How To Be Accidentally Right, Central Banking Style

On Monday, 114 climate activists were arrested in New York City after having made quite the spectacle outside the Federal Reserve building. The stunt came just days after tens of thousands of protesters gathered in Midtown to protest world leaders’ lack of viable action on “the climate crisis,” leading up to President Biden’s Wednesday address at the UN on, among other things, climate change. 

One activist told The Guardian that “Fossil fuel companies … wouldn’t be able to operate without money, and that money is coming primarily from Wall Street.” In a video circulating on social media, an activist passionately screamed into a megaphone “We need clean air, not another billionaire,” with the crowd eagerly tagging along. As these things go, a number of other noticeable institutions such as BlackRock, Citibank and the Museum of Modern Art also received their fair share of anger. 

Perhaps one shouldn’t expect to find truth or accuracy in what’s mostly an entertaining and virtue-signaling publicity stunt, but still, there are some things to clear up. 

First, fossil fuel companies operate real businesses in the real world, moving real stuff and providing real value — something these activists have likely never accomplished. They live in the world of “let it be done” (i.e., fiat) where words mean everything and “improvements” and “solutions” mean passing a law or writing up a regulation. It is their right to have light bulbs buzzing in their heated and cushy NYC apartments, never mind the trade process for how those light bulbs get there (at the cost of about 1.5 minutes of the average earnings for an employee in NYC) or the energy systems that power them. Ironically, and I’m invoking the economist’s meaning of the term “real” here, processes like drilling oil or providing energy are fundamental enough that they operate regardless of monetary regime. The Soviet Union could extract hydrocarbons too; we don’t need money or even capitalism to drill for oil. 

Second, what activists really mean by “money” is financing — a conflation that we will temporarily allow. Even so, the Fed doesn’t finance fossil fuel companies; if anything, central banks around the world have gone out of their way to penalize bankers and investors for supporting fossil fuel companies. Not even Wall Street is particularly keen on holding Big Oil under its wings these days, as Insider reported earlier this year:

Last year, JPMorgan slashed its fossil fuel financing by 42 percent, while Citi cut funding almost 28 percent and Wells Fargo reduced it by about 21 percent. Overall, the 60 banks studied in the report reduced fossil fuel financing 16 percent YoY between 2021 and 2022.

While we all pray for ESG (environmental, social, governance) mania to die out, it’s still very much alive and kicking.

At any rate, giant oil and gas companies made record earnings in Q1, so they don’t exactly need financial markets to fund their operations. 

Third, the billionaire class hasn’t anything to do with this. At best, there are a couple of thousand of them in the world, and even with private-jet level carbon footprints they wouldn’t account for much in the cosmic battle against invisible gasses. 

Many of the highest profile billionaires, Mark Zuckerberg, Michael Bloomberg, Elon Musk, Jeff Bezos, Bill Gates, won’t stop fretting about their green initiatives, policy proposals, books and climate actions. But in the ordinary course of capitalism, billionaires become such by providing value, so attacking them for having produced a lot of it is a little strange. Under capitalism, one gets rich by building large, profitable companies that immensely improve the lives of others, not by screaming or singing catchy climate slogans. The New York Fed doesn’t mint billionaires… 

…except, importantly, in the last few decades when the route to wealth has gone straight through the heart of financial Ponzis, bubbled property markets, interest rate subsidies and monetary stimuli. VC funds, bullshit industries, invasive Big Tech and other Cantillionaires of the world have been getting obscenely rich from efforts that trace back to the money printer. Large corporations have been financing themselves at generous rates below the real-world inflation that the rest of us have to suffer. Corporate zombies are everywhere, dead inside but kept alive by easy money. During the banking crises earlier this year, the Fed and the FDIC did prop up zombie banks and backstop mismanaged banks that deserved to fail. 

Note that the protests in question are not taking place outside Walmart or McDonald’s, these iconic brands of the supposedly late-stage, gluttonous, consumerist capitalism, or even energy giant ExxonMobil or Chevron.

They are protesting outside the source of monetary and financial disturbance.

I’ve long held that the left is an excellent bellwether for broken systems. Its denizens have a particularly sensitive nose for everything that’s truly wrong, even if their ability to correctly identify the causes and assign blame are less accurate. 

Of course, truth is not established by a show of hands, and reality isn’t assessed or changed by the rallying cries of megaphone-wielding activists. Perhaps I was wishing for too much here, looking for economic logic and nuance in the rallying cries of a climate protest. Still, the money is broken, and while these activists might not be able to explain how, they’re not wrong in pointing their fingers at the monetary authority at the center of it all. 

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