Sunday, September 12, 2010

New Global Bank Rules, Zulu's 2 cents

Just been reading the Huffington Post and it seems global bankers have set down together and made new regulations presumably to stop another financial crises, here are the rules, quoting from the online paper, "BASEL, Switzerland — Banks will have to significantly increase their capital reserves under rules endorsed Sunday by the world's major central banks, which are trying to prevent another financial collapse without impeding the fragile economic recovery ... Under current rules, banks must hold back at least 4 percent of their balance sheet to cover their risks. This mandatory reserve – known as tier 1 capital – would rise to 4.5 percent by 2013 under the new rules and reach 6 percent in 2019.

In addition, banks would be required to keep an emergency reserve known as a "conservation buffer" of 2.5 percent. In total, the amount of rock-solid reserves each bank is expected to have by the end of the decade will be 8.5 percent of its balance sheet.

Don't get me wrong but this is good but not the main concern, firstly, money was lost on instruments that where backed by the US mortgage market, what does holding 6% in reserve have to do with that. Would the main issue if people wanted to regulate banks be to curb gambling on extremely risky financial instruments, but those who know me, know I believe in the free market, less regulation better, if you lose go and be a janitor or serve burgers at McDonald, because obviously you are not fit to be a banker and the person and McDonald who you are preventing from being an investment banker knows better economics and finance than you. That now banks have become sacred cows will eventually diminish competition, because they can not make mistakes, if they do they have governments to create policy to defend them and they can continue to hire their nephews and nieces and ethnic friends. That is not wrong with private property, but when the government bails you out it is endorsing incompetence.

This financial crises seems to allow closet communists to have their say and regulate things that where not the cause of the crises, the reserve ratio was not the cause of the crises, even if in 2008 the reserve ratio was at 10%, with the risky financial products and exporting of jobs out of America, there would still have been a financial crises of exactly the same magnitude, because the crises had nothing to do with little money in reserve.

Be careful, these closet communists are creeping in to take over. Communists because they believe they will be the global politburo, George Bush jnr and the Republican party though screaming for free market, when the crunch came, he showed when its tough to save your friends you must be a communist, and he dished out a trillion dollars to his politburo friends, therefore stopping the more talented who had not got themselves into the same mess. Forbes magazine said these are revolutionary times, they had at last taken over in glaring public no longer hiding, the politburo members, the top banks, top corporations showed it has nothing to do with talent, but the connection in power, in the white house, at 10 Downing street, Élysée Palace, Bundeskanzleramt, the power has never rested with the people, that document they run around with starting with the statement "We the people...", has been expressed as the fraud that the likes of Bush, Obama, Clinton, Reagan, Kennedy, Nixon hide under whilst working for the top banks and corporations, now they want to add controls that had nothing to do with causing the financial crises.

These new global rules are just regulations that they have wanted to put in place for decades but never had the opportunity. Soon one hopes Delhi and Beijing will have more sense when they come of age.

Bhekuzulu Khumalo

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Bhekuzulu Khumalo

I write about knowledge economics, information, liberty, and freedom