Financial Crisis or Oil Shock
Former CIBC chief economist for world market, Jeff Rubin, makes a strong case that the financial crisis is a symptom of a sudden doubling of the price of oil, which triggered a rise of interest rates that left sub-prime mortgages at an unprecedented level of risk to default. Rubin, in my opinion, is Canada’s leading economist who understands the link between energy resources, the economy, and financial markets.
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Risks, Consequences and Copenhagen
By DAVID LEONHARDT
Martin Wolf’s most recent Financial Times column contains one of the best short arguments for a new climate policy that I’ve seen. He notes that climate skeptics — or sceptics, in the British spelling — argue that the science of climate change is uncertain and that putting a tax on carbon emissions is therefore a mistake. Mr. Wolf then writes:
Yet it is not enough to argue that the science is uncertain. Given the risks, we have to be quite sure the science is wrong before following the sceptics. By the time we know it is not, it is likely to be too late to act effectively. We cannot repeat experiments with just one planet.
When you’re thinking about taking some kind of corrective or preventive action, you want to keep in mind two factors: the risk of a bad event occurring and the potential consequences of that event. In the case of the climate, the science suggests that the risks of a much warmer planet are significant and the potential consequences severe. Can we be certain that such consequences will occur? Of course not. But it seems a bit reckless to assume — to hope, really — that they won’t.
That’s precisely the sort of thinking that caused economic policy makers, at the Federal Reserve and elsewhere, to ignore the signs of a dangerous bubble in real estate and on Wall Street.
Mr. Wolf’s column is worth reading in full. It also includes more detailed arguments about what should happen at the coming Copenhagen climate conference and beyond.