Opinion

We cannot live without water, but it is a finite resource whose supply we have been taking for granted.The World Meteorological Organisation estimates that nearly 3.6bn people struggle to get enough water to meet their needs for at least one month every year, and it forecasts that 5bn people – more than half of humanity – will be facing the same plight by 2050.But this is not just about getting enough to drink, wash with or to water crops. Extreme weather events sometimes bring too much water all at once.Floods, hurricanes and other water-related events take lives and destroy homes, livelihoods and infrastructure. The United Nations says says almost three-quarters of all natural disasters were water-related between 2001 and 2018.Our global water system is in crisis. Despite safe water and sanitation being a human right, billions of people lack access to these essentials for life, according to the United Nations.Recently, the UN hosted Water Conference – the first in almost 50 years, which was a watershed moment for UN Sustainable Development Goal 6: ensuring the sustainable management of water and sanitation for all.It coincided with the World Water Day, which is marked annually on March 22 to raise awareness about the importance of freshwater and advocate for the sustainable management of freshwater resources.At current rates, some 1.6bn people will lack safely managed drinking water. 2.8bn people will lack safely managed sanitation and 1.9bn people will lack basic hand hygiene facilities.Since the late 1970s, when the last Water Conference took place, the world has been focused on the business of rapid growth and development.Water was available, and its quality and supply was predictable, allowing us to raise families, build cities and factories, prevent the spread of disease, boost farm yields and bring more land under cultivation.But a growing global population – predicted by the UN to reach 8.5bn by 2030 – coupled with economic development and changing consumption patterns means the demands on our water resources are far greater than 50 years ago.Natural resources crises, including for water and food, come within the top 10 biggest risks facing humanity in the coming decade, in the World Economic Forum’s ‘Global Risks Report 2023’.It cites one UN estimate that places the gap between water demand and supply at 40% by 2030, with a “dramatic and unequal increase in demand between countries”.As we continue to over-deplete, mismanage and abuse this vital resource, water is becoming more scarce, more polluted and contested at an unprecedented rate and scale. And as global warming continues to take effect, ordinary weather is becoming a thing of the past, exacerbating our water crisis, with some regions more affected than others.Wind and rainfall conditions have become more extreme and harder to predict. This is affecting water availability and supply.It is clear we need to rethink our approach to how we can best allocate and value water. We need some clear thinking about how to improve the governance of water supplies to ensure everyone has access to water to drink and wash and meet other needs.

No two crises are alike. That is true of recent financial upheavals – the Asian financial crisis of the late 1990s, the dot-com crisis of 2000, and the global financial crisis of 2008-09. It is also the case with crises sparked by geostrategic shocks, such as wars, pestilence, famine, and pandemics.Today, we are witnessing a potentially lethal interplay between these two sources of upheaval: a financial crisis, reflected in the failure of Silicon Valley Bank, and a geostrategic crisis, reflected in the deepening cold war between the United States and China. While the origins of each crisis are different, in one sense it doesn’t really matter: The outcome of their interaction is likely to be greater than the sum of the parts.The failure of SVB is symptomatic of a far bigger problem: a US financial system that is woefully unprepared for the return of inflation and the concomitant normalisation of monetary policy. SVB risk managers were in deep denial of such an outcome, and the bank was brought down by sharp losses on its unhedged $124bn bond portfolio, triggering a classic bank run by fearful depositors.Depositors, even the hotshots of America’s startup culture, can hardly be blamed for not doing the due diligence on complex financial institutions they entrust with their assets. That task falls to the Federal Reserve, which, sadly, blew it again. Starting with reckless monetary accommodation that perpetuated a dangerous string of asset bubbles – from dot-com and housing to credit and long-duration assets – and continuing with the misdiagnosis of post-Covid inflation as “transitory,” the Fed has now made a supervisory error of monumental proportions: It fixated on large banks and overlooked