Credit, Covid and Climate: ‘Rock Star’ Urges Central Banks To Join The Fight Against Climate Change

Reposted from Forbes

By Tilak Doshi,

Not often does a central banker get called a “rock star” but that is among the accolades frequently cited in introductions to Mark Carney, the former Governor of the Bank of England (2013 – 2020). The BBC was no exception and recited the ‘rock star’ moniker in introducing Carney for the prestigious Reith Lecture last week. Posing the ‘triple threat’ of credit, Covid and climate, the lecture starts off reminding its audience that there is always a ‘moral dimension’ to doing business. Given the existential threats of climate change and Covid-19, central banks as the supervisors of credit need to “give shareholders the ammunition they need to impose their moral sentiments on the managers of their assets”.

One would think that the appropriateness of the image of a central banker as a ‘rock star’ is the least of our worries in a world beset by the Covid-19 restrictions and widespread economic carnage. But will Carney ‘rock’ the world’s central banks into abandoning their narrow mandate to ensure financial stability by managing liquidity and interest rates? Are we on the cusp of seeing central banks wade into the murky politics of ESG (environment, social and governance criteria), CSR (corporate social responsibility) and stakeholder capitalism?

Those of us above a certain age were brought up with the rather droll image of central bankers as those whose job was to “take away the punch bowl just when the party gets going’”. The narrow mandate for central banks was to avert financial crisis and achieve price stability by utilizing its tools of credit creation and interest rate guidance. But Carney has far larger – indeed, planetary — concerns in mind. Appointed UN special envoy for climate action and finance in December last year, he is ‘signed up’ to galvanize action among financial institutions in the lead up to the global climate talks due to take place in Glasgow in November 2021.

Carney tells us that it is time to abandon the laissez faire ideologues of right wing think tanks, and enlist the central banks to join the ‘fight against climate change’. The great founder of classical political economy Adam Smith, Carney points out, was also the author of The Theory of Moral Sentiments and not just the The Wealth of Nations. In Carney’s view, Milton Friedman — the famed Chicago economist, Nobel Laureate and advisor to Margaret Thatcher’s monetary policy — abused Adam Smith’s vision of a moral economy and led to the “corrosion of the drift from moral to market sentiments”. Carney, to be sure, “does not want to pin it all on Milton Friedman”, but the Nobel Laureate moved the pendulum “in the direction of the primacy of profit”. The caricatured economist hence became ‘one who knows the price of everything but the value of nothing’.

The appointment of Mark Carney as UN special envoy encapsulates the move in a number of countries that seek to link central banks directly to the climate change cause. Many Western private banks and multilateral financial institutions such as the World Bank, the Asian Development Bank, the European Investment Bank and the International Monetary Fund have already stopped the funding of fossil fuel-based projects.

The European Central Bank now pursues policies to coerce European banks and private sector companies to defund ‘dirty’ industries . Companies that issue debt will be pressured to avoid the fossil fuel sector and instead to make ‘green’ investments that have the approval of the ECB. The European Central Bank will start accepting bonds linked to ‘sustainability’  goals in January as part of the ECB President Christine Lagarde’s drive to press ahead with the green agenda.

So a central bank will now be involved in defining which industry is more ‘dirty’ and which less, presumably depending on which global warming model it adopts for  its internal planning and valuations. One can imagine the ECB issuing reports on  how its purchase plan for green bonds — no doubt at prices higher than what uninformed ‘market sentiments’ would value them at — will lead to lower earth temperatures 80 years hence.

In noting this dangerous ‘mission creep’ of central banks, Professor John Cochrane of the Hoover Institute warns us that the boardrooms of central banks risk becoming politicized like other arms of government. The US Department of Energy’s $535 million failed loan to the solar-panel manufacturer Solyndra during President Obama’s administration is just one instance of the more scandalous examples of renewable energy subsidies that lost tax-payers’ money.

If the historical record of governments successfully ‘picking winners’ is a skimpy one, that of cozy business-government relations (‘cronyism’ is a better word) in pursuit of pet causes – one can’t improve on “saving the planet” – is a rich one. It was another Nobel Laureate economist, George Stigler, who first raised serious attention in the 1970s on the problem of “regulatory capture” as government departments increasingly become the creatures of those they are mandated to regulate. There are few better illustrations of Stigler’s theory than Obama Environmental Protection Agency’s “sue and settle “ practices — deals through which friendly environmental groups file lawsuits against federal agencies so that  court-ordered “consent decrees” are issued based upon prearranged settlements crafted together by like-minded climate advocates behind closed doors.

The involvement of central banks in the climate cause, however, risks damage at orders of magnitude over what even a hyperactive, weaponized EPA could achieve. The politicization of the capital allocation process risks an end to the free enterprise system itself. The considerable power of the central bank over investment decisions and corporate behaviour is seen by environmental advocates as the key to achieving the global transformation needed to ‘fight climate change’ – the ‘Great Reset’ as elaborated by Klaus Schwab, founder of the World Economic Forum and chief impresario of the Davos jet-set.  

