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The ECB’s New Inflation Plan Is Like the Old Plan. But Worse. | Mises Wire

Posted by M. C. on July 18, 2021

Examples of how the ECB has contributed to economic sclerosis include the fantastic continuing gravy train into Italy which has fortified the status quo there but smothered any  creative destruction including winding down of big government and cronyism;

https://mises.org/wire/ecbs-new-inflation-plan-old-plan-worse

Brendan Brown

Old, absurd, and unfit for purpose; how else to describe the “new” monetary framework for euro monetary policy presented by ECB Chief Lagarde amidst much fanfare on Thursday, July 8?

Why old? The “new” framework is remarkably similar to that unveiled in May 2003.

Why absurd?  The main rationale put forward for the framework is to work around a problem of the “zero bound”.  That problem, however, is of the ECB’s own making. 

Why unfit for purpose?  Chief Christine Lagarde tells us that the review has been undertaken to make sure that “our monetary policy strategy is fit for purpose both today and in the future”.  But she considers no critique of that strategy and advances no rebuttal of any.  She does not explain why she expects better results from a plan that so similar to the strategy that’s been pursued during the past quarter century.

What Is New in the Plan?

The ECB has upped its inflation target. 

So what is now new?  “Just below 2 per cent”, the 2003 formulation, has been replaced by “2 per cent”.  Deep in the text of the new framework is reference to knowledge gained since then about the severity of monetary policy paralysis which can occur when inflation falls too far.  This discovery, we’re told, justifies greater leniency in accepting an inflation overshoot for some time.   The reader then arrives at the gobbledygook phrase “price stability is best maintained by aiming for a 2 per cent inflation target over the medium term”.  

The ECB has adopted many new radical tools to make this happen. Following on from the 2 per cent statement, the ECB confirms the setting of interest rates remains the primary tool, but many other tools are available as well:

The Governing Council also confirmed that the set of ECB interest rates remains the primary monetary policy instrument. Other instruments, such as forward guidance, asset purchases and longer-term refinancing operations, that over the past decade have helped mitigate the limitations generated by the lower bound on nominal interest rates will remain an integral part of the ECB”s toolkit, to be used as appropriate.

In other words, the new plan tells us the ECB plans to be much more activist and it plans to use many “tools” that were once considered to be unacceptably radical. 

Think back to Spring 2003 when Professor Otmar Issing introduced the ECB’s then-new framework.   The salient point then was that the ECB would aim for inflation of just under 2 per cent, ready to take as determined action to prevent inflation undershoots as well as overshoots.  In response to a question, he insisted that the ECB had been following in practice this policy framework  since the launch of the euro (1999), even though its formal aim had been simply inflation below 2 per cent, which in principle could have meant inflation for most of the time at zero.   

At the time of the last review Professor Issing was still highly respectful about a second pillar of ECB policymaking founded on a monitoring range for broad money supply growth.  There was no mention then of QE, forward guidance, long-term rate manipulation and these tools were not accepted as legitimate.   Legitimacy and application of such “non-conventional tools” came in the midst of the sovereign and banking debt crises of 2010-12.   They were introduced as essential for monetary control.   Everyone and their dog, however, realized that their primary purpose was for the ECB to effect massive transfers of funds towards supporting the weak sovereigns and their banks.   Now that pretense has become part of the new framework.

Managing Price-Inflation Expectations

One might have expected some pushback against all this from the Bundesbank or the Dutch National Bank.  There is no evidence of this except indirectly in the concession by ECB of a quid pro quo.   Its review states that the estimation of inflation for targeting should be modified eventually to take account of the cost of owner-occupied housing   

 This is a very weak reed of defiance.  The ECB tells us that the cost of owner-occupied housing is now to be estimated in a “stand-alone index” and this should be considered in a wider context of assessing monetary conditions for the next few years.   Ultimately by the mid-2020s the ECB foresees that there will be a modified HICP (euro-area CPI) which includes this estimation of owner-occupied housing costs, but this will not be fully operational as a target variable until the late 2020s.   Who knows; by then the terrific housing price boom across much of the euro-zone, including prominently Germany and Holland in recent years, might have gone into reverse, meaning the HICP will be reformed in a direction which in fact calls for an even more radical European monetary policy.

Why Is the New Plan Necessary? 

