Learning from Dogs

There’s always much more to people than meets the eye!

I can’t recall at what point in the life of Learning from Dogs that Per Kurowski popped up over the parapet but it was pretty early on.  Per has been a great supporter of my varied efforts to promote the way that dogs are a wonderful example of integrity, trust and openness.

Anyway, Per comes from a background that one might not associate with the rest of this article.  Per used to be a director at the World Bank.  One of his Blogs includes this:

I warned many about the coming crisis, long before it happened, on many occasions and in many places, even at the World Bank. They did not want to listen and that´s ok, it usually happens, but what is not ok, is that they still do not seem to want to hear it. “We can easily forgive a child who is afraid of the dark; the real tragedy of life is when men are afraid of the light.” (Plato: 427 BC – 347 BC)

Just a couple of days ago, I posted about the moon that passed closer to the Earth on the 19th than for the last 20 years.  Per added a comment to that Post, “And this is a homemade version of the beautiful Harvest Moon song by Neil Young” With this link.  At that link you can watch and listen to Per singing ‘Harvest Moon’ recorded by Neil Young.  Enjoy.

Here was that moon, as seen from Payson in Arizona with some cloud in the sky!

That moon!

Finally, for those interested in the lyrics, here they are.

Come a little bit closer
Hear what I have to say
Just like children sleepin’
We could dream this night away.

But there’s a full moon risin’
Let’s go dancin’ in the light
We know where the music’s playin’
Let’s go out and feel the night.

Because I’m still in love with you
I want to see you dance again
Because I’m still in love with you
On this harvest moon.

When we were strangers
I watched you from afar
When we were lovers
I loved you with all my heart.

But now it’s gettin’ late
And the moon is climbin’ high
I want to celebrate
See it shinin’ in your eye.

Because I’m still in love with you
I want to see you dance again
Because I’m still in love with you
On this harvest moon.
Come a little bit closer
Hear what I have to say
Just like children sleepin’
We could dream this night away

But there’s a full moon risin’
Let’s go dancin’ in the light
We know where the music’s playin’
Let’s go out and feel the night

Because I’m still in love with you
I want to see you dance again
Because I’m still in love with you
On this harvest moon

When we were strangers
I watched you from afar
When we were lovers
I loved you with all my heart

But now it’s gettin’ late
And the moon is climbin’ high
I want to celebrate
See it shinin’ in your eye

Because I’m still in love with you
I want to see you dance again
Because I’m still in love with you
On this harvest moon

A few days ago I published an article that had first appeared on the CASSE Blog site entitled Top Ten Songs for a Steady State.  A long-term contributor to this Blog, Per Kurowski, then added a comment to that post that I thought deserved being made into a separate item on Learning from Dogs.  Here it is.

This is also a contender:

Where Do the Children Play?
Cat Stevens, Tea for the Tillerman (1970)

Well I think it’s fine, building jumbo planes.
Or taking a ride on a cosmic train.
Switch on summer from a slot machine.
Yes, get what you want to if you want, ’cause you can get anything.

Chorus: I know we’ve come a long way,
We’re changing day to day,
But tell me, where do the children play?

Well you roll on roads over fresh green grass.
For your lorry loads pumping petrol gas.
And you make them long, and you make them tough.
But they just go on and on, and it seems that you can’t get off.

Well you’ve cracked the sky, scrapers fill the air.
But will you keep on building higher
’til there’s no more room up there?
Will you make us laugh, will you make us cry?
Will you tell us when to live, will you tell us when to die?

By the way the following song should also classify as a contender… though excuse me if when I also use music to keep sane… I might drive others insane

http://ayearofsongs.blogspot.com/2010/06/color-of-wind.html

Thanks Per!

Here’s a thought for Basel.

Per Kurowski has been a loyal follower and supporter of this Blog and I’m indebted to him for this.  Per writes the Blog

Per Kurowski

Tea with FT (Financial Times) but his busy life seems to allow sufficient space for the odd comment on Learning from Dogs.

Here’s what Per wrote as a comment to the recent Post entitled, “Is thinking going out of fashion?“.  It seem worthy of being a guest post.

In reference to courage, here is a question on financial regulations, only for the brave.

Currently the financial regulators in the Basel Committee requires the bank to hold 8 percent when lending to unrated small businesses and entrepreneurs but only 1.6 percent when lending to triple A rated clients.

What would have happened if exactly the opposite capital requirements had been imposed? The banks having to hold instead 8 percent in capital when lending to triple-A rated clients and only 1.6 percent when lending to unrated small businesses and entrepreneurs.

It would most surely have created problems, any regulatory discrimination does, but I hold that a crisis as large as the current one would not have happened… since no gigantic financial crisis has ever resulted from excessive lending to those who are perceived as risky, they have always resulted from excessive lending to those who are perceived as not risky.

We could also have had a lot more of jobs, since almost always the next-generation of decent sustainable jobs is to be found among the current small businesses and entrepreneurs.

Our biggest financial systemic risk is without any doubt our financial regulators.

