A view from the Radical Middle

Should we pack like sardines to develop better?

perkurowski@gmail.com (Per Kurowski) — Mon, 24 Aug 2009 02:15:00 +0000

Although undoubtedly it contains some very interesting arguments I feel quite uncomfortable with the message being sent out in the World Development Report 2009 of the World Bank titled "Reshaping Economic Geography".

Somehow the reports seems to argue that we need to pack like sardines in order to develop; and somehow I get the inkling that much of the growth we perceive taking place in the high density areas has to do with the scarcity of space in high density areas. If I am packed as a sardine and therefore have to pay a higher rent for my place am I therefore richer than the one who has to pay much less for his much more generous elbow room available? We do not include home values in growth figures based on square feet but in money terms.

For instance in the US they give more government sponsored financing to houses that lie in higher value areas; which by itself helps to make them higher value areas. Now, is this muscular growth or obesity?

And then it is also the timing of the report… just when communication technologies make it possible to be distantly close here comes a report telling us basically that physical closeness is what most matters.

Sincerely I am not sure this report is sending out the right development message and I sure hope I am wrong about my misgivings.

Here you can view one presentation of the report http://www.blip.tv/file/2498676

The GPS and the AAAs

perkurowski@gmail.com (Per Kurowski) — Sat, 22 Aug 2009 12:52:00 +0000

Not so long ago I asked my daughter to key in an address in the GPS and then even while I continuously heard a little voice inside me telling me I was heading in the wrong direction I ended up where I did not want to go.

Something similar caused the current financial crisis. First the financial regulators in Basel decided that the only thing they would care about was the risk of individual financial defaults and not one iota about any other risks; then though they must have known these were humanly fallible they still empowered some few credit rating agencies to be their GPS on default risks; and finally, by means of the minimum capital requirements for banks, they set up all the incentives possible to force them to heed what the GPS said and to ignore any internal warning voices.

Of course, almost like if planned on purpose, it all ended up in a crisis. In just a couple of years, over two trillion dollars followed some AAA signs over the precipice of badly awarded mortgages to the subprime sector. Today, we are still using the same financial risk GPS with the same keyed in instructions... and not a word about it in the recent Financial Regulatory Reform proposal

I hate the GPS type guidance of any system since I am convinced that any kid brought up with it will have no clue of what north, south, east or west means; just as the bankers not knowing his client's business or how to look into his client's eyes or how to feel the firmness of his client's handshake, can only end up stupidly following someone else's opinion about his client on a stupid monitor.

I hate the GPS type guidance system because, on the margin, it is making our society more stupid as exemplified by how the society, day by day, seems to be giving more importance to some opaque credit scores than to the school grades of their children. I wait in horror for some DNA health rating scores to appear and cause a total breakdown of civilization as we know it.

Yes we are buried under massive loads of information and these systems are a tempting way of trying to make some sense out of it all, but, if we used them, at least we owe ourselves to concentrate all our efforts in developing our capacity to question and to respond adequately when our instincts tell us we're heading in the wrong way.

Not all is lost though. I often order the GPS in my car to instruct me in different tongues so as to learn new languages, it gives a totally new meaning to lost in translation, and I eagerly await a GPS system that can describe the surroundings in more extensive terms than right or left, AAA or BBB-, since that way not only would I get more out of it but, more importantly, I would also be more inclined to talk-back.

The OAS botched it!

perkurowski@gmail.com (Per Kurowski) — Sat, 04 Jul 2009 15:31:00 +0000

The OAS botched and is making much more serious the already Honduras case. Should they be sued for irresponsible behavior?

Amazingly, knowing that there was an open confrontation between the Executive Power, the Congress and the Supreme Justice in Honduras, the OAS sided with Zelaya without even giving the other powers a fair hearing.

In order to understand why this re-election issue is almost an existential issue in Honduras let me point to article 42 in their Constitution that though a bit crazy nonetheless clearly states that you will “lose your conditions as a citizen if inciting, promoting or supporting continuance or the re-election of the President.”

Honduras Constitution Art 42 you “lose your conditions as a citizen if inciting, promoting or supporting the re-election of the President.”

In a democracy is a congressman less elected than a president?

In a democracy is the Supreme Court less is than a president?

