Climate change: Fossil fuel emissions from electricity set to fall - report

 By Matt McGrath

Environment correspondent BBC/ April 11th 2023

The world will likely use fewer fossil fuels to produce electricity this year in a "turning point" for planet-friendly energy, a new report says.

It would be the first ever annual drop in the use of coal, oil and gas to generate electricity, outside of a global recession or pandemic.

As a result, fewer warming gases would be released during energy production.

The authors attribute the expected change to a boom in renewable energy led mainly by China.

Wind and solar now produce 12% of global electricity with enough wind turbines added in 2022 to power almost all of the UK.

Renewables are set to meet all growth in demand this year, the study from energy analysts Ember says.

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Making electricity is the single biggest contributor to global warming, responsible for over a third of energy-related carbon emissions in 2021.

So phasing out coal, oil and gas in this sector is seen as critical in helping the world avoid dangerous levels of climate change.

This new study looks at data from countries representing 93% of global electricity demand.

This, the fourth edition of Ember's Global Electricity Review, indicates that significant progress is now being made in reducing the role of fossil fuels in power production.

The major developments are the continuing rise of solar and wind as economically viable sources of electricity. Around the world, solar grew by 24% last year, enough to meet the annual demands of a country as big as South Africa.

Taken together with nuclear and hydropower, clean sources produced 39% of global electricity in 2022. The report finds that electricity produced last year was, in effect, the cleanest ever made.

But despite this, carbon emissions from the sector also continued to rise, as coal use edged up.

According to the report's authors this is because overall demand for electricity rose, and not all of it was met from clean sources.

There were also problems with nuclear and hydro electricity in 2022, with many French reactors offline, and Europe's rivers too low in many places for hydro generation.

However the report says that in 2023, the growth of wind and solar will be greater than the rise in demand - and this will start to turn the tide on warming gases.

"When you stop adding more fossil fuels to generate your electricity, you start seeing a fall in emissions," said Malgorzata Wiatros-Motyka, the report's lead author.

"This is extremely important in the context of rising electrification, as we have more electric vehicles, more heat pumps, so cleaning the power sector will drive emissions down in other sectors as well."

While the fall in fossil fuel emissions in electricity this year is expected to be small, around 0.3%, the authors believe the drop will continue and accelerate in subsequent years. Key to this is a fall off in the use of gas, which fell slightly last year according to the report, with some countries like Brazil seeing a surge in hydro power which reduced their use of gas by 46% in 2022.

"We now have reached this next turning point of starting to see a new era of falling fossil fuel power sector emissions. We know that wind and solar are the answer and we've just got to get on with a roadmap for building them as quickly as possible," said Dave Jones, from Ember, one of the report's authors.

One significant player impacting the overall trend is China. Around 50% of the global addition of wind power came from China and about 40% of the world's new solar came from from the country that's also the world's biggest use of coal power.

"There is a chance that at the rate that China is building wind and solar and all types of clean generation, that they achieve that peak in coal generation earlier than 2025, which would be significant," said Mr Jones.

Energy experts acknowledge that curbing fossil fuels in power generation could well be a "turning point", but much more remains to be done.

"The earliest peak of coal power generation was in the UK in 1979," said Prof Jessica Jewell from the University of Bergen, who was not involved with the study.

"Nevertheless, it took decades to fully phase out coal power, for example the UK still used a bit of coal in 2022, 43 years past the peak. In order to reach clean energy goals we don't have 40 or even 30 years, we need to fully decarbonize electricity in a much shorter time."

Keynes had No Formal Economics Degree - Is There a Lesson Here?

 Like myself I do not hold a degree in economics....and probably just as well !! RS

MONDAY, MARCH 5, 2012

Reference Source 

http://socialdemocracy21stcentury.blogspot.com/

John Maynard Keynes was educated at King’s College, Cambridge from 1902–1906. In June 1905, he underwent the Tripos examinations, and was ranked in twelfth place. Keynes then spent another year at Cambridge through a King’s scholarship (Moggridge 1992: 82).

