February 19, 2017

If those with good “3bn biochemical letters of human genome” ask insurance companies for rebates, what about the bad?

Sir, in screaming silence I read what Clive Cookson writes about “technologies advancing at extraordinary speed to make possible ultra-precise manipulation of the genome” “Engineered evolution takes another step forward” January 18.

In March 2000, after reading “the government plans to allow insurance companies to use DNA testing to assess whether people are at risk of inheriting serious illness and should pay higher premiums”, I wrote an Op-Ed titled “Human genetics made inhuman”.

In it I expressed many of the concerns about the discriminatory implications of DNA mapping and expressed the view that something needed to be done before any release of DNA information caused irreversible damage. I there suggested “that all insurance companies design a plan which obligates them to issue policies for all of those who undertake a genetic examination. This policy should cover the negative impact and consequence that could arise from anyone getting access to such information.”

But I also admitted: “I know this is only a Band-Aid, but what else can I do? I am not among those that resign and lie down to cry, even though this matter actually would justify just that.”

Now, 17 years later, I have no idea on whether something, anything, has been done to save humans from a release of the information contained in a “DNA sequencing, which reads out all 3bn biochemical letters of an individual human genome [and which can be done] in a few hours for less than $1,000”.

Sir, I ask, if with only $1,000 investment, I can get a test testifying I have a good DNA, and which perhaps allows me to for instance negotiate special favored rates with an insurance company, how will that affect those whose tests indicate a not so good or even a very risky DNA, something that in fact could include me or the ones I love?

Environmental challenges, 1st class robots, 3rd class robots, intelligent artificial intelligence, dumb artificial intelligence, terrorism, nuclear weapons, fast and cheap DNA testing, crazy bank regulators, structural unemployment… and the list of challenges goes on and on. How will a world that spends so much of its very scarce attention span glued to so very attractive juicy fake/irrelevant news stories cope?


February 18, 2017

Until now any excesses in the use of power by President Trump would pale when compared to those of bank regulators

Sir, Gillian Tett writes: “Trump has managed to make the US constitution a live topic of debate…. the White House’s immigration clampdown… has created a real-time lesson on the limits of presidential power… The concept of “checks and balances” is no longer something written about in a school exam but instead is being breathlessly discussed on breakfast television… It is one thing to squeal with fury about the actions of the White House but what is badly needed is for voters (and journalists) to exercise a similar scrutiny over the operations of Congress and the judiciary, not to mention the lobbyists. “Our teenagers stand to profit from their awakening” February 18.

Sir, someday perhaps some grown-up grandchildren will awake and say: “During decades the risk weighted capital requirements gave banks incentives to refinance the “safer” past and present, and not to finance the riskier future we sorely needed to be financed. As a consequence many millions of SMEs and entrepreneurs around the world were denied that bank credit that could have created a new generation of jobs for us. Granma, please tell us you did not know anything about this, and yet said nothing”


There must be serious consequences for regulators and controllers who fail or allow themselves to be cheated

Sir, Tim Harford writes “In the case of VW, transparency was the enemy: regulators should have been vaguer about the emissions test to prevent cheating” “How do you catch a cheat?” February 19.

What? That seems like the absolutely most certain way to produce a cheat. Or is it that Harford believes regulators and emission controllers are a different set of humans with angel like qualities? Does he not understand what kind of temptations that would create?

Sir, the greatest problem with Volkswagen cheating on US emissions tests, is that the failed emission controllers who allowed themselves to be cheated have not been publicly shamed and sent packing home. Just like the extremely failed bank regulators of the Basel Committee for Banking Supervision have not been. In fact, the latter are still working on tweaking their fundamentally wrong regulations.

If creating regulations and controlling what’s being regulated carries no consequence when failing or being cheated, things are only bound to get worse. So, should we parade Paul Volcker, Alan Greenspan, Mario Draghi, Stefan Ingves and all their other bank regulating colleagues down our avenues wearing dunce caps? Why not? Do we not owe at least that to all who have suffered and will be suffering the consequences? Sincerely that seems like a very minor and gentle reprimand for all the societal damages they have caused with their risk weighted capital requirements for banks.

Sir, Harford correctly concludes though with “The truth is that the world can be messy place. When our response is a tidy structure of targets and checkboxes, the problems really begin”. Precisely! It reminds me of an Op-Ed I wrote in 1998 titled “Regulations as enemies of bank missions

PS. Sir you might ask why I here mention Paul Volcker. The truth is that he was one of the responsible for the genesis of what with time will be considered one of the greatest statist regulatory failures ever. 


February 17, 2017

If a manufacturing trade deficit leads to deficits of skills, then that can be something truly serious.

Sir, Professor Robert H Wade when commenting on Martin Sandbu’s “Trump’s love of manufacturing is misguided” of February 15 writes: “manufacturing typically has strongly positive “externalities”, especially in innovation, and that the innovation intensity of manufacturing depends on close, physical links between production and innovation (“learning while doing”).” “Manufacturing has positive externalities” February 17.

Indeed, just think of where you, I and we all would have been, if America had not had that manufacturing capabilities and those skills that allowed it to build up what Franklin Roosevelt called “The Arsenal of Democracy”, and which allowed for the defeat of Germany’s impressive war machinery during World-War-II.

And currently, the possibility of some other nation ending up with 1st class robots, and your own with 2nd or even the 3rd class robots should clearly be a source of much concern to everyone.

My current pray is “God save my grandchildren from being surrounded by dumb artificial intelligence and 2nd class robots”. But that said perhaps intelligent artificial intelligence could be worse, since then we humans might turn into having to be its obedient servers. Who really knows?


February 15, 2017

The fiercest manufacturing competition will be for the most capable robots, and there you never want to fall behind

Sir, Martin Sandbu writes “The economic nationalism of President Trump and Messrs Navarro and Bannon can be described as Germany-envy…Like so often with machismo, the envy is rooted in insecurity — a feeling of inadequacy compared with the perceived strength sported by these economies” “Trump’s love of manufacturing is misguided” February 15.

