The Public Debt Balloon keeps on inflating and flying Up, Up and Away, ever since the Basel Committee cut its moorings, with their Sovereign 0% risk weight
Here part of my letter that was published November 2004 in the Financial Times:
“We wonder how many Basel propositions it will take before they start realizing the damage they are doing by favoring so much bank lending to the public sector. In some developing countries, access to credit for the private sector is all but gone, and the banks are up to the hilt in public credits.”
PS. For example, in 1988 when regulators assigned it a 0% risk weight, the US debt was $2.6 trillion. At end of 2017 it was US$20.2 trillion, and it is still 0% risk weighted. If it keeps on being 0% risk weighted, it is doomed to become 100% risky.