By this time, Keynes’s interests turned to economics. He started to read economics in June 1905, with Alfred Marshall’s Principles as a textbook, though Keynes was soon reading Jevons’s Theory of Political Economy. He also began to spend time with the Marshallian economist Arthur C. Pigou, who was now a lecturer (Moggridge 1992: 82). By 12 October 1905, Keynes applied to attend Marshall’s lectures (Moggridge 1992: 95). By November 1905, Keynes had decided he was good at economics, and Marshall was even asking him to become a professional economist (Moggridge 1992: 96). By December 1905, however, Keynes decided to concentrate on preparations for the Civil Service Examination, and abandon the Economics Tripos (Skidelsky 1983: 166).

Robert Skidelsky (1983: 166) actually points out a very interesting fact:

“[sc. Keynes] … never did take an economics degree. In fact, his total professional training came to little more than eight weeks. All the rest was learnt on the job.”

The greatest economist of the 20th century (at least in my opinion) had no formal economics degree. Are there lessons from this?

Probably that truly great minds do not need formal university degrees to make contributions to the social or natural sciences.

Of course, Keynes also had (1) a great deal of contact with the greatest British economists of his day, (2) much practical experience of government, having worked at the British India Office and Treasury, and (3) a great deal of time to read and reflect on issues that interested him, both as a fellow of King’s College and from 1909 a lecturer in economics (funded by no less than Alfred Marshall, who had a high opinion of Keynes).

I would have liked to say that Keynes’s lack of a formal university degree in economics left his mind open to new ways of economic thinking, but, in the end, I am not really sure this is true. Keynes was imbued with the standard neoclassical theory of his day, mainly from Alfred Marshall. The story of his contribution to economic theory is the gradual emancipation of his mind from neoclassical thinking, which continued to the end of his life, and perhaps was never really complete.

But that does not subtract from the importance of that achievement (for a excellent summary of his work, see Davidson 2009).


BIBLIOGRAPHY

Davidson, Paul. 2009. John Maynard Keynes (rev. edn.), Palgrave Macmillan, Basingstoke.

Moggridge, D. E. 1992. Maynard Keynes: An Economist’s Biography, Routledge, London.

Skidelsky, R. J. A. 1983. John Maynard Keynes: Hopes Betrayed 1883–1920 (vol. 1), Macmillan, London.

How the digital era helped speed up bank runs

 Digital Bank runs can and do happen very fast because money ofcourse is digital, or electronic these days. In TFE or Transfinancial Economics this point is realized....RS

Economy Updated on Mar 15, 2023 5:24 PM EDT — Published on Mar 15, 2023 4:46 PM EDT

NEW YORK (AP) — A bank run conjures images of “It’s a Wonderful Life,” with anxious customers crammed shoulder to shoulder, desperately pleading with a harried George Bailey to hand over their money.

The failure of Silicon Valley Bank last week had the panic but few other similarities, instead taking place on Twitter, message boards, mobile phones and bank websites.

What made the failure of Silicon Valley Bank unique compared to past failures of large banks was how quickly it collapsed. Last Wednesday afternoon, the $200 billion bank announced a plan to raise fresh capital; by Friday morning it was insolvent and under government control.

Regulators, policymakers and bankers are looking at the role that digital messaging and social media may have played in the collapse, and whether banks are entering an age when the psychological behavior behind a bank run — mass fear from depositors of losing their savings — may be amplified and go viral quicker than bank officers and regulators can successfully respond.

“It was a bank sprint, not a bank run, and social media played a central role in that,” said Michael Imerman, a professor at the Paul Merage School of Business at the University of California-Irvine.

The Federal Deposit Insurance Corporation estimates that customers withdrew $40 billion — one fifth of Silicon Valley Bank’s deposits — in just a few hours, prompting the agency to shut down the bank before 12 p.m. ET, instead of waiting until the close of business, which is typical operating procedure for regulators when a bank runs short of money.