The Basel Committee on Banking Supervision

I suspect that you, like me, know diddly-squat about the Basel Committee.  As the Bank of International Settlements puts it:

The Basel Committee on Banking Supervision provides a forum for regular cooperation on banking supervisory matters. Its objective is to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide. It seeks to do so by exchanging information on national supervisory issues, approaches and techniques, with a view to promoting common understanding. At times, the Committee uses this common understanding to develop guidelines and supervisory standards in areas where they are considered desirable. In this regard, the Committee is best known for its international standards on capital adequacy; the Core Principles for Effective Banking Supervision; and the Concordat on cross-border banking supervision.

The Committee’s members come from Argentina, Australia, Belgium, Brazil, Canada, China, France, Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The present Chairman of the Committee is Mr Nout Wellink, President of the Netherlands Bank.

OK, that’s clear then!

Pers Kurowski

Well, according to a good supporter of and Guest contributor to Learning from Dogs, Pers Kurowski, we really ought to know much, much more about this ‘committee’.

Pers has a Blog called Tea with FT (as in the Financial Times) and there is much to read there that helps us understand why we are in so big a mess with the banks.  Here’s his piece from the 4th May.

Basel Committee, why don´t you just shut up!

Sir who do these Basel Committee regulators really think they are bullying us around with an arrogant “the banks should be sensible and realise that it might backfire if they protest too much”? as reported by Brooke Masters, May 4.

They themselves are the ones who thought everything would be fine and dandy if they just had some few credit rating agencies determine default risks and then gave the banks great incentives, by means of different capital requirements, to follow those credit risk opinions. They themselves are the ones who believing in the abundance of safe triple-A rated lending and investments, caused the world to stampede and fall over the subprime mortgages. They themselves should shut up, because rarely has the world seen such a gullible naive and outright stupid bunch of regulators.

Now the banks, in the midst of a crisis, need to build up the equity they do not have precisely because the Basel Committee did not require them to have; precisely when we need the most the banks to lend. The regulators, instead of bullying banks, should busy themselves day and night finding ways for severely capital stretched banks to be able to lend to those small businesses and entrepreneurs who have had to pay the cost of higher capital requirements but who had absolutely nothing to do in generating this crisis.

And just in case, for the record, I am no banker, only a citizen, very upset with the fact that in the 347 pages of the regulations known as Basel II, there is not one single word that describes the purpose of those regulations. Basel Committee why do you not start defining a purpose for what you are doing? Is that too much to ask?

By Paul Handover

Guest author, Per Kurowski, on a rather sobering topic!

I do not know what worse, the arrogance of the regulators thinking they can squeeze out the risk in banking by imposing different and completely arbitrary capital requirements based on the opinions of some few human fallible credit rating agencies, or their childish innocence not knowing this creates systemic risks of gigantic proportions.

What I do know is that an amazing number of intelligent people have fallen for this absurd and extremely dangerous regulatory paradigm. Honestly… I am truly scared!

How could I not be with regulators who can authorize banks to leverage up 62.5 to 1 on public debts like Greece’s while at the same time placing a 12.5 to 1 ceiling on the lending to the small businesses and entrepreneurs whom we depend so much on for our jobs.

Better hope they don't need funding!

All those financial and regulatory experts who kept mum when they should have spoken out on the financial crisis about to happen are now, quite effectively, circling their wagons in order to promote the myth that no one knew. False many did! In order to benefit from the lessons we must learn, they should not be allowed to succeed.

On October 19, 2004, as an Executive Director of the World Bank (2002-2004) I presented a written formal statement at the Board and that included the following:

We [I] believe that much of the world’s financial markets are currently being dangerously overstretched through an exaggerated reliance on intrinsically weak financial models that are based on very short series of statistical evidence and very doubtful volatility assumptions.

And I was no investment banker, nor a regulator, nor an investor, and so to me it is clear that all of them, had they done their job right, should have known… and that this crisis should have been nipped in the bud much earlier, as

Per Kurowski

the real explosion in truly bad mortgages took off in 2004, when the SEC in April delegated the setting of the capital requirements for the investment banks to the Basel Committee, and the G10 in June approved Basel II.

In order to understand it all don’t follow the money… follow the AAAs.  In case you missed “The Financial Crisis explained to dummies, non-experts and financial regulators” you can read it here.

By Per Kurowski

PS. I have put up a document that resumes most of what I said before and during my term as an Executive Director.

Welcome Per Kurowski Egerström

On the 22nd March, Learning from Dogs had the pleasure of a Post from our first Guest Author, Elliot Engstrom.  We are doubly delighted to have Per Kurowski join us as our second Guest Author.

Per Kurowski

Per is a prolific blogger.  He has had a full career including serving as an Executive Director of the World Bank from 2002 until 2004 for Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Spain and Venezuela.  More about Per’s life experiences can be found here.

Here is Per’s first Guest Post for Learning from Dogs.

——————-

The GPS and the AAAs

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.

Whither we are led?

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.

Second 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.

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 all recent Financial Regulatory Reform proposals

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 banker 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 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 it to 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.

By Per Kurowski