Climate Change Is the New Fed Mandate

Mish

Officially, Congress sets the Fed's priorities but the Fed has independence on how to carry out its mandates. Unofficially, the Fed just adopted its own new mandate.

The Evolution of an Idea

The Federal Reserve Bank of Richmond explains the Evolution of an Idea.

Since 1977, the Federal Reserve has operated under a mandate from Congress to "promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates" — what is now commonly referred to as the Fed's "dual mandate." The idea that the Fed should pursue multiple goals can be traced back to at least the 1940s, however, with shifting emphasis on which objective should be paramount. 

That snip is from 2011 and matches what the Fed has said over the years. 

I do not believe I see the words "climate change" anywhere in the "dual mandate".

Fed Joins Climate Change Network

Despite climate change being no part of the Fed's mandate the Fed Joins Climate Network, to Applause From the Left.

The Fed’s board in Washington voted unanimously to become a member of the Network of Central Banks and Supervisors for Greening the Financial System.

“The public will expect that we do figure out what are the implications of climate change for financial stability, and that we do put policies in place,” Jerome H. Powell, the Fed chair, said this month at a Senate hearing. “The broad response to climate change on the part of society really needs to be set by elected representatives — that’s you. We see implications of climate change for the job that you’ve given us, and that’s what we’re working on.”

Greening of the Fed

"We see implications of climate change for the job that you’ve given us, and that’s what we’re working on," said Powell.

Excuse me for asking but when did Congress add climate change to the Fed's list of mandates? 

Given the Fed has blown three economic bubbles in succession, has never spotted a recession in advance, and is totally clueless about price stability, perhaps it ought to stick to monetary policy.

Then again, if the Fed were to abandon monetary policy and just let the free market work, that could be an adequate tradeoff for letting the Fed pontificate on climate change.

Mish

Comments (69)
No. 1-28
Dodge Demon
Dodge Demon

There are and will be many more gen sets with diesel storage tanks or nat gas supply valves nicely fenced/hidden at the electric charging stations at the virtue signaling big box stores.

Dr. Manhattan23
Dr. Manhattan23

"Given the Fed has blown three economic bubbles in succession, has never spotted a recession in advance, and is totally clueless about price stability, perhaps it ought to stick to monetary policy.

Then again, if the Fed were to abandon monetary policy and just let the free market work, that could be an adequate tradeoff for letting the Fed pontificate on climate change."

you got that right. Preach brother......

Clueless fed, or maybe they know exactly what they are doing?

numike
numike

The Big Thaw: How Russia Could Dominate a Warming World

Climate change is propelling enormous human migrations as it transforms global agriculture and remakes the world order — and no country stands to gain more than Russia. https://www.propublica.org/article/the-big-thaw-how-russia-could-dominate-a-warming-world

Eddie_T
Eddie_T

Welcome to the New Green Energy Bubble. Buy renewables now and avoid the rush.

Zardoz
Zardoz

Ok... so what is the fed doing about erectile dysfunction?

njbr
njbr

The people at the Fed are no dummies. They are intelligent people who have the luxury of looking beyond today's chaos and into the future. The Fed is seeing that the quadrennial cycle (now intensified) is leaving the US woefully unprepared for the world that is coming, whether we want it to or not. So yes, there are limits. And money is only money.

Doug78
Doug78

Having done everything to get the people who want this into office I find it strange that you don't like what they plan to do once in.

amigator
amigator

The Fed was created to bail out the banks period. Everything else they do is just there to fill in the time in between bailouts.

The Fed/Government is going to ride this Climate change for every tax dollar they can find. More taxes equals more money to promote their ideal.s The climate has been changing and will be changing forever. This will turn into one of their best revenue streams ever. Better even than the war on Terror which has been extremely successful in dictating powers and bolstering the defense coffers of our great nation. Climate change has all the ingredients of the War on Terror threat minus the murder and destruction of property but will give them the freedom to mold the system as they feel fit.

Goldman Sachs and the boys are drooling at the mouth thinking about trading Carbon futures all guised as a "green" concept. But wall streets ideas of green are not the came green that is being promoted!

KSFO
KSFO

I read a great response to this on Twitter... "the fed can raise to 15 percent , that will take care of climate change in a hurry"

Bam_Man
Bam_Man

It is now just one big Clown Show.

njbr
njbr

Bill Barr telegraphs the future after he leaves office this week....

...Attorney General Bill Barr said Monday that he saw “no basis” for the federal government to seize voting machines...

....Barr said he stood by his previous remarks indicating the Department had not found evidence of mass voter fraud in the 2020 presidential contest....

....“To this point, I have not seen a reason to appoint a special counsel” for the Hunter Biden investigation, Barr said, “and I have no plan to do so before I leave.”

Sidney Powell, new AG ? She was at the WH last night, again.