smaller regional banks like SVB, Signature, and First Republic, where accidents were waiting to happen.This is particularly disheartening in the aftermath of the post-2008 implementation of a new supervisory regime. “What if” stress tests for banks quickly became the gold standard for minimising the risk of financial contagion. The first stress test in early 2009 effectively marked the trough of that crisis, because it revealed that newly capitalised major banks could withstand the worst-case blows of a sharp deepening of an already wrenching recession.Over time, however, stress tests became an exercise in mindless repetition. Big banks built ample cushions of financial capital that all but ruled out systemic failure in the event of a major recessionary shock. A string of Treasury Secretaries, Fed chairs, bank CEOs, and even presidents were unanimous in boasting of a US financial system that was in excellent shape. From time to time, the Fed would use the annual stress test as a warning to a few institutions to improve their risk-management practices or strengthen their capital adequacy. It largely worked like a charm – until now.We should have seen the latest twist coming, because the stress test suffered a major flaw: It had turned into an asymmetrical risk-assessment exercise, examining the performance of large systemically important banks in the event of “hypothetical severe recessions.” The Fed staff modelled simulated impacts of sharp declines in global GDP, soaring unemployment, and plunging asset markets – shocks that were presumed to be accompanied by renewed disinflation (flirting with outright deflation) and falling interest rates.Of course, this hypothetical shock – which the Fed calls a “supervisory severely adverse scenario” – is precisely the opposite of the interest-rate shock that hit SVB. In its February 2023 stress test, the Fed conceded that it needed to start thinking more broadly about different shocks, and it allowed for the possibility of a new “exploratory market shock” – still a recession, albeit one accompanied by higher inflation. But, buried in terse language near the end of the latest stress-test report, the Fed noted that any firm-specific exploratory results wouldn’t be available until June 2023. And there was no indication that such results would be published for smaller regional banks. Too little, too late.So, what does this have to do with China and the escalating Sino-American conflict? For the past 20 years, a group within the senior ranks of the Chinese leadership has argued that America is in a state of permanent decline, providing an opening for China’s global ascendancy. This view gained support in the aftermath of the US-made global financial crisis, and most assuredly will gain even more support as the SVB crisis hits a new segment of the US financial system.A rising China could hardly ask for more. At a time when the Western financial system is once again suffering from self-inflicted impairment, the imagery of Russian President Vladimir Putin and Chinese President Xi Jinping embracing each other in the Kremlin as “dear friends” pretty much says it all. China apparently views a cold war and the carnage in Ukraine as a small price to pay to strengthen its push for geostrategic hegemony.There is an important footnote to China’s view of a declining America. While Mao alluded to it in broad terms – a US “paper tiger ... in the throes of its deathbed struggle” – this argument was first fully articulated by Wang Huning in his 1991 book America Against America. Based on Wang’s firsthand observations while living in the US, the book was a scathing critique of America’s social, political, and economic decay.Wang is hardly an innocent bystander to China’s new assertiveness. He was the chief ideological adviser to Xi Jinping’s two immediate predecessors, Jiang Zemin and Hu Jintao, and has played a similar role for Xi in the exposition of “Xi Jinping Thought” as China’s new ideological anchor. And Wang, one of only two holdovers who remained on the top seven-man leadership team (the Standing Committee of the Politburo), has also just been named Chairman of the Chinese People’s Political Consultative Conference. The demise of SVB only cements Wang’s stature.In the end, it pays to ponder Chinese etymology. In Mandarin, weiji has the dual meaning of danger and opportunity. From SVB to Wang Huning, that’s precisely the point of the increasingly worrisome interplay between another US-made financial shock and a sharply escalating Sino-American cold war. A rising China is taking dead aim at crisis-prone America. – Project Syndicate* Stephen S Roach, a former chairman of Morgan Stanley Asia, is a faculty member at Yale University and the author, most recently, of Accidental Conflict: America, China, and the Clash of False Narratives (Yale University Press, 2022).