It is truly sad to see international organizations circling two school boys shouting for two of them to fight till death, and enjoying it

After Zelaya, how many consecutive elections must be held in Honduras before a new Government is legitimate?

How come?

perkurowski@gmail.com (Per Kurowski) — Wed, 24 Jun 2009 21:28:00 +0000

How come a nation of free citizens have accepted to chain themselves to some opaque credit scores to such an extent that one sometimes can hear parents worrying more about their children’s credit scores than their school grades?

At the UN 192 countries got it wrong

perkurowski@gmail.com (Per Kurowski) — Wed, 24 Jun 2009 16:10:00 +0000

192 countries got together for the United Nations Conference on the World Financial and Economic Crisis and its Impact on Development and, in their final communiqué, among the causes of the crisis they say “major failures in financial regulation, supervision, and monitoring of the financial sector, and inadequate surveillance and early warning… compounded by over-reliance on market self-regulation, overall lack of transparency, financial integrity and irresponsible behavior, have led to excessive risk-taking, unsustainably high asset prices, irresponsible leveraging, and high levels of consumption fuelled by easy credit and inflated asset prices.”

How can 192 countries get it so wrong? Yes it is true that assets reached unsustainably high prices and yes it is true there were high levels of consumption fuelled by easy credit and inflated asset prices but it is absolutely false that there was excessive risk-taking or autonomously created irresponsible leverage.

The markets, over just a couple of years channeled two trillions of dollars (perhaps more than what has been lent by the Word Bank and the IMF ever since their creation) to finance houses in the US through securities rated AAA and this would much better classify more as misguided excessive risk-aversion.

And the high real leverage of the banks was foremost a direct the consequences of the regulatory innovation of the minimum capital requirements for the banks based on risks that emanated from the Basel Committee. For instance the regulations authorized an outrageous 62.5 to 1 leverage for when banks lent to corporations rated AAA to AA-.

Nor did the conference say a word about how these minimum capital requirements by which the regulators arbitrarily intervened in the market mechanism of allocating risks, created a de-facto subsidy for what can dress itself up as low risk and a de-facto tax on whatever contains more risk, such as the risks normally present in development.

Give the global migrant workers community an undiluted voice

perkurowski@gmail.com (Per Kurowski) — Wed, 24 Jun 2009 15:45:00 +0000

Those migrants that when they leave there homeland are so easily forgotten, except when they forget to send a check home; and that upon their arrival are not sufficiently recognized by their new host conform a particular group of human beings with a particular set of interest and needs. Nowadays the economic significance of this migrant working community can be estimated to be somewhere between that of China and India but yet, just because they have no land, they have not been given a formal voice in the global and multilateral institutions.

This needs to be corrected and as a minimum the global working migrant community should have a chair at the World Bank and the United Nations.

It was our experts that failed us… and they still do.

perkurowski@gmail.com (Per Kurowski) — Mon, 04 May 2009 15:25:00 +0000

That the markets did not work because there were intromissions in its workings, is not the same as a market failure, and that is a distinction that we must make so when we now find ourselves lost so that we do not lose us even more. We owe that foremost to the developing countries.

The Basel Committee the most important regulatory authorities of the by means of allowing for immensely smaller bank capital requirements, favored immensely anything that could display a triple-A sign issued by the credit rating agencies. And sure enough… the market responded as human markets normally respond by creating a huge number of AAA signs, many of them related to securities backed by lousily awarded subprime mortgages and which the investors, like a herd, followed over a precipice.

Unfortunately because most of the experts failed to realize it, or if they did they did not speak out against it, almost all notorious economic and financial experts are mostly ignoring the above in a global cover-up. More than a market failure what we had were the experts failing us.

Let me just give one example of what I mean. “The Commission of Experts on Reforms of the International Monetary System” of the President of the General Assembly of the United Nations, chaired by Professor Joseph Stiglitz and comprised of outstanding economist, policy makers, and practitioners from all over the world chosen, and I quote the Note by the President of the General Assembly, “based on their comprehensive understanding of the complex and interrelated issues raised by the workings of the financial system”, they write the following in paragraph 41 of their report dated March 19 2009.