Some other well-known bank failures, such as IndyMac or Washington Mutual in 2008 or Continental Illinois in the 1980s, only happened after days or weeks of reports indicated those banks faced deep financial difficulties. Then a run occurred and regulators stepped in.

EXPLAINER: What to know about the Silicon Valley Bank collapse

The Silicon Valley Bank run was, in many ways, the first of the digital era. Few depositors lined up at a branch. Instead, they used bank apps and phone calls to access their money in minutes. Venture capitalists and business owners described the early stages of the Silicon Valley run being led by private message boards or Slack channels, where entrepreneurs were encouraged to withdraw their funds.

Silicon Valley Bank also was unique in being almost entirely exposed to one community — the tech industry, venture capital and startups. When this close-knit community of depositors talked to one another — using digital channels to do so quickly — the bank likely became more vulnerable to rumors and a run. This was a risk outside of the growth of social media, industry experts said.

Sam Altman, CEO of Open AI, tweeted: “the speed of the world has changed. things can unwind fast. people talk fast. people move money fast.”

While the withdrawals initially may have been orderly, they became a full-on bank run Thursday evening after the news spilled over to Twitter that billionaire venture capitalist Peter Thiel had advised his invested companies to close their accounts with Silicon Valley Bank.

“If you are not advising your companies to get the cash out, then you are not doing your job as a Board Member or as a Shareholder. Daily life in startups is risky enough, don’t play with your lifeline…,” wrote Mark Tluszcz, the CEO of Europe-based investment firm Mangrove, on Twitter that Friday morning.

For David Murray, the warning of the first bank run of the social-media age came in a one-sentence email.

He’s a co-founder of Confirm.com, an employee performance management company in San Francisco that had millions of dollars sitting in accounts at Silicon Valley Bank.

Murray received a terse email Thursday morning saying that a run was underway there and recommending everyone pull their money out immediately. The email came from an investor whom Murray hears from so infrequently that his co-founder wondered if it was a phishing attempt or other scam.

ANALYSIS: What Silicon Valley Bank collapse means for the U.S. financial system

After verifying the email and seeing the steep drop in the stock price of the bank’s parent company, SVB Financial, Murray and his colleagues rushed to withdraw the company’s money. Instead of heading to a branch, they quickly pulled up a webpage and logged in. It took a few tries, but they eventually moved every cent to an account at a different bank within a half hour.

Murray could see fear rising among other startup companies in real time.

“We have a trusted network of founders” of startup companies who communicate with each other over Slack, Murray said. “Normally these chat groups are dead. But that day, all the Slack groups were lit up.”

As depicted with the fictional Building and Loan in “ It’s a Wonderful Life,” runs on a bank often start off as a rumor and can quickly devolve to a tribal-like collective fear that sends depositors clamoring for their money, even when nothing is wrong. Because a bank run can happen at random and is hard to stop once started, the U.S. government created the FDIC to stop future bank runs under the premise that depositors’ funds would be insured.

Between 1930 and 1933, during the Great Depression, roughly 9,000 banks failed. Since the FDIC’s creation in 1933, bank runs have become much rarer. According to the FDIC, there were 562 bank failures between 2001 and 2023, with the vast majority of those happening during the 2007-2009 recession.

The entire banking industry is now grappling with the fact that they could be the next target of a social media-fueled bank run. The hive-like behavior is similar to what happened during the 2021 “meme stock” boom where companies were targeted by groups of mostly retail investors, although in that case groups of investors were using social media to push stocks higher.

Silicon Valley Bank’s failure dominated social media platforms for days. Several prominent investors issued bombastic predictions that if the federal government did not step in to make all Silicon Valley Bank depositors whole — both insured and uninsured — there would be more bank runs on Monday.

In the end, Washington capitulated. Under the plan announced by U.S. regulators on Sunday, depositors at Silicon Valley Bank were able to access all their money. A new Federal Reserve program will allow banks to post certain high-quality securities as collateral and borrow from a government emergency fund. Both Treasury and Federal Reserve officials told reporters over the weekend that the programs were created in part due to concerns further bank runs — fueled by social media — could occur.