Sechel
Sechel

so here is why the Fed might want to be concerned about climate change.
it needs to be modelled. but like the article states i don't think monetary policy should be used to as a tool to mitigate climate change or change how we consume energy if that can even be done. also sone of this research is better done by other govt agencies but the Fed does have resources

In addition to the financial risks associated with damage caused by climate change — including “potential loan losses at banks resulting from the business interruptions and bankruptcies caused by storms, droughts, wildfires, and other extreme events” —transition risks, including “unexpected losses in the value of assets or companies that depend on fossil fuels,” need to be factored in.

Long-term risks still create short-term consequences, he writes. Also, financial firms that make loans to businesses or individuals impacted by climate change “face substantial climate-based credit risk exposure,” Rudebusch notes.

“If such exposures were broadly correlated across regions or industries, the resulting climate-based risk could threaten the stability of the financial system as a whole and be of macroprudential concern,” he said. “In response, the financial supervisory authorities in a number of countries have encouraged financial institutions to disclose any climate-related financial risks and to conduct ‘climate stress tests.’”

Other reasons central banks need to be concerned about climate change: “climate-related financial risks could affect the economy through elevated credit spreads, greater precautionary saving, and, in the extreme, a financial crisis.”

In addition, climate changed could lead to “larger and more frequent macroeconomic shocks” and result in “infrastructure damage, agricultural losses, and commodity price spikes.” Even if drought, flood or hurricanes worsened by climate change strike outside the U.S., they can “disrupt exports, imports, and supply chains.”

Higher temperatures, according to researchers, have “slowed growth in a variety of sectors, and could cut output “by more than 1⁄2 percentage point later in this century.”

Spending on methods to soften the effects of climate change — seawalls, etc. — “is expected to increasingly divert resources from productive capital accumulation,” according to Rudebusch. “In short, climate change is becoming relevant for a range of macroeconomic issues, including potential output growth, capital formation, productivity, and the long-run level of the real interest rate.”

While monetary policy decisions generally exclude “temporary disturbances from weather events like hurricanes or blizzards,” he notes, these shocks may “grow in size and frequency and their disruptive effects could become more persistent and harder to ignore.”

And those who dismiss the costs of climate change because they “will occur well past the usual policy forecast horizon,” Rudebusch points out that “central banks routinely consider the policy implications of demographic trends, such as declining labor force participation, which have long-run effects much like climate change.”

Equity and long-term financial asset prices measure “expected future conditions, so even climate risks decades ahead can have near-term financial consequences. Climate change could also be a factor in achieving and maintaining low inflation. It took a decade or two — a relevant time scale for climate change — for the Fed to achieve its inflation objective after the Great Inflation of the 1970s and the Great Recession. Finally, the economic research that quantifies optimal monetary policy routinely uses a very long-run perspective that takes into account inflation and output quite far out in the future.”

Despite the importance for the Fed to consider climate change, Rudebusch concludes, it “is not in a position to use monetary policy actively to foster a transition to a low-carbon economy.”

mrdentss
mrdentss

It's not do to CC ...it's over building ....

CCBW
CCBW

The world economic forum has the solution give everybody minimum basic income. Equalize wages darn now you can't afford that mortgage that ok we the goverment will take it and rent you the house . Get people to work from home. You see poor people don’t use as much energy. Gee that solves the whole problem. With the lock downs we have a lot more poor people already so we’re on are way. It will be UTOPIA! I hope you Lefties like what you wished for you might just get it. ccbw

Realist
Realist

The vast majority of businesses and institutions attempt to prepare for the future, based on the best information they can acquire, in order to take advantage of expected opportunities and avoid any serious issues that they foresee. You don’t need a “mandate” to tell you to be prepared.

PecuniaNonOlet
PecuniaNonOlet

It wont matter a damn thing, coronavirus pandemic was a preview of the absolute self-centered selfishness of a large part of humans on the planet. People were asked to wear a mask and social distance and look what you got...

Imagine asking people to cut back on gasoline, consumption, travel, etc to combat climate change and you can kiss your planet goodbye. In the past wars were fought to gain control of land or resources, I suspect they will be fought to keep pollution down in the future.

The only way it will happen will be through penalties and force. I suggest smart people move to areas where there is plenty of fresh water available, moving to desert areas like anything west of colorodo will be hard living.

njbr
njbr

Newsmax on Monday became the second television operation to air a lengthy fact-check-style segment rebutting the conspiracy theories it’s aired for weeks about the 2020 election, after a voting machine manufacturer threatened them with legal consequences.

Newsmax, like Fox News, received a letter earlier this month from manufacturer Smartmatic threatening legal action unless the network retracted various “false and defamatory statements.” ...

Newsmax host John Tobacco, host of “Liquid Lunch,” did the dirty work himself on Monday.

The network would like to clarify it’s coverage, Tobacco said — “and note it has not reported as true certain claims made about these companies.”

What followed was an effective summary of the weeks of conspiracy theories that Newsmax and other fringe outlets have aired as consolation prizes to Trump dead-enders.