1. “The collapse in confidence in the financial sector is widely recognized as central in the economic crisis; restoration of confidence will be central in the recovery. But it will be hard to restore confidence without changing the incentives and constraints facing the financial crisis”

Of course restoration of confidence is central for economic recovery but for the recovery of confidence a full understanding of what happened is a must. That a Bernard Madoff can cheat does not affect confidence in the markets because the markets are much aware that cheaters have always been around and are in fact themselves a part of the market.

But, if the credit rating agencies who were so recently officially bestowed with so much power in the surveillance of risks, and therefore must be the best, sort of the “Appointed Surveyors to the Majesty” managed to fail so miserably, then that is of course a tremendous blow to confidence. That loss of confidence can only be cured by fully acknowledging that the mistake was in the creation of an oligopoly in risk surveyance .and that this oligopoly will now be eliminated… not strengthened.

2. “It is imperative that the regulatory reforms be real and substantive, and go beyond the financial sector to address underlying problems in corporate governance and competition policy, and in tax structures, giving preferential treatment to capital gains, that may provide incentives for excessive leverage.

The above says that not taxing the profits is at fault and so that presumably we now must tax profits? Silly, the problem is not that the profits had tax incentives but that the profits proved to not be profits at all. The “incentives for excessive leverage” those were provided by the regulators and thank God… the authorized financial leverage was never even reached by any bank before the crisis. This of course does not preclude that there might be other valid reasons to tax profits but that is a quite different matter.

3. “Even if there had been full disclosure of derivative positions, their complexity was so great as to make an evaluation of the balance sheet position of the financial institutions extraordinarily difficult”.

First the crisis was not caused by “derivative positions” and second, the “complexity” argument is irrelevant because the instruments that were so complex that they were not even understood by those who generated them, would never even have reached the balance sheet of a bank, or an investor, had they not been granted the triple-A rating which substituted for the understanding, unfortunately in a much imperfect way. There is of course a need for a better management of the exposures though central clearing houses but that is a quite different matter.

Does this all mean that I do not believe that Stiglitz and his fellow experts cannot help us? Of course not and I do agree with many of the recommendations in the report. But, in order for these and other experts to really be of help they better step down from where they think they belong and start to discuss as the faulty humans we all are.

The commission says “As the world focuses on the exigencies of the moment the long standing commitments to the achievements of the Millennium Development Goals and protecting the world against the threat of climate change must remain the overarching priorities; indeed, appropriately designed global reform should provide an opportunity to accelerate progress toward meeting these goals.”

I could not agree more… but that has to start with a debate that is much more profound than a Lilliput-Blefuscu or a short-long skirt-length type of debate and to which the commission seems to be headed, when it allows itself to (somewhat gloatingly) say that “the current crisis has exposed deficiencies in the policies of some national authorities and international institutions based on previously fashionable doctrines.”

Sincerely,

A member from the civil society who having seen trillions going down the drain of badly awarded mortgages instead of perhaps helping to avert or to adapt to climate change, does not really feel like being too civil for the time being.

Odious Debt

perkurowski@gmail.com (Per Kurowski) — Sun, 03 May 2009 16:54:00 +0000

One of my recent articles, which focused on the need to protect the environment, concluded by recalling the ancient proverb, “We have not inherited the world from our parents; we have borrowed it from our children.” On that occasion, as always, I thought about Venezuela and I knew that, as borrowers from our children, we have acted like veritable pigs. Not only have we extracted our country’s oil without putting it to much good use, we’ve even mortgaged its future in the process.

Some countries may be in need of foreign loans to get on their feet, but here in Venezuela we ought to know by now that our foreign public debt, be it the debt of yesterday, today, or tomorrow, only serves to fasten us all the more securely to a sinking ship. Foreign public debt is a monstrous obstacle. It keeps our citizens from getting loans (or at least makes loans much more expensive) that could indeed lead to growth in the country and allow the government to satisfy social needs through taxation.

