The Green Swan: BIS Urges Climate Action to Prevent a new GFC

Guest essay by Eric Worrall

Banking globalists are piling on the pressure too try to wreck the coal industry and for governments to hand out lots of free cash, to save the planet from a climate problem which doesn’t exist. But something sinister might be happening behind the scenes.

The abstract of the report;

The green swan
Central banking and financial stability in the age of climate change

Patrick BOLTON – Morgan DESPRES – Luiz Awazu PEREIRA DA SILVA Frédéric SAMAMA – Romain SVARTZMAN
January 2020

Climate change poses new challenges to central banks, regulators and supervisors. This book reviews ways of addressing these new risks within central banks’ financial stability mandate. However, integrating climate-related risk analysis into financial stability monitoring is particularly challenging because of the radical uncertainty associated with a physical, social and economic phenomenon that is constantly changing and involves complex dynamics and chain reactions. Traditional backward-looking risk assessments and existing climate-economic models cannot anticipate accurately enough the form that climate-related risks will take. These include what we call “green swan” risks: potentially extremely financially disruptive events that could be behind the next systemic financial crisis. Central banks have a role to play in avoiding such an outcome, including by seeking to improve their understanding of climate- related risks through the development of forward-looking scenario-based analysis. But central banks alone cannot mitigate climate change. This complex collective action problem requires coordinating actions among many players including governments, the private sector, civil society and the international community. Central banks can therefore have an additional role to play in helping coordinate the measures to fight climate change. Those include climate mitigation policies such as carbon pricing, the integration of sustainability into financial practices and accounting frameworks, the search for appropriate policy mixes, and the development of new financial mechanisms at the international level. All these actions will be complex to coordinate and could have significant redistributive consequences that should be adequately handled, yet they are essential to preserve long-term financial (and price) stability in the age of climate change.

Read more:

From the report: a carbon tax is the best solution to save the world from a green global financial crisis;

Naturally, the first-best solution to address climate change and reduce greenhouse gas emissions is Pigovian carbon taxation. This policy suggests that fundamental responsibility for addressing issues related to climate change lies with governments. But such an ambitious new tax policy requires consensus- building and is difficult to implement. Nor can central banks resolve this complex collective action problem by themselves. An effective response requires raising stakeholders’ awareness and facilitating coordination among them. Central banks’ financial stability mandate can contribute to this and should guide their appropriate involvement. For instance, central banks can coordinate their own actions with a broad set of measures to be implemented by other players (governments, the private sector, civil society and the international community). This is urgent since climate-related risks continue to build, and negative outcomes such as what this book calls “green swan” events could materialise.

The attack on fossil fuel;

Limiting global warming to less than 1.5°C or 2°C requires keeping a large proportion of existing fossil fuel reserves in the ground (Matikainen (2018)). These are referred to as stranded assets. For instance, a study (McGlade and Elkins (2015)) found that in order to have at least a 50% chance of keeping global warming below 2°C, over 80% of current coal reserves, half of gas reserves and a third of oil reserves should remain unused from 2010 to 2050. As the risk related to stranded assets is not reflected in the value of the companies that extract, distribute and rely on these fossil fuels, these assets may suffer from unanticipated and sudden writedowns, devaluations or conversion to liabilities.

Offering an exit path to fossil fuel investors;

In the worst case scenario, central banks may have to confront a situation where they are called upon by their local constituencies to intervene as climate rescuers of last resort For example, a new financial crisis caused by green swan events severely affecting the financial health of the banking and insurance sectors could force central banks to intervene and buy a large set of carbon-intensive assets and/or assets stricken by physical impacts.

Given the severity of these risks, the uncertainty involved and the awareness of the interventions of central banks following the 2007–08 Great Financial Crisis, the sociopolitical pressure is already mounting to make central banks (perhaps again) the “only game in town” and to substitute for other if not all government interventions, this time to fight climate change. For instance, it has been suggested that central banks could engage in “green quantitative easing”10 in order to solve the complex socioeconomic problems related to a low-carbon transition.

Relying too much on central banks would be misguided for many reasons (Villeroy de Galhau (2019a), Weidmann (2019)). First, it may distort markets further and create disincentives: the instruments that central banks and supervisors have at their disposal cannot substitute for the many areas of interventions that are needed to transition to a global low-carbon economy.

I used to work for merchant bankers. I know some of their games.

In my opinion there is no evidence central bank interventions during the 2007-8 GFC reduced the pain for ordinary people.

Worse, plenty of senior people who worked in banking were in my opinion well aware that the interventions were not benefitting the general economy, but most of them kept their mouths shut because they wanted to keep their jobs. Without the cash injections, the people who knew what was really happening, people who had a lifetime of savings invested in the failed banks would have lost everything.

One of the few governments to resist urgent demands from banks to inject vast sums of free cash into the system was Iceland. Their experience is instructive.

Gudrun Johnsen: The reckoning 

Gudrun Johnsen was on the special commission set up to learn lessons from Iceland’s banking collapse. 

“The banks were 10 times the GDP of Iceland; 20 times the state budget. They were too big to bail out.

“The stock market collapsed: 80% of the stock market was wiped out overnight. Shareholders were badly hurt. About every other business in Iceland became technically bankrupt. 

“97% of the banking sector collapsed in a matter of three days, and I hope I will not witness this anywhere in the world again.

“People felt very let down. They were very angry and took to the streets. Two or three per cent of the entire nation gathered in front of parliament demanding answers.

