Tuesday, February 21, 2017

Here I will keep my up-today main comments on Universal Basic Income (UBI)

Years ago I wrote: “We need decent and worthy unemployments”. With ever growing structural unemployment threatening, I am sure that a Universal Basic Income is a fundamental tool for achieving that. 

Here follows my current thinking on UBI:

Universal Basic Income eats directly into the redistribution profiteers’ franchise value, and so they will be its strongest opponents. Their opposition can take many forms, like that of enthusiastically supporting UBI, but cleverly backstabbing it at any possible opportunity. We must always be alert!

There are some fundamental mistakes that could kill UBI, even after its inception, and so therefore we must see to that the enemy does not exploit any of its possible Achilles’s heels.

1. UBI is strictly for the population of working age. Children and elderly have their very specific needs that should be satisfied with different tools.

2. UBI shall strictly be related to working conditions, like 70% of the lowest fulltime salary; and NOT to any poverty related threshold.

3. UBI needs to be 100% funded with real and clearly identifiable sources of income, and not with any debts. One possibility is to apply to robots and similar automations those payroll taxes and similar that applies to humans. As am added benefit that would also allow for a more efficient allocation of labor/capital resources.

4. The more UBI is funded by sources linked to other socially relevant matters, like from carbon taxes to help stop pollution, the better.

5. UBI must always be kept as a citizen to citizens affair and so, ideally, it should be enshrined in some type of constitutional protection, so that populists trying to serve their own ambitions do not capture it.

Saturday, February 18, 2017

Here some disorderly lose cannon questions about life in the just around the corner Robot/Automation La-La-Land

The more varied and crazy questions we pose, the better chance we have to prepare ourselves... and so, in no special order, here we go with some tweet-sized ones!!!

When Mexicans, Chinese and American compete for the jobs the robots are taking, is that not just a Lilliput/Blefuscu war?

Why is how to handle jobs being productively taken over by robots/automation, not sufficiently high on our agendas?

How will net salaries not paid to robots be used: Lower prices, higher salaries, bonuses or dividends?

And when robots substitute for humans, what are the consequences for a nations tax base?

Is not falling working-age population numbers quite irrelevant with so many robots volunteering to work? 

When 2nd class robots don’t cut it, how to we assure ourselves we get the 1st class ones?

Having your nation being “Second” is livable, but is having your robots not being “First” that?

The better the robots, the more we lose human jobs, the more the need of a Universal Basic Income (UBI). Are we prepared?

Universal Basic Income threatens the redistribution profiteers so they will try to stop it. How can we stop them?

The lower trade tariffs and human salaries are, the more competition do robot manufacturers face. Is that good?

The higher the trade tariffs and human salaries are, the more will robot manufacturers profit. Is that good?

The better the robot, the more it can produce for us, but the more human jobs it can take from us. So what do we do?

Should we allow 3rd class robots, only because of unfair competition, like no payroll taxes, to replace humans?

In order to force our robots to become 1st class, we need to tax them, quite a lot. 

If land A has the better robots how can B compete: with tariffs or with lower dividends, salaries, bonuses and UBIs?

If my grandchildren’s future depends on the quality of their robots, is it really a sin to engage in some industrial espionage?

To who does robot productivity that supplants human productivity belong: to all, or to the 0.00000001 percenters?

How can I help my grandchildren to be needed as sane and happy humans, in tomorrows’ Robot/Automation-land?

What are unions to do with a shrinking labor base? Will tomorrows CEO’s need a union? What if robots want to unionize?

What’s better intelligent artificial intelligence or sort of dumb artificial intelligence we can still sort of better control?

When supplanted by robots how can we avoid being thought of as an unneeded human surplus?

If we humans are supplanted by robots, are we doomed to join Jethro Tull’s “Heavy Horses” in retirement? 

PS. My Universal Basic Income 

Where are those Mexicans? (and the robot is laughing)

Friday, January 20, 2017

President Trump, here is a conflict of interest on which many would appreciate you acted on in your own future self-interest.

President Trump. 

I am not an American, so I did not vote. But had I been I must confess I would most likely have voted for the Gary Johnson escape-valve. Congrats anyhow!