The ECB pleads that its new “framework” has become necessary because the problem of the “zero bound” has become so severe.  That is, with interest rates already so low, it is assumed the central bank needs new tools to push up price inflation, even with target interest rates already at zero or below zero.  This is due, it says, to issues beyond its control. “Structural developments have lowered the equilibrium real rate of interest – decline in productivity growth, demography, and persistently higher demand for safe liquid assets. Hence the incidence and direction of episodes in which nominal policy rates are close to the effective lower bound increased – with the current episode lasting more than 10 years”.

The ECB Won’t Solve the Problem the ECB Created

What chutzpah!  This alleged problem of “extraordinarily low equilibrium real rates” is a problem of the central bank’s own making.  The European sovereign debt and banking crisis of 2010-12, the trigger to initial downward forces on the equilibrium real rate, was itself a consequence of ECB policy through the years 1997-2007.  This was highly inflationary, albeit that the symptoms were more sharply visible for much of the time in asset markets than goods and services markets.    By aiming for 2 per cent inflation at a time of rapid productivity growth and globalization, also with downward pressure on prices due to increased competition within EMU, the ECB fanned monetary inflation.   

“Equilibrium real rates” have remained so low far beyond the crises of 2008-12 and their immediate aftermath precisely because the ECB’s policies have induced and added to economic sclerosis.  Its radicalism, characterized by negative interest rates and vast QE operations focussed on bailing out weak sovereigns and banks, has sapped any potential dynamism out of the European economies.   

Examples of how the ECB has contributed to economic sclerosis include the fantastic continuing gravy train into Italy which has fortified the status quo there but smothered any  creative destruction including winding down of big government and cronyism; the stimulation of a financial engineering boom and more broadly financial speculation in which investors pursue high apparent returns based on camouflaged leverage and other optical illusions rather than potential returns on long-gestation capital spending ; the generation of massive capital exports as interest income famine European investors search out apparently high returns abroad especially in high-risk credit markets  and also in the Eldorado of US monopoly capitalism (especially the big five FAAAMs), itself a dead hand throttling economic dynamism globally; the fuelling of a fantastic real estate construction boom most of all in Germany which does not generate productivity growth; creating desperation amongst some households about negative returns on their savings and the ultimate prospects of their pensions becoming cut in the midst of the next financial crisis and so causing them to restrict spending.

Unsound money whether by the Fed or the ECB or the Bank of Japan has produced an apparent low and allegedly (according to the central bank narrative) sub-zero equilibrium interest rate. 

Sound money, not a digging in around the present monetary framework, is the answer to the zero rate boundary problem.   Author:

Brendan Brown

Brendan Brown is a founding partner of Macro Hedge Advisors (www.macrohedgeadvisors.com) and senior fellow at Hudson Institute. As an international monetary and financial economist, consultant, and author, his roles have included Head of Economic Research at Mitsubishi UFJ Financial Group. He is also a Senior Fellow of the Mises Institute. He is the author of Europe’s Century of Crises under Dollar Hegemony: A Dialogue on the Global Tyranny of Unsound Money with Philippe Simonnot. His other books include The Case Against 2 Per Cent Inflation (Palgrave, 2018) and he is publisher of “Monetary Scenarios,” Euro Crash: How Asset Price Inflation Destroys the Wealth of Nations and The Global Curse of the Federal Reserve: Manifesto for a Second Monetarist Revolution.

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BIDEN’S BANANA REPUBLIC – Matterhorn – GoldSwitzerland

Posted by M. C. on January 16, 2021

https://goldswitzerland.com/bidens-banana-republic/

By Egon von Greyerz

Donald Trump is probably the luckiest presidential candidate in history to have lost an election. He doesn’t realise it yet as he suffers from a self-inflicted wound in the final moments of his presidency. Nor does Biden yet realise how unlucky he is to have won. But that will soon change as his presidency goes from crisis to crisis in all areas from monetary to fiscal to social and political. Very little will go right during his presidency.

The next four years could easily be four years of hell for Biden (if he stays the course for the whole four years), for the US and thus for the world.

TRUMP OBLIGED AS PREDICTED

When Trump won the election in November 2016 I wrote an article, dated Nov 18, 2016, called “Trump Will Grow US Debt Exponentially” .

The article also contained the following graph. In the article I predicted that US debt would double by 2025 to $40 trillion and that it would be $28t in January 2021 at the end of the four years.

Well, surprise, surprise, the debt is today $27.77t which can easily be rounded up to $28t.

