Sunday, April 27, 2014

Bank of England keeps mum about its shady distortions of the allocation of bank credit to the real economy.

View the episode of the splendid educational video produced by the Bank of England.

There you will see that at no moment does BoE indicates that it, like their colleagues in other places, require banks to hold different amounts of shareholder´s capital against different assets, and therefore allow banks to obtain different returns on equity for different assets, and therefore distort the allocation of bank credit in the real economy… with disastrous medium and long term results, even for the banks.

Why could that be? Does BoE not know it distorts, or does it have a bad conscience about it? Who knows, it does not really matter. The pain for a medium and small businesses, entrepreneur or start-up, "the risky", of  not gaining access to bank credit or having to pay more for it, is the same.