Mr. President, you have all your life been an entrepreneur, of one sort or another. As such we could easily presume you have quite often needed to have access to bank credit. Once you are back to civil life in some years, I also assume you would like to reassume your life as entrepreneur, since once one, forever one, and therefore to again have access to bank credit.

Now President Trump, you might not be much aware of it, few really are, and there are of course those interested in it not to be known, or at least not understood but, since 1988, with the Basel Accord, for purposes of determining how much capital banks should hold, the risk weighted for ordinary citizen borrowers was set at 100%, while if it was the central government doing the borrower, then the risk weight was 0%. Yes, you read right… 0%!

That has introduced a disastrous discrimination against all SMEs, start-ups and entrepreneurs when accessing bank credit. The risk aversion that regulation signifies banks no longer finance the riskier future our children need to be financed, they mostly just refinance the “safer” past and present.

A ship in harbor is safe, but that is not what ships are for.” John A Shedd, 1850-1926

To top it up, regulators have not been able to realize that all this does not make the banking sector any safer. All major bank crises have only resulted from unexpected events, criminal behavior or excessive exposures to what ex ante was perceived as very safe but that ex post turned out very risky. No major bank crises ever was the result of excessive exposures to something ex ante perceived risky.

May God defend me from my friends, I can defend myself from my enemies” Voltaire

So President Trump, please help America, and the rest of the world ,to banish forever this dangerous nonsense of the risk-weighted capital requirements for banks.

I have tried to inform, for instance your Consumer Financial Protection Bureau CFPB and so many others about this, but they have not been interested. You as an Entrepreneur President do surely stand a better chance to catch their attentions.

PS. When it comes to bank regulations that could destroy the economy of your country, is that not also an issue for Homeland Security?

PS. What poses a bigger threat to American jobs, Mexicans, Canadians or robots?

Tuesday, December 27, 2016

That we suffer under the thumb of neoliberalism is mostly a self-serving myth created by statism fans.

In its simplest form neoliberalism represents a belief in that free markets will do better for all, or at least for most, than government with its central planning. 

So many failures have been attributed to neoliberalism and its bad intents that it takes too long to explain them all. In this respect I will here refer briefly to only two aspects that have been sold as neoliberalism, but that in reality are quite far from it, namely financial deregulation and privatizations.

Bank regulations: In 1988 the Basel Committee for Banking Supervision, for the purpose of setting the capital requirements for banks, decided that the risk weight of the Sovereign, meaning the central government was 0%, while that of We the People was 100%. That meant banks would be allowed to leverage more their equity when lending to the public sector than when lending to the private sector; which meant banks could earn higher expected risk adjusted returns on equity when lending to the public sector than when lending to the private sector; which meant banks would lend more to the public sector than to the private sector; which de facto meant that regulators believed the public sector could make better use of bank credit than the private sector. 

That principle is still well and alive today. How it has anything to do with neoliberalism, with financial deregulation and not with financial missregulation, is beyond my comprehension.

For instance those who attribute the financial meltdown of 2007‑8 to neoliberalism must ignore completely the decisive role that bank regulations played in distorting the allocation of credit to the real economy. It suffices to understand the definite role regulations played in the subprime mess and in the excessive lending for instance to Greece. Those regulations basically decreed inequality.

Privatization: Many or perhaps most of the privatizations of public services were allocated, not to those who offered to provide those services in the cheapest and best way, but to those who offered to pay the government the most for the rights. That in all essence signified the government collecting taxes in advance, leaving the citizens to repay these by mean of higher tariffs. How that has anything to do with neoliberalism, is beyond my comprehension.

Why have so many swallowed the myth of neoliberalism? One reason is that the world has too uncritically accepted using the term of crony capitalism, when most of the deviations it suffers are the direct consequence of crony statism.

Thursday, November 10, 2016

Canada: A Universal Basic Income, should never be more than a step-ladder to help reach up to the real economy.

Had Venezuela’s oil revenues over the last 15 years been distributed directly to the Venezuelans by means of a (in this case a variable) Universal Basic Income (UBI), instead of by redistribution profiteers, the poorest of my homeland would have received at least six times more of it, and the country would not be so close to being a totally failed state.

Be sure, the best way to increase the efficiency of our citizen-to-citizen solidarity, everywhere, is to avoid the redistribution profiteers’ tolls.