I can agree with much of Sandbu’s arguments, but that part of his article is simply under the belt out of place Trump bashing, which leads to nothing constructive at all. But, having gotten that out of my system, let me refer to another more vital issue.

When you lose manufacturing jobs, you do not only lose jobs, you lose skill-building opportunities; and to be able to retain some of the manufacturing skills in your country could also be part of your national security needs.

To understand that argument it suffices to read A.J. Baines “The Arsenal of Democracy”. Had America’s manufacturing capacity not existed in America, Sandbu would have lived under German rule, and I would not exists, since it was Americans that rescued my polish father from a German concentration camp… so perhaps we should both thank God for American “machismo”, and fret its possible disappearance.

Moreover, since “automation is reducing the need for manufacturing jobs everywhere” one can wonder if the dwindling manufacturing is not a great learning ground for robot and automation development. If so, giving up on that, one could face the serious problem of not ending up with the absolutely best robots.

Sir, I have tweeted: “God, please save my grandchildren from being dependent on dumb artificial intelligence and 2nd class robots”

PS. Of course there is also the great race for the most intelligent artificial intelligence.

February 14, 2017

On FT’s Patrick Jenkins’ discussion of Donald Trump’s “seven “core principles” for (de) regulating US finance

Sir, I refer to Patrick Jenkins’ discussion of Donald Trump’s “seven “core principles” for (de) regulating US finance this month”; as “decoded by a sceptic”, “Trump’s battle with red tape will hurt consumers and world” February 14.

1. “A swipe at the Consumer Financial Protection Bureau, the new body that has returned $12bn to more than 25m Americans ill-treated by financial groups.”

That comes to an average of $480 per person, which leaves open the questions of: At what cost? Should Americans because of CFPB’s feel safer and, if they do so, are they really safer? What has happened to good and useful old “Caveat emptor”?

2. “Mr Gary Cohn blamed regulatory capital requirements for a shortage of credit to the economy: “Banks do not lend money to companies . . . because they’re forced to hoard capital,” he said. Nonsense, given that equity capital is free to be used for lending.” What? Has Patrick Jenkins not yet understood how for instance requiring banks to hold more capital against “risky” SMEs than against the sovereign and the “safe” AAA-risktocracy, distorts the allocation of bank credit?

3. “There has in any case been pretty strong credit growth, about 6 per cent a year since 2012.”

Credit for what? Yes: for corporation repurchasing their shares; for more loans to “safe” sovereign; for increased automobile financing portfolios; for residential mortgages… but what about the financing of the riskier future our kids and grandchildren need to be financed?

4. “It may also be a pop at the Financial Stability Oversight Council, the only US federal body that assesses risk across banks and non-banks… disbanding FSOC, would… be dangerous”

No! All those involved with bank regulations that do not understand the fundamental reality that what is perceived as very safe, is much more dangerous to the bank system than what is perceived as very risky, should be disbanded… the faster the better.

5. “Enable American companies to be competitive with foreign groups in domestic and foreign markets. A natural adjunct of the president’s all-encompassing call for national greatness… is likely to translate into… deregulation.”

What? If banks have needed to hold the same amount of capital against loans to Greece or AAA rated securities that they needed to hold against loans to SMEs and entrepreneurs we might have had other type of crisis, but not the 2007/08 one, nor would we be suffering such lazy economic responses to all the huge stimuli doled out?

6. “be in no doubt: this president will deregulate”

If that means to take away what distorts the allocation of bank credit to the real economy then welcome, not a moment too soon. To just modify the regulations is not to deregulate, but only to neo-misregulate.

7. “Restore public accountability within Federal financial regulatory agencies”

That would be not a second too late. Not only the Federal financial regulatory agencies, but also most of the world’s bank regulators, refuse to answer some simple questions such as: Why do you assign a low 20% risk weight to the so dangerous for the banking system AAA rated, and a whopping 150% to the so innocuous below BB- rated?


If we are to avoid Nazi mentalities to take over, citizens need to be able to express their deeper inner concerns

Sir, I refer to Richard Milne’s “Rise of populists poses dilemma for Nordic mainstream” February 14.

As a son of a polish citizen who had to suffer concentration camps for almost five years, I am as far away as can be with sympathizing with Nazis. And of course I see with disgust anyone “pictured with Nazi memorabilia or uttering racist comments”. But Sir, that does not determined them to be, in any way, “uniquely awful”.

To argue so just opens the door to the exercise of dangerous political hypocrisy while closing the door on the possibilities of citizens to express their usually not at all bad meaning, deep concerns.

For a citizen, in a fairly small society like Sweden to be worrying about immigrants does not make him a bad citizen… it makes him just a citizen worrying about immigrants. Is that so hard to understand or is that what some do not want to be understood?

Sir, the repression of citizens’ feeling and worries, is precisely the best fertilizer for movements that can be taken over by Nazi type mentalities. Healthy societies need to be able to discuss, to ventilate, everything that bothers them, not only what’s political correct to discuss. 

A personal PS: My mother was Swedish. 93 years old, she passed away last Friday. On Thursday night, two not at all Swedish looking immigrants, vociferating in a totally foreign language, transported her home. I have rarely met a person more open to treat all without any kind of distinctions than my mother, but had she not the right not to feel totally at ease?


February 13, 2017

What mental block stops FT from understanding why the real economy is not responding stronger to so many stimuli?

Sir, you correctly write: “The capital weighting of many risky securities simply makes prop trading uneconomic. This is why banks in Europe have also reined in trading activities, even though Volcker does not apply to them.” “Drop the Volcker rule and keep what works” February 12.

Sir, If you see that, I truly do not understand how you cannot get your hands around the fact that the capital weighting of many risky borrowers, simply makes lending to SMEs and entrepreneurs uneconomic for the banks, and making it impossible for the real economy to respond sufficiently to all the stimulus offered?

