Guest essay by Eric Worrall
What is the difference between a centrally planned Communist economy, and an economy where Central bankers punish businesses which defy their investment directives?
Global Warming Is a Central Bank Issue
Ferdinando Giugliano
13 April 2018, 3:30 PM
Last week, central bank governors from the U.K., France and the Netherlands met in Amsterdam to discuss how to adapt regulation to the risks posed by climate change. Together with five other institutions (from China, Germany, Mexico, Singapore and Sweden), these central banks have formed the “Network for Greening the Financial System” (NGFS). This group has two objectives: sharing and identifying best practices in the supervision of climate-related risks, and enhancing the role of the financial sector in mobilizing “green” financing.
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To do so, central bankers may need to extend the supervisory horizon beyond their usual time span. Climate change may only pose a threat for the balance sheet some years down the road, but these risks should be assessed now. Villeroy de Galhau argued in his speech that the financial sector should move towards “a compulsory transparency requirement,” so that companies are forced to provide a snapshot of their climate-related risks. It’s an idea supervisors around the world should embrace.
The idea that central banks should promote “green investment” — which the central bank group also endorses — is more problematic. For a start, the goal could conflict with the main central bank objective of preserving financial stability. For example, if a bank loan to a company which produces renewable energy is given a lower risk weight than now just because it is “green,” then supervisors would be giving banks the wrong incentive to load up on such assets. To his credit, Villeroy de Galhau said he would be against giving “green” assets a lower risk weight when establishing capital requirements — though it’s an idea which the European Commission is currently looking at.
But the French central banker said he would be in favor of giving higher risk weights to “brown assets,” which contribute to polluting the environment. He added that these could be included in the so-called “Pillar 2” requirements — which are set independently by supervisors. This plan would make “brown” assets dearer to hold in relative terms, but would not change the risk weight which is attached to “green” assets. The idea is that “brown” assets would become riskier as the world moves towards a low-carbon economy.
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Read more: https://www.bloombergquint.com/markets/2018/04/13/global-warming-is-a-central-bank-issue
The suggestion that insurers are vulnerable to climate risk is ridiculous, but don’t take my word for it – read Warren Buffett’s explanation.
… Over the years, inflation has caused a huge increase in the cost of repairing both the cars and the humans involved in accidents. But these increased costs have been promptly matched by increased premiums. So, paradoxically, the upward march in loss costs has made insurance companies far more valuable. If costs had remained unchanged, Berkshire would now own an auto insurer doing $600 million of business annually rather than one doing $23 billion.
Up to now, climate change has not produced more frequent nor more costly hurricanes nor other weather- related events covered by insurance. As a consequence, U.S. super-cat rates have fallen steadily in recent years, which is why we have backed away from that business. If super-cats become costlier and more frequent, the likely – though far from certain – effect on Berkshire’s insurance business would be to make it larger and more profitable.
As a citizen, you may understandably find climate change keeping you up nights. As a homeowner in a low-lying area, you may wish to consider moving. But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries. …
Read more: http://www.berkshirehathaway.com/letters/2015ltr.pdf
Climate change might make insurance more expensive, but climate change might also make weather insurance more necessary. Insurers recoup any losses by raising their premiums to match the risk.
Central bankers of all people should be aware of this simple insurance business reality. So how do we explain the apparent ignorance behind claims that insurance businesses will be badly affected by climate change?
One possible explanation might be that central bankers see climate change as a convenient excuse to seize greater control of the economies they are tasked with governing, though I guess it is also possible that bankers making the climate insurance claims are utter incompetents.
Mussolini described fascism as the combination of big government and big business.
Now, big banks can be added to the definition.
so that companies are forced to provide a snapshot of their climate-related risks.
It would be absolutely hilarious if they did. Dear Mr Banker, we’ve consulted the very latest science as published by the United Nations IPCC AR5 and it says that population, income, lifestyle, aging, technology, energy prices and other things will be much larger effects on our industry than climate change so we’re not particularly worried.
https://wattsupwiththat.com/2016/01/01/we-have-bigger-problems-than-climate-change-so-sayeth-ipcc-ar5/
How soon to AR15?
For any young’ins out there, remember this, the true “currency” of communism and fascism is not spent money but spent human lives. Free markets require humans to be alive; communism and fascism require fewer humans to make control easier.