I am not a Canadian but I have two Canadian granddaughters, and so I have a vested interest in Canada’s future. I firmly believe that a UBI is a very important tool in order to meet many actual and future social and economic challenges.

But the number one objection to a UBI, and which your local redistribution profiteers will try to argue in order to keep their franchise, is that it could reduce the willingness for work.

In this respect, and referring to Andre Picard’s “Basic income is not just about work, it’s about health” Globe and Mail, November 8, I believe that the UBI to be tested, should not be set as is proposed as 75% of low income measure before tax (LIM-BT), $1,320, but as a percentage of the salary you could obtain working, for instance 60% at the minimum salary level. As I calculate it, that would yield $1,100.

For me the biggest benefit of UBI is as a step-ladder that facilitates reaching up to that gig-economy that seems to have arrived as a fixed feature. We do need worthy and decent unemployments.

UBI should never be seen as lifting anyone out of poverty but allowing millions to lift themselves out of poverty.

UBI has much less to do with human rights, "doing good", than with an intelligent society organizing itself for challenging times, "doing smart".

UBI should always be a beautiful citizens to citizens affair. At no moment should it be soiled by referring to it as a government handout. 



Of course UBI has to be funded with real money, no cheating paying it with inflation or public debt. Besides natural savings in the redistribution costs, one interesting alternative is the use of revenues from high carbon taxes. That would align the incentives between the fights for a better environment and against inequality.

PS. Joking but not really joking: Perhaps a payroll tax on robots and driverless cars could also be used as funding mechanism; that would also help us humans workers to be able to compete on a more level playing field.

http://perkurowski.blogspot.com/2016/04/the-wealthy-and-poor-should-all-be.html

http://perkurowski.blogspot.com/2016/10/how-to-start-discussions-and.html

Tuesday, October 25, 2016

I tweeted: How do you morph a $200 million Picasso hanging on a wall of a wealthy into real purchasing power for the poor?

Someone answered: "If owner says $200m & you think it's worth more, then you buy it for $200m, else you tax it 1/2%/yr"

I answered: "If you buy it for $200m then you used $200m you could have otherwise given the poor"

And I answered: "And if you tax it 1/2% year... how many will then want to own a $200m Picasso?"

Then someone answered (I think): “You mortgage that painting and invest that money into some job generating venture”

And I answered: "That's perhaps a great idea, if I make a really good job-generating investment. But, what if the markets get nervous about too much art being mortgaged at banks? Then the price of art might come down, or interest rates for banks go up… and then we might sort of be getting back to square one."

And I thought, if you hit especially at art wealth, will that not affect the expectations of art being worth more? And if so, will not the price for the paintings of the current painters go down… and so painters have less chance to make it?

And so I am getting closer and closer to conclude: In essence, he who hangs a $200m Picasso painting on the wall, has paid a $200m wealth tax.

I am a bit at loss. Do you have some arguments that could shed light on this issue?

Or clearer yet: He who has agreed to freeze $200m of his purchasing power, hanging a Picasso on a wall, and so therefore does not to compete with other's purchasing powers, has he not already paid a $200m wealth tax?

Do you have another idea on this? Then email me

The wealth of 62 richest equals that of 3.6 billion poorest” That‘s a deviously false odiously divisive argument.

"Panama Papers" Don't let redistribution agitation profiteers raise your expectations.

Saturday, October 22, 2016

The Basel Committee’s risk weighted capital requirements for banks, is one cultural genocide of the western world

Frequently we read about how the destruction of monuments amounts to cultural genocides. But are monuments all there is about cultural heritages? No! Also such heritages as a cultural willingness to take risks.

In 1988, with the Basel Accord, Basel I, regulators introduced risk based capital requirements for banks; which were further amplified in 2004 with Basel II.

That regulation allows banks to earn higher risk adjusted returns on equity when holding “safe” assets, than when holding “risky” assets.

The layer of regulatory risk aversion it introduced, made banks abandon financing the riskier future, in order to just refinance the safer past and present.

The willingness to take risks is part of the cultural heritage of my western world, in churches we sang a psalm that prayed for “God make us daring”.

The willingness to risk making mistakes, has provided the western economies with the raw material necessary for the successes that helped to buildup its economy.

