Monday, October 25, 2010

God make us daring!

A Swedish psalm 288 Text: F Kaan 1968 B G Hallqvist 1970

Gud, från ditt hus, vår tillflykt, du oss kallar
ut i en värld där stora risker väntar.
Ett med din värld, så vill du vi skall leva.
Gud, gör oss djärva!

“God, from your house, our refuge, you call us
out to a world where many risks await us.
As one with your world, you want us to live.

God make us daring!”

The Parable of Talents

Pope John Paul II also reminded us that Jesus Christ invited the Apostle to "put out into the deep" for a catch: "Duc in Altum". That is something regulators should remember when, with their risk weighted capital requirements, they want our banks to fish only from “safe” shores

A ship in harbor is safe, but that is not what ships are for.” John A Shedd.

And all for nothing! At the end of the day the current risk-weighted capital requirements for banks guarantees especially large bank crises, caused by especially large exposures to something ex ante perceived, decreed or concocted as especially safe, and which ex post turns into being especially risky, while being held against especially little capital.

Here is an aide-mémoire on what is so wrong with the current risk weighted capital requirements for banks.

PS. In Italy deaths from coronavirus COVID19 are only 0.25% for those under 40 years of age. YES, we older need to take care, but it is those under 40 years who will for the longest bear the brunt of the economic costs of overreacting... Just in case I am now, April 2020, weeks away from 70.