It is in bank regulations, where the animal spirit is being slayed, where Keynes is most needed

John Maynard Keynes argued: One family whose breadwinner loses a job can and should cut back on spending to make ends meet. But everyone can’t do it at once when there’s generalized weakness because one person’s spending is another’s income.

But the same goes for risk-taking. The risk-taking by the few creates the opportunities for the many. In other words, nothing can be as risky as excessive risk-aversion.

Unfortunately bank regulators, with their credit-risk-weighted capital/equity requirements, have effectively instructed banks:

“Stop taking the risk of financing the ‘risky’!”… the medium and small businesses, the entrepreneurs and start ups… 

“Finance only the ‘infallible’!”… the sovereigns, the housing sector and the AAAristocracy.

Keynes stated: “If the animal spirits are dimmed and the spontaneous optimism falters, leaving us to depend on nothing but a mathematical expectation, enterprise will fade and die.”

And so today, it is clearly in the Basel Committee for Banking Supervision, in the Financial Stability Board and in the IMF where Keynes is most needed; in order to demolish the obstacles that distort the normal risk-taking that should take place in our banks.