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

But now: “If God can’t make our bankers sufficiently coward, then we have to!” Bank regulators

In short, the Basel Committee for Banking Supervision’s regulatory imposed risk aversion, constitutes a destruction of a cultural heritage of our western world.

And all for nothing! The regulators justified it with that it would make our banks safer. What nonsense! Major bank crises never ever result from excessive exposures to something ex ante perceived as risky; these always result from either unexpected events, or excessive exposures to what was ex ante perceived as very safe, but that ex post turned out to be very risky.

May God defend me from my friends, I can defend myself from my enemies” Voltaire

PS. Actual risk weights: AAA to AA rated 20%, Below BB- 150%. Can it be more loony than that?

Sunday, October 16, 2016

So much in the world, like art, to become a reality, has required tremendous doses of inequality.

Walking around the museum Louvre in Paris I suddenly I saw an amazingly decorated silk embroidered full with gold filaments shield, made around 1555-1560 by Pierre Reddon for King Charles IX.


I then asked myself who in his sane mind would request this type of absolutely useless shield? Clearly it had to be someone extremely wealthy and powerful, someone who did not care one iota about his own security being threaten on a close range, or about its enormous costs.

In that moment it suddenly dawned on me that basically nothing of what I was seeing at the museum would exist, if it had to be produced by a society were income and wealth was equally distributed. In other words, all this art around me, to have become a reality, has actually required a very unequal society. 

In other words, shhh... between you and me...the museum of Louvre is, unwittingly, a homage to inequality.

So are all those of us who with good intentions are fighting for a more equal society truly aware of what we could be giving up, of all unexpected consequences, if we were too successful?

I then tweeted: What would Thomas Piketty’s France exhibit at Louvre, had not huge societal inequality allowed the financing of so much "unnecessary" art?

Then of course you find cases like Vincent Van Gogh who did not require much inequality to give us his marvels, much more of a loving brother.

PS. That’s not only at Louvre just go to the BritishMuseum.

PS. Without inequality the world would never ever have been able to see a Fabergé egg.
Would that have been a better world? I don’t know. You tell me! At least we would not have to envy that some got more impressive burial gaskets than us.


Tuesday, October 11, 2016

Should there be clawbacks clauses for university professors? Yes! Especially for finance professors.

University professors have been able to earn much higher salaries thanks to the availability to their students of credit for education.

Now many of their students are struggling to repay their loans, because market conditions, and the economic benefits of education, did not turn out as expected.

So clearly there is a case to ask whether there should not be some claw-back clauses applicable to them

I surely think so, and especially in the case of the professors in finance.

There, right before their eyes, with Basel I in 1988, and with Basel II in 2004, the bank regulators introduced risk weighted capital requirements for banks.

And these regulations discriminated against that financing of the riskier future that the students needed to be financed in order to aspire to get good paying jobs; and those regulations discriminated in favor of the safer present that had grown out of the risk-taking of the past, and which was of more interest to soon retiring professors.

I believe that never ever before, has an education community let down its students so much.

There’s just got to be some formal claw-back.

PS. Here again is an aide memoire that explains some of the regulatory monstrosities.




Monday, October 10, 2016

Ideas on how to start discussions and implementation of a Universal Basic Income, or Societal Dividend

We must all be aware that the Redistribution Profiteers will be out on force trying to confuse the discussions on Universal Basic Income. 

Therefore I believe some very few principles needs to be established and firmly held on to.

First that we are always talking about a “basic” universal income that in no way should reduce the incentive of people to try earn some additional income. In essence it could initially be argued as a complement to the gig economy.

The UBI should start to be tested in low amounts that are slowly moved upward in line with the experiences.

It should be clear from the very start that all UBI needs to be funded with real money… no funny inflationary money. Initially it should be funded exclusively with taxes already collected; although special taxes like on pollution could also be useful to align UBI with other important objectives.

From the very beginning we need to identify who could provide the payment services in the cheapest way possible. 

And then of course it needs to be clear that UBI is NOT a government handout. It is a societal dividend decreed by all the shareholders, all the citizens.

Friday, September 23, 2016

Curses and blessings quite often come hand in hand

I will keep here my reflections on the subject in Kenneth Rogoff’s book “The Curse of Cash”. (For full disclosure I have yet not found the time to read it in its entirety)

In my comments I will often also refer to Professor Rogoff’s blog.