The argument that climate change is a risk to the financial system allows central banks to change the terms of the financial playing field in favour of ‘ESG’ businesses, and at a stroke destroys the impartiality of central banks towards different regions and sectors of the economy. At the ECB conference on Monetary Policy in October, Prof. Cochrane notes the irony involved in this. In his view, climate change does not play a role in financial risks facing private sector companies in the 1, 5 or even 10-year range and insurance companies have more than adequate means to handle the impacts of naturally variable weather. To the contrary, the key risk facing private enterprise in the West is now posed by the financial regulators themselves.

Now that the ECB has already become the financial vanguard in the Global Reset and ‘net zero emissions by 2050’ agendas under Christine Lagarde, all that is left is for the Biden administration to unleash Janet Yellen (picked for the Treasury Secretary position) when it presumably takes office on January 20th. Yellen has already promised to use the wide-ranging regulatory and oversight powers of the Treasury department to fix not only the ‘climate crisis’ but also other causes of the progressive package such as gender and racial ’inclusivity’.

U.S. corporate law requires that company directors and executives have a fiduciary duty to shareholders. In open and competitive markets, enterprises which deliver goods and services at the best combination of quality and price as perceived by consumers are those that serve the shareholder interest best. So long as they abide by the rules and ethical norms of the game, shareholder capitalism is the best game in town, as Prof. Friedman argued in a celebrated essay 50 years ago.

When central banks attenuate the shareholder rule, it is an invitation for special interests to encroach  into the heart of the financial system. The central banks’ headlong rush into climate policy will fatally compromise their ability to fulfil their only legitimate role in a democracy: to ensure sound money and stem financial crises. Not that they have excelled in this basic role, having floundered in the last financial crisis. Central banks would  be well advised to avoid the moral sentiments of rock stars as their guide.  

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Ed Zuiderwijk
December 10, 2020 6:15 am

A banker lends you a brollie when the sun shines and asks it back when it rains.

Greg
Reply to  Ed Zuiderwijk
December 10, 2020 1:11 pm

…. with interest. But then you realise that it was your own brolly which you paid for with next years earnings that he lent you anyway, so you paid him back twice and lost the brolly as well. It’s called fraction reserve umbrella banking.

credit, Covid and climate

Yes both the fake climate “crisis” and the bank bailout being disguised as “COVID relief” are all about shoring up the eternal increase in debt.

Joseph Bastardi
December 10, 2020 6:42 am

2 chapters right out of my book! ( this was written back in March when Covid started. Added it to the book when I saw they would do this)
Chapter 10: COVID-19/Climate-Change Alliance Weaponization
Chapter 11: The False Equivalency Between Climate Change & COVID-19

December 10, 2020 6:46 am

I urge Central Banks to help quiet all that noise made by “rock stars”. All of man’s organizations march towards becoming corrupt as soon as they are created. Religion…government…military…science….all of it. Periodic purges….cleansing….reorganization….reinvention is required…..except in the case of the IPCC – just ban it.

Steve Case
December 10, 2020 6:51 am

So a central bank will now be involved in defining which industry is more ‘dirty’ and which less, presumably depending on which global warming model it adopts for its internal planning and valuations

Taken to its logical conclusion that statement will eventually morph into:

Government will be involved in defining who is ‘undesirable’ and how they shall be dispatched.

“If you want a picture of the future, imagine a boot stamping on a human face—for ever.”

― George Orwell, 1984

MarkW
Reply to  Steve Case
December 10, 2020 7:44 am

To put it another way, the government will decide which industries are allowed and which ones are to be banned.

In other words, Fascism.

Izaak Walton
Reply to  MarkW
December 10, 2020 1:28 pm

does stopping slavey count as Fascism?

D. J. Hawkins
Reply to  Izaak Walton
December 10, 2020 2:01 pm

The court isn’t going to allow this line of questioning unless counsel shows relevance.

Izaak Walton
Reply to  D. J. Hawkins
December 10, 2020 4:19 pm

Simple, governments decided to stop the slave industry and also decided to stop the use of child labour, home coal fires etc etc. Governments decide which industries are allowed, where they are allowed, what working practices are allowed etc etc. None of that is fascism but rather an essential role of governments in a democratic society.

Steve Case
Reply to  D. J. Hawkins
December 10, 2020 5:38 pm

Izaak Walton December 10, 2020 at 4:19 pm
Simple, governments decided to stop the slave industry and also decided to stop the use of child labour, home coal fires etc etc. Governments decide which industries are allowed, where they are allowed, what working practices are allowed etc etc. None of that is fascism but rather an essential role of governments in a democratic society.

