The Climate Crisis And High Finance

How Climate Change Could Trigger the Next Global Financial Crisis; The Federal Reserve should act aggressively to reduce that risk, a leading economic historian argues.

Robinson Meyer, August 1, 2019 (The Atlantic)

“…[The U.S. Federal Reserve needs to battle climate change in the same way it responded to the 2008 recession, according to Columbia University Professor of History Adam Tooze. Policymakers] will need to pull every lever at their disposal…[Jerome Powell, the Fed chairman] is probably the most powerful person in the American government who affirms climate science. Yet he has taken a subdued approach to mitigating climate change…[He has written that] addressing climate change is a responsibility that Congress has entrusted to other agencies…[His British counterpart has convened 33 central banks to investigate how to ‘green the financial system’...and every powerful central bank is [reportedly] working with him—except for Banco do Brasil and the Fed…

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[The head of the Bank of England has raised the possibility that the climate crisis is a Minsky moment in which] an asset’s price suddenly collapses after a long period of growth…[That means there could be] some kind of subprime-like scenario…[It could be created if fossil-fuel assets were] on the balance sheet of actors who were under huge pressure in a fire-sale situation and who couldn’t deal with a sudden revaluation…[The sudden revaluation could happen if climate nonlinearities kick in and create] a Fukushima-style event…[That leads to nervous democratic politicians] suddenly deciding that we have to [immediately] stop doing one or another part of our carbon-based economy…[That leads to] big shocks…[and] sudden revaluations…[Because one-third] of equity and fixed income assets issued in global financial markets can be classified as belonging to the natural resource and extraction sectors, as well as carbon-intensive power utilities, chemicals, construction, and industrial goods firms…” click here for more

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