Last year, the Nobel Prize in Economics went to two economists who study the dynamics of bank runs, as well as to former US Federal Reserve Chair Ben Bernanke for his work analysing how central banks have dealt with some of history’s worst banking crises, such as those in the Great Depression of the 1930s. Half a year later, we are witnessing another bank run whose contagious effects could destabilise economies, trigger recessions, and impose high costs on taxpayers.Banks play a double role in the economy, taking short-term deposits and savings and then using those savings to lend money over the long term in the form of mortgages, business loans, and other investments. A run occurs when enough depositors come to fear that a bank may go bust, taking their savings with it. They all run to the bank to withdraw their funds, but because the bank has deployed those funds toward the other services it provides, it becomes insolvent. Having witnessed such runs, US president Franklin Roosevelt’s administration (followed by others around the world) created insurance schemes to alleviate depositors’ fears that they would not get at least some of their money back following a run.But we now have a technological solution that could end bank runs forever. A country’s monetary authority could introduce a central bank digital currency (CBDC) and provide all depositors (taxpayers) with interest-bearing accounts at the central bank. Such a system would eliminate many barriers to financial transactions by making the broader payments system more fluid.This system would not be anything like the Wild West of cryptocurrencies and speculative pyramid schemes that have cropped up in recent years, nor would it be socialised banking. There are already plenty of fintech companies (Revolut, Wise, N26) offering sleek apps and innovative services that enable instantaneous smartphone payments to other users who bank with competing operators. These same financial operators could access CBDC balances held by the central bank and compete for customers by minimising transaction costs.Of course, traditional banks also compete; but they do it worse and at a scandalous cost to customers. If the interbank rate charged by the central bank is 3%, your traditional bank offers you at best 1% on a deposit, taking the other two percentage points as profit. Traditional banks can exert monopoly power because there is no instantaneous clearance for payments. In the United States, it generally takes at least two working days for a money transfer to enter your bank account. And making matters worse, traditional banks’ excessive risk-taking transforms your risk-free deposit into a risky investment when the bank cannot meet your withdrawal request.With an interest-bearing CBDC, a bank run is impossible. As the lender of last resort, the central bank could issue as much money as needed if depositors wanted to withdraw their money simultaneously. And, owing to fluid, instantaneous transfers between users, competition would deliver a 3% return on those deposits. Other than traditional banks, who could possibly oppose this solution?To be sure, traditional banks are crucial for the financial system because they create value by making loans. They monitor whether households that apply for mortgages are solvent, and whether business loans will be used for profitable investments. Because lending is always risky, even the most competitive bank will charge a spread on a loan. The same 3% interbank rate at which the bank can obtain funds today may result in a 5% interest rate for a mortgage, or a 9% rate for a risky investment by a tech startup. Some institution, such as a bank, is needed to evaluate and price these risks.But, because banks can profit by playing with depositors’ money and relying on the government to bail them out, they tend to assume too much risk. That is why academics and regulators have long argued that banks should be subject to higher capital requirements. When they cannot use households’ savings to finance risky investments or rely on government bailouts, their risk-taking will be sharply reduced.A CBDC would bring market discipline to the banking sector. Traditional banks would be forced to focus on picking profitable loans, and they would close most of their network of retail branches. Likewise, the credit-card oligopoly that hijacks our credit-less payment system would melt like snow in the sun. In its place, we would get a fluid payment system operated by a network of competitors offering access to your CBDC account. In today’s economy, households would receive 3% on deposits that are safely shielded from bank runs.A CBDC is not imminent, though. Central bankers are scared to slaughter the cash cow of the traditional banks, under the pretext that doing so will lead to the collapse of the banking sector. The private bank lobby will strongly oppose digital innovation and seek to maintain its dominant position at the cost of the stability of the financial system.Still, we may see CBDCs introduced sooner than anticipated. If one major economy takes the plunge, others will be forced to follow suit or risk seeing their currencies be eclipsed. That is why the Canadian central bank has already signalled its readiness to introduce a CBDC if the US decides to launch its own. If China tries to dominate international transactions with its digital renminbi, other central banks certainly will be prompted to follow suit.Whoever takes the first major step in disrupting the banking sector, it cannot come soon enough. We already have the tools to end bank runs and ensure financial stability. All we need is the will to use them. – Project Syndicate* Jan Eeckhout is Professor of Economics at Universitat Pompeu Fabra and author of The Profit Paradox: How Thriving Firms Threaten the Future of Work (Princeton University Press, 2021).