“The government demanded that the banks decrease the debt of households [owing more than the value of their house], and that people would not be driven into bankruptcy.

“The government also set up a special agency where people in big financial trouble could apply for debt forgiveness. 

“Parliament had to respond to the outcry and set up a Special Investigation Commission, equipped with enormous data privileges so it could reveal the truth behind the collapse. 

“It found the assets of the banks and the loans had been extended into a cobweb: firm A owns firm B, which owns firm C and, sometimes firm C owns firm A. There was virtually very little or no equity in those businesses. The operations are entirely dependent on credit from the banks. 

“What also came to light was that those who owned these pyramids of corporations were in the ownership of the largest shareholders of the banks themselves. That was very worrisome – we had a financial system that was really opaque. The bankers didn’t really know how much equity there was to be matched against the loans they were extending. 

“If you don’t know exactly what happened, you don’t know what type of behaviour you need to correct, and cultural change is really difficult. There was a benefit in the entire system going down. We know what failed and as a consequence we were able to clean house pretty quickly.”

Read more:

Iceland’s politicians let their failed banks fall, and investigated and prosecuted the criminals whose recklessness and fraud allowed it to happen. The courage of Iceland’s politicians was rewarded with a comparatively rapid financial recovery – the Icelandic government allowed their banking system to self correct and purge itself of failure.

What about the coal industry? Even if the general economy doesn’t need a bailout, maybe coal investors and coal workers need some kind of special treatment? Not so much.

Thermal coal prices set for recovery this year as oversupply tightens

in  Commodity News 21/01/2020

Thermal coal prices are expected to recover this year after losing around a third of their value last year as demand from some south-east Asian countries grows and oversupply tightens due to financing constraints for new capacity.

Investors widely anticipate the slow demise of coal use due to policies encouraging cleaner natural gas and renewable energy generation, as well as public pressure on companies to fight climate change and increasing divestment from coal assets.

However, the shorter-term outlook is for a resurgence in prices as oversupply is reduced.

“As 2020 gets under way there are signs that the support that international coal prices found at the tail end of last year could just be a foretaste of a market recovery in the year ahead,” said Guillaume Perret at consultancy Perret Associates.

“Although demand looks set to remain largely subdued, tightening supply, especially in the Atlantic market, could boost prices after their heavy fall in 2019,” he added.

Scant investment in the industry, difficulties securing finance and cost-cutting measures means stocks are depleting quickly which will reduce oversupply.

Read more:

If the Hellenic Shipping News report is correct, parachuting money into the coal industry right now would do more harm than good. In 2019, there was an oversupply of coal. The industry responded to market signals by cutting back on investment and shuttering less efficient, higher cost mines, cutting supply. As inventories run down, pressure will build for a price recovery. Capitalism 101.

Given the dubious and likely nonexistent benefits of bailouts to the global economy, why this sudden globalist push for a new round of green free money giveaways?

I no longer work in the banking sector, so I am not as in touch as I once was with what is really happening in the world of finance. But my personal, very speculative view is that hidden in the banking system is a dangerous asset bubble or series of bubbles, of similar, or perhaps even greater magnitude than the subprime bubble which triggered the 2007-8 GFC.

How do bankers convince the long suffering public to save their necks with yet another colossal bailout? By calling it a climate crisis of course. If the next banking crisis was caused by global warming, then it is not the fault of the world’s bankers.

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Greg Cavanagh
January 20, 2020 6:19 pm

Lots of coulds, that’s all I read. We could do this, they could do that, and Earth could explode.

Seriously, anybody without a brain cell could write an article like this, positing scenarios that “could” happen.

Michael Moran
Reply to  Greg Cavanagh
January 21, 2020 11:53 am

While a bit cloudy in the article, Iceland changed its deposit insurance so bank depositors lost money. Let’s remember with Iceland most of the depositors who lost money were Brits and Dutch. With every other country the local citizens were the depositors. So the situation was a bit different. And Iceland did in fact “bail out” its local citizens, as the deposit insurance remained in effect for locals. While there are many complaints about the bank bail outs in the US, the US made money on all the bail outs except the autos. And the amount lost by the taxpayer on the auto bail outs was almost exactly the value of the post bankruptcy stock the unions got.

January 20, 2020 6:22 pm

Iceland’s experience is indeed interesting. They sent people to jail. link

Reply to  commieBob
January 20, 2020 6:54 pm

thanks for that…good read

Reply to  commieBob
January 20, 2020 8:23 pm

The normal response of western governments to a crisis is to penalise the prudent by using their assets to reward the reckless. Iceland let the reckless go to the wall as deserved – and it worked. I am not at all surprised that it worked. What is surprising is that they had the guts to do it. If there is a “new normal” as so many try to claim, then it is gutlessness.

Reply to  Mike Jonas
January 20, 2020 9:01 pm

… expressed as corruption.

Lawrence Ayres
Reply to  Mike Jonas
January 22, 2020 3:39 pm

A great response. As with Obama’s Quantitative Easing the people who lose are the savers and investors and the people who gained were the spendthrifts and borrowers. I have serious doubts when it is the very rich leading the Global Warming scam. No matter how hard the corrective action on the average Joe they will not feel any pain and stand to make even more money. The subsidies paid to windfarm and solar operators is a case in point; they reap huge profits while consumers and manufacturers struggle to pay for electricity. The net benefit to the environment is usually negative.