I am certainly no forecasting genius, nor was the forecast just luck.

No, it was applying the best method that we have all been given but that few apply or understand.

This method is called HISTORY.

DEBT UP 31X & TAX REVENUE UP 6X

US debt had on average doubled every 8 years since Reagan took over in 1981. So as Trump became president in Jan 2017, he inherited a debt of $20t. Easy then to forecast that 8 years later the debt would be $40t. The $28t forecast for Jan 2021 is just the mathematical in-between point between $20t and $40t.

Even worse than the debt explosion is the the lack of tax revenue to finance the escalating and chronic budget deficits. As the graph above shows, debt has grown 31x since 1981 whilst tax revenues have only grown 6x.

The US deficit is currently $3.3t which is virtually equal to total tax revenue of $3.4t. This means that 50% of annual government spending needs to be borrowed.

BANANA REPUBLIC

The US economy now clearly fits the definition of a Banana republic. A brief description is: “In political science, the term banana republic describes a politically unstable country with an economy dependent upon the exportation of a limited-resource product, such as bananas or minerals.”

In the case of the US, the product they export is of course dollars printed out of thin air – a wonderful export item since supply is unlimited.

Further description is: “Typically, a banana republic has a society of extremely stratified social classes, usually a large impoverished working class and a ruling class plutocracy, composed of the business, political, and military elites of that society.”

Like all Banana Republics, the US economy and social structure is now on the way to perdition with virtually nil chance for Biden & Co to reverse the inevitable course of events.

HISTORY – HISTORY

So back to history – History is what has formed us and history doesn’t just rhyme as Mark Twain said but it often repeats itself. The debt explosion is another good example.

If more people studied and understood history, they would not just recognise the utmost importance of what lies behind us but also that history will teach us about what lies in front of us.

But very few scholars and no journalists study history. Instead we are now in an era when both the media and universities worldwide want to erase history and rewrite the history books. This shows us the total lack of understanding of the utmost importance of history in the evolution of the world.

But this is part of the total decadence and denial that we see at the end of major eras or cycles. The current cycle, whether it is just a 300 year cycle or a 2,000 year old cycle is now coming to an end. These changes clearly don’t happen overnight but the first phase of the fall can be dramatic. And that phase is likely to be starting very soon.

BIDEN ONLY HAS ONE TRICK UP HIS SLEEVE

So what will Biden and his masters do? Well Biden has already called for $ trillions of further support.

He also said: “If we don’t act now, things are going to get much worse and harder to get out of a hole later.”

Well we always knew that Biden really only had one trick up his sleeve – TO PRINT MORE than any president has done in history. To beat Trump is not hard, he only printed $8t in 4 years!

Let’s just remind ourselves that it took 200 years (1808-2008) to increase the US debt from $65 million to $10 trillion.

When Obama took over in Jan 2009 he inherited a $8t debt. Eight years later he handed over a $20t batten to Trump.

In 8 years Obama printed and borrowed more money than the previous presidents had achieved in the course of 200 years!

So will Biden print more than $10t?

Definitely!

Will he do it in 4 years? Most probably!

As I forecasted in my article in 2016, the debt will be at least $40t in Jan 2025, a $12t increase from today.

But no one should believe that Biden will stop at $40t. The US economy is already leaking like a sieve. And the problems have just started.

The problems in the currently semi-paralysed US economy will escalate at a rapid rate and the Biden team will attempt to plug every hole at all levels from a minimum wage to saving major corporations.

But sadly, Banana Republics don’t survive by printing worthless money.

PROBLEMS IN THE FINANCIAL SYSTEM AND NOT CV-19 STARTED THE CRISIS

Still, we mustn’t forget what started the latest phase of problems in the US economy.

It wasn’t Covid back in February 2020. No, that was a mere catalyst. The underlying disaster was a lot deeper. The real problem started back in Aug-Sep 2019. This is when the problems in the financial system became acute and both the ECB and Fed started flooding the system with money. But not real money of course but just worthless paper money created with just pushing a button.

Between the Fed and the ECB just under $8t of “fake” money has been created digitally since Sep 2019. It must obviously be called fake since nobody had to perform any work or produce any goods or services against this money.

It is really scandalous to call it money since it is no different from the Monopoly game money.

WHEN THE MUSIC STOPS…….