Banks are divided over how to account for carbon emissions linked to their capital markets business, sources told Reuters, with some riled by a proposal that 100% would be attributed to them rather than to investors who buy the financial instruments.An industry-wide methodology was due to be announced in late 2022, but four sources with direct knowledge of the process said this has been stalled by the row over how much of the carbon emissions associated with a deal should be booked by each bank.Reaching an agreement is seen as a crucial step for the financial industry as pressure grows on it to do more to help with the transition to net-zero, with a study by UN scientists this week urging a rapid phasing out of fossil fuels.Without a methodology in place, investors are being hampered in tracking the carbon footprint of individual banks, which is an increasingly important part of their shareholder remit.Most banks are yet to reflect the emissions associated with the deals they do, which are known as “facilitated emissions”, in their targets, making it hard to track their progress towards pledges to reach net-zero emissions by 2050.At present, many banks’ pledges to reduce emissions refer solely to their financed emissions.But between 2016 and 2021, 57% of the financing provided by Europe’s largest 25 banks to the top 50 companies expanding oil and gas production was through capital markets underwriting, according to ShareAction, a responsible investment NGO.“Facilitated emissions is the way some of the heaviest emitting sectors are financing their operations, and while banks don’t have as much influence as they do over lending, they still have influence,” said Dan Saccardi at Ceres, a non-profit organisation focused on sustainable capital markets.Morgan Stanley, Barclays, Citigroup, Standard Chartered, HSBC and Britain’s NatWest are among the members of a working group discussing the next steps as part of the industry-led Partnership for Carbon Accounting Financials (PCAF).NatWest, supported by climate activist groups, is happy with 100% of facilitated emissions being attributed to the banks behind capital markets deals.The bank says an alternative proposal of 17% derived from the Basel Committee on Banking Supervision’s methodology for assessing Global Systemically Important Banks is problematic.Tonia Plakhotniuk, NatWest Markets’ Vice-President, Climate & ESG Capital Markets, said that 17% risked “a mismatch” because investors would not account for the remainder themselves.It is a “very subjective assessment to measure the role of an underwriter,” she said, adding that “more outreach, research or analysis” was needed to reach an agreement.Those favouring a lower share argue that unlike corporate loans, a bond or equity sale is a single transaction and banks have less leverage to get clients to change their behaviour.“100% is clearly too high. We will have to meet somewhere in the middle but I don’t know where,” an executive at a major bank involved in the talks told Reuters.Evan Bruner, a spokesperson for PCAF, said the group continued “to work toward a final method” but did not have any updates on progress.A few banks have begun using their own methodology.This includes Barclays, which apportions 33% of the capital markets financing to the bank and the rest to investors.Until banks agree on a compromise, experts say lenders could look to book more business as capital markets rather than loans. – Reuters

Two organic compounds essential for living organisms have been found in samples retrieved from the asteroid Ryugu, buttressing the notion that some ingredients crucial for the advent of life arrived on Earth aboard rocks from space billions of years ago.Scientists said on Tuesday they detected uracil and niacin in rocks obtained by the Japanese Space Agency’s Hayabusa2 spacecraft from two sites on Ryugu in 2019. Uracil is one of the chemical building blocks for RNA, a molecule carrying directions for building and operating living organisms. Niacin, also called Vitamin B3 or nicotinic acid, is vital for their metabolism.The Ryugu samples, which looked like dark-gray rubble, were transported 155mn miles (250mn km) back to Earth and returned to our planet’s surface in a sealed capsule that landed in 2020 in Australia’s remote outback for analysis in Japan.Scientists long have pondered about the conditions necessary for life to arise after Earth formed about 4.5bn years ago. The new findings fit well with the hypothesis that bodies like comets, asteroids and meteorites that bombarded early Earth seeded the young planet with compounds that helped pave the way for the first microbes.Scientists previously detected key organic molecules in carbon-rich meteorites found on Earth. But there was the question of whether these space rocks had been contaminated by exposure to the Earth’s environment after landing.“Our key finding is that uracil and niacin, both of which are of biological significance, are indeed present in extra-terrestrial environments and they may have been provided to the early Earth as a component of asteroids and meteorites. We suspect they had a role in prebiotic evolution on Earth and possibly for the emergence of first life,” said astrochemist Yasuhiro Oba of Hokkaido University in Japan, lead author of the research published in the journal Nature Communications.