January 20, 2020 6:46 pm

Radio talk host Jerry Doyle had a simple solution when the Bush, Senate bail out was formulated during the 2008 election, buy down all loans to 2 or 3 % interest, thus reducing ALL housing mortgage loan payments to a level that almost everyone, even those with 0% down payement or NO INCOME VERIFICATION loans could afford. It would have cost about 1/3 of the eventual bailout and would have sustained the economy and infused the rotten banks with cash to cover the truly failed loans.

Instead the government gave the banks the money essentially with no strings attached, and the collapse occured. With the election of Obama, the democrats were able to keep the economy from recovering for 8 solid years. It took TRUMP! to get the economy going again. The central bank attempted to put a stop to growth by raising rates 4 times in 1 year. Luckly TRUMP! scared them into stopping the madness, and the economy is again expanding through growth in output, not just through inflation and population growth.

TRUMP! 2020! If any Democrat wins, which I am scared to death might happen given the power of Google and Facebook to manipulate the week minded, the freeze that the economy will feel will result in massive house and senate losses in the 2022 mid term for dems and a crushing defeat in 2024 for the Democrat president when TRUMP! takes back the white house.

Nicholas McGinley
Reply to  Drake
January 20, 2020 7:39 pm

Why should taxpayers buy loans for people with homes that are underwater?
People with no documentation of income?
With unknown layers of debt?
Multiple mortgages on overpriced houses and a job changing tires or pounding nails?
With jobs that no longer exist?
How would relieving the banks and savings and loans of their stupid loans by buying them from them, have prevented the collapse of housing prices?
When an asset bubble exists, it will burst eventually.
It was bursting.
The bailouts were intending to prevent a run on the banks and restore some measure of confidence in the banking system.
Nothing was going to keep people in homes they could not afford, and had never had any way to even pay the mortgages besides for second mortgages and instaflipping at an inflated price…a price which had lept upwards in matter of months.
There was nothing that would have prevented financial disaster.
The only question was whether to do something or do nothing to keep financial institutions from going belly up.
And it had to be done by the geniuses that the people had elected to sit in congress and the White House, and those who had been appointed by them to run the various agencies.
It had to be done fast and it had to be done with bad information and no benefit of hindsight, let alone a clear understanding of exactly what was occurring, or why, or how bad it might get depending on what was or was not done.
And why the hell should the general taxpaying public jump in on the side of people who had foolishly invested in an asset bubble?
People who had knowingly taken out loans they could no afford, or done so by lying on loan documents?

In any case, it is water long since over the dam or under the bridge.
The interesting and relevant question for the present is, what does the future hold?
Are there currently asset bubbles which exist or are forming?
Knowing about an asset bubble ahead of the time it bursts is among the the best money making opportunities one can happen upon.
Consider what is going on with what is known as ESG.
There are money managers and corporate leaders who are insisting that all investment dollars and corporate planning must be done from the perspective of taking account of (translation: Taking advantage of) climate change, the climate crisis, the NGD, sustainability, FF divestment, etc.

So the question becomes…if one knows this is all based on a giant steaming pile of BS, how to make sure one does not get burned or bankrupted by such shenanigans and jackassery?
Indeed, how might one be positioned to take advantage of bad decision making by people with their heads jammed tightly up their behinds?
To know this, one must know such things as…are these people true believers, or rent seeking opportunist swamp dwellers and cronyist pork barrel slop swillers?
IOW…are they deluded fools or people looking to cash in on the delusions of others?

This guy is apparently no dummy…he is the CEO of Microsoft, and has engineered that companies comeback from investment no-man’s land to once again make MSFT for a time the most valuable company in the US, at a current market capitalization of over $1.2 trillion.

Reply to  Nicholas McGinley
January 21, 2020 5:51 am

“Why should taxpayers buy loans for people with homes that are underwater?”

Well when you print the helicopter money to begin with to fuel such bubbles I guess you feel responsible for trying to ameliorate the fallout when the inevitable bust occurs. Show me the bubble that wasn’t facilitated by money printing of one kind or another in the first place and I’ll show you no dramatic bust. These lefty taxeaters have long ago worked out if you run out of other people’s money just print some more and there’ll be plenty of snouts in the trough to help out rather than having to save and invest real hard earned to get ahead.

William Astley
Reply to  observa
January 21, 2020 1:43 pm

Greta gets traction with..

…an end of the world prediction that is 100% incorrect.

and the declaration of a ‘climate emergency’ which means force every country to spend trillions and trillions of dollars on green stuff that does not work, shutdown the hydrocarbon industry, and create a world government to handle taxes and distribution of all the money.

….because we are living in good financial times and we believe good financial times will continue.

Bubbles always burst. The big question is when and how this special all in bubble will end.

It is a fact that all developed and developing countries, most companies, and many individuals have copied the US, China, and the EU, borrowing more and more of that low interest money.

There is talk this super bubble will end with a major drop in the stock market and a run on investment banks.

Reply to  Drake
January 21, 2020 12:28 am

‘week minded’ ?
Would that be brainless goofs who can’t remember more than week in the past, or think more than a week ahead?

Johann Wundersamer
Reply to  Drake
February 2, 2020 10:18 pm

During the 1990s, the MSM kept hammering about deregulation and every street newspaper stand was doing stock market bets via Internet.

Juveniles did internet broking instead of going to school. parents were losers because they went to work and their sons made 10fold money from the kinderzimmer via Internet.