“The last several days represent a unique incident fueled by misinformation on social media and are not indicative of the health of our industry,” said Lindsey Johnson, president of the Consumer Bankers Association, in a statement.

For policymakers, there doesn’t appear to be any immediate solution. One possibility that’s been around for decades — also depicted in “It’s a Wonderful Life” — is the idea of a bank holiday where regulators close a bank for a few days to allow for cooler heads to prevail.

On Monday after the government stepped in to backstop the banking system, it seemed like a portion of the technology community had become aware of their ability to cause mass panic in finance and should be more careful when posting about the potential health of banks.

“In the age of social media, if you have a big enough platform and yell loud enough about a bank run, you might eventually be correct. Doesn’t make it right,” wrote Logan Bartlett with Redpoint Ventures.

Left: FDIC representatives Luis Mayorga and Igor Fayermark speak with customers outside of the Silicon Valley Bank headquarters in Santa Clara, California, U.S. March 13, 2023. REUTERS/Brittany Hosea-Small

Related

• As fears renews of bank weakness, stocks tumble on Wall Street

  By Stan Choe, Associated Press

• Analysis: Why Silicon Valley Bank and Signature Bank failed so fast

  By Vidhura S. Tennekoon, The Conversation

• Class action lawsuit filed against Silicon Valley Bank parent company

  By Michelle Chapman, Associated Press

Go Deeper

• bank run
• signature bank
• silicon valley bank

By — 

Ken Sweet, Associated Press

By — 

Stan Choe, Associated Press

What Is a Bank Run? Definition, Examples, and How It Works

 

By 

ADAM HAYES

 

Updated March 14, 2023

Reviewed by 

SOMER ANDERSON

What Is a Bank Run?

A bank run is when a large number of customers of a bank or other financial institution withdraw their deposits at the same time over fears about the bank's solvency. As more people withdraw their funds, the probability of default increases, which, in turn, can cause more people to withdraw their deposits. In extreme cases, the bank's reserves may not be sufficient to cover the withdrawals.

• A bank run occurs when a large group of depositors withdraw their money from banks at the same time.
• Customers in bank runs typically withdraw money based on fears that the institution will become insolvent.
• With more people withdrawing money, banks will use up their cash reserves and can end up defaulting.
• Bank runs have occurred throughout history, including during the Great Depression and the 2008 financial crisis.
• The Federal Deposit Insurance Corporation (FDIC) was established in 1933 to try to reduce the occurrence of bank runs.

How Bank Runs Work

Bank runs happen when a large number of people start making withdrawals from a bank because they fear the institution will run out of money. A bank run is typically the result of panic rather than true insolvency. However, a bank run triggered by fear can push a bank into actual insolvency. So what begins as unfounded panic can eventually turn into a default.1

Most institutions have a set limit to how much they can store in their vaults each day. These limits are set based on need and for security reasons. At the same time, banks are required to keep a minimum amount of cash reserves on hand, either in a bank vault or in an account with a central bank, to minimize the risks related to bank runs.23

Because banks typically keep only a small percentage of deposits as cash on hand, they must increase their cash position to meet the withdrawal demands of their customers. One method a bank uses to increase cash on hand is to sell off its assets—sometimes at significantly lower prices than if it did not have to sell quickly. Losses on the sale of assets at lower prices can cause concern which can trigger withdrawals.

Examples of Bank Runs

In modern history, bank runs are often associated with the Great Depression. In the wake of the 1929 stock market crash, American depositors began to panic and seek refuge in holding physical cash. A succession of bank runs on thousands of banks occurred in the early 1930s in a domino effect.4

In response to the bank runs of the 1930s, the U.S. government set up several regulatory mechanisms to try to prevent bank runs, including establishing the Federal Deposit Insurance Corporation (FDIC), which today insures depositors up to $250,000 per banking institution.5

However, bank runs still occur. More recent examples of significant bank runs include those on Silicon Valley Bank, Washington Mutual Bank (WaMu), and Wachovia Bank.