Our only salvation is to learn how to resist the lure of the eternal sirens’ song, which goes “foreign debt taken on by the previous administrations is evil and good for nothing, but rest assured, with us, everything’s going to be different.” How do we—like the ancient Odysseus—tie ourselves to the mast?
There are those, in similar desperation, who argue that since our creditors were accomplices of those administrations, we shouldn’t pay our debts to them. I accept the theory of complicity, at least on the part of the intermediaries, but I think we should punish them much more harshly, by canceling the entire debt and never again taking out another loan.
What can ordinary citizens do who want to and have to go about their daily lives and can’t be continually overseeing the government? The same as any company: they can refuse to provide their management with authorization for contracting debts. Along these lines, a doctrine is now being discussed in the world according to which, if the debt was contracted by an illegitimate government, or for uses that were clearly of no benefit to the country said debt could be declared odious and, as such, would not be legally demandable.

Dear friends, if we are going to do right by our children, our grandchildren, and our great grandchildren, and return the country we borrowed from them in good shape, maybe we should take advantage of such a possibility and declare our foreign public debt eternally odious. Given that threat: Would creditors dare provide us with loans? What would the credit-rating agencies say? Or let us be even more clear about the message and amend our constitution to say that the government of Venezuela has no authority to borrow from foreign sources, that any attempt to do so is illegal, and hence that all such illegal debts will not be repaid. That should stop foreigners from lending us money!

Translated from El Universal, Caracas, March 25, 2004

Odious Credit

perkurowski@gmail.com (Per Kurowski) — Sun, 03 May 2009 16:47:00 +0000

I recently wrote about odious foreign public debt, that debt about which there is a current debate in the world as to whether it can be legally repudiated if it is taken on by illegitimate governments or for illegitimate ends.

The other side of the coin is odious credit. Please don’t think I’m against banks—quite the opposite. But I respect the role of the financial middlemen too highly to keep quiet when they are not doing their job right. In 1981, the representative of a foreign bank in Venezuela showed me a letter in which his boss instructed him to “give credit to the INAVI, Venezuela’s National Housing Institute. It’s the worst public institution, which means that it pays us the highest rate and, as you know, in the end it’s just as public as the best of them and Venezuela will have to pay up just the same.” Odious credit, isn’t it?

The first thing a good banker should ask a client applying for a loan is what is it for and if the answer is not satisfactory he should reject the application, regardless of the guarantees offered. Simple plain-vanilla fraud of the Parmalat kind will always exist, but the asinine way all their creditors fell into the trap makes one suspect that this is only the first case of systemic risk in the banking system: tempted by the regulators in Basel, banks subordinate their own criteria to those dictated by auditors and credit raters. This development, bad in itself, is even more serious in the case of public credit, where the what it’s for is being replaced by how much can be carried, perversely derived by calculating the level of sustainable public debt.

When I call for the total elimination of foreign public debt (which is feasible and would not require huge sacrifices in an oil rich land like Venezuela) my colleagues often argue that a certain level of debt is good and necessary for the country. This does not convince me, since it makes debt sound like electricity that must be kept at a certain voltage. Because public debt must always be paid back, regardless of whether anybody ever knew what or whom it was for, I’m fighting for the day when the private sector in Venezuela can return to the markets, freely, without having to carry that huge monkey—foreign public debt—on its back.

In my opinion, the Benemérito (the dictator Juan Vicente Gómez (1864–1935) who ruled the country between 1908 and 1935) deserved great credit for ridding Venezuela of her foreign debts He certainly knew that to shake off that vice more than patches or pieces of chewing gum are needed.

From El Universal, Caracas, April 22, 2004

The citizen’s minimum minimorum on opinions.

perkurowski@gmail.com (Per Kurowski) — Fri, 24 Apr 2009 11:57:00 +0000

Anyone has the right to opine in anyone’s name... that is an integral part of the freedom of opinions.

Most of those opining in the name of the citizens independently of whether the citizens opine so or even have an opinion are usually known, collectively, as the civil society, and this even when they behave somewhat uncivil.

In this respect and though it should be the duty of most citizens to opine on matters of their concern, but which unfortunately they most often do not, the least we should ask from them, as a minimum minimorum, is that they should be informed about what the civil society is opining in their name.

Stress test the American taxpayer and you’ll see you need a brand new generation of taxes

perkurowski@gmail.com (Per Kurowski) — Thu, 16 Apr 2009 14:10:00 +0000

What the US dollar bill really should state is “In the American Taxpayer We Trust” and so the more pragmatic Americans have printed the “In God We Trust” on it.