Fathers murdered their sleeping families out of shame when they lost everything on electronic market bets.

No one today can really re-imagine the mood of the 1990s.

So 2008 was unavoidable.

The MSM never apologised for their rouse. 2010 they were up and on it louder than bevor.

January 20, 2020 6:55 pm

“Climate change poses new challenges to central banks, regulators and supervisors”

Statistics, for example.

Alan the Brit
Reply to  Chaamjamal
January 21, 2020 2:57 am

Is that coded English for, “We need to make sure we still control, manipulate, & screw the system to maintain our obscence profit levels, backed up by squillions of taxpayers’ dosh when we balls it all up just like last time because we were so greedy, & we still get our “performance” bonuses regardless of how well we performed!”?

Reply to  Alan the Brit
January 21, 2020 4:06 am

and this is all tied into the davod un imf crud.
imagine the power and control the banksters would gain when the agw sca, falls over and THEY controlled coal for power for everyone..
it pretty scary stuff

January 20, 2020 7:04 pm

Everything wasn’t bad under Obama and everything is not great under Trump. That said, Trump’s policies generally favor free enterprise and freedom in general, while Obama’s socialist policies were all about government control. Still, there will be a debt reckoning some day.

Nicholas McGinley
Reply to  Scissor
January 20, 2020 7:43 pm

People have been sounding that trumpet since I was a teenager in the 1970s…and probably a lot longer than that.
The solution to debt is growth.
Putting a lid on spending would likewise shrink the significance of the debt over time.
But no one gets elected in the US with promises of austerity and financial responsibility.

Reply to  Nicholas McGinley
January 20, 2020 8:24 pm

“The solution to debt is growth “?? Really? When every uptick in growth is accompanied hand in hand by further rise in debt? You are either witlessly blind, or worse, wilfully.
The only practical solution to debt is self control in spending and discipline in repaying. But those are truths unpalatable to our self indulgent discomfort adverse society.

Nicholas McGinley
Reply to  Richard
January 21, 2020 1:52 am

“When every uptick in growth is accompanied hand in hand by further rise in debt? You are either witlessly blind, or worse, wilfully.”
Get a grip there, Ace!
Who said any increase in economic growth is necessarily accompanied by an increase in spending?
I did not say that.
You said it, in the form of a question yet.
One might wonder or ask what the heck you are talking about.
Besides for that, you said controlling spending is a solution, but I said it first.
Only you said controlling spending and making repayments is the only practical solution.
How is it practical?
I would be willing to settle for an answer that only describes how it is even vaguely possible to reduce spending and actual repay (buy back?) the debt?
Let us hear some numbers, or admit you are just making crap up.
I really do not appreciate being addressed in such language, Dick!
One might suggest that it is, in fact, you being the witless wunderkind here…or worse yet, willfully and woefully misinformed.
Or one might suppose you are a deliberate purveyor of disinformation.
There are lots of ways to determine the level of debt, but the metric most economists agree is the most important is the debt to GDP ratio.
A look at a couple of charts makes it obvious why this is the case.
For one thing, if we look at a graph of national debt which is not adjusted for inflation, we get one chart…a chart of the actual dollar amounts of the national debt as it was reported at the time.
But most graphs of the national debt are in what is called constant dollars, meaning they have been adjusted for inflation and are NOT a graph of what the actual debt amount was in the past years.
And a look at the level of debt that takes into account the total size of the economy looks different than either of those first two graphs.
Six hundred dollars in debt means something different for a single parent who earns $600/week, and is a far different matter, than the same 600 dollars for a doctor who makes $250,000 a year(~$4800/week).

Not adjusting for inflation, the national debt has not decreased appreciably since the year immediately following WWII:

After adjusting for inflation, the amount of the debt, when graphed, looks completely different…huge spike during WWII followed by a flat pattern for many years until about 1980 or so, then rising to the present except for a few years in the 1990s when it decreased slightly:

comment image

And looked at as a percentage of GDP, the graph looks completely different, dropping sharply after WWII until the 1980s.
Inflation and a growing economy have a large effect on the significance of a given dollar amount of debt.
And the debt has not shrunk in actual dollar amount since prior to WWII, except for the four years of so from 1996 to 2000 or so.

During those years the amount of the debt shrunk back to where it was in about 1992.
But those were also years of rapid economic growth, and rapidly increasing federal tax revenue due to the stock market going up sharply, coupled with a decrease in capital gains taxes, as well as other changes to the tax code.

So you are factually and demonstrably wrong, as a matter of logic and as a matter of historical fact.
Growth is not automatically “accompanied hand in hand by a further rise in debt”.
Where on Earth did you get that idea?
What were you taking when you hallucinated that this was the case?

During the late 1990s rapid growth was coupled with spending freezes, but there was never any actual year over year decrease in actual dollar level of spending of any significance:

comment image

And yet the amount of the debt shrank, if only slightly and only briefly.
In the years from about 1950 to 1978 or so, the dollar amount of the national debt did not decrease, it increased, but in inflation adjusted dollars it was basically flat, and as a percent of GDP it was shrinking dramatically.
For a few years in the late 1970s and early 1980s the debt shrank, after adjusting for inflation, although it never did in actual dollars…it was growing rapidly in those years. But inflation was very high, so in constant dollars the debt was shrinking.