Silicon Valley Bank

The collapse of Silicon Valley Bank in March 2023 was a result of a bank run caused by venture capitalists. The bank reported that it needed $2.25 billion to shore up its balance sheet, and by the end of the following business day customers had withdrawn about $42 billion. Regulators closed the bank and took control of its assets.67

Silicon Valley Bank had last reported $209 billion in assets as of the fourth quarter of 2022, making it the second-largest bank failure of all time.8

Washington Mutual (WaMu)

Washington Mutual (WaMu), which had about $310 billion in assets at the time of its failure in 2008, was the largest bank failure in the U.S. Its collapse was caused by a number of factors including a poor housing market and rapid expansion. The bank also suffered a run when customers withdrew $16.7 billion within two weeks.9

Washington Mutual was eventually bought by JPMorgan Chase for $1.9 billion.10

Wachovia Bank

Wachovia Bank was also shuttered after depositors withdrew over $15 billion over a two-week period after Wachovia reported negative earnings results. Wachovia was eventually acquired by Wells Fargo for $15 billion.11

Much of the withdrawals at Wachovia were concentrated among commercial accounts with balances above the limit insured by the Federal Deposit Insurance Corporation (FDIC), drawing those balances down to just below the FDIC limit.

The failure of large investment banks like Lehman Brothers, AIG, and Bear Stearns was not the result of a bank run. Rather, these bank failures resulted from a credit and liquidity crisis involving derivatives and asset-backed securities.1213

Preventing Bank Runs

In response to the turmoil of the 1930s, governments took several steps to diminish the risk of future bank runs. Perhaps the biggest was establishing reserve requirements, which mandate that banks maintain a certain percentage of total deposits on hand as cash.

Additionally, the U.S. Congress established the FDIC in 1933 to insure bank deposits in response to the many bank failures that happened in the preceding years. Its mission is to maintain stability and public confidence in the U.S. financial system.14

The FDIC provides $250,000 worth of insurance per depositor, per account for banks that have FDIC backing. That means, if a bank fails, your deposits will be protected up to that amount.15

In some cases, the FDIC may extend its coverage. For example, when Silicon Valley Bank failed in 2023, the FDIC used funds from the Deposit Insurance Fund to fully reimburse depositors. The money in the fund is furnished by quarterly fees assed on banks.16

In some cases, banks need to take a more proactive approach if faced with the threat of a bank run. For example, they may temporarily close to prevent people from withdrawing their money en masse. Franklin D. Roosevelt declared a bank holiday in 1933, calling for inspections to ensure banks' solvency so they could continue operating.17

What Is a Silent Bank Run?

A silent bank run is when depositors withdraw funds electronically in large volumes without physically entering the bank. Silent bank runs are similar to normal bank runs, except funds are withdrawn via ACH transfers, wire transfers, and other methods that do not require physical withdrawals of cash.

What Is Meant by a Run on the Bank?

When people literally run to their bank in order to withdraw their funds for fear of the bank collapsing is where the term originated. When this is done simultaneously by many depositors, the bank can run out of cash (due to fractional reserve banking) and collapse.

Why Is a Bank Run Bad?

Bank runs create negative feedback loops that can bring down banks and cause a more systemic financial crisis. A bank usually only has a limited amount of cash on hand that is not that same amount of its overall deposits, if say, too many customers demand their money, the bank simply won't have enough to return to their depositors.

The Bottom Line

A bank run is when bank customers flock to banks, either physically online, to make withdrawals because of a loss of confidence in the bank. In extreme cases, they can cause the collapse of a bank as a bank run did in 2023 with the closure of Silicon Valley Bank.

To reduce your risk of losing money in a bank run, you can keep the amount of your deposit under the FDIC insured limit of $250,000 per depositor, per insured bank. If you need to deposit more funds, you can open an account at another bank and receive the same protection.15

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