From Wikipedia I get: “A mental block can be an inability to continue or complete a train of thought, as in the case of writer's block. A similar phenomenon occurs when one cannot solve a problem in mathematics which one would normally consider simple”

Wikipedia also states “one tactic that is used when people with mental blocks are learning new information, is repetition”. Sir, you know how I have tried to help you repeating my arguments way over 2.000 times, but sadly all these efforts have until now been to no avail.

Sir, strictly between you and me, don’t you think that, just in case, it would be wise to set up an appointment for you in order to have a Psychological assessment? I mean, what have you to fear? You did not come up with those crazy regulations that assign a risk weight of only 20% to the for the banking system so dangerous AAA rated, while weighting the totally innocuous below BB- rated with a whopping 150%


The failure of telling the truth about the role of bank regulators in Greece’s crisis helps create alternative facts.

Sir, Wolfgang Münchau writes: “The Greek crisis is only the most glaring example of failure to tell the truth…When the truth dies, we should not be surprised if alternative facts are put in its place” “A failure to tell the truth imperils Greece” February 2004.

Indeed! I agree with most of what Münchau argues, but first let’s start from the beginning.

When has it been explained to the Greek people that their current travails would never have happened, had some bank regulators not decided, on their own, that banks needed to hold so much less capital when lending to the Greek sovereign, than for instance when lending to American, German or Greek SMEs or entrepreneurs?

And how would they feel if they came to know that many of those who had direct responsibility in that huge regulatory mishap, were still involved in deciding its future?

Sir, how can you work yourself out of a crisis being helped by some interested in hiding vital truths about the cause of the crisis?


If President Trump makes unfit profit on his hotels, so might those who are in the business of opposing him.

Sir, Edward Luce’s “America’s monetiser-in-chief” of February 13, could easily end up being used by all those who by email and other means, ask us to give money to them so that they fight Trump on our behalf.

Currently too many are reminded of Irving Berlin’s song “Anything You Can Do” from the “Annie Get Your Gun” musical. The days open up with a: “Some say they can fight Trump, but I can do that better, I can fight Trump, better than all”, which is then followed by an ever increasing number of voices belting out their, “No you can't. Yes, I can. No, you can't. Yes, I can. No, you can't. Yes, I can, Yes, I can!”

Luce writes: “Even where Mr Trump has the highest motives, he will fail the Caesar’s wife test”. In what world does Luce think we are living? Do not failed Caesar’s wife tests surround us everywhere? Is political profiteering really so much different from business profiteering? Surely if Trump is caught in an act of extending an overt invitation to be corrupted, I am sure that the consequences for him and for the corrupter, will be much more severe than for all those politicians who daily mingle with their dedicated lobbyist.

Sir, I am not condoning any possible Trump shenanigans, and I will protest it as much as you, or even more than you, if and when any real evidence is presented. But, meanwhile, there is a vital need for staying focused on realities and not being distracted by anti-Trump populists or anti-Trump profiteers. 

First, as a Venezuelan still living the “Chavez” era, what Luce describes when preaching for the choir, means nothing in terms of eroding the popularity of a populist. Quite often the opposite happens.

Second, there are too many infinitely more important and urgent issues at hand. Just think of all those robots that compete with us humans for jobs without being burden with payroll taxes and similar handicaps. Just think of those regulatory gnomes distorting as they see fit, with their risk weighted capital requirements, the allocation of bank credit to the real economy.

Third, Trump represents a new wind in Washington, so let’s try to use it as much as we can. For instance the proposal by the Climate Leadership Council of imposing a carbon tax, which revenues would go directly to the citizens, is the best win-win possibility I have seen in many years. If that would be its price, I would gladly look the other way, if those horrendous anti America and anti economic plans of Trump Hotels to quintuple its outlets in America become reality.

PS. Hotel building needs financing, and bankers and investors, must consider the after 4 or 8 years profitability of the hotels.

PS. I have just received an email where someone indicates that after a review they have found that I have yet to donate the minimum $3 to fight Trump, and that I must hurry up. I wonder if someone keeps a list of the 10 largest anti-Trump-movement's profiteers?


February 12, 2017

How do you suggest a contrarian belief to a President without causing him great disconfirmatory feedback discomfort?

Sir, Tim Harford writes that when “I think I’m doing a good job, and then you tell me that I’m not… [research indicates] “that when this, which in the jargon is known as disconfirmatory feedback arrived, workers would then avoid contact with the people who had given them the unwelcome comments.” “If I’m cruising along in a complacent bubble, I badly need someone to explain what I’m doing wrong” January 11.

Bank regulators think they are doing great assigning a risk weight of 20% for what is AAA rated, and 150% for what is below BB-. I tell them they’re wrong, that what’s perceived as safe, contains much more danger than what is perceived as risky. I back it up with Voltaire’s “May God defend me from my friends, I can defend myself from my enemies” … and then the regulators avoid all contact with me. It sure looks like a case of reaction to a disconfirmatory feedback.

But, at a level of a Basel Committee for Banking Supervision should its members not have to be able to handle rationally any disconfirmatory feedback? And what about those even higher up?

For instance, I believe that in the race for jobs in the US, much more important than human competition from China and Mexico, is the fact that Americans have to compete with robots from everywhere that do not have to carry weights like payroll taxes.

Sir, I ask, how can I convey such a belief to a President without risking causing him great disconfirmatory feedback discomfort?

PS. Sir FT, since you have also mostly shut me up, could it be because I have gone over the level of disconfirmatory feedback you can handle? If so, how should we handle it? I ask because I have no wish to give up writing you my mind on so many things you might not agree with.


February 11, 2017

Gillian Tett also suffers from "biases in our brains that undermine our capacity to make rational decisions”

Sir, Gillian Tett writes on the issue of “how bad humans are at assessing risk”, and refers to that “academics Daniel Kahneman and Amos Tversky have highlighted all manner of biases in our brains that undermine our capacity to make rational decisions.” “Fear of cultural ‘pollutants’ can be allayed with acceptance”, February 11.

