Yes Mme. Lagarde. It matters much where banks are going, and they’re being directed in the wrong direction.

Yes Mme. Lagarde. It matters much where banks are going, and they’re heading the wrong way.

Christine Lagarde Managing Director, International Monetary Fund in “The IMF at 70: Making the Right Choices—Yesterday, Today, and Tomorrow” during The IMF/World Bank Annual Meetings, Washington, D.C. October 10, 2014, states: “It matters where we want to go in order to decide which way we go.”

Indeed it matters. And that is why I ask Christine Lagarde to use her influence to ask bank regulators: where do they want our banks to go.

I say this because in all their regulations there is not on single word about the destiny of the banks, in terms of the purpose of our banks. 

And that is of course why they have allowed themselves to impose on banks “credit-risk weighted capital requirements for banks”, which introduces a sissy silly risk aversion in the banking system and which completely distorts the allocation of bank credit to the real economy.

When Mme. Lagarde presents to us a choice between stability and fragility, that is a perfect opportunity to remind all of you that the search for stability can itself produce that stiffness, brittleness and lack of flexibility, that can lead to real monstrous fragility.

When Mme. Lagarde presents to us a choice between acceleration and stagnation that is not really a choice, since the lack of acceleration, moving forward, taking risks, will make the economy stall and fall, sooner or later.

And finally when Mme. Lagarde presents to us the choice between solidarity and seclusion, I would just note that, though there is a saying that goes “better alone than in bad company”, whenever you build a wall, you cannot be absolutely sure you end up on the right side of it.

IMF, and World Bank you have an important and urgent role to perform in holding bank regulators accountable for what they have done and are doing… please do not shy away from it.

And also never forget that secular stagnation, deflation, mediocre economy, unemployment, underemployment, managed depression and all similar obnoxious creatures, are all direct descendants of risk aversion.

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