In August 2021, a group of lawmakers including Reps. Alexandria Ocasio-Cortez (D-N.Y.), Rashida Tlaib (D-Mich.), Ayanna Pressley (D-Mass.), Mondaire Jones (D-N.Y), and Chuy Garcia (D-Ill.), issued a public statement to President Biden, “As news of the possible reappointment of Federal Reserve Chair Jerome Powell circulates, we urge President Biden to reimagine a Federal Reserve focused on eliminating climate risk and advancing racial and economic justice."
These deep thinkers of Congress continued, "Under his leadership the Federal Reserve has taken very little action to mitigate the risk climate change poses to our financial system."
The congresspersons’ comments were duly noted (I guess) and Jerome Powell was reappointed to another term as chairman of the Fed.
A Lotta People Can Do DamageThe president recently nominated Sarah Bloom Raskin for the position as the Fed’s vice chair for bank supervision. Not a high-profile position, but a highly influential one to be sure. Raskin would be Team Ocasio-Cortez’s dream plan-B pick. She’s bringing all the right attitude to the job.
But it’s also terrible because it highlights a huge bias on her part. That government and other agencies (like the Fed) should be picking winners and losers. That they should be using their power to shape the evolution of our economy from the top of their ivory towers down.
In an op-ed last September, she painted this delightfully apocalyptic picture of the future: “As this year’s brutal summer showed, it has become increasingly easy to track the consequences of climate change. Just as extreme weather is claiming more and more human lives, more and more species are being lost to extinction. Entire communities have been displaced by savage storms and intolerable temperatures, and rising sea levels and unstable agricultural production threaten to destroy millions of jobs.”
Naturally, she called on government agencies who don’t have a specific mandate to solve the problem: “But even though the United States lacks a single monolithic financial regulator, the complexity of its regulatory apparatus need not imply climate inaction. While none of its regulatory agencies was specifically designed to mitigate the risks of climate-related events, each has a mandate broad enough to encompass these risks within the scope of the instruments already given to it by Congress. Accordingly, all U.S. regulators can—and should—be looking at their existing powers and considering how they might be brought to bear on efforts to mitigate climate risk.”
A Great Leap BackwardThis kind of thinking is a free market economy’s worst nightmare.
Not that we live in a free-market economy—but it is a reasonable facsimile. And we should keep it that way as much as possible.
It’s bad enough that Congress and the Fed have flooded our economy with fiat money and helped spark a round of roaring inflation. But the idea that government agencies, populated with career bureaucrats, could actually direct the evolution of a $25 trillion economy is just absurd. That’s the market’s job.
I’d refer you to Mao’s “Great Leap Forward” to see the kinds of results centrally managed economies deliver.
Right now her confirmation rests in the hands of the U.S. Senate. Should she be approved, it would largely add another layer of uncertainty to what is already a jittery market. And in uncertain times, markets catering to basic human needs are often your best bet. Oil’s not going anywhere but up, and that means funds like the Energy Select Sector SPDR Fund (XLE) should continue to do well. Commodity prices should follow so I’d look for any one of the Elements Rogers International Commodity Indexes to perform as well.