The printed $8 trillion at $15 per hour (Biden’s new minimum wage) equals 60 million man hours. But in the modern MMT (Money Market Theory) paradigm, you don’t need to work for the money. Whatever the world needs, central banks and governments can just create out of nothing.

That is until the music stops. And Biden or Harris are the likely conductors who will preside over the music stopping and the whole edifice collapsing.

The wise will obviously find a chair already now because when the music stops there will be no chairs free and all hell will break loose.

By that time debt will not just be in the $trillions or $100s of trillions. No, the printing will have reached $ and EUR quadrillions as not only most collapsing debt will need to be bought by central banks but also derivatives which probably amount to $2 quadrillion or more.

In addition, medical care, social security and unfunded pensions will probably exceed $1 quadrillion globally and add to the demise of the financial system.

Could I be wrong. Maybe. A close friend gave me once a T-shirt with the inscription:

“I AM NOT ALWAYS RIGHT – But I am never wrong”!

The gift must have been a subtle hint – Hmmm

Still, in my humble view I don’t believe that any orderly reset will change the inevitable course of events. So as far as I am concerned, it is not IF but WHEN.

A professional life of over half a century has taught me that even the most evident events can take longer to develop than you think.

But as I see risk at an extreme, now is the time to prepare.

MARKETS

So to finish, let’s have a quick look at where I see markets. I know forecasting is a mug’s game and I am not really interested in how markets move in the short term more than from an observational point of view.

In the next few years it is all about economic survival and wealth preservation rather than worrying about where the Dow or the Dax is going next.

See the rest here

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Central Bank Digital Currencies and the War on (Physical) Cash | Mises Wire

Posted by M. C. on December 7, 2020

At the end of the day, central bank digital currencies are all about control, not meeting consumer demand. The ECB admits as much at several points in their report. Here is just one instance: If people are really demanding a digital euro, why would it have to be assigned legal tender status in order for it to be accepted, as the authors of the report clearly state would be necessary (p. 33)? The only scenario where introducing a CBDC makes sense is in order to phase out the use of physical cash in order to be able to impose whatever negative interest rate regime the central bankers in charge judge necessary. Helicopter money, restrictions on cash holding, and negative interest rates are all part of the bundle of desirable policies that can only—or most easily—be achieved with digital currencies fully controlled by the issuing central banks.

https://mises.org/wire/central-bank-digital-currencies-and-war-physical-cash

Kristoffer Mousten Hansen

Twenty twenty is a year dominated by bad news. While governments around the world have imposed extremely destructive restrictions on economic life and promise a “Great Reset” that amounts to a great leap forward into the socialist future, central bankers have advanced plans for implementing central bank digital currencies (CBDCs). These may arrive as early as next year. Yet what is the motivation behind this innovation? Reports recently published by the Bank for International Settlements1 and the European Central Bank2 provide part of the answer. These publications provide fascinating insight into the theories and ideologies driving central bankers in their pursuit of CBDCs.

Monetary Policy? Moi?

One perhaps surprising theme in both reports is the disavowal of any monetary policy behind plans for introducing CBDCs. The BIS report claims that “[m]onetary policy will not be the primary motivation for issuing CBDC” (p. 8) and the ECB report notes that a “possible role for the digital euro as a tool to strengthen monetary policy is not identified in this report” (p. 3). One might first of all suppose that introducing a new form of money would by definition amount to monetary policy, at least in a broad sense, and secondly perhaps find it a tiny bit weird that institutions dedicated to researching and implementing monetary policy would not have considered the potential effects of a new form of money in light of its effects on policy. But what is really striking is that both reports—and especially the one issued by the ECB—at great length detail the implications for monetary policy of CBDC. True, they say they don’t, but looking beyond the executive summary and paying attention to what is written in the report itself puts the lie to that claim.

In order to see this, we only need to look at the key features the central bankers identify as desirable in a CBDC: it should be interest bearing, and it should be possible to cap how much each individual can hold. Both measures are clearly aimed at supporting monetary policy. The cap on holdings forces people to spend their money, driving either price inflation or investment in financial assets, and by making the CBDC interest bearing (or remunerated, in the language of the ECB) it becomes a tool of setting and passing on policy rate changes, including negative interest rates.

