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The U.S. Federal Reserve’s take on greening the economy: Not our job

By Ann Saphir and Lindsay (NYSE:LNN) Dunsmuir



The U.S. Federal Reserve's take on greening the economy: Not our job
© Reuters. FILE PHOTO: Climate change activists voice their opposition to U.S. President Joe Biden reappointing Jerome Powell to serve a second four-year term as the chairman of the Federal Reserve and demand Biden appoint a climate advocate, during a rally outside


By Ann Saphir and Lindsay (NYSE:) Dunsmuir

(Reuters) – The U.S. Federal Reserve trails other major central banks in tackling climate change, even as President Joe Biden pledges a “whole of government” approach and fights to salvage his ambitious climate agenda as global leaders meet in Glasgow to hash out responses to rising world temperatures.

In recent years the Fed has only begun to look at how changing weather patterns impact its ability to do its job, which includes safeguarding the financial system through bank regulation, and combating economic shocks through monetary policy.

And while it is devoting more effort to studying climate-related impacts, it treats climate risk as just another element that affects the economic and financial landscape, like trade or childcare policy, rather than as anything the Fed might try to shape.

That puts it well behind its peers who are gearing up to buy green assets, crack down on fossil-fuel lending, and push companies toward lower-carbon choices.

The hesitance to prioritize action on climate risk at the world’s most powerful central bank will have consequences, analysts and activists say, not just for the U.S. economy but for a global financial system whose largest actors are in New York.

“If [the U.S.] are laggards, it won’t be good for our markets, it won’t be good for our companies,” said Sanjay Patnaik, a Brookings Institution fellow specializing in climate policies. “The U.S. doesn’t want to fall behind, or our financial system will be more vulnerable to climate risk.”

Fed policymakers could catch up relatively quickly “if they engage fully,” he said, particularly by implementing stress tests to gauge banks’ vulnerability to climate risks such as higher temperatures or exposure to loans financing fossil fuel. The Bank of England has already started such testing, with a view to using the results to nudge banks to be better prepared.

Such tests could fall under the Fed’s own remit for financial stability and Fed officials have said they will explore the possibility. But, leery of blowback on what is a fraught U.S. political issue, they maintain it’s up to Congress, not them, to incentivize businesses to go green.

As Fed Chair Jerome Powell summed it up this summer: “We are not and we don’t seek to be climate policymakers as such.”


In the past year, the Bank of England and the European Central Bank have released comprehensive plans to help manage the transition to a greener economy, including using their asset-buying clout to selectively benefit less-polluting companies.

By contrast, the Fed, central bank to the largest greenhouse-gas producing country, remains stuck near the starting gate. It was the last major central bank to sign up to the Network for Greening the Financial System when it joined in December 2020, and has only just begun an effort to analyze financial-stability risks from climate change, but so far embracing no new policies to address it.

“When I think about why are other banks ahead of us really – and they are – it’s because in those governments, they decided some years back that these are critical risks,” San Francisco Fed President Mary Daly said recently. Her bank has several economists leading the charge at the Fed on climate-change research.

Others such as the ECB and People’s Bank of China have started green bond programs — purchasing debt to finance environmentally friendly projects — to nurture a transition toward alternative energy. The Fed views such policies as beyond its economic and financial stability mandates.

Daly acknowledged that as fire seasons lengthen, droughts deepen, and severe weather disrupts more economic activity, the Fed may need to respond more assertively.

“If climate effects occur and they are bridling the growth of our economy and putting us below our potential, then it would be our job to lean against the risks,” she said, although she added that’s different to mitigating climate risk directly.

The Fed’s role is “not to even pull levers that would do that. It’s really to be students of it so we are well prepared,” Daly said.


Last Friday, activists demonstrated at many of the regional Fed banks and at the Fed Board in Washington, demanding more action and the replacement of Powell with a leader more focused on climate. Powell awaits Biden’s decision on whether to nominate him for a second term, with critics seeing his assertion of climate change as a “longer-term issue” as a black mark against him.

“What we are pushing for is an aggressive level of regulation that we don’t think he has the appetite for,” said Kathleen Brophy, senior strategist at the Sunrise Project, a youth environmental activist group helping to organize the protests. “They have definitely stepped up on this issue for sure – but it doesn’t match the urgency.”

Others point out the Fed remains caught between an administration with a much bolder climate change agenda than in the Trump era and a Congress where Republicans and a few Democrats oppose action on climate change.

Even the small steps taken so far have drawn some rebukes.

In a letter to Daly, Republican Senator Pat Toomey called the bank’s climate-change research “politically charged” and asked the Fed to abandon what he termed mission creep.

“Such activities are inconsistent with its statutory responsibilities; only Congress has the authority to reform the Federal Reserve or modify its mission,” Toomey said.

But while the Fed’s mandate is fairly narrow, its responsibilities are wide, and this is where it can take a stand on climate, analysts say.

“I think the Fed can and should be ahead, in the sense of that it’s their job to supervise banks,” said Paul Fisher, a former policymaker at the Bank of England who coordinated its climate initiatives. “Climate change is clearly a material threat to the banks and they have to supervise that… supervisors ought be getting on with this quietly in the background. Most of the banks recognize it’s a financial risk. It shouldn’t be that controversial.”

