Current bank regulations present two absolute inexplicable lunacies, which can only be justified if you are a communist

Starting 1988, with the G10 Basel Accord of which the US is a signatory, bank regulators, in Basel I, for the purposes of establishing how much capital (equity) banks need to hold against assets, declared the following credit-risk-weights: Government Zero percent; citizens, or their SMEs, 100 percent.

Knowing that only the citizens are the real back up of any government, and that governments can be very creative dishonoring their debt, for instance by means of inflation… that is an absolute inexplicable lunacy... unless you’re a communist of course.

Worse yet. Those risk weights cause banks to lend more and at lower relative rates to the government than to the citizens and to their SMEs. And that would imply that government bureaucrats are more productive using bank credit than the citizens, or their SMEs.

In other words, the credit-risk-weights de facto simultaneously translates into bank-credit-productivity-weights of 100% for government bureaucrats and zero percent for citizens, or for their SMEs. 

And so the question lingers is the Basel Committee a tool for communists to infiltrate the financial system of the free world? It would certainly seem so.

Here: The confessions of an ideologue.

PS. Here my letter to the Financial Stability Board

The Basel Committee’s credit-risk weighted capital requirements for banks, is a leading cause of falling productivity

For the purpose of establishing how much capital (equity) banks need to hold against loans, the Basel Accord (Basel I), Basel II and Basel III defined the following credit-risk weights: Governments 0%; SMEs and entrepreneurs 100%.

I believe that to be absolutely crazy… but regulators won’t listen to me.

But those credit risk weights also de facto translates into that the Basel Committee deems the risk that bank credits are not used productively to be: Government bureaucrats = 0%; SMEs and entrepreneurs = 100%.

And that is of course even crazier… but regulators will still not listen to me.

Now when we reading about so many concerns with the lack of productivity in many economies… will anyone help me to explain to the Basel Committee the connection that exists between their credit-risk-weights and the falling productivity of economies?

Is it not time to think a little bit about productivity weights too?