The ECB’s Report on a Digital Euro in particular goes on at great length about the need to limit or disincentivize “the large-scale use of a digital euro as an investment” (p. 28). The reasoning behind this position is crystal clear: since monetary policy has driven interest rates into negative territory, the ECB should not allow large-scale holding of digital euros, since investors would then, quite sensibly, chuck their holdings of negative-yielding bonds and seek a safe haven in digital euros—that is, if they can hold them at no cost. Similarly, the ECB is averse to letting people convert their bank deposits into digital euros (p. 16), which would reside in their individual wallets rather than in a bank account. Indeed, the horror of what the BIS and ECB reports call “financial disintermediation” looms large in the minds of central bankers: if people keep their money outside of banks, these will have less money to lend out, thereby increasing borrowing costs. In the words of the BIS report, they are concerned that

a widely available CBDC could make such events [i.e., bank runs] more frequent by enabling “digital runs” toward the central bank with unprecedented speed and scale. More generally, if banks begin to lose deposits to CBDC over time they may come to rely more on wholesale funding, and possibly restrict credit supply in the economy with potential impacts on economic growth. (p. 8)

Of course, Austrian economists since Ludwig von Mises3 understand that “financial disintermediation” can really be a blessing. In the context of digital euros, all it means is that people would hold the amount of cash they deemed desirable outside the banks. They would only make true savings deposits in banks, i.e., they would only surrender money that they did not want instant access to. Under such circumstances, banks would be incapable of expanding credit by issuing unbacked claims to money; they could only make loans out of the funds their customers had explicitly made available for that purpose. This would not only result in a leaner or sounder financial system, it would also avoid the problems of the perennially recurring business cycle. And contrary to what the central bankers fear, the supply of credit would not be restricted, it would simply be forced to correspond to the supply of real savings in the economy. This, unfortunately, is an understanding of economics completely alien to central bankers.

Negative Interest Rates

One aim in introducing CBDCs that is only hinted at is the possibility of imposing even lower negative interest rates. In recent years monetary economists4 have increasingly discussed the problem of the “zero lower bound” on interest rates: the fact that it is impossible to set a negative interest since depositors in that case would simply shift into holding physical cash. When manipulating the interest rate is the main policy tool of central banks this is obviously a problem: How can they work their alchemy and secure an acceptable spread between the main policy rates and the market rate of interest when interest rates are already very low? Allowing for the cost of holding physical cash, –0.5 percent seems to be about as low as they can go.

With a centrally controlled digital currency this problem would disappear. The central bank could set a limit on how much each person and company could hold cost free, and above this limit, they would have to pay whatever negative interest rate (or “remuneration,” as the ECB insists on calling it) is consonant with central bank policy. In this way, holding cash would not obstruct monetary policy, as the cash holdings would be fully under the control of the central bank.

There is just one problem with using CBDC in this way: it only works if physical cash is outlawed. Otherwise, physical cash would still simply play the role it does today, i.e., as the most basic and least risky way of holding one’s wealth and of avoiding negative interest rates. The BIS report clearly identifies this problem (p. 8n7), as does the ECB (p. 12n18): a CBDC could help eliminate the zero lower bound on interest rates, but only if physical cash disappeared. So long as physical cash remains in use, the zero lower bound cannot be breached.

But the People Demand It!

However, people might of their own accord come to the rescue of the world’s central banks, sorely beset as they are by the zero lower bound. At least according to Benoît Coeuré, head of the BIS Innovation Hub (the group tasked with researching CBDC), plenty of people want a central bank digital currency. The ECB also sees the decline in the use of physical cash in favor of other means of payment as one of the main scenarios that would require the issue of a digital euro (p. 10).

Now, while some people might like CBDC, there is really no reason to believe, notwithstanding monsieur Coeuré’s anecdotal evidence, that there is widespread demand for central bank digital currency. The ECB admits as much when they write that physical cash is still the dominant means of payment in the euro area, accounting for over half the value of all payments at the retail level (p. 7). But Coeuré does not need to go far to see the continuing relevance of cash: in 2018 researchers at the BIS itself concluded that cash, far from declining in importance, was still the dominant form of payment.5 More recently, a study in the International Journal of Central Banking showed that cash usage is not only not declining, but even increasing in importance.6

Be that as it may, the central bankers are certainly right that there is an increased demand for digital payment solutions and for cryptocurrencies. However, it is erroneous to conclude from this that therefore a central bank digital currency is demanded. Demand for a payment solution is not the same as demand for a new kind of money. It simply means that people demand payment services that allow them to more cheaply transact with each other. Such services are plentifully provided by companies such as Visa, Mastercard, Paypal, banks, and so on and so forth. There is no reason to believe that central banks need to provide this service nor that they could do it better than private companies and banks, and it is simply a mistake to equate demand for such services with demand for a money.