As an example, Tett mentions that in the US “the data suggest that the chance of dying in a terrorist attack by a refugee, of any religion, was just one in 3.64bn in any given year. That is far lower than the risk of being struck by lightning”. Yet Tett writes, there is “irrational” fear of immigrants.

Ms. Tett, should perhaps do well showing more humility because, like all of us, she is just as bound to be afflicted by exactly the same human weakness

There is no data that would indicate that any major bank crisis was caused by excessive bank exposures to something perceived as risky when placed on balance sheets; and all data points that the real dangers lies with what is perceived as very safe, yet Ms Tett, her colleagues, and most of the bank regulation community see nothing strange with risk weights of 20% for what is AA to AA rated and 150% for the below BB-.

Ms Tett writes “There is little point in countering people’s “irrational” fear of immigrants by throwing statistics about or dismissing Trump’s supporters as “racist”.

Sir, I am of course not talking about racism, but should I not insist, as I do, day after day, with thousands of letters, in trying to illuminate those that who by favoring the dangerous safe, actually discriminate against the access to bank credit of the innocuous risky?

Over the last decade, around the world, millions of SMEs and entrepreneurs have seen their begging for an opportunity denied by sheer financial regulatory bigotry. And Sir, you are well aware that FT shamefully keeps mum on it.


February 10, 2017

The political establishment fell prey to an idiotic regulatory technocracy they did not dare to question

Sir, Philip Stephens writes: “Rising populism has been fed by a political establishment in thrall to unfettered capitalism”, “Why the liberal order is worth saving” February 10.

Nonsense! The political establishment fell prey to an idiotic regulatory technocracy they did not dare to question.

Some of the Basel Committee for Banking Supervision’s risk weights used to determine the capital requirements for banks are: The Sovereign 0%; We the People 100%; AAA to AA rated 20%, below BB- 150%.

That has absolutely nothing to do with unfettered capitalism all to do with unchecked and dumb statist intervention.

The liberal order went out the kitchen door of the Basel Accord, in 1988, before in 1989 the Berlin wall felt and the “Washington Consensus” saw light.

Here are some questions that have yet to be posed by someone able to force bank regulators to answer:


February 09, 2017

Why are experts like Martin Wolf so silent on the immoral and utterly stupid facets of current bank regulations?

Sir, Martin Wolf questions the UK government’s “moral choices for a country forced to share out losses imposed by a massive financial crisis and weak subsequent growth [because] the government has decided to give greater priority to the old than to the young, to pensioners than families with children and to the better off than to the relatively worse off” “May’s policies make a mockery of her rhetoric” February 10.

But, when I question the intelligence and the morality of current bank regulations, Wolf ignores it. So Sir, here we go again, for the umpteenth time!

The risk weighted capital requirements for banks, caused a massive financial crisis by giving too large incentives for banks to create excessive bank exposures to what was supposed to be safe, like AAA rated securities and Greece; and with incentives that hinder banks from taking sufficient risks on the future, like lending to “risky” SMEs and entrepreneurs, causes weak growth and lack of increased productivity.

That clearly immorally favors the well-off over those poor wanting and needing credit opportunities; just as it immorally favors banks financing the safer past and present, than the riskier future the young need to be financed.

It is also I would say almost immorally stupid; since major bank crises always result from unexpected events, criminal behavior or excessive exposures to what was erroneously perceived or decreed as safe, and never ever from excessive exposures to something perceived as risky when placed on banks’ balance sheets.

Basel I assigned a risk weight of 0% to the Sovereign and one of 100% to us We the People; and it would seem Wolf is unable to grasp the runaway statism of that.

Basel II assigned a risk weight of 20% to what was AAA to AA rated and one of 150% to what is below BB-; and it would seem Wolf is unable to grasp the lunacy of that.


To better help the environment and fight inequality, get rid of the profiteers, and give the citizens the incentives

Sir, after a price increase of 6.000% last year, gasoline is currently being sold a US$ 1 cent per liter in Venezuela, a country in which people are dying because of lack of food and medicines. Can you imagine how much better it would be to sell that gasoline at international prices, and perhaps even adding some carbon taxes to it, and then share out the new revenues obtained among all Venezuelans? I have been fighting for such a solution for soon two decades.

That is why I jump of joy reading Ed Crooks’ report about a proposal in the US for “a tax on carbon dioxide emissions, starting at $40 per tonne, with all the revenue recycled in dividends paid back to the public.” It is being introduced by the "Climate Leadership Council" “Republican grandees propose carbon tax” February 9.

In May 2016 you also kindly published a letter of mine in which I proposed something similar as a tool to fight pollution in Mexico. 

I pray the referred to proposal gets to be approved in the US. It would set up a great example for the world on how one can effectively align the fights against environmental damages and against inequality. It would serve as a great appetizer for a Universal Basic Income scheme.

That said we could reasonably assume that, since it reduces the value of their franchises, the usual green movements and redistribution profiteers will fight it tooth and nail.

PS. Venezuela’s domestic gasoline prices should in fact be considered a violation of economic human rights, but I have found little interest, for instance in OAS, for pursuing such matter.


February 08, 2017

Why has society ignored for so long the structural unemployment that is already here, and that will grow so much worse?

Sir, Sarah O’Connor does all of us an immense favor putting forward data such as “America’s unemployment rate may be close to the lowest in a decade at 4.8 per cent [but] the rising share of people in their prime years (between 25 and 54) who are neither working nor looking for work, now stands at about 20 per cent” “‘Jobs for the boys’ is just half the story in America” February 7.

History is sure going to analyze the question of how a generation that prides itself from having so much knowledge and information at its disposal, could have turned such a totally blind eye to one of the greatest challenges it faces, namely the structural unemployment caused by robots and automation.

