Wednesday, January 23, 2008

Off to Switzerland...

My oh my how a year changes everything, just a year ago in Davos, Switzerland at the World Economic Forum, the focus was on climate change and a warm economic future. To give you a sense of the world view at the time according to the Financial Times of London

Big risks to global economy 'receding'

ower energy prices and a more stable US housing market have diminished risks in the global economy to the point where the world now has the "luxury" of worrying about mispriced financial markets, according to the new first deputy managing director of the International Monetary Fund.

John Lipsky told the Financial Times that financial market risks - including general high asset prices, an explosion of structured finance or unwise trading in the yen - were "less pressing than those we worried about a few months ago".

Reading that article, you wonder how could we be so wrong. More appropo for this blog is the realization that climate change is definitively off the table and that makes this blogger admittedly nervous. A slowing economy will no doubt moderate consumption, but there is a real danger that green technologies will lose big as they will be underpriced by more polluting alternatives whose Research and Development costs have already been amortized. A worse case scenario is that car dealers will start unloading bloating inventories of SUVs at a discount which will once again become popular because of the declining cost of gasoline due to the current economic climate.

Other concerns is that in an effort to jumpstart the economy, employment will target toward larger industrial efforts leading to more carbon production. It's a perverse form of Gresham's Law where the bad drive out the good.

The challenge now will be stimulating investment, an environmental new deal that focuses on projects to reclaim our waste. If we develop programs that re-engineer our waste flow, we'll be able to come out of this economic slump stronger both economically and environmentally. However, I also know that more pressing concerns of paying the bills will make it difficult for people to focus on the long view. I'll try to keep perspective

The focus at Davos may have changed because a new bear is at the door, we just have make sure we don't forget the other bear hasn't left.


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