Tags: Forbes | Paulson | climate | financial

Steve Forbes: Henry Paulson Errs in His Crusade Against Climate Change

By    |   Wednesday, 02 July 2014 10:38 AM

In his fight against climate change now and his actions around the financial crisis as Treasury secretary, Henry Paulson has flubbed big-time, says Forbes Media Chairman Steve Forbes.

He compares Paulson's mistakes to those of Robert McNamara when he was U.S. Defense Secretary from 1961 to 1968 and when he was president of the World Bank afterward.

"McNamara is long gone, but bad-judgment-cum-grandiosity is alive and well in the person of former Treasury Secretary Hank Paulson," Forbes writes in his publication.

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"Not content with bearing major responsibility for one of our worst-ever economic disasters — one whose effects, thanks to persistent errors, weigh us and the world down to this day — Paulson now wants to help lead the charge to save us from global warming."

The former Goldman Sachs CEO, who recently wrote an opinion piece in The New York Times detailing his views on climate change, is wrong on multiple fronts, Forbes insists.

"The global-warming issue is hardly settled. Temperatures change for a variety of reasons, including sun spots. Such shifts have been going on from time immemorial," he notes.

"Even if you buy into man-made climate change, the inconvenient truth indicates that, overall, warming does more good than harm. Nonetheless, Paulson wants to burden us with more taxes to force the use of renewable energy sources."

Germany has gone all in on renewables and its electricity costs are approximately three times those in the United States, Forbes argues. "Paulson airily dismisses energy cost differentials."

As for the financial crisis, "the principal cause was the weak-dollar policy that he and two of his predecessors pursued," Forbes explains. "Weak money always begets economic disasters."

But when the value of money is fixed, which the dollar was for 180 years under the gold standard, it generates long-term growth, he maintains.

"When you undermine a currency, money flees to commodities and other hard assets," Forbes states. "Yet Paulson, his immediate predecessors and the Federal Reserve have never linked the dots between the weak dollar and the surge in oil prices or the bubble in housing."

Paulson also erred in his bailout of Bear Stearns, encouraging expectations that Lehman Brothers would receive the same treatment, and in making solvent banks accept government bailouts, he states.

"It all added up to a catastrophic mess," including "unprecedented power-grabbing" by the Fed, Forbes adds. "No wonder the economies of the U.S. and the world are struggling."

Other commentators agree that the central bank has gone too far in its massive easing program. Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute, is one of them.

"Central banks should wind down expansionary monetary policy without delay," she writes in an article for MarketWatch.

"One of the consequences of this accommodative monetary policy has been an exuberant financial market and a weak real recovery, as monetary policy has failed to encourage investment."

While the Fed has cut back its bond purchases to $35 billion a month from $85 billion last year, its balance sheet has mushroomed to $4.3 trillion. And its federal funds rate target remains at a record low of zero to 0.25 percent.

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Economy
In his fight against climate change now and his actions around the financial crisis as Treasury secretary, Henry Paulson has flubbed big-time, says Forbes Media Chairman Steve Forbes.
Forbes, Paulson, climate, financial
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2014-38-02
Wednesday, 02 July 2014 10:38 AM
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