Where can we find data about how much robots and automation have substituted for human jobs and salaries, year by year, during for instance the last 20 years? It might exist, but I certainly have not found it.

In 2012, having been worried for quite some time about this issue I wrote an Op-Ed titled “We need worthy and decent unemployments”. But only quite recently are possible remedies to a real inexistence of jobs surfacing into public debate, like that of a Universal Basic Income. Though much too late that is good. Nonetheless the “whys” or the “how comes” of all social blindness to this issue, needs also to be studied.

PS. Why is there no concern with that humans have to so unfairly compete for jobs with robots that are not handicapped by having to carry weights like payroll taxes?

PS. Just like the “whys” or the “how comes” about the silence on stupid bank regulations, based on the silly notion that what is perceived as risky is more dangerous to the bank system than what is perceived as safe, needs to be studied.


Brexit contains more true catastrophic risks for the EU and the Euro than it does for Britain

Sir, I refer to Martin Wolf’s “Britain’s leap into the unknown” February 8.

Do I disagree with him? No, if I look at Brexit as Wolf does with a microscope focused solely on Britain. But, from a wider perspective, looking at so many other unknowns, his Brexit concerns takes on some Lilliput against Blefuscu war characteristics.

Why? Many would probably start by mentioning the environmental problems of the earth and overpopulation. But setting these aside there are many other challenges that needs to be considered so as to weigh correctly what could be coming with Brexit. Let me just briefly mention the following three.

First, I have the impression that Brexit carries with it more risk of true catastrophes for EU and the Euro than what it has for Britain. This is not a case Britain leaving a happy family behind. It is more like running away from a very messy dam full of repressed feelings of discontent, ready to burst at the urgings of any able populist, and to which its comfortable and full of themselves technocracy is unable to respond to adequately.

Second the banking system. Its regulators, with their risk weighted capital requirements, manipulated and distorted the system in such a way that the real economy is not being fed the nourishment it needs; and the banks themselves are bound to collapse, as would collapse any casino that had its roulette table equally manipulated.

Third, the growing structural unemployment caused by robots and automation. The only reasonable response to that seems to be some sort of Universal Basic Income floor, and that is something that must be much easier to develop within a nation. Just thinking of some EU Commissioners having to agree to a uniform Universal Basic Income policy applicable to Germany and Greece is too challenging.

Of course Brexit represents difficulties… but like all difficulties it also encompasses some opportunity. My dear English friends think of it like this. You are now sailing back to your homeland and soon, for good or for bad, you will at least be able to see the white cliffs of Dover again. 


February 07, 2017

ECB’s Mario Draghi, as a bank regulator, is he taking us all for a ride? Is he unwittingly (dumb) or wittingly (bad)?

Sir, Claire Jones quotes Mari Draghi with: “The last thing we need is a relaxation of regulation… The idea of repeating the conditions of before the crisis is very worrisome.” “Draghi pushes back against protectionist programme” February 7.

As the former Chairman of the Financial Stability Board, and as the current Chairman of the Group of Governors and Heads of Supervision to which the Basel Committee for Banking Supervision reports, Mario Draghi is as responsible for bank regulations as anyone can be.

And so this is a man who clearly believes that what is rated AAA to AA represents such little risk for the banking system that it merits a risk weight of only 20%, while what is rated below BB- is so dangerous that it must be risk weighted 150%. That is of course sheer lunacy.

And so this is a man who clearly believes that a sovereign can have a risk weight of 0%, while the citizens who give the sovereign its strength must be risk weighted 100%. That is of course run-away statism.

Sir, now I dare you to read the latest document issued by the Basel Committee, titled “Frequently asked questions on market risk capital requirements” and then dare, without fear and without favor, answer me this very straightforward question, with a Yes or a No. Do you think the Basel Committee is digging us out, or digging us further down, in the regulatory hole they have placed us in?

Sir, in my mind it is perfectly clear in that Mario Draghi has no moral authority whatsoever, to lecture anyone about manipulation or protectionism.

The risk weighted capital requirements for banks is an outright manipulation of the access to bank credit that discriminates against the risky, like SMEs and entrepreneurs, and protects the interests of the banks and of those perceived, decreed or concocted as safe. 


A holier than thou alliance of hysterical extreme besserwisser progressives, is pushing too many into No No Land

Sir, Janan Ganesh opines that visceral/hysterical reaction against Trump no matter how correct it might be, might evidence to many voters that progressives do not share their deeply felt concerns about national security, crime, welfare dependency and similar. “Liberalism can only win if it holds a hawkish line” February 7.

Ganesh is absolutely correct. As a Venezuelan I can testify on that this type of reaction, by a similar holier than thou besserwisser group mostly correct in their opinions preaching to the choir, only made Chavez stronger.

For instance I utterly dislike walls, foremost because you can never be real sure you or your grandchildren end up on the right side of it. But, in the case of the Mexican Wall, much more constructive would a “Yes let’s build it” be. That followed up of course with “The USA puts up the land, the Mexicans the cheaper labor, perhaps the Canadians the materials needed, and the FED, by means of a wall-easing program, buys the 1%, 50 years bonds that are needed to finance it all”. I guess that would bring the emotionally laden discussions about that wall to a more sane level… better for all.

Sir, but Ganesh also writes: “Whenever the state imposes a counterterror measure, especially one as brute as the US president’s, statistics are dug out to show that fewer westerners perish in terror attacks than in everyday mishaps. Slipping in the bath is a tragicomic favourite. We chuckle, share the data and wait for voters and politicians to see sense.”

And that, as you might intuit, irresistibly provokes me to ask the following: When the state imposes a regulatory measure based on something so brutish as believing that what is perceived as very risky is riskier for the bank system than what is perceived as very safe… why does then so few chuckle, share the info, and wait for regulators to see sense?


