Supply Chains
Over the past year, U.S. consumer prices have risen by about 7%. Although some experts attribute the rise to President Biden’s COVID-19 relief package, there may be an additional culprit: climate change-induced threats to the supply chain, which are causing “greenflation.”
“For years, scientists and economists have warned that climate change could cause massive shortages of major commodities. . . That phenomenon, long hypothesized, may be starting to actually arrive. Over the past year, unprecedented weather disasters have caused the price of key commodities to spike.”
For example, when the U.S. experienced its hottest summer on record last year, “searing heat—combined with record-setting drought—gave rise to swarms of grasshoppers that devoured the wheat crop. Those conditions helped push wheat prices to their highest level in years.”
Similar conditions have plagued the lumber industry, where productive capacity has declined as a result of wildfires and floods, and prices have reached new highs.
It is doubtful that the Federal Reserve can fix greenflation through rising interest rates. One lumber trader remarked that “raising interest rates will blunt demand for housing—no doubt. But if you blunt demand enough to bring lumber prices down, you’re destroying the economy. Raising rates doesn’t grow more trees.”
Federal Reserve
Sarah Bloom Raskin’s nomination to be Vice Chair of Supervision for the Fed faces significant pushback from Republican senators, who seem likely to be unified in opposing her confirmation.
“Several Republican lawmakers referred to an opinion piece critical of government support for fossil fuel companies that Ms. Raskin wrote for the New York Times in 2020.” However, at her confirmation hearing, Raskin “rebutt[ed] the idea that she would favor using bank supervision to choke off lending to oil and gas companies.”
In response to questions from senators, Raskin repeatedly said “it is inappropriate for the Fed to make credit decisions and allocations based on choosing winners and losers—banks choose their borrowers, the Fed does not.”
Raskin’s confirmation also faces a different roadblock: If she receives no support from Republicans, then New Mexico Senator Ben Ray Luján—who is currently absent from the chamber while recovering from a stroke—may need to provide the 50th vote. Her confirmation may be delayed as they wait for Senator Luján to make a full recovery.