“These molecules on Ryugu were recovered in a pristine extra-terrestrial setting,” Oba said. “It was directly sampled on the asteroid Ryugu and returned to Earth, and finally to laboratories without any contact with terrestrial contaminants.”RNA, short for ribonucleic acid, would not be possible without uracil. RNA, a molecule present in all living cells, is vital in coding, regulation and activity of genes. RNA has structural similarities to DNA, a molecule that carries an organism’s genetic blueprint.Niacin is important in underpinning metabolism and can help produce the “energy” that powers living organisms.The researchers extracted uracil, niacin and some other organic compounds in the Ryugu samples by soaking the material in hot water and then performing analyses called liquid chromatography and high-resolution mass spectrometry.Organic astrochemist and study co-author Yoshinori Takano of the Japan Agency for Marine-Earth Science and Technology (JAMSTEC) said he is now looking forward to the results of analyses on samples being returned to Earth in September from another asteroid. The US space agency Nasa during its OSIRIS-REx mission collected samples in 2020 from the asteroid Bennu.Oba said uracil and niacin were found at both landing sites on Ryugu, which is about a half-mile (900m) in diameter and is classified as a near-Earth asteroid. The concentrations of the compounds were higher at one of the sites than the other.The sample from the site with the lower concentrations was derived from surface material more susceptible to degradation induced by energetic particles darting through space, Oba said. The sample from the other site was mainly derived from subsurface material more protected from degradation, Oba added.Asteroids are rocky primordial bodies that formed in the early solar system. The researchers suggest that the organic compounds found on Ryugu may have been formed with the help of chemical reactions caused by starlight in icy materials residing in interstellar space.

When a bank fails, attention inevitably turns to its regulators. Who was asleep at the wheel? Who failed to spot the warning signs? The failure of Silicon Valley Bank (SVB) is no exception.In the United States, these questions are often directed at many different agencies, since the system is complex and hard for outsiders to understand. So, the conclusion is often an inverted form of John F Kennedy’s famous observation after the Bay of Pigs fiasco, to the effect that “success has many fathers, but failure is an orphan.” American bank failures often have several fathers – all disclaiming paternity.Congress will get its teeth into the SVB collapse before too long, and we will learn more. In the meantime, a few facts are clear. SVB was exempted by the Trump-era Regulatory Relief Act from enhanced supervision. This means that it did not have to submit to stress tests, for example, which should have exposed its vulnerability to a sharp rise in interest rates. The United Kingdom’s stress test includes a five-point rise in interest rates, which would have revealed – and perhaps prevented – SVB’s maturity mismatch. Moreover, a five-year exemption from the Volcker rule, which prohibits proprietary trading by banks, allowed SVB to invest in venture capital funds. As its website proudly proclaimed: “There are many ways to describe us. Bank is just one.”SVB’s main regulators were the US Federal Reserve Board, acting through the Federal Reserve Bank of San Francisco, the Federal Deposit Insurance Corporation (FDIC), and, as a state-chartered bank, the California Department of Financial Protection and Innovation, whose name hints at a problematic mix of oversight and promotion. The department’s commissioner is a lawyer with a background in sports organisations.We know two other possibly relevant facts. When SVB acquired Boston Private Bank in June 2021, the Fed predicted that the merged entity “would not pose significant risks to the financial system in the event of financial distress.” Clearly something had changed since then. And the San Francisco Fed had good insight into SVB’s affairs, since SVB’s CEO was on its board until the bank failed.Of course, it would be simplistic to claim a causal link between the oddities of the US regulatory system and the problems of any individual bank. But it is instructive to look at what the main actors in the last financial meltdown thought about the regulatory structure through which they were obliged to work.In his memoir Stress Test: Reflections on Financial Crises, Timothy Geithner, who was President of the New York Fed and later US Treasury Secretary, noted that “our current oversight regime, with its competing fiefdoms and perverse incentives encouraging firms to shop around for friendly regulation, was an archaic mess.”In his own reflections on that turbulent period, Hank Paulson, Geithner’s predecessor as Treasury Secretary, argued that the US needed “a better framework that featured less duplication and that restricted the ability of financial firms to pick and choose their own, generally less strict, regulators in a practice known as regulatory arbitrage.” Here was a rare example of bipartisan