Uh huh until government decides that you’re unessential which for some people has already occurred and it wasn’t a democratic process. More like a biblical fiat. Single party rule which is the direction we are headed will do that.

Eric
December 10, 2020 6:54 am

Been there, done that.

Remember the 1997 Community Reinvestment Act (CRA)? A well-meaning attempt to encourage homeownership in disadvantaged communities. It led to relaxed fiscal controls on lending and opened the doors to egregious abuses that led to the sub-prime mortgage meltdown. Unintended consequences indeed.

MarkW
Reply to  Eric
December 10, 2020 7:45 am

Bernie Sanders has a solution to that. He wants to create government run banks.
Government run banks can never collapse, they’ll just raise taxes to cover any shortfalls.

Greg
Reply to  MarkW
December 10, 2020 2:12 pm

Is that any different from a private cartel like the Federal Reserve, which gets bailed out by tax payers when their high risk, high interest gambling all goes wrong ?

At least with a state owned bank the tax payer benfits when times are good.

I will never forget Ben Bernanke interviewed on TV. Ask what he would say if the pres. of US asked to know who the two TRILLION dollars of “tarp” money was actually going be given to, he replied that he would refuse to say.

Robertvd
Reply to  Greg
December 10, 2020 4:04 pm

The Federal Reserve has been in power since 1913. They can print whatever they need to corrupt the system. They are the wizards behind the curtain in control of the puppet politicians.
That’s why it really doesn’t matter who you vote for. Trump’s biggest problem were the puppet republican politicians.
The UK with Boris Johnson is another example that those who print rule. Who needs the Labour party if you have Boris doing the same stupid things.
It’s clear that they are all controlled by the same body .

Steve Keppel-Jones
Reply to  Robertvd
December 11, 2020 8:28 am

I suspect the Federal Reserve and other central banks are not the ultimate wizards. I think there is at least one more curtain behind them, with yet more wizards pulling their strings. And possibly more curtains behind that…

Steve Keppel-Jones
Reply to  Eric
December 10, 2020 8:20 am

Some might say that the CRA and similar measures were not at all well-meaning, and that the consequences were not at all unintended. This implies that the periodic financial collapses are not accidents either, therefore nor are the central banks the solution. We live in interesting times indeed…

leowaj
Reply to  Steve Keppel-Jones
December 10, 2020 8:32 am

It would be good to know who those people are who would say that.

ferdberple
December 10, 2020 6:58 am

Carney makes me ashamed to be Canadian. The problem with “do gooders” is that they are blind to the harm they do.

When you take money from an efficient process and direct it towards a less efficient process, at the end of the day there will be less for everyone. Repeat this often enough and the will be nothing left to be shared.

MarkW
Reply to  ferdberple
December 10, 2020 7:46 am

IE, communism.

Jeff Alberts
Reply to  ferdberple
December 10, 2020 8:58 am

Tax the rich,
feed the poor,
till there are no,
rich no more…

Then everyone goes hungry.

Richard Page
Reply to  ferdberple
December 11, 2020 9:11 am

Carney may be a ‘rock star’ to some of the illiterati but some of us remember just how badly wrong his over-hyped ‘projections’ have been and his huge contribution to project fear during the Brexit campaign. Not a trusted source by any means.

Gerry, England
December 10, 2020 7:03 am

Looks like they will create a great opportunity for China to fill the void, especially in Africa. And if you want woke-free investing, China would be your market.

Klem
December 10, 2020 7:13 am

‘ shareholder capitalism is the best game in town, ‘

I currently work in a capital intensive industry but my company has engaged McKinsey consulting to help us transition to the outdated ‘stakeholder capitalism’ style of business. It means effectively that we will try to please everyone, but in the end will please no one. No wonder our share price is half what it should be.

Stakeholder capitalism is straight out of the Marxist Klaus Shwab’s philosophy supporting his Great Reset lunacy.

This transition is deeply disturbing to me.

MarkW
Reply to  Klem
December 10, 2020 7:51 am

Companies that fail to keep their workers happy, lose their workers.
Companies that fail to keep their customers happy, lose their customers.
Companies that fail to keep their investors happy, have a change of management.

Companies already have all the incentive they need to keep employees, customers and investors happy.
Outside of those three groups, the only other group that matters is law enforcement. Don’t break any laws while you are keeping the other three groups happy.

The idea that companies have any obligations to groups outside of those listed above is nonsense. If you want to influence a company, buy stock, not politicians.

Josie
December 10, 2020 7:16 am

So for the West we have a rock star and (probably) two post-menopausal groupies who seem to have forgotten what is feels like to have a brain…what’s not to like huh? Cheers.

MarkW
Reply to  Josie
December 10, 2020 7:53 am

30 years ago, most entertainers at least had enough intelligence to know that insulting half your audience was never a good idea.