The mistake in the case of cryptocurrencies is even more egregious. When people hold bitcoin or another cryptocurrency, it is not because their heartfelt demand for a CBDC has to go unfulfilled and this is their closest alternative. On the contrary, people want to own bitcoin precisely so they can avoid the negative interests imposed on the established banking system and the risks of holding inflationary fiat money. Introducing a CBDC would not mitigate those risks, but rather add to them, as the central bank would assume total control of the money supply through it and the attendant abolition of physical cash. The felt need for inflation hedges and the desire to escape central bank control, including as it does negative interest rates and caps on how much cash one could hold, would only increase.

It’s All about Control

At the end of the day, central bank digital currencies are all about control, not meeting consumer demand. The ECB admits as much at several points in their report. Here is just one instance: If people are really demanding a digital euro, why would it have to be assigned legal tender status in order for it to be accepted, as the authors of the report clearly state would be necessary (p. 33)? The only scenario where introducing a CBDC makes sense is in order to phase out the use of physical cash in order to be able to impose whatever negative interest rate regime the central bankers in charge judge necessary. Helicopter money, restrictions on cash holding, and negative interest rates are all part of the bundle of desirable policies that can only—or most easily—be achieved with digital currencies fully controlled by the issuing central banks.

Ironically, far from buttressing the role of central banks and government fiat money, imposing a CBDC may have the completely opposite effect. Replacing physical cash with a CBDC would only strengthen the undesirable qualities of fiat money and further hamper a free market in money and financial services, increasing the demand for alternatives to government money, such as gold and bitcoin.

  • 1. Bank of Canada, European Central Bank, Bank of Japan, Sveriges Riksbank, Swiss National Bank, Bank of England, Board of Governors of the Federal Reserve, and Bank for International Settlements, CBDC: Central Bank Digital Currencies: Foundational Principles and Core Features (N.p: Bank for International Settlements, 2020), https://www.bis.org/publ/othp33.htm.
  • 2. European Central Bank, Report on a Digital Euro (Frankfurt am Main: European Central Bank, October 2020), https://www.ecb.europa.eu/euro/html/digitaleuro-report.en.html.
  • 3. Ludwig von Mises, The Theory of Money and Credit, trans. H. E. Batson (New Haven, CT: Yale University Press, 1953), p. 261ff.
  • 4. See, e.g., Marvin Goodfriend, “Overcoming the Zero Bound on Interest Rate Policy,” Journal of Money, Credit and Banking 32, no. 4 (2000): 1007–35.
  • 5. Morten Bech, Umar Faruqui, Frederik Ougaard, and Cristina Picillo,”Payments Are A-Changin’ but Cash Still Rules,” BIS Quarterly Review (March 2018): 67–80.
  • 6. Jonathan Ashworth and Charles A.E. Goodhart, “The Surprising Recovery of Currency Usage,” International Journal of Central Banking 16, no. 3 (2020): 239–77.

Author:

Kristoffer Mousten Hansen

Kristoffer Mousten Hansen is a research assistant at the Institute for Economic Policy at Leipzig University and a PhD candidate at the University of Angers. He is also a Mises Institute research fellow. 

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Fed’s Core Mission Now Includes Climate Change

Posted by M. C. on January 30, 2020

Here’s a lesson for you climate fearmongers: Never put a time frame on your prediction that is shorter than your expected life or you will be ridiculed until you die.

https://moneymaven.io/mishtalk/economics/fed-s-core-mission-now-includes-climate-change-9i0VcEMMnka-AOFy69N5XQ

Mish

The Fed, ECB, Bank of England, and Bank of Japan have now embraced climate change as part of their mission.
It’s bad enough that central bankers are clueless about inflation.They now want their hands in another thing they do not understand and cannot control even if they did.

Fed’s Core Mission Change

Lael Brainard, Chair of the Fed’s Committee on Financial Stability, says Climate Change Matters for Monetary Policy and Financial Stability.

So how does climate change fit into the work of the Federal Reserve? To support a strong economy and a stable financial system, the Federal Reserve needs to analyze and adapt to important changes to the economy and financial system. This is no less true for climate change than it was for globalization or the information technology revolution.

