G8, for the unemployed young ones sake, please wake up! We do not pray “God make us daring” for nothing.

G8, the world has not reached this far by avoiding taking risks. Current bank regulations which by allowing banks to hold much less equity against assets perceived as “absolutely safe” than against assets perceived as “risky”, allow banks to earn much higher expected risk-adjusted returns on equity when lending to The Infallible than when lending to The Risky. 

That has castrated our banks which makes it impossible for these to allocate economic resources efficiently in the real economy. That dooms our youth to unemployment. Never forget The Infallible of today were The Risky of yesterday.

That does not make our banks safer either, as it only guarantees that any absolutely safe-haven will, sooner or later, become dangerously overpopulated, and then catch our banks with their pants down, meaning with no capital. Just consider how Basel II did Europe in.

G8, please wake up and throw away current bank regulations issued by the Basel Committee. We do not pray “God make us daring” for nothing.