There is no way that the current American generation, having been brought up as the consumers of last resort in the world, would now turn around and accept to be the world’s taxpayers of last resort… at least not with the current taxes… any stress-test of them would show you that.

The US government should be much more conscious of this before launching itself on a fiscal spending stimulus binge which, if allowed by the markets, will build up its public debt to a totally unsustainable level.

That said I believe the international markets are going to say NO much earlier than that, since one thing is to be searching for a safe temporary haven and another quite different to be trapped in a permanent home.

And that is why, before the US Dollar loses its AAA rating, that the US, and the world, should work hard in developing a totally new generation of taxes that can be perceived as legitimate, that are aligned with the new global realities, and that interfere as little as possible with the functioning of a competitive economy. I have argued for the following two:

1. The Intellectual Property Right tax: Society, for many good reasons, has decided it needs to award and defend intellectual-property rights. The downside is the creation of temporary monopoly rights that can be overexploited. Also, awarding these rights impose on society the obligation to defend them, which costs money.

As it does not seem fair to assess taxes on a business venture that has to compete in the market without any kind of protection at the same rate than projects that have been awarded intellectual-property rights, there should be a special tax levied on all profits generated from intellectual-property rights.

2. The keeping the big lean tax: There is nothing wrong with a business striving to obtain a large market share but while its market share grows for all the good reasons and for the benefit of society, there is unfortunately also an accumulation of market power that can acquire monopolistic characteristics with negative results for the society. Therefore there is also a need of a tax that is of a progressive nature based entirely on market shares.

Protest Sign

perkurowski@gmail.com (Per Kurowski) — Fri, 03 Apr 2009 09:13:00 +0000

Après nous le déluge !

The baby-boomers

Learning about main street USA

perkurowski@gmail.com (Per Kurowski) — Mon, 30 Mar 2009 16:43:00 +0000

I have quite a good idea of how this crisis was caused by the top-down supervisory forces that originated in the Basel Committee and I have frequently written and discussed about that in articles papers and blogs.

But as a foreigner who’s wellbeing as a foreigner depends so much on the United States I wanted to understand better what bottom-up forces had been or are still in effect on the main streets of the USA and so I signed up to get myself a license in real estate sales and a license as a loan officer in mortgages. If all goes as planned I should be licensed for both in just a couple of weeks.

Below what has surprised me the most while studying for the above.

How a country that prohibits discrimination allows for discrimination based on some opaque credit scores, to such an extent that parents often seem to worry more about their children credit scores than their school grades.

How federal authorities can be allowed to finance different amounts depending on the region when that can only lead for those differences to grow even bigger. If I was a major of a small and remote and poor city I would sue the FHA for discrimination.

How an entity like the FHA can come up with such a haywire criteria that establishes that those who do not meet some minimum credit scores or are currently unemployed cannot refinance their current mortgages at lower rates on a streamline basis. These borrowers are really those who would benefit the most from a refinance so much that one could almost make a case for the opposite... those employed and with scores over a number should not be allowed to streamline refinance.

On a closely related issue how can the Government, the Congress and the Fed be spending so much time and resources trying to provide stimulants without worrying about getting rid of the depressants such as the ludicrous high interest rates on credit cards?

To me, a country where the government pays 10 basis points in order to finance its short term consumption while its own citizens have to pay at least 1690 basis point more to finance their consumption is sort of an unsustainable country. If it was me I would limit the interest rates that credit card companies could charge to for instance 7% and, out of the public budget, pay an additional 2% to the credit rating agencies on the balances as part of the stimulus package.

But then again I would always favor the workers getting those salaries that allow them to pay for their needs in cash… it is bad enough to having to buy everything in the store of the mining company… but it is much worse when having to buy it on credit... at 17% or more.

Why stimulate before making sure the economy as a whole will enjoy it?

perkurowski@gmail.com (Per Kurowski) — Thu, 05 Feb 2009 02:08:00 +0000

I just received a letter from one of those big banks that has recently received billions of dollars in official assistance, informing me that if I finance my purchases with my credit card my annual interest rate will be 17% and, if I enter into any default, 26%.

This in a country where there are no inflation expectations, the government is paying less than 1% on its short term borrowings, contemplates a close to a trillion dollar stimulus package and wants the consumers to spend more to keep the economy from falling.