February 06, 2017

Dear Sir, using your extraordinary savoir-faire and FT’s immense influence, please educate our bank regulators

(I will try it the Lucy Kellaway way “How to ask for what you want — and get it every time” February 6.)

Sir, the world needs for you and your astonishing influential paper, as always without fear and without favour, to inform bank regulators about that their current regulations is based on a fundamental mistake, a sort of the mother of all “alternative facts”; namely that what is AAA to AA rated, is much safer for the banking system than what is rated below BB-.

That, in their standardized risk weights, has caused them to assign a meager 20% risk weight to the very dangerous AAA-risktocracy and 150% to those made so innocuous by being perceived ex ante as very risky.

Most probably because I am so unimportant, I have not found a way to transmit to the regulators the real truth, namely that excessive exposures to what was perceived as risky when placed on banks’ balance sheets have never caused a major bank crisis. That dishonor belongs to unforeseen events (like devaluations), criminal behavior, and to what was ex ante perceived as very safe but that ex post turned out to be very risky.

But Sir, with your importance and extraordinary savoir faire I am sure you would be able to reach out to them, discreetly if you so wish.

When you do, the world will owe you immense gratitude because, as is, this mistake has created such distortions in the allocation of bank credit to the real economy that our banks are no longer financing the riskier future our children needs to be financed, but only refinancing the safer past and present.

If they are too hardheaded and you need some backup argument, you could always quote Voltaire to them “May God defend me from my friends, I can defend myself from my enemies

Yours always, admiringly and cordially

Per Kurowski

February 04, 2017

Risk weights of 20% for AAA rated and 150% for the below BB-, evidences the Basel Committee’s intellectual failure

Sir, Brooke Masters makes a lot of good points in her “Loss of a safety-first regulatory regime is no reason to party” February 4. Unfortunately, again, as is usual for almost all commenting on bank regulations, these are solely from the perspective of the safety of banks; so rarely from the perspective of the borrowers, most specially the “risky” borrowers, like the SMEs and entrepreneurs, and whose borrowings are taxed with the highest capital requirements for the banks.

When Masters’ writes that relative to some large institutions “Some smaller banks are struggling with high compliance requirements”, it is so in much because the natural borrowing clientele of smaller local banks belong to the “risky” group.

Masters ends by recommending: “just trim back the Dodd-Frank rules and stay in the Basel process but temper its safety drive… even try leaving the fiduciary rule in place”

I do not agree. The Basel Committee has produced regulations that make no sense to the real economy and, if you really want banks to have a chance to be sustainably safe, you must make sure the allocation of credit to the real economy is efficient and adequate. The Basel Committee with its risk weighted capital requirements dangerously distorts that allocation. And all based on the completely erroneous theory that what is ex ante perceived as risky is riskier ex post to the banks than what is perceived as safe.

That the AAA rated, so dangerous in that a perceived safety can easily cause very high exposures, have a risk weight of 20%, while the really so innocuous below BB-rated are assigned a risk weight of 150%, is about the best example of how confused current bank regulators are. To rebuild those regulations using the same builders and who are not even recognizing the mistakes cannot lead to anything good. Face it, banking after around 600 years of functioning, was in 1988, with Basel I, dramatically changed for the worse. 

The Dodd-Frank Act? What can I say: to me it is a monument to legislative surrealism. For instance in its 848 pages it does not even mention the Basel Committee for Banking Supervision.

Fiduciary role? Since no one can really guarantee that any fiduciary responsibility is complied with, it is better not to imply such thing with regulations. The best approach is just explaining to investors what its acceptance or not by the advisors, is “supposed” to mean. 

PS. It would be great if Brooke Masters used her influence to get some answers from any bank regulators to these questions.

PS. The sad truth is that our banks are in the hands of Chauncey Gardiner type regulators.


February 03, 2017

If Britain wants to prosper, it needs to rid itself of dangerously loony and useless bank regulation

Sir, Augustus Fukushima writes: “Britain must invest aggressively. Key sectors such as transport, education, and manufacturing suffer from chronic under-investment. The government must not relegate itself to the back seat by assuming a purely regulatory role but must instead lead investment” “Brexit Britain must go on the offensive to prosper” February 3.

Oh if only government had assumed a proper purely regulatory role. But, with their risk weighted capital requirements for banks they distorted the allocation of bank credit to the real economy.

First, with a risk weight of 0% for the sovereign and one of 100% for the citizens they guaranteed the government a too favorable access to bank credit.

Then, with for instance a 35% risk weight for financing houses and a 100% risk weight for SMEs and entrepreneurs; they allowed banks to leverage more their equity with loans to house buyers than with loans to SMEs or entrepreneurs; which de facto means banks earn higher expected risk-adjusted returns on equity on loans to house buyers than on loans to SMEs or entrepreneurs; which results in that banks will much prefer financing the “safe” basements in which kids without jobs can live with their parents, than the “risky” SMEs or entrepreneurs that could help the kids get the jobs they need to be able to afford buying a house and become parents too.

If Britain wants to prosper, it needs to get rid of this dangerously loony and useless bank regulation. Useless? Of course, as Voltaire would have put it if a regulator: “May God defend our banks from what they perceive as safe, from what they perceive as risky they can defend themselves.”

PS. FT’s Future of Britain Project would be much well served by asking the regulators some questions as those in the link below. But we can’t have that can we?


Help! Our so serious looking bank regulating technocrats are guided by childish romantic illusions. That’s dangerous.

Sir, Arthur Beesley and Alex Barker quotes Frans Timmermans, vice-president of the European Commission with: “Politics is always a balance between the head and the heart. In European politics we’ve sort of forgotten about the heart for too long, just thinking with the head. Then you end up in the underbelly, apparently, in some of our member states.” “Timmermans urges EU ‘not to punish Brits’”, February 3.

For EU politics that could be correct, though I really don’t know, and besides there are always more or less intelligent heads. But, in the case of regulations where only heads should be at work, there I am 100% sure, at least in the case of bank regulators, that only hearts reign.