In quick succession, Tobacco said there was no evidence to support assertions that Smartmatic or fellow voting machine manufacturer Dominion were used to flip votes in the 2020 election, and noted that Dominion had denied any relationship to a number of Trumpy boogeymen — including the Feinsteins, Clintons, Pelosis, Chavezes, and George Soros.

Frank Sterle Jr.
Frank Sterle Jr.

Our existence has for too long been analogous to a cafeteria lineup consisting of diversely societally represented people, all adamantly arguing over which identifiable traditionally marginalized person should be at the front and, conversely, at the back of the line.

Many of them further fight over to whom amongst them should go the last piece of quality pie and how much should they have to pay for it—all the while the interstellar spaceship on which they’re all permanently confined, owned and operated by (besides the most wealthy) the fossil fuel industry, is burning and toxifying at locations not normally investigated.

And the latter is allowed to occur, because blue-shirted liberals and red-hatted conservatives are preoccupied loudly blasting each other for their politics and beliefs thus distracting attention from big business’s moral and ethical corruption, where it should be focused.

Meanwhile, mindless arguments are made, like the stupid-sounding catchphrase, “It’s the economy, stupid!”

In short, we’re distracting ourselves from our own burning and heavily polluting spaceship, Earth

There’s discouragingly insufficient political gonad to sufficiently address the cause-and-effect of manmade global warming and climate change.

What is sufficiently universal, however, is that the laborers are simply too exhausted and preoccupied with just barely feeding and housing their families on a substandard, if not below the poverty line, income to criticize the former for the great damage it’s doing to our planet’s natural environment and therefore our health, particularly when that damage may not be immediately observable.

njbr
njbr

Three thoughts, aren't there a couple more criticial issues at hand, and what is the fascination with "classical architecture" and authoritarians, and has anyone examined the cost of replicating classical designs?

....Trump announced the executive order Monday morning. The order’s text bemoans a lack of “beautiful” federal buildings — and seeks to change it.

“With a limited number of exceptions, such as the Tuscaloosa Federal Building and Courthouse and the Corpus Christi Federal Courthouse, the Federal Government has largely stopped building beautiful buildings,” the order reads. “In Washington, D.C., Federal architecture has become a discordant mixture of classical and modernist designs.”

“It is time to update the policies guiding Federal architecture to address these problems and ensure that architects designing Federal buildings serve their clients, the American people. New Federal building designs should, like America’s beloved landmark buildings, uplift and beautify public spaces, inspire the human spirit, ennoble the United States, command respect from the general public, and, as appropriate, respect the architectural heritage of a region,”

ohno
ohno

In other words, off to destroy the climate?

Betweentwoages
Betweentwoages

Climate change , Covid and Equality are issues that we face . Make no mistake, the wealthy and influential will Magnify the emergency of each , see to it the the public becomes very aware and holds desired opinions , and all will be leveraged as emergencies for the profit of the most influential. The marketing emotional messages to the public have been fine tuned by think tanks , (Many folks won’t want to seem “selfish” to Disagree and not sacrifice as they are herded into the profitable sacrifices) critical thought that questions the solutions will be deemed (some negative knee jerk connotation) and this will help steer the public into A new economic paradigm. Unelected officials will have more say- we will all be in “this show” together globally .

Think about it .

Betweentwoages
Betweentwoages

Climate change , Covid and Equality are issues that we face . Make no mistake, the wealthy and influential will Magnify the emergency of each , see to it the the public becomes very aware and holds desired opinions , and all will be leveraged as emergencies for the profit of the most influential. The marketing emotional messages to the public have been fine tuned by think tanks , (Many folks won’t want to seem “selfish” to Disagree and not sacrifice as they are herded into the profitable sacrifices) critical thought that questions the solutions will be deemed (some negative knee jerk connotation) and this will help steer the public into A new economic paradigm. Unelected officials will have more say- we will all be in “this show” together globally .

The three pillars to be leveraged seem to be Covid, climate change and equality and corporates and politicians will all “act” as if these are terrible emergencies , when in fact they will use them as great opportunities to build a economic recovery on where they have more control via emergency powers and they will of course profit the most

Anda
Anda

Very reasonable of them I think. For example if the printing press stops due to overheating because of climatic conditions they will be in
a lot of trouble. Same goes for electronic trading, what happens if a bank tries to connect to its reserves at the fed and is unable to because the servers had to be switched off due to their temperature ? Potential customers will doubt those reserves actually exists is what. So greening the fed is a good idea. They could line the hallways and offices with more plants for example, print more dollars also because they're green even if they only line pockets, so maybe a new colour scheme for the fed buildings to go with that to exteriorise the intent as a form of public compensation ?

Call_me_Al
Call_me_Al

"We see implications of climate change for the job that you’ve given us..."

Wait, who gave what job to whom, Mr. Powell?

ColoradoAccountant
ColoradoAccountant

By climate change do we mean a warmer planet? Me and the plants would love that. I am a bicycle and motorcycle rider but the streets are covered in snow right now.

Dodge Demon
Dodge Demon

10 degrees in Chicago right now. Enough to at least keep the Cali Kooks going to Austin.


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