Debt as a percentage of GDP:

And the same data back to 1790:

comment image

Try not to be so nasty.
I have no desire to communicate with anyone who behaves like you do, except for the reason of pointing out that you actually have no idea what the hell you are talking about…and I do know exactly what I am talking about.
Being a jackass is easy.
Knowing the facts takes caring what the facts are and doing a little homework.
But there is no excuse anymore for such ignorance and uninformed blathering…this is the frickin’ internet, and all the info in the world is available with a few clicks of a finger.

People that speak in absolutes while also being a gigantic assclown are easy to ignore…especially when they say things that are factually inaccurate, logically challenged, or just plain wrong.
Public debt exists primarily in the form of bonds which have been issued, typically with various periods of maturity.
Such debt is rarely paid down…it is more commonly retired as the bonds mature and are not reissued.
Ronald Reagan made a campaign issue out of the national debt in 1980, and won the White House that year in part because he made it seem like it was getting really bad…it was rapidly approaching 1 trillion dollars for the first time in history.
But as a percentage of GDP the debt was lower in 1980 than it had been at any time since the Great Depression, after reaching a peak in the year after WWI, and falling through the Roaring ’20s, before rising again after the stock market crash of 1929.

Economic growth is what can change the most easily and painlessly.
Economic growth increases the size of the pie, and can do so rapidly.
From 1980 to 2002 the economy of the US approximately quadrupled in size, from 2.8 to nearly 11 trillion dollars.

Samuel C Cogar
Reply to  Nicholas McGinley
January 21, 2020 9:04 am

Nicholas McGinley – January 21, 2020 at 1:52 am

I would be willing to settle for an answer that only describes how it is even vaguely possible to reduce spending and actual repay (buy back?) the debt?

It’s a SIMPLE “income verses revenue” trick, …… McGinley.

Just quit spending part of your income on cigarettes, beer and sex ……. and spend it repaying your car loan.

Nicholas Mc, since you are “on-a-roll”, ….. tell us about Social Security Trust Fund going broke.

John Endicott
Reply to  Nicholas McGinley
January 21, 2020 10:37 am

Samuel, since when has government/the political class been disciplined enough to “quit spending part of your income on cigarettes, beer and sex” when they consider an *increase* in spending that turned out to be smaller than initially expected as a “spending cut”.

Nicholas McGinley
Reply to  Nicholas McGinley
January 21, 2020 10:56 am

I suppose we could just zero out the trillion dollars a year the federal government spends on beer and cigarettes.
Oh, wait…

Samuel C Cogar
Reply to  Nicholas McGinley
January 22, 2020 4:33 am

McGinley, ….. you sure don’t know very much about the “actions” of the DC Swamp, …. do ya?

Apparently you must think all that “impeachment crapolla” that has been festering for the past 4 years isn’t costing any taxpayer money.

Just the money charged to “expense accounts” could pay for a couple new “sewer systems” or “potable water” projects,

Nicholas McGinley
Reply to  Nicholas McGinley
January 23, 2020 6:01 am

Is there some hidden “logic” to which words and “phrases” you put in scare “quotes”?
Or is it just random and meaningless, like “everything” else you say?
What have I said that makes my thoughts or knowledge of the swamp or impeachment issues “apparent”?
Apparently you just hallucinate that you are some sort of Kreskin like psychic and know what other people think or know regarding issues that they have not even spoken about…and you can do it via the internet!
Congrats to you.
The next logical step would be to get even one single thing even remotely correct.
Then you will really be on a tear…although I expect you will still be just as much of a boring jerk.
I do not know you, but I am pretty sure there is something wrong with you.
Do not bother to explain why phrases like “expense accounts”, “sewer systems”, or “potable water”, let alone “on a roll” are in quotes, given that these particular phrases have not been mentioned and where in no way part of the discussion. Do not bother, because no one cares. No one cares where you dream up your nonsense, or why.
I know exactly why you make pointless comments aimed at me, even if no one else does…it is because you are a bitter fool given to spouting off nonsensically, and who then gets all offended when someone contradicts you with facts, at which point you deal with your emotions and embarrassment by carrying on some sort of childlike grudge.
The things you say might warry some scintilla of weight if you could offer even some tiny level of support for your assertions, or try to keep them relevant to something someone actually…you know…said.
Stop being a horses ass Samuel.
It is tiresome.

John Endicott
Reply to  Richard
January 21, 2020 10:15 am

It actually requires both sides of the equation to work together. Basically you have 4 possibilities:
1) income grows/increases while spending does not (it either stays steady or it deceases)
result: debt increases slow down and eventually become debt decreases.

2) income grows/increases and spending rises by the same amount or more.
result: debt continues to steadily grow

3) income does not grow (it stays the same or drops) while spending stays same or increase
result: debt continues to steadily grow

4) income does not grow (it stays the same or drops) while spending drops more than income does
result: debt increases slow down and eventually become debt decreases.

Only 1 & 4 have a hope of decreasing the debt (and 4 is unlikely to happen as government spending rarely ever shrinks). So yes, growth (option 1) is the solutions to debt so long as spending isn’t increasing to match – otherwise you are in option 2 territory.

Reply to  Nicholas McGinley
January 20, 2020 8:33 pm

You’re right, but that’s why a dollar of today is really only worth a few cents of a hundred of years ago, for commodities and many goods at least. Of course, one can purchase a smart phone today that could not be had for any price a hundred years ago or vaccines or antibiotics that can prevent and cure diseases.