To fulfill our core responsibilities, it will be important for the Federal Reserve to study the implications of climate change for the economy and the financial system and to adapt our work accordingly.

Climate Change Essential to Achieving Mission

Brainard was just one of the speakers at the Fed’s Economics of Climate Change summit last November.

Mary Daly, San Francisco Fed president has this Q&A in her presentation.

Q: Why is the San Francisco Fed hosting a climate conference? Why this? Why now?

A: The answer is simple. It’s essential to achieving our mission.

Bank of Japan Warns of Climate Change Risks

Japan Times reports Bank of Japan Gov. Haruhiko Kuroda Warns of Climate Change Risks.

The challenges posed by a string of recent natural disasters and the potential hit to the economy from slowing overseas growth “should be better addressed by government with fiscal policy and structural policies,” Kuroda said at a seminar.

As Japan is prone to big typhoons and earthquakes, Kuroda highlighted the risks related to climate change as an example of new issues central banks must deal with in maintaining financial stability.

“Climate-related risk differs from other risks in that its relatively long-term impact means the effects will last longer than other financial risks, and the impact is far less predictable,” he said. “It is therefore necessary to thoroughly investigate and analyze the impact of climate-related risk.”

Bank of England Climate Change Warning

The Bank of England hopped on the climate change bandwagon on December 30, with a Climate Change Warning from BoE Chief Mark Carney.

The world will face irreversible heating unless firms shift their priorities soon, the outgoing head of the Bank of England has told the BBC.

He said leading pension fund analysis “is that if you add up the policies of all of companies out there, they are consistent with warming of 3.7-3.8C”.

Scientists say the risks associated with an increase of 4C include a nine metre rise in sea levels – affecting up to 760 million people – searing heatwaves and droughts, and serious food supply problems.

“Now $120tn worth of balance sheets of banks and asset managers are wanting this disclosure [of investments in fossil fuels]. But it’s not moving fast enough.”

ECB in on the Climate Change Act

The Financial Times reports Christine Lagarde Wants Key Role for Climate Change in ECB Review.

Consider this Open Letter to ECB head Christine Lagarde from the European Parliament.

During your hearing at the European Parliament, you rightly pledged to make sure the ECB puts the “protection of the environment at the core of the understanding of its mission.” As academics, civil society and trade union leaders, entrepreneurs and citizens deeply concerned by climate change, we believe that the most powerful financial institution in Europe cannot just sit passively as we witness a growing environmental crisis.

Climate change not only imperils life-sustaining processes, it also threatens the financial stability, real economy and jobs. It has been estimated that without mitigation efforts, physical risks related to climate change could result in losses of up to $24 trillion of the value of global financial assets.

Wow. $24 Trillion at risk.

Nonetheless, Germany’s Bundesbank president Jens Weidmann, who also sits on the on the ECB’s governing council, understands the silliness of the move.

Weidmann says that he would view “very critically” any attempt to redirect a central bank’s actions towards climate change, such as favouring the purchase of green bonds as part of a quantitative easing programme.

Weidmann is guaranteed to be overruled.

Excellent Video on Climate Nonsense

Global Warming Fraud Exposed In Pictures

Please consider Global Warming Fraud Exposed In Pictures

The key to understanding the fraud is a changing timeline for temperature, fires, Winters, growing seasons, and sea level, all cherry picked for maximum impact.

Central Bank Fearmongering Blue Ribbon Contenders

  1. European Parliament: $24 Trillion in Damages
  2. Bank of England: 9 Meter rise in seal level (29.53 feet).

To decide who wins the blue ribbon, first let’s do a simulation.

10 Meter Rise in Seal Level

Mercy!

The above Alarming Map shows what might be left of Florida when the sea level rises by 10 meters.

Caney said 9 meters but the average elevation of Florida is allegedly only 6 feet. The highest elevation is only 312 feet.

Mark Carney Wins Fearmongering Blue Ribbon

I give Mark Carney the Central Bank fearmongering Blue Ribbon because people can understand the concept of Florida being three feet underwater.

In contrast, no one understands $24 trillion. Besides, that estimates will soon be $250 trillion or higher due to Fearmongering Inflation.

Fearmongering Lesson

None of the above tops AOC who says World Will End in 12 Years: Here’s What to Do About It

Here’s a lesson for you climate fearmongers: Never put a time frame on your prediction that is shorter than your expected life or you will be ridiculed until you die.

Mike “Mish” Shedlock

Be seeing you

 

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