Wednesday, December 31, 2014
I wish for the Western World to fully comprehend that it is not by allowing its banks to earn higher risk adjusted returns on what from a credit-risk perspective is perceived as safe, than on what is perceived as risky, that it can move forward.
Because this is what currently happens when its bank regulators, those in the Basel Committee and the Financial Stability Board, allow banks to hold much less capital (meaning equity) against assets perceived as safe, than against assets perceived as risky.
And not that this would make the banks safer either. We all know that what is really risky for banks, is not really what is perceived as risky, even if risky, but what is ex ante perceived as absolutely safe, but that ex post could turn out to be very risky.
It is vital that we, the older members of the Western World, understand that we have no moral right to impose on the future generations a baby-boomers’ risk-adverseness agenda more suitable to retirees.
The risk-taking of our forefathers was what brought us where we are, and it requires a lot of risk-taking to keep the Western World moving forward, in order not to stall and fall.
Western World, please listen up, “God make us daring!” is a prayer as valid as ever.