This is merely how to put into practice something already decided. Carney the BoE governor chaired a BIS committee to decide how to instruct CBs and then commercial banks on the RoR and risk criteria for investments and expenditure. These were specifically related to impact EVERY decision , related or not to climate change.
Its now baked into the global financial system.
This is what this is all about, finding ways to reward global investments without risk. The risk is covered by the tax payers in each nation.
Unless there is an overthrow of the global financial system, its done.
Dear Eric, thanks for the information.
What I think what we are seeing is a kind of „Galileo“ effect. When Galileo presented his findings to the church astronomers, there where two main responses; the first was grouped around the notion, „looking through the telescope we see the moons circling Jupiter, but this cannot be trough because it conflicts with our belief that the earth is the center of the universe. Therefore we reject what we see“. The second group was centered around the rejection of looking through the telescope, because it was a devil‘s tool and therefore could not be believed in“.
The central bankers may know what Buffet observed but neglect it because of a conflicting believe „global warming is true, therefore conflicting evidence is missing something“.
The bankers involved are not stupid but BELIEVES trumps REALITY.
This is in my mind the greatest enemy we face today!
And thus while the skeptics have mostly proven their points about the falsity of CO2 human caused catastrophe, the Golden Rule (those with gold, rule) lives on and on. And the money just continues to be siphoned off to line the coffers of the usual Left groups. How many times have you read/heard that the CO2 alarmist theories are dead? This shows the power of propaganda on a scale most never have imagined. More profound than the Solar Cycles and the great Spots Debate.
The biggest financial risks for “brown” companies are regulation and exorbitant energy prices. For “green” companies the greatest risk is that the subsidies will go a away. These are politically driven risks. Are companies now going to have to disclose that Leftist governments will have a negative impact on their bottom line?
Good discussion.
A key factor that hasn’t been addressed is one of the major pillars of the #EXXONKNEW shakedown. The government has almost unlimited authority to impose truly bone-headed (Think DDT) industry-killing regulations based on it’s own “science.” The banks must evaluate the likelihood of CCS, or even reparation payouts to state governments for a proper risk analysis. Even the Supreme Court recognized its incompetence in reviewing questions of science, and did not kill the Clean Power Plan on sight.
It’s no wonder that Scott Pruitt is so hated by the statists!
What makes a company profitable is your percentage of profit, not the total volume of profit.
Yes, inflation has increased the total amount of profit your company is making. At the same time that same inflation is decreasing the value of the profit that you are making.
End result, no change.
Under communal-ism, government works to move private economic decisions into the sphere of government control via communal control like “people’s committees” composed of people chosen by the Party. The ownership of business and business assets is held in the name of the State or State “enterprises.”.
Under fascism, government works to move private economic decisions into the sphere of government via directives about business conduct from state bureaucracies.
In short, under communal-ism, the State owns the cow. The farmer lives at a worker’s cooperative, takes his meals at the cooperative, sleeps in his bed at the cooperative and carries out the directives of the cooperative about the cow. When he sells the cow, he only does so for a price that the state sets and the money goes back to the state.
Under fascism, the farmer owns the cow, the farm and the barn. But the state tells him when to sell the cow, where he should sell it and how much he is to be paid for it. Any unfair profits from the sale of the cow are heavily taxed. Any losses are the farmer’s to pay for out of his pocket.
Now all the above is enforced by men in suits who regularly visit the farmer and inform him of the wishes of the State. Should the farmer decline to follow their orders, they can send men with guns to arrest him.
When central bankers want to intrude into an area of the economy, they don’t need men with guns. They can just seize any money belonging to the farmer at whatever bank he must use. They don’t need men with guns because the bank is fully compliant with any order the central bank issues.
The economic historian Ludwig von Mises called both communal-ism and fascism forms of “interventionism”, where government seizes private economic decisions via rules, regulation, coercion and compulsion. The results are all the same: when the free market is destroyed, the real price of real components of the real dynamic economy can no longer be known by any participant. When prices cannot be known, it becomes impossible to know if any economic activity produces a profit or a loss. At that point, the economy as a whole becomes “unsustainable”, a concept that the left loves to scold the rest of us about.
This is how we get Venezuela, a country with more oil than Saudi Arabia, declining to the point that it cannot pay for imports of food nor medicine.
First they took the guy down the street. Next the guy at the end of the block. Now, they are knocking on my door! Nothing has changed. The same people are still with us. They ran the inquisitions, the Communist purges in in Russia, the NAZI propaganda machine, the Red Guard purges and, now, they are people pushing man-made climate change. Evil never goes away! Good people simply wait too long to stop them.