For a consumer to finance the anticipation of any purchases at 17% would be an act of extreme irresponsibility.

For someone in default having to pay 26% will only guarantee to dig him deeper in the hole he is in. The only way to justify these extraordinary high rates is that they need to compensate for all those who should not have been given a credit line to begin with.

What is going on? Have we not learned anything? And why should anyone stimulate the economy before making sure that all the new green sprouts are not going to be devoured by some players in the financial sector?

Implementation, implementation and implementation

perkurowski@gmail.com (Per Kurowski) — Wed, 28 Jan 2009 14:48:00 +0000

Many are pushing for satisfying the pro-markets with lower taxes, or the pro-government with deficit spending and both directions could create an abysmal fiscal hole. Very few are concerned or much less busy with the more mundane but more vital issues of implementation, implementation and implementation. If lower taxes or government spending do not generate the right kind of sustainable demand or the right kinds of projects in sustainable sectors, in a fiscally cost effective way, inaction will always be the better option.

The AAA-bomb

perkurowski@gmail.com (Per Kurowski) — Sat, 10 Jan 2009 15:33:00 +0000

There are those who feel that the current crisis is a direct result of economic imbalances and they most certainly have very good arguments.

But then there are also some, like me, who believe that the financial sector and its regulatory system stopped the normal market mechanisms from working, among other by luring funds into the mortgage sector which financed the growth of further imbalances, so as to cause a crisis, of this magnitude.

Certainly nothing of this sort would have happened without the economic imbalances that provided the enriched uranium, but it was the financial sector that turned it al into an AAA-bomb.

Please, do not stimulate until you USA drop.

perkurowski@gmail.com (Per Kurowski) — Fri, 09 Jan 2009 18:34:00 +0000

The US consumers shopped until they dropped and now it seems that their government is taking over with “we will stimulate until we drop”. We understand the reasoning but we can’t help feeling nervous about it.

There are seminars on “How to restore Global Financial Stability” but, in the name of the do-no-harm principle, let us not forget that the most important role for the US is to preserve the global financial stability we still have, namely the current role of their dollar in the international financial system.

Many American economists egged on by some foreign economists indicate, even in the face of the many surplus countries wanting to reactivate their own domestic demand, which leaves less resources to buy US debt, that there is absolutely no problem in sight…Let us pray they are right!

But, just in case, and especially after the unsettling recent experience with the adjustable mortgages, could we not ask the US to build up its debt with long term paper at fixed rates? I mean allowing so many to anchor their boats so close to the exit of that safe-haven the dollar currently represents seems not the wisest thing to do.

PS. Do all those who propose stimulation know for sure the whereabouts of the economy’s Gräfenberg spot or are they just boasting?

I do not like this race!

perkurowski@gmail.com (Per Kurowski) — Thu, 08 Jan 2009 14:29:00 +0000

The world is witnessing an extremely dangerous race between the build up of US public debt in order to create all kind of bailouts and stimulus packages to save the world from a monstrous depression; and said debt becoming so unsustainably large that it will by itself cause the mother of all meltdowns. Many hold that the only thing that could help avoid a tragedy is the serious collaboration from all current surplus countries to reactivate their economies, expecting this would generate the counter-flows that will help to stabilize the US debt at a serviceable level.

Is running this suicidal race the world’s only option? Some very reputable persons seem to think so as they egg on ever larger stimulus packages with ever more resulting debt. To back up their arguments, they have shamelessly recruited Keynes into their camp… though I am not at all sure that a resuscitated Keynes would be on their side was he aware of the stakes.

I myself would perhaps be more agreeable to risk it if convinced that, if victorious, the revived economy expecting us was worth it, but, thinking of a revived economy that could just have more Chinese consumers buying more cars somehow does not make me overly enthusiastic.

No let us not look for our economic health where we lost it let us look for it where we want to find it… and that place is not in the land of ever growing public debt.

What impact on development could the asymmetry between NGOs have?

perkurowski@gmail.com (Per Kurowski) — Thu, 20 Nov 2008 17:05:00 +0000

Is the asymmetry between the developing and the developed countries made worse because of the asymmetry between the weak and often subordinated NGO’s from developing countries and the strong and often in command NGO’s from the developed countries?