Perhaps the debt reckoning is a slow wreck from which most people can get out of its way.

Nicholas McGinley
Reply to  Scissor
January 20, 2020 11:44 pm

One can also go to work serving coffee in Seattle and get $15 an hour starting salary, which was not possible when you could buy dinner for a nickel.
It was not obvious to many people who grew up in the inflation addled days of the 1970s and 1980s, but deflation is no picnic either. Deflation is what happens during periods such as The Great Depression or The Great Recession, when our assets become worth less and less, and cannot even be sold for what we paid for them, jobs become scarce at a wage which will meet expenses, etc.

I used to worry as much as anyone about the deficit and the debt.
But consider the analogy to a person with a 30 year home mortgage.
If that person has a $200,000 mortgage at 3.5%, and a monthly payment of around $1000, then a lot of the monthly payment will be for interest, and that will be the case for year after year.
Suppose one has $200,000 in liquid assets, such as stocks, bonds, 401 k plan mutual funds and ETFs, etc…would it be a better idea to sell those assets and pay off the mortgage?
Over many decades, the annualized rate of return on a balanced portfolio of stocks, such as at S&P 500 index fund, has been 8% or so. And in recent decades it has been higher than that in most year.
So the net effect of disposing of the debt would be to forgo all of the years of 8% annual growth of wealth on the 200k, plus the effects of compounding on the accumulating portfolio, for the purpose of avoiding paying an interest rate of less than half of that 8%.
Another way to look at it is, between now and 30 years from now, the money that is used to pay off that loan will become easier and easier to earn, as wages and such other sources of income as stock dividends and social security payments increase due to inflation.

Perhaps a more straightforward way to look at it is…there is no realistic way to pay off the national debt. It stands at over $20 trillion dollars. The US federal government has about $3.6 trillion in annual tax revenues from all sources, and a budget proposal for 2020 is pending which will be over $4.7 trillion is passed as is.
Of that 4.7 trillion, 2.84 trillion is mandatory obligations such as Social Security, Medicare, and Medicaid.
Interest of the national debt will be about 0.48 trillion.
And discretionary spending…the part which can be cut to nothing without cheating anyone out of what they are “owed” (scare quotes for numerous reasons) is about $1.42 trillion.
More than half of that is for the military.
Every year we have to build and maintain all of our planes, build and maintain ships, build and maintain out arsenals of various weapons…and pay a bunch of people.
Excluding the military budget and Veterans Affairs, there is about $500 billion in discretionary spending…for everything else.
Health and Human service, Education, Homeland Security, Housing and Urban Development, Dept of State and International spending, Departments of Energy, Justice, Transportation, Agriculture, Treasury, Interior , Commerce, and the Labor.
Those are in descending order of the amounts of their budgets…from $90 billion down to $11 billion.
Where would money to pay down the debt come from?
What would attempting to extract it, from the people that have the money to take, do to the economy?
Very little of the large concentrations of wealth exist in the form of piles of money or gold.
It is in real estate, stocks of large corporations, etc.
Any attempt to sell some large percentage of such assets to raise money would cause the value of them to crash…to an extent no one can really specify for certain.
But what would happen to the share price of Amazon if Jeff Bezos started to sell all of his shares? To Microsoft or Berkshire Hathaway of Bill Gates or Warren Buffet did so?
I have wondered if Elizabeth Warren has considered this before she called for a wealth tax of over 5% on such people?

In any case, no one has ever articulated a plan for actually paying down the debt. Most calls for shrinking it do so by freezing spending or reducing spending at some small rate for some number of years, across the board.
The problem of course is that every single dollar of the federal budget has a constituency…someone on the receiving end of each and every one of those dollars…and every one of those people screams bloody murder at any serious talk or suggestion of cutting those spending dollars.
Recall what happened in 2017 when Trump called for freezing or even eliminating some redundant federal programs?
Trump called for shrinking the budget for the Dept of Health and Human services by some 17% back in march of 2017. The hue and cry was immediate and thunderous…that Trump was trying to starve senior citizens who relied on Meals On Wheels for part of their food consumption. Because some small part of that agencies funding goes to support some of the many agencies around the country that run those Meals on Wheels programs.
It did not matter that Trump never said one word about cutting Meals on Wheels.
Repeat that same scenario for every dollar in the budget, and also keep in mind that in the bizarre world of Waskington D.C. speak, merely suggesting that future increases in any spending be curtailed is the same thing as calling for a cut in spending.
Reducing the rate of expected future increases is translated, in budget lingo, into a de facto budget cut!

Besides for all of that…the question few ever consider is…who does the government owe all that money to?
Who are the holders of public debt?
From the way the issue is typically bandied about in media and such, one might think that the Chinese are the holders of most US national debt…but this is not the case.
Americans citizens and our institutions hold the vast majority of it, through pension funds, direct holding of bonds, the Federal Reserve bank holdings, etc.
26% of the $23 trillion national debt is held by other US governmental institutions…one federal agency owes it to another !
How many times have you heard anyone point that out?

The remaining 74%, some $17.1 trillion as of last September…the most recent time that data is available for…is what is held by the public.
Of this public debt, ~29% is held by foreign governments. Individuals, banks and investors hold 17%. The Federal Reserve holds 11%
Mutual funds hold 9%.
State and local governments own 5% of it.
The rest is held by pension funds, insurance companies, and savings bonds.

