It’s Wednesday and I’m on the road most of the time, so I don’t have much time for writing. Some of the issues are discussed below, including the problems that climate change poses for central banks, and recent research on what appears to be a causal link between initial Covid infections and a range of life-threatening illnesses. Then some music.
climate risk
Last week (24 August 2022), a senior RBA official gave an interesting speech – Climate change risks in the financial system – This is certainly appropriate, since about 33% of Pakistan is now underwater, where rivers are running wild, and not far from Europe, rivers are drying up and industries that depend on water have had to shut down.
Some key points:
1. “It is widely believed that there are great benefits to addressing climate change-related issues early. Delaying action will not only worsen climate change, but also have more severe impacts on social, economic and financial systems.”
The problem here is that while there may be “broad agreement” to act as quickly as possible, there should be no agreement on how quickly action should be implemented and the depth of change.
Companies have perfected the “green wash” narrative to make it look like they’re doing something.
Green groups talk about market-based solutions – trading schemes – but have no answer as to how not to get caught by big polluters who will go to poorer countries and impose stupid technological developments on small communities And damage the latter, while still polluting the “home”.
So far, politicians won’t make tough calls — like — to tell the coal industry that they have a maximum of 5 to 10 years to shut down, like — shut down petrol-engine cars in 5 years, like — introduce more Strict building codes and funding the difference between the two. Currently, allowable, energy-horrible homes, developers throw away everywhere (and in the process destroy local market gardens on the fringes of the city, etc.), making it illegal to sell meat products like… we can go on.
Deep action is needed now – one that will revolutionize the way we live.
Not many people are ready to do that.
So “broad agreement” is just the game we all play and it looks like we care and are dealing with that.
Achieving net zero emissions by 2050 is an example, a complete joke.
2. The presentation then focused on “what financial regulators are doing to create a framework that enables financial system actors to best manage climate change risks and opportunities to help transition to a more sustainable future.”
My position is that financial markets should be prevented from creating “green” derivatives.
I wrote in this blog post- Financial markets should stay away from climate crisis solutions (November 10, 2021).
If gamblers get involved and pursue speculative profits under the guise of tackling climate change, nothing good is going to happen.
3. The speech talked about “transition risks”, that is, “risks arising from changes in policies, technologies and people’s preferences brought about by climate change”.
Then we read that “transition risks will almost certainly involve changes in the structure of the economy” – which tells you how conservative central banks are on the topic.
The way I’d say it is that transformational risk definitely requires massive, irreversible and profound changes to what can be produced and consumed.
This is not an “almost certain” question.
Deep changes are required.
For example, if we were serious, Australia would have to stop exporting coal almost immediately.
The presentation provided a graph below, which exemplifies how few policies are available to address this issue.
4. An interesting aspect of the risk problem is the interaction between bank lending and home buying.
We know that most people need a large bank mortgage to buy a home.
Banks require borrowers to insure assets while their mortgages are outstanding.
In Australia, for example, insurers are increasingly denying coverage to homeowners in areas such as coastal fringes, river flooding or bushfire-prone areas.
This action effectively makes the existing housing stock a stranded asset, while also preventing first-time buyers from accessing credit.
This problem will worsen as sea levels rise and/or temperatures rise, and will exacerbate already bad wealth inequality.
The presentation has other interesting points to make, but I’m running out of time today (a lot of travel throughout the day takes up my time).
Those who try to deny the dangers of Covid
One of the things people learn when dealing with data (and the behavior that drives numbers) is not to jump too fast.
Because time-series dynamics are often complex, a robust, measurable approach to data movement is required.
So when those Barrington Manifesto figures started shouting how right they were, because humanity hasn’t been wiped out by Covid, I thought ok, let’s see.
First, they have no reason to declare victory. In general, the constraints of allowing time for a vaccine have spared us, and even then, the mortality rate is high.
There has never been a working idea that would allow us to achieve some kind of herd immunity against this virus. It was a crazy (early) idea that Boris Johnson et al pushed and quickly abandoned.
Second, as time goes on and more evidence emerges, we are also learning why it is wise to avoid the virus in the first place.
This week (29 August 2022) there is an interesting article in the Financial Times – Growing evidence that Covid-19 is making people sicker
Recent studies have shown that those who have endured the new coronavirus are more likely to develop other life-threatening illnesses later on — stroke, early dementia, brain shrinkage and many others.
The guess is this:
The coronavirus has left people vulnerable to a variety of other diseases, triggering an epidemiological aftershock that threatens a global health system already struggling with under-resourced and ageing populations.
Data from the United Kingdom and the United States suggest that “even some people who do not become seriously ill from Covid-19 have an increased risk of cardiovascular disease later on”.
And: “Researchers found that people who recovered from Covid had much higher rates of many diseases, such as heart failure and stroke, than uninfected similar people.”
Obviously, the time span of the dataset is still relatively short, so caution is required before we draw any definitive conclusions.
What we do know is that there is now “a higher disease burden in the population” and we are not sure if this is “due to increased susceptibility to severe disease following Covid” or the “long lingering, little-known effects” of the coronavirus sick”.
Either way, advocating for a system that does not seek to reduce infection rates in the wider population but only claims responsibility is to protect the elderly and already frail, which is essentially the line of the Barrington Declaration, is deeply irresponsible.
We already know that our workforce has been devastated by sick workers unable to work, and then, over time, many of them have continued to endure the debilitating illness and disability brought on by COVID-19.
Now our hospitals are filling these spin-off cases.
MMT update
Registration is now open for the next course in our edX MOOC – Modern Monetary Theory: Economics in the 21st Century.
The 4-week free course will start on September 14, 2022 and run until October 12, 2022.
There’s lots of video and written content to learn, some light-hearted game shows, things to do, research assignments, screenwriting opportunities, and interviews with many MMT folks.
More 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
Here’s what I’ve been listening to this morning at work.
Here’s a 1980 single – B-side – with Mighty Diamonds Zion’s Gate On side A.
Here we have the unparalleled rhythm section – sly dunbar (drums)—and— Robbie Shakespeare (Electric Bass) – Dub mix with A-side to Zion is dubbing.
Robbie Shakespeare passed away last December, bringing to an end the best drum and bass collaboration ever.
Together these guys defined the sound of reggae as Ska and Rock Steady gave way to a smoother reggae mode.
They were on reggae records by other artists and released many albums together.
They make the best sound.
Enough for today!
(c) Copyright 2022 William Mitchell. all rights reserved.
