela’s future.

https://www.carnegiecouncil.org/publications/archive/policy_innovations/commentary/000083

https://perkurowski.blogspot.com/2012/03/my-tax-paradise.html

https://perkurowski.blogspot.com/2017/06/a-simple-but-complex-question-from.html

http://unsustainabledebtsustainability.blogspot.com/2006/05/debt-sustainability-analysis-sdl.html
https://theoilcurse.blogspot.com/2015/07/cidhdenunciasoas.html

http://theoilcurse.blogspot.com/2016/05/the-last-thing-venezuela-needs-is-to.html

Bank regulators behave like the scarer employed at the energy-producing factory Monsters, Inc.

The idea of requiring banks to hold less capital (equity) against what is perceived, decreed or concocted as safe, like sovereigns, the AAArisktocracy and residential houses, than against what is perceived as risky, like SMEs and entrepreneurs, is absolutely cuckoo.

That means that when banks try to maximize their risk adjusted return on equity they can multiply (leverage) many times more the perceived net risk adjusted margins received from “the safe” than those received from “the risky”. As a result clearly, sooner or later, the safe are going to get too much bank credit (causing financial instability) and the risky have, immediately, less access to it (causing a weakening of the real economy). 

Anyone who can as regulators did in Basel II, assign a 20% risk weight to what is AAA rated, and to which therefore dangerously excessive exposures could be created, and 150% to what is made so innocuous to our banking systems by being rated below BB-, always reminds me of those in Monsters, Inc. who run scared of the children. I wish they stopped finding energy in the screams of SMEs and start using their laughter instead.

“We need a people’s Fed”. Yes, we sure do! Assigning 0% risk weight to the sovereign and 100% to any unrated citizen is pure statist ideology driven discrimination in favor of government bureaucrats and against the people. But perhaps the activists depicted are not into that kind of arguments. 

PS. Those in Monsters Inc. finally figured it out. Our bank regulators in the Basel Committee and the Financial Stability Board have yet to do so, even 10 years after that 2008 crisis, which was caused exclusively by excessive exposures to what was perceived, decreed of concocted as safe, like AAA rated securities and loans to sovereigns like Greece 😩