What is a good way for the Fed to deflect attention from the fact that after a decade of liquidity injections it has created the world’s largest asset bubble? Why point to another, even bigger – in its view – threat. And with green bonds, unlimited fiscal deficits and MMT all the rage (if not today, then soon), what better bogeyman for the Fed to wave in front of the public than the hottest topic, so to speak, of the day: climate change.
Speaking at the GARP Global Risk Forum, NY Fed executive vice president Kevin Stiroh warned in his prepared remarks, that climate change – not, say, asset bubbles created by his employer – is a major threat that risk managers can’t ignore.
“The U.S. economy has experienced more than $500 billion in direct losses over the last five years due to climate and weather-related events. In addition, climate change has significant consequences for the U.S. economy and financial sector through slowing productivity growth, asset revaluations and sectoral reallocations of business activity” he
That was how Stiroh framed the one danger that, according to the Fed, is emerging as the biggest threat to the US economy.
But why is the Fed, whose only concern should be the cost of money, suddenly preoccupied with the weather? Because as the EVP says in his speech, “as supervisors, we can consider climate-related risks in terms of both microprudential and macroprudential objectives.”
In other words, it’s only a matter of time before the Fed blames the weather for the next great, “unexpected” crisis… which like the bubbles of 2001 and 2008 was entirely the Fed’s doing.
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