[MCN] Cost of climate change: The Fed comes awake to economic risk
lance at wildrockies.org
Tue Mar 26 20:02:18 EDT 2019
Excerpt: Climate change was already worrying enough — now a report from the U.S. central bank cautions that rising temperatures and extreme storms could eventually trigger a financial collapse.
A Federal Reserve researcher warned in a report on Monday <https://www.frbsf.org/economic-research/publications/economic-letter/2019/march/climate-change-and-federal-reserve/?utm_source=frbsf-home-economic-letter-title&utm_medium=frbsf&utm_campaign=economic-letter> that “climate-based risk could threaten the stability of the financial system as a whole.” But possible fixes — using the Fed’s buying power to green the economy — are currently against the law.
Climate change could soon hit the banking system “by storms, droughts, wildfires, and other extreme events” making it harder for businesses to repay loans.
“Businesses and households that produce greenhouse gas emissions, say, by driving cars or generating electricity, do not pay for the losses and damage caused by that pollution.”
A hefty carbon tax alone wouldn’t be enough to fix the problem — what he calls an “intergenerational and international market failure.”
Along with a report last week <https://grist.org/article/report-climate-change-could-make-insurance-too-expensive-for-most-people/> from the insurance industry saying that climate change could eventually make insurance unaffordable for most people, Rudebusch’s report is part of a growing body of evidence that climate change poses an existential threat to the world economy <https://www.theguardian.com/commentisfree/2019/mar/18/ending-climate-change-end-capitalism> as it currently exists.
Last month, Fed chairman Jerome Powell told legislators <https://www.bloomberg.com/news/articles/2019-03-25/fed-researcher-warns-climate-change-could-spur-financial-crisis?cmpid%3D=socialflow-twitter-politics&utm_campaign=socialflow-organic&utm_medium=social&utm_content=politics&utm_source=twitter> that asking why the Fed doesn’t currently consider the risks of climate change was a “fair question.”
Despite recognizing the downsides of debt, the lure of spending remains strong. After covering off on necessities, Americans said 40%
of their monthly income goes toward discretionary spending on entertainment, leisure travel, hobbies, etc. In fact, when asked what
financial pitfalls they are prone to, one quarter of Americans flagged “excessive/frivolous” spending.
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