That is because anyone who thinks that what is ex-ante perceived as risky, is ex post more dangerous than what is perceived as safe, is a naïve romantic full of illusions. The smart heads, like Voltaire did, would say “May God defend me from my friends, I can defend myself from my enemies”

Now for those who like EU have embraced the Basel Committee’s principles, this means for instance that a bank is allowed to hold less capital (equity) when financing the purchase of a house, than when lending to a SME or an entrepreneur.

That means a bank can leverage its equity more when financing the purchase of a house than when lending to a SME or an entrepreneur.

That de facto means a bank can earn a higher expected risk-adjusted return on equity when financing the purchase of a house, than when lending to a SME or an entrepreneur.

Consequentially that means banks will much prefer financing the “safe” basements in which kids without jobs can live with their parents, than the “risky” SMEs or entrepreneurs that could help the kids get the jobs they need to be able to afford buying a house and become parents too.

If that is not extraordinarily dangerous for the future of EU, what is? Sir why don’t you suggest Timmermans that if he has some 100% head-applying technocrats available, then he should urgently have them to take over current bank regulations. 


February 02, 2017

When will the competitiveness of your robots be more important to your real economy than that of your human workers?

Sir, if worker productivity had remained as 1950 levels, how many humans workers would have been needed in the world to deliver the 2016 manufacturing production, compared to those 43m who, according to Martin Wolf, were worldwide employed in 1950? I have no idea but definitely many times more than those 145m Wolf indicates as currently employed in 2016. “Tough talk on trade will not bring jobs back” February 1.

Set in this perspective “The main explanation for the longterm decline in the share of manufacturing employment in the US (and other high-income economies)” is not so much what Wolf states “the rise in employment elsewhere”, but the increased productivity of which Wolf also writes.

So, what do we want, the higher productivity that generates “sustained improvement in living standards”, or some lower productivity that could generate more jobs for humans?

Wolf, like most of us, perhaps with exception of those who might still dream of some 60s’ hippie-solutions, rightly prefers the first; and therefore his concern with that in the “US manufacturing employment rose a little… as a result… of productivity’s recent stagnation: in manufacturing, output per hour rose only 1 per cent between the first quarters of 2012 and 2016.”

The crudest implication of this is: do we need humans more capable to work or better robots? That question naturally leads to: will the competitiveness of the robots they possess, define the strength of future human groupings?

Sir, for me these are much more fundamental questions than that of: how can we save jobs for [our] manufacturer workers from being taken away by [their] workers?

In 2012 I wrote an Op-Ed titled “We need decent and worthy unemployments”. Perhaps within the application of a Universal Basic Income scheme, lies part of the solution to the enormous societal challenges automation causes.

But, no matter what we do, let us get rid of those dangerous distortions of the allocation of bank credit, because, whatever the future needs, how on earth are you suppose to give it to the future, if one is not willing for banks to take risks. Again, as a minimum minimorum, we must save ourselves from regulators so dumb they assign a 20% risk weight to that so dangerous to the bank system as the AAA rated, while hitting the innocuous below BB- rated, with a 150% risk weight.

Sir, I want my grandchildren to be able to develop themselves the most they can, as humans. That will require them being surrounded by content and happily unemployed humans, as well as possessing savagely efficient (and obedient) robots.

PS. The absence of statistical information on how much robots and other automation have substituted for human salaries and jobs, is baffling, especially in these data days. No wonder we might be in sore need of some artificial intelligence assistance, like from for instance IBM’s Watson.


January 29, 2017

Beware of Brexit EU. Britain might not use Euros, but that does not mean the Euro is totally independent of Britain

Sir, Tim Harford writes: “Imagine detaching your steering wheel and flamboyantly discarding it as you race headlong towards your opponent. Victory would be guaranteed. Nobody would drive straight at a car that cannot steer out of the way.”, “Brexit as a game of Chicken” January 28. 

It reminded me that in 1998, on the eve of the Euro, I wrote an Op-Ed titled “Burning the bridges inEurope”, because “in all the abundant legislation that regulates this process, there is no mention whatsoever of how to manage the withdrawal or future regret of any of the union’s members.” That sure was something like discarding the steering wheel.

But looking back at the Euro now, I have also come to believe that part of the glue that has helped the Euro hold together, has to do with the feeling that Britain in EU would be able to help arbitrate and reduce the frictions between Euro’s so dissimilar members.

Therefore the Eurozone should very carefully consider what a bad Brexit would do, not solely to the EU, but also to the Euro. 

Sir, Hartford also writes: “May badly needs to sign a deal with someone –Trump, perhaps, or China’s president Xi Jinping. But neither Trump nor Xi badly need to sign a deal with her. This is not a great starting point.”

I am not so sure about that. The way Trump seems to be digging himself into a hole, he might very well need to sign a big deal with someone. Perhaps “A New English Language Empire”?


January 27, 2017

Rising productivity cannot result when regulatory risk aversion is distorting the allocation of bank credit

Sir, Martin Wolf writes: “UK’s future income will depend on rising output per hour” “The productivity challenge to the British economy” January 27.

To be able to increase productivity is not a God given right. In general it requires a lot of risk-taking, like loans to SMEs, entrepreneurs and start-ups. The risk weighted capital requirements for banks represents a big effective wall against such risk taking. But on that Wolf has steadfastly kept mum.

PS. I dreamt last night that I had finally gotten an answer from the regulators on my questions… but then I woke up L


January 25, 2017

Is the “permissive consensus” that allowed dumb hubris-inflated elites to regulate banks over? Doesn’t look like it

Sir, Emmanuel Macron, a candidate for the French presidency writes “The permissive consensus that allowed Europe to be governed by the elite for the elite is over” “Europe holds its destiny in its own hands”.

