Discussion about this post

User's avatar
Bob's avatar

Tyler Cowen just recommended Scott Sumner's new book on market monetarism. Can we get a future post about your take on that philosophy?

Expand full comment
dcomerf4's avatar

Think you miss an important part of the policy demands here: forcing climate risk considerations into financial stability tests enables climate policy by government.

John Cochrane has had a couple of posts on how ridiculous it is for climate change considerations to be part of financial stability concerns. And on physical risk, he's probably right, on any time horizon that current policymakers should be concerned with. But he's very wrong on transition risk.

Transition risk is policy that makes formerly profitable businesses bust. The Fed forcing banks to conduct climate stress tests will mean that businesses exposed to transition risk will not get loans. So monetary policy authorities implement some climate policy in this way. And it also means the banks don't go bust when transition risk is realised. Which makes climate policy by the government easier to implement (as they won't be killing the financial sector when they do so).

So I understand entirely the Squad's insistence that climate change be part of the Fed's remit.

Expand full comment
45 more comments...

No posts