And the Fed is forging ahead on its exploratory path. In October it signed on to a report on climate-related financial risk with other U.S. regulators that, for the first time, framed global warming as a financial risk.

“That’s the major contribution of the…report,” Patnaik said. “How do you get people to care about something? You tell them it’s a risk to their livelihood and their assets.”


World food prices chart: World food prices have plummeted



why worldwide food prices are rising

Why are worldwide food prices rising? First, because of the current world situation. But world food prices fell sharply in July, with prices of major grains and vegetable oils dropping more than 10% in a month. 

World food prices chart

The Food Price Index was 140.9 points in July, down 8.6% from June. The drop in the index value continues for the fourth consecutive month after it reached an all-time high at the beginning of the year. Compared to July 2021, the index is up 13.1%. 

Despite the decline in high food prices, there are still many uncertainties around the world, such as high fertilizer prices, exchange rate volatility and weak global economic forecasts.

Vegetable Oil Price Index fell 19.2% in July from a month earlier, reaching its lowest level in a decade. Global cereal prices fell 11.5% for the month, still 16.6% higher than last year. Wheat prices fell the most (14.5%). 

World sugar prices over the month decreased by 3.8%; dairy products — by 2.5%, meat — by 0.5% due to weakened import demand for beef, lamb, and pork. At the same time, chicken meat rose in price due to strong demand and lower production volumes related to bird flu outbreaks. 

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Are hedge funds bad? Investors are disappointed in hedge funds



are hedge funds bad

Are hedge funds bad? This year is sure to be one of the worst years in hedge fund history. In the first six months of 2022, funds posted losses of 5.6%, according to HFR. In July, though, they rebounded by 0.5%, but nevertheless, writes the Financial Times, the sector is well on its way to its second-lowest year in a third of a century, since 1990, when they started keeping records. The only time the hedge fund market was worse than this was during the financial crisis in 2008.

Are hedge funds losing money? 

Most of the problems are accounted for by so-called long-short-term funds, whose assets total about $1.2 trillion. The results of their activity depend directly on the securities market. In the first half of this year, these funds lost an average of 12%, according to HFR data. This category of funds earned only about 1% in July, according to JPMorgan’s John Schlegel calculations, well below the 7% rally in the stock market last month.

Among the hardest hit is the well-known Maverick Capital fund, which has been making double-digit returns to its investors for the past three years but lost 35% in January and June of this year. Similar losses have seen Skye Global, which has pleased investors with high returns over the past six years, but lost 10.4% in June alone. The fund was let down by a large stake in Amazon, which fell 36% in January-June 2022. However, in recent weeks, the retail giant has improved and cut its losses in half, to 19%. 

Already the first signs are starting to emerge that the losses are scaring investors. While they invested a total of $13.92 billion in hedge funds last year, only $440 million in the first quarter. There was a strong outflow of funds in March, and in June it exceeded $10.1 billion, according to Citco’s fund administrator. Redemptions are expected to be $7.8 billion in the third quarter and $6.4 billion at the end of the year.

Weak performance in the first half of 2022 and investor dissatisfaction, however, have not affected the sector’s confidence in its ability to raise funds. A survey of 100 hedge funds by technology company SigTech found that nearly one-in-four (23%) expect a sharp increase in investor activity in the next two years; 60% of respondents expect a slight increase in activity and only 4% believe investor activity will decline in 2023-24.

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Chinese economy 2022: China will give up first place in the list of the largest importers of raw materials



chinese economy 2022

Chinese economy 2022 news: China’s commodity-buying companies will be adversely affected by government debt and demographic problems.

Over the next ten years, debt problems and slowing population growth may force China to cede the unofficial title of world’s largest buyer of raw materials and minerals to India. 

Chinese economy analysis — the current situation

The structural challenges will make it very difficult for Beijing to accept and implement most of the policy initiatives coming from the center. Apart from the Chinese economy, this trend will have a major negative impact on mining companies around the world, many of which are heavily dependent on demand in China. Incidentally, many such companies are located in Australia.

China will likely be replaced in the next few years by India. If UN statistics are to be believed, India could overtake China regarding population as early as this year. This will have not only psychological, but also “material consequences” for the global market of raw materials and minerals.

China has been much criticized for shifting to mindless spending to combat the economic slowdown. Lowy Institute economist Roland Raja is pessimistic about the growth prospects of the Chinese economy. Even though the Indian economy is only a small part of the Chinese economy, he sees no signs of a slowdown soon. 

China will try to be more aggressive this year in combating the economic slowdown. Beijing will invest very heavily in the extractive industries.

Moyo also believes that Beijing will no longer be able to regain the high growth rates of past years. According to her forecast, China’s economic growth will be 4% this year. Recall, the Chinese leadership set a higher target of 5.5%. Incidentally, this is the lowest growth in the Chinese economy for the past three decades. In the second quarter of this year, China’s economic growth slowed to 0.4%.

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