Hair cuts and hair splitting

Ordinary people who trust banks believe that banks are managed by strong and competent boards 

“All decent people live beyond their incomes, and those who aren’t respectable live beyond other people’s incomes. A few gifted individuals manage to do both” 

– Hector Munro 

Jargons are subject specific special words in the vocabulary of experts, professionals and politicians claiming superior insight. 

In the Daily FT Guest Column on Saturday 20 August ‘Haircuts and economic revival strategies’ Dinesh Weerakkody makes this observation: 

“Local debt haircuts would have to deal with the resultant banks’ capital augmentation through capital injections, where possible from FDIs or local investments with better bank prudential behaviour and strong and competent boards, independent of GOSL suasion on bond investments factors they see as the “radix causa” of the LKR liquidity crisis that benefited themselves and not the nation and that fed into the USD liquidity crisis, and its devastating results on bank balance sheets. The impact on insurance firms, asset managers, large corporates and wealth by households could also be directly affected. Indeed, non-banks hold around half of the stock of domestic debt. The knock-on consequences could be severe and should be factored into any policymaker cost-benefit analysis exercise.”  Ordinary people trust banks with their savings. They don’t go to banks for haircuts. Isn’t there a simpler way of explaining to those who go to the nearest barber for a haircut how a ‘local debt haircut would result with a need for a bank’s capital augmentation through capital infusion?  

‘Better bank prudential behaviour’ is a curious amalgam of words that suggests behaviour less prudential or more bluntly reckless, stupid, myopic or all three put together. 

Ordinary people who trust banks believe that banks are managed by strong and competent boards. Are banks susceptible to ‘GOSL suasion’? Isn’t there a simpler word for ‘GOSL suasion’? Isn’t it government directive, state coercion or political trespass? 

What is the ‘radix causa’ – the root cause of why we the ordinary people are in this deep ‘poop pit’? 

What are ‘knock-on consequences? 

Is “devastating consequences on the balance sheet’ a euphemism for the much simpler and honest expression for ‘going broke’? 

Economist Evsey Domar in his ‘Essays in the theory of economic growth’ offers some timeless wisdom: “The construction of an economic model, or of any model or theory for that matter (or the writing of a novel, a short story, or a play) consists of snatching from the enormous and complex mass of facts called reality, a few simple, easily managed key points which, when put together in some cunning way, become for certain purposes a substitute for reality itself.”

Jargon can be wickedly hilarious. Our economy is virtually horizontalised. Verticalising, it requires moral integrity, lack of which is the ‘radix causa’ of our current predicament.