Risk Through the Looking-Glass

The question of what is really risk in capital investments is posed and discussed. It is suggested that the almost total acceptance of the concept that volatility constitutes a good measure of risk is not appropriate in the context of capital investment appraisal. It is argued that the Expected Loss should be employed as a measure of risk. It is further illustrated how the risk aversion attitudes of potential investors can be taken into consideration in the decision to invest or not. The pursuit of return without risk inevitably leads to the transfer of wealth through a failing banking system which collaborates with an unregulated financial market whereby it is constantly sought to invest in low risk and relatively safe returns for the benefit of their wealthy clients. The promise of a “return without the risk†leads financial intermediaries in the direction of an elusive quest whereby the only way to attain this is through directing funding towards the capture of existing assets rather than investing in the real economy to create new wealth.