agreement.The Dodd-Frank financial reforms, enacted in the wake of the 2008 crisis, did very little to address these structural problems. The Office of Thrift Supervision was merged into the Office of the Comptroller of the Currency, and a new Consumer Financial Protection Bureau was created – adding a further acronym to the alphabet soup. But the rest of the system so disliked by Geithner and Paulson was left intact.Former Fed Chair Paul Volcker continued the fight for simplification until his death at the end of 2019. In 2015, the non-profit Volcker Alliance published a searing indictment of the system and drew up an outline of a more coherent structure.The key elements were straightforward. The Fed would have beefed-up overarching responsibility for financial stability, and the Financial Stability Oversight Council, which has rapidly rotating membership from all the assorted bodies involved in financial regulation across the country, would be cut back sharply and put under the Fed’s control. And the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) would be merged in that restructuring. (The US is the only country where cash securities and their derivatives are regulated by different entities.)The Volcker Alliance also recommended establishing a new Prudential Supervisory Authority, an independent agency which would incorporate all the prudential functions now carried out by the Fed, the Office of the Comptroller of the Currency, the FDIC, and the SEC and CFTC, which currently oversee broker dealers and indeed money market funds. The result would be “a simpler, clearer, more adaptive, and more resilient regime that would have a mandate to deal with the financial system as it exists now and would be capable of keeping pace with the evolving financial landscape.”Sadly, Volcker is no longer with us and able to push for reform. But, wherever he is, he may be allowing himself a sad smile about recent events. They amount to further proof that the US system is dysfunctional. The US authorities currently are fire-fighting, and we must all hope they succeed. But, when the short-term crisis is over, they might dust off Volcker’s report. Its analysis reads well today and the recommendations are clear and workable, as one would expect from someone who oversaw the current regulatory thicket for a dozen years. The system still doesn’t work well, and it needs to be fixed before it reveals its shortcomings again. — Project SyndicateHoward Davies, a former deputy governor of the Bank of England, is Chairman of NatWest Group.

The speed at which depositors fled Silicon Valley Bank this month — withdrawing $42bn in 24 hours — has left authorities confronting a new risk: the social media-driven bank run.Gone are the days when lines of people outside banks served as the defining image of a lender on the brink. In today’s turbocharged digital age, customers can withdraw cash through a few taps on their phone.Reports on social media during the week of March 6 that some venture capital firms, including influential investor Peter Thiel’s Founders Fund, were advising companies to pull cash from tech-focused SVB snowballed into a stock rout and sent customers scrambling for the exit. Authorities shut SVB on March 10.Switzerland’s Credit Suisse, which on Sunday had to be rescued by archrival UBS in a government-engineered takeover following a collapse in investor confidence, knows only too well the dangers of social media. Last year it breached liquidity requirements at some of its entities after an unsubstantiated social media report sparked client exits.“The fact that people can communicate so much more quickly ... (has) changed the dynamic of bank runs and perhaps changed the way we have to think about liquidity risk management,” said Todd Baker, a senior fellow at Columbia University’s Richmond Center.Billionaire hedge fund manager William Ackman warned a few days after SVB’s collapse that “no bank is safe from a run” in a world with online bank accounts and social media unless the government gives depositors an explicit guarantee of “complete access” to all of their cash.Regulators know they are battling against the potential for bank runs to unfold faster than ever, although how they can specifically address the risk of Twitter-fuelled panic is unclear.In the US, the decision to insure all bank deposits after SVB was shuttered surprised many. Experts said it showed authorities were sufficiently concerned about depositors withdrawing cash from other lenders.“It’s possible that the issue is that deposits have never moved so fast and that is what formed the basis of this decision — the outflows at SVB were without equivalent,” said Nicolas Veron, senior fellow at the Peterson Institute for International Economics in Washington.Some in the banking industry play down the risks of another SVB-style downfall.They point to SVB’s unique vulnerability to a social media-driven bank run, given its highly concentrated customer base of technology and venture capital entrepreneurs who mingled in the same circles.