Kenneth Rogoff writes: “But for all the advantages of cash, we have to recognize that the current system is badly off kilter. A lot of central banks and finance ministries know it, as do justice departments and tax authorities.”

I fully agree, 100%, but do “We the People know it? There are reasonable and unreasonable doubts out there. And I am not 100% sure among which of those mine could best qualify.

Should not abolishing larger anonymous practical ways of storing wealth have to be subject to something like a referendum? I have no idea?

Yes cash might cause some local tax evasion, but does anyone really believe that big tax evaders keep their fortunes in cash like some seem to say? I just know that the word “cash” is open to all types of confusions (that are sometimes exploited)

Cash in hand, if devalued, looses its value equally for all. Non-cash can be devalued discriminatorily. Do we want our grandchildren to be subject to such great Big Brother power? As a Venezuelan, not me for sure!

Cash, as can oil, can indeed be a curse. But does that mean that we in Venezuela should stop extracting oil? I don’t think so.

And how would the elimination of for instance $100 bills, that might represent about one trillion dollars take place? I have no clue.

Would it not just dramatically increase the value of other assets? Not much, it seems like peanuts when compared to what is done with Quantitative Easing.

Do I want cash to assist drug trafficking? Of course not, don’t be silly.

Rogoff writes: “but most world holdings of dollars are in the underground economy (crime and tax evasion). I am not sure. First of all because I do not agree that all underground economy must be either illegal or bad. Then because I think criminals have many alternatives of how moving cash into something else. Moreover, much cash might make even many hardened criminals nervous.

Thursday, September 22, 2016

Low interest rates, by inspiring laziness, sometimes also act as a determent to economic activity

I just want to add a factor that I feel has been ignored in all the ongoing debate on how low or even negative interest rates can stimulate economic activity.

During my life as a financial and strategic consultant, I have often seen how the pressure of the interest-costs-clock on projects, have really inspired these to get going, to execute fast. In other words, low interest rates can also inspire laziness.

What a great deal! Take loan at negative interest rates... do nothing... stay in bed... repay... and profit!

Wednesday, August 31, 2016

My number umpteenth effort to explain to XXX the very bad of current bank regulations.

A “risky asset” yields more, let us say 15%.
A “safe asset” yields less, let us say 5%.

And those yields would be deemed by the market as equal risk adjusted yields.

And market participants would buy those assets according to their needs and risk appetites.

But then came the Basel Committee for Banking Supervision with its risk weighted capital requirements for banks, more risk more equity – less risk less equity, and that completely distorted the allocation of bank credit.

Because now banks could leverage their equity more with safe assets and thereby obtain higher risk adjusted returns on safe assets than with risky assets.

As a result the overall market demand for safe assets increased, and that of risky assets decreased. That “risky asset” yielding 15% before, might now have to yield 16% or more. That “safe asset” yielding 5% before, might now just yield 4% or less.

Is this good? Of course not! Regulators, probably without even understanding what they were doing, altered the free market’s risk assessments; causing dangerous overpopulation of safe havens; and, for the real economy, equally dangerous under-exploration of the risky bays where SMEs and entrepreneurs usually reside. 

The net result of it is:

Crises, like that of 2007-08, resulting from excessive exposures to what was perceived, decreed or concocted as safe, like AAA rated securities and loans to sovereigns (Greece)

Stagnation, resulting from all the stimulus, like that of QEs, not flowing freely to where they are most needed, but only populating more and more the remaining safe havens.

In other words this damn piece of regulation has our banks no longer financing the riskier future but only refinancing the safer past; and so we are doomed to doom and gloom, and to run out of safe havens.

Of course, having set the risk weight for loans to sovereigns at 0% and to We the People, the regulators also introduced, through the backdoor in 1988, a powerful pro-statism tool.

The distortions are not even acknowledged by the regulators, much less discussed.

God help needing pensioners and job seeking youth! God help us all!

PS. If you have understood this and want more details on the greatest regulatory faux pas in history you might want to read the following more extensive aide memoire.

PS. Here are some of my past explanations for dummies.

PS. Today 50% of my constituency, my grandchildren, gets to be 5 years old.