“We always find the strength to bear the misfortunes of others,” the French writer La Rochefoucauld observed centuries ago. And when the misfortunes are those of the victims of climate change, our politicians and their corporate sponsors are like Atlas, strong enough to bear a world of hurt on their well-tailored shoulders.
They may find themselves feeling just a little shaky, however, after a recent open letter written by Canadian Mark Carney, governor of the Bank of England, with Banque de France governor François Velleroy de Falhau and Frank Elderson, chair of the Network for Greening the Financial Services (NGFS).
These guys are not shaggy Extinction Rebellion protesters being busted in London. And teenage activist Greta Thunberg would likely ask why they took so long to admit what’s been obvious since long before she was born in 2003.
But Carney and his colleagues advise the masters of the universe; they are the consiglieri of the world’s corporate capos, and when they murmur a warning in the capos’ collective ear, wise capos heed them.
Their open letter announced the first report of the Network for Greening the Financial Services, a group that includes central bankers from around the world. That report tells the capos that “climate-related risks are a source of financial risk.” (Greta Thunberg and billions of other girls would roll their eyes.)
The report continues with equally obvious warnings: climate change will affect the economy on all levels from households to government; it’s highly certain; it’s irreversible; and it depends on short-term actions (right now, this minute) by “governments, central banks and supervisors, financial market participants, firms and households.”
Back to 1960
I can imagine how badly the Trudeau government will take this advice, never mind the Conservative provincial governments that now extend from Edmonton to Toronto. Their agendas amount to burning fossil fuels as fast as possible, whether by shipping them overseas, flying Canadians to charming tourist destinations or burning gas domestically in their Ford F150s.
But Carney and his colleagues are consiglieri who can count. They’re reminding the capos that sometimes there’s no money left in the racket.
“The stakes are undoubtedly high, but the commitment of all actors in the financial system to act on these recommendations will help avoid a climate-driven ‘Minsky moment’ — the term we use to refer to a sudden collapse in asset prices,” he wrote.
A Minsky moment is the instant when you realize that the house you’ve bought is worth less than the mortgage you’re still paying off. When, even if the house is paid off, selling it wouldn’t sustain you through even a short retirement — not after you’ve also paid off the consumer debt you’ve blithely run up ever since your first student loan.
Running on fumes
That debt has put Canadians at the bottom of a hole $2.16-trillion deep, the highest relative household debt load of any Group of Seven country. We are collectively running on the CO2 fumes of our fossil fuels.
According to a recent report, almost half of us are just $200 from insolvency and our own personal Minsky moment.
That helps to explain why Alberta is so obsessed with expanding the Trans Mountain pipeline: Albertans have the highest average debt in the country. After borrowing during the boom years, the average Alberta household debt rose from $164,000 in 2010 to $192,000 in 2016. And that includes an average mortgage in 2016 of $124,000.
A Minsky moment might start when enough debtors declare bankruptcy to cause problems for their banks. Or it might start when oil companies realize even a pipeline won’t save them, fire all their workers, and shut down. Or when sanctions shut off Iranian oil and the price soars beyond many countries’ ability to pay.
As Dr. Samuel Johnson famously observed over two centuries ago, “Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.” Mark Carney may carry enough credibility to concentrate the minds of the masters of the universe, who might then hit the brakes and adopt climate-friendly investment policies, with the paid applause of their political servants.
But Hyman Minsky and a few like-minded economists warned of disaster in the 1990s, and the market still imploded in 2008. Heroic measures saved the system, which recovered only to fund the presidential campaign of Donald Trump.
Politicians talk about “balancing” the environment and the economy; it’s understood as code for business as usual and never mind the emissions. Carney and his colleagues are reminding the capos that business as usual is going to cost them far more than diverting their funds into renewable, sustainable energy.
The capos should be grateful: it’s an offer they can’t refuse.