Good Morning to you all!
I am delighted to be here again at the prestigious Annual Central Banking Seminar, a flagship event of the Federal Reserve Bank of New York for which it has earned global renown. It is truly an honour to interact with central bankers from around the world, our community of tomorrow. You embody the theme of India’s G20 Presidency – Vasudhaivya Kutumbakam: the world is one family.
The Climate is Striking Back
In my past interactions in this Seminar, I have dwelled on macroeconomic stability; price stability; exchange rate stability; financial stability – all essentially issues centered around the core competence of conservative central bankers from which we are reluctant to stray. After all, central banks stand for stability.
Today, however, I will venture to address a theme which threatens to overwhelm all these aspects of stability – the sum of all fears, to borrow the name of a gripping 2002 movie starring Ben Affleck and Morgan Freeman. It is a theme about which several central banks have expressed reservations about engaging in order to avoid mission creep, while others have expressed inability in view of lacking the instruments to deal with it. The stark ominous reality is that the climate is striking back. Central banks cannot be immune or inactive any longer.
Climate change is not new. The earth’s climate has changed in the past, and quite drastically. The Smithsonian National Museum of Natural History has released findings about the earth’s temperature over the last 500 million years. They show warm temperatures dominating most of the time, with global temperatures repeatedly rising above 26.6 degree Celsius (°C) and even above 32°C – much too warm for ice sheets or perennial sea ice. In fact, polar caps cannot exist when the temperature crosses 18°C. This is the fever line. About 250 million years ago, it was too hot for even swamps to exist! In the last 100 million years, global temperatures have peaked twice. In fact, during much of the Paleocene and early Eocene epochs 55-56 million years ago, the poles were free of ice caps, and palm trees and crocodiles lived above the Arctic Circle. About 60 million years ago, the earth’s climate changed dramatically due to the devastating impact of a large asteroid colliding with the earth, leading to the extinction of dinosaurs. However, one dinosaur survived – the theropod group, which included T-rex. It evolved into the birds that rule earth’s skies today.