D. J. Hawkins
Reply to  MarkW
December 10, 2020 2:04 pm

Or as Michael Jordan said, “Republicans buy sneakers, too.”

MarkW
December 10, 2020 7:42 am

Bernie Sanders wants the Post Office to start offering banking services.
A government run bank competing with private banks. That’s an idea that can’t end well.

fretslider
Reply to  MarkW
December 10, 2020 7:56 am
fretslider
December 10, 2020 8:00 am

Can these Rock Star = Bitcoin hating – people really fix a climate crisis like the prolonged wind drought we’re having in the UK?

Er, no.

Bruce Cobb
December 10, 2020 8:12 am

“…central banks as the supervisors of credit need to “give shareholders the ammunition they need to impose their moral sentiments on the managers of their assets”.
By this they mean “central banks as the supervisors of credit need to be given the ammunition they need to impose their marxist sentiments on the shareholders of their assets”.

Joe Crawford
December 10, 2020 8:38 am

Just another example of Conquest’s 2nd Law: “Any organization not explicitly and constitutionally right-wing will sooner or later become left-wing.”

Since left-wing policies are based on emotion rather than logic the Left can’t tolerate anyone questioning their belief system. So, they only associate with those that believe as they do.

TonyG
Reply to  Joe Crawford
December 10, 2020 1:46 pm

And those that don’t change will be driven out of existence. Can’t have anyone around to question.

Jeff Alberts
December 10, 2020 9:02 am

“Carney tells us that it is time to abandon the laissez faire ideologues of right wing think tanks, and enlist the central banks to join the ‘fight against climate change’.”

So, he and the banks are going to stop: Plate Tectonics, the Earth rotating on its axis, the Moon orbiting the Earth, and the Earth revolving around the sun. That’s the only way they can even begin to “fight against climate change”. Again, an extremely moronic phrase coming from the mouths of supposedly intelligent people.

fretslider
December 10, 2020 9:20 am

Carney might well be remembered for his outstanding contribution to climate justice:

Mark Carney, has formally unveiled the Bank of England’s first plastic banknote, the new fiver featuring Sir Winston Churchill.

https://www.theguardian.com/business/2016/jun/02/flash-the-plastic-bank-of-england-unveils-untearable-plastic-5-note

We have banned plastic drinking straws

Rainer Bensch
Reply to  fretslider
December 11, 2020 2:13 am

Yeah. And remember all the money going down the drain.

Richard M
December 10, 2020 9:21 am

“Given the existential threats of climate change and Covid-19 …”

Just a small amount of logic destroys both of these idiotic claims. That people continue to repeat this nonsense says much about the state of our world. It’s not the meek that will inherit the world, it is the morons.

markl
December 10, 2020 9:23 am

All part of a plan for Marxist control. Wealth redistribution acceptance is questionable and too slow so what better way to destroy Capitalism than outrageous deficit spending and investments designed to fail?

Doonman
December 10, 2020 10:22 am

Do gooder’s always claim to have a moral imperative to do what they do. But when questioned on where their morals originate, they have no answer. It certainly isn’t god because they won’t pray and claim belief in a supreme being is hogwash. The fact of the matter is you cannot have god given rights if there is no god.

Jeff Alberts
Reply to  Doonman
December 10, 2020 10:50 am

The concept of “god-given rights” was made up by humans. As was the concept of god.

MarkW
Reply to  Jeff Alberts
December 10, 2020 11:40 am

Please provide proof to support both claims.

Jeff Alberts
Reply to  MarkW
December 10, 2020 8:24 pm

Please provide proof that there is, or ever has been, a god, gods, etc.

Herbert
December 10, 2020 1:53 pm

As Mark Carney has read “The Wealth of Nations”and “The Theory of Moral Sentiments”, has he read Charles Mackay’s “Extraordinary Popular Delusions and the Madness of Crowds”?

William Haas
December 10, 2020 5:07 pm

The reality is that, based on the paleoclimate record and the work done with models, the climate change we have been experiencing is caused by the sun and the oceans over which mankind has no control. Despite the hype, there is no real evidence that CO2 has any effect on climate and there is plenty of scientific rationale to support the conclusion that the climate sensitivity of CO2 is zero. We do not even know what the optimum global climate actually is let alone how to change it. But even if we could, some how, stop the Earth’s climate from changing, extreme weather conditions and sea level rise would continue unabated so there would be no benefits. Rather than wasting our time and money trying to fight climate change, we are far better off putting our efforts into improving the global economy which but us in a better economic position to deal with the ravages of extreme weather events and other catastrophes.

hunterson7
December 11, 2020 6:08 am

Unacceptable.
The devolution to totalitarian must be stopped.
Billions of people will be this if the revolution succeeds.
“Climate concern” is worse than radical Islam.
It is a cancer that infects and ruins all aspects of our lives.

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