Citibank and Bank of America both have already announced they will decline to loan money to gun makers of “military style firearms for civilian use.”
If they did this on their own, then such stupidity is their right.
All they are doing is abandoning a profitable industry. Their competitors thank them.
Banks have always taken risks and probabilities into account when lending money. They will at the present day already be taking into account their perceived risks arising from climate change. What seems to be being asked for now is a change in in investment policies so as to steer investments into ‘green climate-change’ projects and away from projects perceived as non-green. I am not too concerned.
Some banks might even make this change of their own volition, but all of them? Never. For example, while Chinese banks might steer money into projects which reduce local air pollution I can’t see them using their clout to try and reverse politically perceived climate change. Nor will India, Africa or banks in many other parts of the world.
“What is the difference between a centrally planned Communist economy, and an economy where Central bankers punish businesses which defy their investment directives?”
Best lead-in ever!
Here’s what we do. We support President Trump and Congress in lifting the regulations on the small banks and Credit Unions, which the big banks incurred and then use to destroy competition. After all, it was not the small banks that caused the Crisis of 2008.
Genuine, competitive banking services owned by Americans and serving Americans is a possible relief, so customers can go about their business.
ref: “While the bill from Sen. Mike Crapo (R-Idaho) is focused on exempting dozens of banks from stricter federal oversight, it also rolls back restrictions on lending across the financial sector. The Senate is expected to vote on the bill within the next two weeks.
NAFCU President Dan Berger attended the meeting with a group of member CEOs. The group had been seeking a meeting with the president for months.
Berger said the 30-minute meeting was generally focused on “the landscape in terms of financial regulations.”
“He’ll be supportive of any relief that could be provided to us,” Berger said of Trump.
Berger also said Trump briefly mentioned that he’s weeding through potential nominees for Consumer Financial Protection Bureau director. He said a timeline wasn’t discussed.
CUNA President Jim Nussle said before the meeting that he and five member CEOs would tell “President Trump that the country’s credit unions support this bill because it gives them a fighting chance against big banks, unburdens them from regulations written for Wall Street.””
the hill com
BANK GUN CONTROL
Citigroup is setting restrictions on the sale of firearms by its business customers, making it the first Wall Street bank to take a stance in the divisive nationwide gun control debate.
The new policy, announced Thursday, prohibits the sale of firearms to customers who have not passed a background check or who are younger than 21. It also bars the sale of bump stocks and high-capacity magazines. It would apply to clients who offer credit cards backed by Citigroup or borrow money, use banking services or raise capital through the company.
The rules, which the company described as “common-sense measures,” echo similar restrictions established by some major retailers, like Walmart. But they also represent the boldest such move to emerge from the banking sector.
https://www.nytimes.com/2018/03/22/business/citigroup-gun-control-policy.html
The underground economy works well on a cash basis. Very profitable.
The background check rule has been in force for several rules. Fill out Form 4473, wait for the answer – it usually takes no more than a couple of days. If Citigroup doesn’t want my money in the form of exorbitantly high interest rates, that’s fine by me. And people who sell guns, such as shop owners, are always happy to take cash.
Someone mentioned cryptocurrencies. This is a burgeoning industry that banks can’t fight at all. I thought it was a joke but it is not. It may become the means of getting past companies like Citigroup and their control freak behavior.
Citibank isn’t the only bank either. If they want to pass up profit, there will always be someone else who won’t.
Every one of the things that Citibank has just “banned” are already illegal.
I have the solution if any are willing to listen!
To mitigate ANY loses due to global warming, Farm Greenland when it melts like Vikings did when it was warmer.
Citibank is attempting to usurp the unalienable rights guaranteed by the USA Constitution. Let your Congressional representatives know you want this stopped. Some representatives are already examining ways to remove government contracts from Citibank.
http://www.breitbart.com/big-government/2018/04/13/rep-todd-rokita-sends-letter-end-citibanks-contract-because-anti-gun-policies/
Comment sent at 12:28pm pacific time just ‘disappeared’ into the wordpress ethers….
Mine too at 12:24 EDT.
The underground economy works well on a cash basis.
Let your Congressional representatives know you want this stopped.
Bet dollars to doughnuts that one can find the hands of central ‘bankers’ in the demise of rural America.