Inept Climate Policy
Germany’s decision to scrap its nuclear reactors before having replacement energy is in play.
In April, then UK Prime Minister Boris Johnson bragged his Energy Security Strategy would “bring clean, affordable, secure power to the people for generations to come.”
In the US, California marches on with the blessing of president Biden, preposterous targets for electric cars without having the faintest idea where the minerals and mining for those batteries will come from.
Global Crisis of Climate Policy
The Wall Street Journal comments on the Coming Global Crisis of Climate Policy.
A crisis isn’t coming, it’s already here, and obviously so.
The Federal Reserve, Bank of England and European Central Bank, among others, want to know how global temperature variations a century hence might weigh on Citi’s or Barclays’ or Deutsche Bank’s capital and risk weightings today. The fad is for quantifying, with preposterous faux-precision, the costs of reinsuring flood risks, or fire, or the depressed corporate profits of a dystopian hotter future.
Well, if you seek “climate risk” to financial stability, look around you. It has arrived, although in exactly the opposite manner to what our current crop of eco-financiers predicted. Europe’s plight tells a tale that could become all too familiar in the U.S. soon.
The U.K. may be facing a wave of business bankruptcies exceeding anything witnessed during the post-2008 panic and recession. Some 100,000 firms could be forced into insolvency in coming months, bankruptcy consultancy Red Flag Alert warned this week. These are otherwise healthy firms with at least £1 million in annual revenue. Business failures on this scale would dwarf the roughly 65,000 firms of any size that went under from 2008-10.
Matters are probably worse in Germany, the eurozone’s largest economy. Some 73% of small and medium-sized enterprises in one survey reported feeling heavy pressure from energy prices, and 10% of those say they believe they face “existential” threats to their businesses over the next six months. And that poll, from the small-business association BMD, is the optimistic one. A separate survey published this week by the BDI, a major industry association, found 34% of respondents describing energy prices as an “existential challenge.” Business failures will ripple up and down supply chains and quickly into the banks.
Does anyone know what exactly any of this will mean for the financial system? Of course not. No one has seriously bothered to “stress test” catastrophic increases in energy prices, even though the Bank of England claims to have modeled the economic impact of allowing global temperatures to rise by 3.3 degrees Celsius over the next few decades. By the way, the BOE also predicted the economic impact of the transition to a net-zero-CO2-emissions future would be modest.
Inflationary Madness
Policy decisions by clueless heads of state bow down to Saint Gretta, AOC, and president Biden.
They have put in place an inflationary inferno that central bankers do not know how to stop.
Even more ridiculous, President Biden, Elizabeth Warren and others want the Fed to take on a third mandate and stress test the economic impact of continued rise in temperature.
What needs to be stress tested is the reverse, the inflationary impact of a push for clean energy before battery storage technology exists, grid improvements exist, and whether or not physical metals for all the batteries that will be needed are even available.