Five countries, Switzerland, Luxembourg, Ireland, Brazil, and the UK, between them hold about 1/5 of all foreign held debt, about $1.41 trillion.
China holds about $1.1 trillion.
And Japan holds the most…some $1.17 trillion.

Someone once said words to the effect that when you owe someone a million dollars, they own you.
But when you owe them a billion, you own them.
Some countries hold a lot of our paper.
If we ever defaulted…what could they do?
Come and take Iowa back to their country?
Maybe we would get lucky…they would come and take NYC and Washington DC.

If anyone wants a source for these figures, just ask. It is all readily available public info.

John Endicott
Reply to  Nicholas McGinley
January 21, 2020 9:46 am

And if we’re really, really, really lucky they’ll take Commiefornia.

Nicholas McGinley
Reply to  Nicholas McGinley
January 21, 2020 2:09 pm

We could toss in Oregon and Washington State iffen they promise to hurry…

January 20, 2020 7:11 pm

Average global temperature trend is up because the water vapor trend is still up. CO2 just tags along.

January 20, 2020 7:11 pm

This is improper usage of the English language “… potentially extremely financially disruptive events …”.

Reply to  goldminor
January 20, 2020 11:44 pm


we don’t really know what will unfold but what the scientists are saying about the science of climate science is that it’s going to be bad, really really bad, and I mean BAD! That’s the science of it anyway.

January 20, 2020 7:28 pm

Well, the Pigovian Tax idea is nothing new for “Tragedies Of The Commons” … but it seems to me central banks have come up with a fine “cure” for their INSOLVENCY, not hypothetical Man-Caused Climate Change.

Heyyyyy … wait a second …

January 20, 2020 7:48 pm

They’re big on climate change in Canberra right now-
Now wipe that smile off your faces deplorables.

Reply to  observa
January 20, 2020 8:11 pm

Quote of the year-

“In the short-term, I hope they can put up a bit of a tarp or something”

Tom Abbott
January 20, 2020 7:48 pm

From the article, with an addition: [The Delusion of Human-Caused] Climate change poses new challenges to central banks, regulators and supervisors.”

Yes, I bet those delusions are very troubling. Delusions usually are.

Intensive WUWT Therapy is recommended.

John F. Hultquist
January 20, 2020 8:16 pm

My guess is there will be a financial crisis long before there is a green swan climate disruption. “High probability”, as they say.

Reply to  John F. Hultquist
January 20, 2020 9:46 pm

Hopefully, this time they FAIL.

Tom Abbott
January 20, 2020 8:34 pm

From the article: “Naturally, the first-best solution to address climate change and reduce greenhouse gas emissions is Pigovian carbon taxation. This policy suggests that fundamental responsibility for addressing issues related to climate change lies with governments. But such an ambitious new tax policy requires consensus- building and is difficult to implement.”

Impossible to implement, I would say.

The Carbon Dioxide Tax might fly with a few wacky socialist nations but the rest are not going to agree to increased taxes on an international scale.

January 20, 2020 8:41 pm

Interesting, people in glass houses shouldn’t be hailed on or something.

January 20, 2020 8:42 pm

Worse crisis- Nature yesterday destroyed years of CSIRO’s Greenhouse research. Let’s hope their models are safe

Reply to  JaneHM
January 21, 2020 4:12 am

typical abc slant too
not lost but sure slowed some up ie growing plants the dud interviewed said as much and other experiments have seed saved and can be rebooted when the roofs fixed
stuffed if I can see why they use normal glass and not a tougher alternative or a perspex that is lighter toughr and wouldnt be as dangerous as glass shards even if it did shatter

Reply to  JaneHM
January 21, 2020 4:16 am

Now, that’s funny!

January 20, 2020 8:50 pm

” … However, integrating climate-related risk analysis into financial stability monitoring is particularly challenging because of the radical uncertainty associated with a physical, social and economic phenomenon that is constantly changing and involves complex dynamics and chain reactions. … ”

What a pile of ostentatious hyperbolic blah-blah – with side-salad and plate-o’-chips! It reads like some dreary mindless twaddle written by a dweeb in his mum’s basement after ingesting way too many Chocolate-Eclairs again.

Reply to  WXcycles
January 20, 2020 9:15 pm

Actually all financial risk analysis is ‘radical uncertainty’. Too many times financial quants have made the mistake of thinking that if they mathematically add a risk term to their equation then risk is manageable. It’s not, it’s still radical uncertainty.

January 20, 2020 8:58 pm

” … Investors widely anticipate the slow demise of coal use due to policies encouraging cleaner natural gas and renewable energy generation, as well as public pressure on companies to fight climate change and increasing divestment from coal assets. …”

If I was these investors I’d want to hear contrary-views not confirmation-bias fodder from untrustworthy bankers.

Reply to  WXcycles
January 20, 2020 9:48 pm

It’d be nice if big guvmint stopped printing money for them and made them make their investments work for once or they lose their butts.

January 20, 2020 9:43 pm

“Banking globalists are piling on the pressure too try to wreck the coal industry and for governments to hand out lots of free cash, …”

Those evil Communists are at it again!

Joel O’Bryan
January 21, 2020 12:21 am

The dumbest sentence ever written is found in this article: “Central banks can therefore have an additional role to play in helping coordinate the measures to fight climate change.”

It takes a Liberally-trained, weak mind to believe that.

shortus cynicus
Reply to  Joel O’Bryan
January 21, 2020 4:21 am

What about Pentagon? They can bomb “climate change” into stone age! Turn it into glass!

