How Basel III threatens small businesses

• Basel III requires an increase in the size of banks' equity relative to their loans and a more formal assessment of risk. It is built on the same foundations as Basel I and II. The reasons why those initiatives failed may well apply also to Basel III, not least because the adjusment of assets for risk cannot be conducted with any certainty.
• Soverign debts once considered safe are not necessarily safe any longer.
• The rules agreed in September 2010 are to be phased in between 2014 and 2019 to give banks time to adjust. Most of the capital adjustment will come from banks lending less but better and with increased margins - that is, higher interest rates to customers.
• Big companies will be able to shop around within the competitive international markets. However, in a situation where five big banks dominate the UK market, Britain's smal and medium-sized enterprises (SMEs) will be hit both by the reduced aviailability of loans and by higher interest rates.
• Since SMEs drive the UK economy, the consequence of Basel III is negative for the UK.

Read the full briefing paper here.

The Case for Nominal GDP Targeting

The recent economic crisis has exposed important flaws with inflation targeting, particularly the form practiced by real world central banks. A nominal GDP target can address the dual concerns of macroeconomic policy – inflation and jobs – with a single policy target. Had central banks pursued nominal GDP targeting during 2008, it is quite likely that both the financial crisis and the recession would have been much milder. Nominal GDP targeting works best when “level targeting” is used, which means making up for past underor overshoots, and also if the central bank targets market expectations of nominal GDP growth.

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Codification and Reform of the British Constitutional Arrangement

In this briefing paper, Karthik Reddy argues that the British constitutional arrangement has changed such that traditional checks and balances against governmental abuses of power have been lost, and says that a codified constitution is needed which clearly articulates the limits to parliamentary sovereignty. Reddy argues that the Prime Minister's presidential powers must be recognised and responded to by separating the executive from the legislature and making the office of Prime Minister directly electable by the British people, with parliament acting as an independent legislative balance against the executive.

Read it here.