I say this because I have often found it so hard for activists from developing countries to understand that the stability they look for in their natural desire to keep all that they have gained under their belt, has nothing to do with the risk-taking a developing country needs in order to place at least something under its belt.

I have also often found that some agendas of the NGOs of developed countries, though most often certainly representing worthy causes, not only differ but can also turn into outright distractions from the more practical development agendas that NGOs from developing countries would wish to pursue, if on their own.

There are a lot of discussions about much needed governance reforms at the International Finance Institutions, the IFIs. Please remember that those reforms might have to include their relations with the NGOs too.

Is it real or bluff stuff?

perkurowski@gmail.com (Per Kurowski) — Sun, 16 Nov 2008 13:50:00 +0000

The G-20 Statement of November 15, 2008 says “Regulators must ensure that their actions support market discipline, avoid potentially adverse impacts on other countries, including regulatory arbitrage…”

What more discipline could they want than having imposed on the markets as a Governess Fraulein Credit Rating Agencies and that later turned out to be so crazy as to send them of to the subprime swamplands? Do they really believe that finding a better qualified Mary Poppins, or a Maria will do it? Scary! Why don’t they leave the banks alone so that they learn to depend on themselves instead of following as a herd any agency that no matter how good it gets, is bound to take them, and us, sooner or later, over a cliff?

“Adverse impacts on other countries”? Like when the supposed global good of a credit rating agency turned into a global bad and caused a German bank that had never awarded a mortgage in Germany to be the first casualty of this subprime mortgage having followed the AAA signs looking for high risk-weighted returns in California?

“including regulatory arbitrage? Are we now finally get rid of the current “minimum capital requirements for banks” that has created such a damaging and useless regulatory arbitrage on risk…whatever that is?

The G-20, do they mean what they say, do they know what they say, or are they just bluffing?

Micro-financing… for what?

perkurowski@gmail.com (Per Kurowski) — Sun, 16 Nov 2008 13:40:00 +0000

We need to define better what the purpose of the micro-finance institutions should be. If it is to help small entrepreneurs to get financing at as good rate possible, them I am all for it. If it is to accelerate the consumption of the poor, but by applying higher interest rates than the risk free rate, which effectively means them having to pay a present value premium for their consumption, which will just make them poorer, then I am all against it, since that is not what development is all about!

Many of the problems of this sector are derived from that instead of working on how to make microfinance help development, it has been taken over by those more interested in developing the microfinance institutions per se, which though quite legal and normal is something absolutely different.

Leverage!

perkurowski@gmail.com (Per Kurowski) — Wed, 15 Oct 2008 14:35:00 +0000

Civil Society can help turn millions into billions.

Financial regulators turn billions into trillions.

Let us keep our eyes on the gorilla!

In God We Trust to see that…

perkurowski@gmail.com (Per Kurowski) — Tue, 14 Oct 2008 12:30:00 +0000

The dollars, for which value the US is responsible, are printed with the abbreviated prayer of “In God We Trust”.

A more complete version would be “In God We Trust to see that the politicians and the bureaucrats do not print and circulate more dollars that what the economy could back or, otherwise, that the American taxpayer finds it in him the capacity and the willingness to pay taxes so as to make up any shortfalls.”

Let us rescue Caveat Emptor!

perkurowski@gmail.com (Per Kurowski) — Sat, 11 Oct 2008 15:15:00 +0000

The implied warranty of fitness given to us by the credit rating agencies has not served us well, especially when the issuers of the warranties now inform us that they give us their opinions under the protection of the First Amendment, and that they cannot therefore be held responsible for their opinions.

It is obviously high time to rescue the Caveat Emptor principles in financial regulations, though in fact it seems that the market has been doing so on its own lately.

Let us never forget that the current crisis did not result from the market investing in badly awarded mortgage loans to what is known as the subprime sector but from investing securities collateralized with such mortgages and that received a prime rating.

To get to common ground we must fight common distance.

perkurowski@gmail.com (Per Kurowski) — Thu, 09 Oct 2008 14:47:00 +0000

The other day when listening to a new appeal for finding “common ground” but that implicitly sounded subtitled “as long as it is on my ground” once again I had to reflect that the only way for us all to be able to reach the common ground we so urgently need is to start by getting rid of our “common distance”