“This was a centre of influence, and that was concentrated in this ecosystem, unlike it is in other areas,” said Randell Leach, chief executive officer of California-based Beneficial State Bank.Still, some depositors across the globe are taking no chances even when they believe their bank is fundamentally sound.One biotech investor in Germany who banked with Credit Suisse and spoke before Sunday’s rescue deal said he had shifted his personal deposits to another institution even though he thought Credit Suisse was a “good bank.” SVB had shown how quickly deposits can disappear, the investor said.Dan Awrey, a law professor at Cornell University, blamed the fallout from SVB on an “absence of a communications strategy.”Between the Friday morning SVB collapsed and the end of the weekend regulators should have explained the bank had a unique business model and other lenders were not as risky, he said.Failure to do this caused depositors elsewhere to worry their funds were in danger, exacerbating stress in the system, Awrey said.“All of that was just lacking between Friday morning and Sunday in a way that allowed the Twittersphere to really take hold of the information dynamic and the narrative,” he added.Other US regional banks have since come under pressure, with First Rebublic Bank’s share price diving 47% on Monday on concerns about its liquidity.The SVB saga and nonstop social media speculation could eventually lead to banks providing round-the-clock service, including on weekends, said Jez Mohideen, CEO of Laser Digital, the cryptocurrency arm of Japanese bank Nomura.Regulators will also need to monitor social media and develop a set of protocols to guide how they respond, according to Patricia McCoy, a law professor at Boston College.“They need to be looking for any signs of unsubstantiated rumours, panic starting to mount on social media, and they’ve got to do it around the clock,” she said. — Reuters

When a market liquidity and/or funding liquidity crisis occurs at a moment when inflation is above-target, tension between the objectives of central banks – price stability and financial stability – is inevitable. In such cases, I believe that financial stability must come first, because it is a precondition for the effective pursuit of price stability.But this does not mean that the central bank should cease or suspend its anti-inflationary policies when threatened with a banking crisis or similar systemic stability risk. The conflict between the objectives of price stability and financial stability should be manageable by using the central bank’s policy rate to target inflation, and by using the size and composition of its balance sheet as a macro prudential policy tool to target financial stability. Credible communication is essential to achieve both objectives.Financial stability in a large advanced economy is not materially impacted by a 50-basis-point increase in the risk-free short nominal rate of interest. It is impacted by the interrelated liquidity and credit risk premia and the vanishing would-be purchasers and lenders in illiquid financial markets – when credit rationing rules the roost. The Bank of England (BoE) got this right last year when, during a period of monetary-policy tightening brought on by then-prime minister Liz Truss’s incoherent policies, it engaged in temporary purchases of long-dated UK government bonds and postponed quantitative tightening through Asset Purchase Facility gilt sales.The asset purchases, which lasted from September 28 until October 14, were needed to counter material dysfunctionality in the longer-dated gilt markets. At its first Monetary Policy Committee meeting following the purchases, on November 3, the BoE signalled its continued commitment to the inflation target by raising the policy rate by 75 bps, from 2.25% to 3%. Two further 50 bps rate hikes followed on December 15 and February 2. The prudential nature of its temporary asset purchases would have been even clearer if they had been sterilised.The European Central Bank (ECB) also got it right this month when it raised its policy rates by 50 bps, despite the financial kerfuffle that had blown over from the United States following the insolvency of Silicon Valley Bank (SVB). Headline HICP (Harmonised Index of Consumer Prices) inflation in February was 8.5%, with the core HICP inflation rate (which strips out volatile energy and food prices) at 5.6%. The ECB addressed the financial-stability concerns by stating that its “policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy.” Moreover, “the Transmission Protection Instrument is available to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across all euro area countries.”What will the Federal Reserve do at its upcoming meeting? I believe that the financial stability concerns following the demise of SVB and Signature Bank were addressed effectively by ensuring that all deposits in these two badly managed institutions would be made whole. De facto, this means that all deposits in US banks are henceforth insured. This no doubt contributes to moral hazard, because incompetent or reckless bank management will not be punished through a loss of informed depositors. But it is the unavoidable price of ruling out the systemic threat posed by bank runs. Moral hazard was contained by letting the banks go bust and exposing the shareholders and unsecured creditors (and presumably even secured creditors if the losses are large enough) to whatever the banks’ mismanagement