It’s Wednesday and I have been on the road most of the day so have had less time to write. A few issues are discussed below, including the problem that climate change is presenting central banks with, recent research on how an initial Covid infection appears to be causally related to a range of life threatening maladies. And then some music.
Climate risk
There was an interesting Speech given by a senior Reserve Bank of Australia official last week (August 24, 2022) – Climate Change Risk in the Financial System – which is certainly apposite given that approximately 33 per cent of Pakistan is now under water and rivers are running wild there, while not far away in Europe, the rivers are drying up and industry that relies on the water are having to shut down.
Some of the key points:
1. “there is broad agreement … that there are strong benefits to addressing issues related to climate change sooner rather than later. Delaying action will not only make climate change worse, it will make the implications for society, the economy and the financial system more severe.”
The problem here is that while there might be ‘broad agreement’ to act sooner – there is no agreement on how quickly the action should be implemented and how deep the changes should be.
Corporations have perfected the ‘green washing’ narratives to make them look as they are doing something.
Green groups talk about market-based solutions – trading schemes – but have no answers for how that will not be captured by big polluters who will get ‘offsets’ by going to poorer nations and imposing stupid technological developments on small communities to the detriment of the latter, while still polluting back ‘home’.
Politicians will not, so far, make hard calls – like – telling the coal industry they have 5-10 years max to close, like – closing down petrol engine cars within 5 years, like – introducing tougher building codes and funding the difference between the current, allowed, energy-terrible houses that developers chuck up everywhere (and in the process destroy local market gardens on the edge of cities etc), like making it illegal to sell meat products, like … we could go on.
Deep action is required now – which will drastically alter the way we live.
Not too many are prepared to do that.
So the ‘broad agreement’ is just a game we all play to look like we care and are dealing with the problem.
Zero net emissions by 2050 is an example and a total joke.
2. The Speech then concentrated on “what financial regulators are doing to create the framework that best enables participants in the financial system to manage climate change risks and opportunities, thereby assisting with the transition to a more sustainable future.”
My position is that the financial markets should be prevented from creating ‘green’ derivative products.
I wrote about that in this blog post – The financial markets should be kept away from the climate crisis solution (November 10, 2021).
Nothing good will come if the gamblers get in on the act and pursue speculative profits under the cloak of doing something about climate change.
3. The Speech talked about “transition risk” which is the “risks resulting from changes to policies, technology and people’s preferences that are brought about by climate change.”
Then we read “Transition risk will almost certainly involve changes to the structure of the economy” – which tells you how conservative the central banking thought is on the topic.
The way I would express it is that transition risk will definitely require massive, irrevocable and deep changes to what can be producted and consumed.
It is not an ‘almost certainly’ matter.
Deep changes will be required.
For example, Australia would have to STOP exporting coal – almost immediately – if we were serious.
The Speech provides a graph as below, which exemplifies how little policy is moving to deal with the problem.
4. An interesting aspect of the risk problem is the interaction between bank lending and home purchases.
We know that most people require large bank mortgage loans to purchase a house.
Banks require the borrowers to insure the assets while the mortgage is outstanding.
Increasingly, in Australia, for example, insurers are refusing to provide coverage to home owners in areas such as the coastal fringe and in river flood areas or bushfire prone areas.
That action, effectively makes the existing housing stock a stranded asset and also prevents the first-home buyer from accessing the credit.
This problem will worsen as sea levels rise and/or temperatures rise and will worsen the wealth inequalities which are already bad.
The Speech has other interesting points to make but I have run out of time today (a lot of travel all day has taken my time).
Those who seek to deny the Covid danger
One of the things one learns when dealing with data (and the behaviour that drives the numbers) is not to jump to soon.
A steady, measured approach to data movements is required because the time series dynamics are usually complex.
So when those Barrington Declaration characters started crowing about how right they were because humanity hasn’t been wiped out by Covid, I thought well let’s wait and see.
First, there is no basis for them to declare victory. In general, we were saved the worst by the restrictions which gave time for the vaccines, and even then the death rates have been high.
There was never a valid idea that we would reach some sort of herd immunity to this virus. That was a mad (early) idea that the likes of Boris Johnson pushed and quickly abandoned.
Second, as time passes and more evidence emerges, we are also learning why it is wise to avoid getting the virus in the first place.
There was an interesting article in the Financial Times this week (August 29, 2022) – The growing evidence that Covid-19 is leaving people sicker
Recent research shows that those who have endured Covid are more likely to come down with other life threatening maladies later – strokes, early dementia, brain shrinkage and many other conditions.
The conjecture is that:
Covid generated a kind of epidemiological aftershock by leaving people susceptible to a huge range of other conditions, threatening global health systems already struggling with insufficient resources and ageing populations.
Data from the UK and the US suggests that “even some people who had not been seriously ill with Covid had an increased risk of cardiovascular problems” later.
And: “Researchers found that rates of many conditions, such as heart failure and stroke, were substantially higher in people who had recovered from Covid than in similar people who had not been infected.”
Clearly the datasets are still relatively short in time span, so caution is needed before we categorically conclude anything.
What we know is that there is “a higher burden of disease in the population” now and we are not sure whether it is “from the increased susceptibility to serious illness after Covid” or is due to “the lingering, little understood impact of long Covid”.
Either way, to advocate a system that did not seek to reduce the infection rates in the broader population and only claim the responsibility was to protect the elderly and already frail, which is essentially the Barrington Declaration line, was incredibly irresponsible.
We already know that our workforces have been devastated by sick workers not being able to work, and then, as time past, many of them continuing to endure debilitating illness from Covid and being rendered disabled.
Now our hospitals are filling up with these derivative disease cases.
MMTed update
Enrolments are now open for the next offering of our edX MOOC – Modern Monetary Theory: Economics for the 21st Century.
The free, 4-week course will begin on September 14, 2022 and run until October 12, 2022.
There is a lot of video and written content to study, a Game Show for some light entertainment, things to do, research tasks, script writing opportunities, and interviews with many MMT people.
Further Details:
https://www.newcastle.edu.au/study/online-learning/modern-monetary-theory-economics-for-the-21st-century
https://www.edx.org/course/modern-monetary-theory-economics-for-the-21st-century
Music – Sly and Robbie
This is what I have been listening to while working this morning.
This was from a 1980 single – the B-side nonetheless – with the Mighty Diamonds Gates of Zion on the A-side.
Here we have the inimitable rhythm section – Sly Dunbar (drums) – and – Robbie Shakespeare (electric bass) – with a dub mix of the A-side, which was released as Zion in Dub.
Robbie Shakespeare died last December, which ended the best drum-bass partnership around.
Together, these guys defined the reggae sound as Ska and Rock Steady gave way to the smoother patterns of reggae.
They are on stacks of reggae recordings of other artists and released many albums together.
They make the best sounds.
That is enough for today!
(c) Copyright 2022 William Mitchell. All Rights Reserved.
