This week, Andrew Stuttaford wrote an article for National Review about the strange and dangerous results that are likely to result from the Federal Reserve’s decision that the country’s central bank should have a climate policy that affects monetary policy.
He cites CNBC’s reporting that the Fed is moving forward with efforts to protect the financial system from “climate risks.” A newly created Financial Stability Climate Committee will be tasked to work with a Supervision Climate Committee to focus on the risks presented by climate change to “transition to a sustainable economy.” Fed Governor Lael Brainard said that a “core pillar” of the Fed’s mission is to address climate change’s “macro-financial” risks.
Stuttaford argues that the need for this sort of action by the Fed to address “climate risk” is “almost entirely bogus.” He cites a Project Syndicate article that argues that financial regulations are being designed that will “smuggle in” climate policies that the public would reject in other contexts.
That article also argues that natural events such as hurricanes, droughts, and other climate disasters have not caused system-wide financial crises in the past. No climate science predicts any changes in the next ten years that would affect financial systems differently than in the past. Extensive regulation and risk management of climate investments will not protect systems against catastrophic events not currently modeled or projected.
The argument continues that the biggest threat to financial stability would come through a “green bubble,” inflated by government and Fed subsidies and policy encouragement. Current investments could easily be crippled by technological development or political changes. `
Fed Chair Jerome Powell has so far indicated that he considers climate change to be important but not central to the Fed’s mission. He said recently that the central bank has the responsibility to “start the process” of understanding the risk of climate change to the financial system.
Powell’s approach is not audacious enough for many progressive Democrats, such as Rep. Alexandria Ocasio-Cortez (D-NY). They aggressively call on President Joe Biden to replace Powell as a beginning move in a wide-ranging makeover.
Ocasio-Cortez and members of the Congressional Progressive Caucus started on August 31, urging Biden to “reimagine” the Fed as prioritizing the elimination of climate risk and advancing “racial and economic justice.”
The caucus cites as authoritative a report from Positive Money titled “The Tragedy of Growth.” That report states that America must “abandon GDP growth” and change the country’s financial system to “protect the wellbeing and avoid ecological disaster.” The report says that economic growth does not enhance the protection of the environment or “life satisfaction” and does not alleviate poverty.
At least the Congressional progressives are not hiding their climate strategy for “transforming” America’s economy into a “social justice” focused and centrally planned socialist nightmare.