January 21, 2020 4:26 am

However, integrating climate-related risk analysis into financial stability monitoring is particularly challenging because of the radical uncertainty associated with a physical, social and economic phenomenon that is constantly changing and involves complex dynamics and chain reactions. – article

Anyone besides me remember credit default swaps and the disastrous financial collapse that followed? There were many things were at the base cause of the 2008 debacle, but they were part of it, and a large part. What that sentence says is that the Big Banks still have not learned their lesson. They are still gambling and this time, they are counting on hot air bolstering and supporting them.

Iceland did the right thing. It should have happened to every big bank, especially those that are chartered, but the people who engage in these financial shenanigans are so far immune to prosecution.
Meantime, I see no harm in not using up resources such as coal and oil. I keep questioning why, if oil is so abundant, we haven’t seen prices slide back to less than $1,00/gallon for gas at the pump, but I know why: inflation is a manufactured excuse for overcharging and high prices. And besides, the commodities traders have only one interest: profit, and the more profit, the better.

Nicholas McGinley
Reply to  Sara
January 21, 2020 5:21 am

Much of the cost of gasoline at the pump is taxes, which is why the price varies so much from county to county and state to state, and is mostly a dollar, more or less, above the wholesale price seen on commodity price charts.
Some places have increased taxes over the years.
But in general, the big difference is inflation.
After adjusting for inflation, the price for gasoline is actually about average compared to the past 100 years.
If not for the taxes, the price right now would be very low by historical standards.
Two charts…the last ten plus years of the wholesale commodity price, and the past 100 years adjusted for inflation of the retail price…which it appears does not exclude taxes but is the actual price paid at the pump.

John Endicott
Reply to  Sara
January 21, 2020 10:31 am

I keep questioning why, if oil is so abundant, we haven’t seen prices slide back to less than $1,00/gallon for gas at the pump, but I know why: inflation is a manufactured excuse for overcharging and high prices.

It’s really not. When costs go up (minimum wage is being pushed to $15/hour, burdensome regulations, frivolous lawsuits add to the cost of doing business, rising insurance prices, etc. all add to the cost of doing business), prices follow since it’s the prices that pay for the costs. That’s econ 101. But really, gas prices would be a lot closer to $1/gal if it weren’t for the taxes which have gone up considerably since the last time gas was priced that low.

Yes, businesses want as much profit as they can get. However, consumers want as low prices as they can get and thus, in general, all else being equal, will spend their money at the businesses that can offer them the lower prices. price your product too high and you will lose customers and thus profits to the competing businesses that don’t. again, this is econ 101 stuff.

Coach Springer
January 21, 2020 5:24 am

That is the crap that passes for thinking outside the box when you’re inside the smallest of the Russian dolls.

January 21, 2020 6:01 am

Our governor is doing all he possibly can to destroy coal and coal fired plants. He’s doing his best folks. This takes time. It also destroys our economy, but who the heck cares???? He’s a liberal and proud to destroy coal (ignore the letter after his name—letters lie).

There are less than 1% of problems that are solved with money and more money. ALL others are due to stupidity, greed, corruption, ignorance, etc. Until you solve the REAL problems, forget the money. It’s probably better to burn it in the wood stove and try to keep warm than pretend it solves anything. Climate is NOT AFFECTED BY CASH. Repeat as necessary.

January 21, 2020 6:54 am

Central banks like the world bank, Bank of England, and the Federal Reserve, make money out of public fear. Traditionally, the fear they have used is the fear of war. They buy the war bonds of the wealthy nations that are able to tax their population. Then loan money to poor nations and keep them in debt. All with paper money (not gold or anything of real value. The UN was established to do away with war ( it hasn’t done much in that direction). If they did, the central banks needed a new fear to continue to feed their cash cow. They selected anthropogenic global warming, primarily, for two reasons; first, the distribution of energy from fossil fuels is an economic commodity over which they have little control, second, fear of possible harmful effects of climate change can be blamed on AGW (burning of fossil fuel).

Steve Z
January 21, 2020 10:03 am

Basically, all that a central bank (such as the Federal Reserve) does is regulate the amount of new money injected into a national economy, and the interest rate at which it is lent. A central bank “lends” the new money to other large private banks, who can do with it as they please. A central bank cannot, by itself, forbid the banks receiving the money from investing in fossil fuel development. If a private bank wants to lend money to a company that wants to drill a well and frack for oil and gas, they can do so, unless the government (Congress and the President) decides that such activity is illegal.

Having government try to support or subsidize “green” technology is usually a bad idea. US taxpayers “invested” half a billion dollars in Solyndra in 2011, and all we got for that investment was a lot of hazardous waste to be cleaned up. If some company has a brilliant new idea to produce energy, let them use their own money on R&D, not ours.

January 22, 2020 8:50 am

No, it has nothing to do with the weather. If banks fail it will be from spreading marxism, tremendous deficit spending, greed, media scaremongering and incompetence/mal-education.

Johann Wundersamer
February 2, 2020 10:42 pm

voestalpine focuses on internationalization in the Special Steel …

15.03.2013 · The Special Steel Division, headed by Franz Rotter, … said our business is stock markets.

There’s plenty other steel manufacturers out there.

– can’t help: take it or leave it.

Johann Wundersamer
February 2, 2020 11:35 pm
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