Fear Climate Change Policy, Not Climate Change! By James Reed
The Wall Street Journal was not only brave, but totally correct in saying that climate change policy is a greater threat to economic security than any supposed climate change, whatever that is. Energy prices in Europe, for example are crippling industry and business in general, continuing the body blows received from the Covid plandemic and its insane lockdowns of businesses. In the UK alone 100,000 firms face insolvency in the next few months, maybe by January 2023. Ten percent of German businesses face the same economic existential threat. So, if the Greens like Greta Thunberg want deindustrialisation, they are set to get it in record time. Only thing is that the de-industrial school thought that this process could be done with some sort of alternative economy set up, delusional, but slightly saner than the hard landing the Greta Thunbergs of the world seem to want us in. It will truly be a type of Mad Max scenario, sans the hot cars. There will not be the fuel for that in the coming economic collapse, orchestrated for the Great Reset, and Great Replacement of the West by communist China.
“Let’s come right out and say it: Anyone who still thinks climate change is a greater threat than climate policy to financial stability deserves to be exiled to a peat-burning yurt in the wilderness.
Lest you’ve forgotten, the world’s central banks and other regulators are in the middle of a major push to introduce various forms of climate stress testing into their oversight. 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.
The culprit is energy prices, which the consultancy believes could account directly for around one-quarter of the possible insolvencies. These prices are rising for British businesses in intervals of several hundred percent at a time and sometimes with steep deposit requirements from utilities that fear precisely a wave of bankruptcies.
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.
European governments aren’t blind to the energy-price threat—an awareness that, perversely, creates a threat of its own. The only politically viable solution for this winter will be subsidies on a monumental scale. Hundreds of billions of dollars for households and businesses (and utilities) across the Continent already have been announced, and desperate capitals won’t stop there. This will require substantial borrowing on top of the fisc-wrecking bond issuance during the pandemic.
All of this adds up to an extraordinary threat to financial stability. Banks and other financial firms inevitably will find themselves right at the edge of the water if or when a tsunami of energy-price bankruptcies washes ashore. Meanwhile, they’ll be called on to mediate extraordinary levels of new government borrowing—on top of the additional borrowing governments normally do during recessions to finance social-welfare assistance. All of this while interest rates start rising after resting for more than a decade on (or below) the floor.
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.
Politicians are happy to blame Vladimir Putin
and his Ukraine invasion for the current energy disaster. But what transformed that one-off shift in the relative price for energy into a global disaster was two decades of green-energy policy beforehand. In Europe, that includes a fixation on renewables incapable of powering industrial economies absent battery technologies that don’t exist, a refusal to tap domestic fossil-fuel reserves such as shale gas, and a deep and irrational hostility to nuclear power in many parts of the Continent.
This has created an energy system of dangerous rigidity and inefficiency incapable of adapting to a blow such as Russia’s partial exit from the European gas market. It’s almost inevitable that the imminent result will be a recession in Europe. We can only hope that it won’t also trigger a global financial crisis.”
Unfortunately, is almost certainly will.
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