Starting 1988 regulators introduced risk weighted capital requirements for banks, and in the process inexplicably decided on such outlandish risk weights as 0% for the Sovereign 20% for the AAA-risktocracy, 100% for We the People, and 150% for those poor bastards rated below BB-, those who of course already had their access to bank credit basically reduced to nothing.

With that the regulators introduced statism and a risk aversion that now have banks no longer financing the riskier future, only refinancing the safer past and present. And all that for nothing, since it is never what is perceived ex ante as risky that causes any bank crises. That dishonor belongs to unexpected events, to criminal behavior, or to something ex ante perceived as very safe turning out, ex post, as being very risky.

Macron writes: “The French people did not emancipate themselves from absolute monarchy in 1789 with the declaration that “the principle of any sovereignty lies primarily in the nation”. True emancipation arrived in 1792, when citizens across France rose up to defend the revolution against foreign kings.” Macron is probably not aware of that, thanks to experts, French banks can now hold much less capital when lending to many foreign sovereigns than when lending to French SMEs and entrepreneurs.

But those crazily failed bank regulators keep on regulating, as if nothing, and still captured by a monstrously large confirmation bias. For instance this week Mario Draghi, the former chair of the Financial Stability Board, the current chair of the Group of Governors and Head of Supervision in the Basel Committee for Banking Supervision, ranked in 2015 by Fortune as the as the world's second greatest leader; without the blinking of an eye gratefully received the (bit obscure) “Premio Camillo Cavour” 2016, for services to Italy and Europe.

Would Italy and Europe be in its current difficulties had their “safe” sovereigns and their “risky” SMEs and entrepreneurs have had the same risk-weight? Absolutely not!

PS. Sir, ponder on that perhaps your own permissiveness on these regulations, perhaps out of a wrong sense of solidarity or awe with experts, helped cause the 2007/08 crisis, and the slow economic growth thereafter; that which (much much more than Russians hackers) has led to Donald Trump becoming president. How do you feel about that?


January 24, 2017

Martin Wolf, I totally agree it is not nice where we find ourselves, but you’re part of how we got here… I am not!

Sir, Martin Wolf writes: “Who would have imagined that primitive mercantilism would seize the policymaking machinery of the world’s most powerful market economy and issuer of the world’s principal reserve currency? The frightening fact is that the people who seem closest to Mr Trump believe things that are almost entirely false… Protection just helps some businesses at the expense of others… The rhetoric of “America First” reads like a declaration of economic warfare.”"Trump and Xi battle over globalization" January 25.

Indeed but then again: “Who would have imagined that primitive statist technocrats would seize the regulatory machinery of banks of the world? And the frightening fact is that the people who seem close to the Basel Committee, like Martin Wolf, also believe things that are entirely false, like that what is perceived as very risky is very risky to our banking system… which only helps to protect the access to bank credit of “the safe”, at the expense of “the risky”…The rhetoric of “We Regulators must make our banks safe” reads like a declaration of economic warfare.”

Sir, I am sure that had the world not silently accepted the risk weighted capital requirements for banks in 1988, which introduced such obnoxious statist concepts of assigning a risk weight of 0% to the Sovereign and 100% to We the People; and then in 2004 going on to assign a such a meager risk weight of 20% to what was AAA rated… the subprime crisis would not have happened… Greece would not have received so much in loans, and Trump would still busy himself with hotels and casinos.

Martin Wolf, I understand you are also a victim of that confirmation bias that have swept the regulatory circle, but your silence on the distortion in the allocation of bank credit to the real economy, makes you, ever so little, an accomplice of Trump’s rise to the presidency of America… so don’t just wash your hands like any Pilate.

PS. “rules-based trade” is not really “open markets”


FT, you have good reporters; send them to the Whitehouse to pose Trump some constructive questions on protectionism.

Sir, you write: “Forcing industrial output to return to the US is likely to create work for US-based robots rather than workers” “Take the US president’s protectionism seriously” January 25.

Precisely, that is what I have tweeted for some time now, and on which I have written some letters that you have steadfastly decided to ignore, like those on the subprime banking regulations, without thinking of it as any type of censoring, or without “without favour”.

But, without resorting to qualifying Trump’s protectionism as “profoundly retrograde” which means so little, which sounds so besserwisser, and which can only insult those who are then implied of having voted for a “retrograde”, why don’t you use your voice to send a journalist to Washington to ask of the Whitehouse, directly, some constructive questions?

For instance: “With current and future actions taken against foreign suppliers, in order to make America great again, what ratio of new employments of humans to robots do you foresee? How many robots have substituted for humans in jobs in USA during 2106?

And, if there’s a chance and a will, dare ask: Why does the Whitehouse think that trade protectionism is worse than that financial protectionism that is imbedded in the current risk weighted capital requirements for banks?


Financial protectionism could be just as bad or even worse than trade protectionism

Sir, I refer to the so plentiful anti-trade-protectionism writings, in FT and everywhere, and which all warn about the dangers of what Big Bad Donald Trump is up to. Many of these, not all, are solidly argued. Yet these contrast so much with the almost absolute silence against the financial protectionism that is imbedded in current bank regulations.

The risk weighted capital requirements for banks allow banks to leverage more with assets perceived, decreed or concocted as safe, than with assets perceived as risky. That means banks will earn higher risk adjusted returns on equity on the “safe” than on the “risky; so banks will favor with credit or investments what’s safe over what’s risky.

Is this not how it always is. Yes but before the introduction of these capital requirements the perceived risk was cleared for by the size of the exposure and the risk premiums charged. Now when capital requirements are also based on the same perceived risks, the effect of these in the allocation of bank credit to the real economy are augmented and so distort.

Here are some risk-weights of Basel II. Sovereign=0%, AAArisktocracy=20%, residential housing=35%, not rated “We the People”, like SMEs=100%, below BB-rated=150%.

Those who do not see how those with lower risk weights have their access to bank credit protected, against that of the risky, are not interested, dumb or trapped, almost irreversibly, by the mother of all confirmation biases.