Monday, February 2, 2015

Unfortunately, with respect to believing the West decadent, it would seem Putin is right.

Edward Lucas of the Daily Mail suggests: “Putin believes the West is finished: overstretched, decadent and discredited. The truth is we are not losing this spate of arm-wrestles because we are weak, but because our willpower is weak.”

In terms of “decadent”, it seems Putin could unfortunately be right.

I say this because to impose larger equity requirements on banks when lending to “the risky” than when lending to “the safe” as the Basel Committee does; and thereby allow banks to earn higher risk-adjusted returns on equity when lending to the safe than when lending to the risky, is besides being something very dumb, a very clear sign of decadent risk aversion.

The Western world was built upon a lot of risk-taking, among others by its banks... but in 1988 it got hit by the Basel Accord asteroid.