cost.But this prudential response was not optimal, because the new Bank Term Funding Program created by the Fed, which offers one-year loans to banks with the collateral valued at par, should have been made available only on penalty terms. With market value well below par for many eligible debt instruments, the lender of last resort has become the lender of first resort – offering materially subsidised loans. The same anomaly (valuing collateral at par) now applies to loans at the discount window.At the end of 2022, US banks had about $620bn of unrealised losses on securities they planned to hold to maturity. Raising the policy rate will most likely further depress the market value of long-duration securities. So be it. We don’t know how much of this duration risk was hedged by the banks (and who the counterparties to such hedging are). But we do know that bank losses (in orderly markets) due to mistaken investment decisions are part of the healthy Darwinian mechanism that sustains a market economy, as is the orderly resolution of bankrupt institutions. The central bank must be ready, as lender of last resort and market maker of last resort, to discharge its financial-stability responsibilities should illiquidity, bank runs, or other market failures pose a systemic threat.With core personal-consumption-expenditures inflation still at 4.7% in January, the Fed should raise its policy rate target zone by 50 bps at its upcoming meeting. But I fear it may stop at 25 bps, owing to an erroneous concern about the financial stability implications of a larger rate hike. Financial stability in the US is best served in the short run by the Fed standing ready to intervene as lender and market maker of last resort. In the medium and long run, the original Dodd-Frank regulations, repealed for small and medium-sized banks in 2018, should be reimposed, and perhaps limits on banks’ proprietary investment activities should be restored – or maybe fractional reserve banking should be abandoned altogether. More assertive and competent supervision wouldn’t hurt, either. — Project SyndicateWillem H Buiter, a former chief economist at Citibank and former member of the Monetary Policy Committee of the Bank of England, is an independent economic adviser.

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The world is becoming accustomed to the drip-drip of catastrophic headlines following each new climate-driven disaster. Increasingly frequent and severe heatwaves are causing wildfires in California and widespread coral die-offs in Australia. Unprecedented floods have wreaked havoc in Pakistan, Germany, China, and New Zealand. Drought in the Horn of Africa is causing famine for millions. And this list could go on.The common element underlying all these cataclysms is water. From the forced shutdown of nuclear reactors in France to the heavy snowfall that covered large swaths of North America in December, or the recent cholera outbreak in Lebanon, we are witnessing the symptoms of a mounting global water crisis – either too much, too little, or too dirty.Yet water remains mostly absent from global discussions. While concerns about the geopolitical order, climate change, and the Covid-19 pandemic have understandably been in the spotlight, water is rarely discussed outside the context of humanitarian responses to local, national, or transboundary floods or droughts. This is a major blind spot: In the World Economic Forum’s 2023 Global Risks Report, nine of the ten biggest risks for the next decade have a water-related component.For at least the last 5,000 years, human communities and civilisations have deliberately regulated water in order to survive. Even today, many people see water as a gift from God – or, in more secular terms, as a key part of a universal cycle that demands our respect and appreciation. However, in most places where water is “controlled” through dams and pipes, and made safe and available around the clock, we have come to take it for granted. And when concerns about access to safe water or exposure to extreme weather events are raised, they are generally ignored or treated as a low priority.This apathy is no longer tenable. The injustices associated with water-driven disasters are growing, and the global water cycle itself is changing. Human freshwater use has exceeded blue-water capacity (rivers, lakes, and aquifers), creating huge risks for everyone and the planet’s ecosystems. Around 20% of global water consumption for irrigation now comes from overuse of groundwater sources, and about 10% of the world’s food trade comes from non-renewable groundwater.Climate change is amplifying these challenges. Global warming increases demand for water as temperatures rise and as water requirements for food increase with the decline in relative air humidity. By 2070, two-thirds of the world’s land mass will experience a reduction in terrestrial water storage, and the land area subject to extreme hydrological droughts could more than double to 8%. Southwestern South America, Mediterranean Europe, and North Africa are all projected to suffer unprecedented and extreme drought conditions by 2050.The UN 2023 Water Conference in March – the first such gathering in almost a half-century – must mark a turning point in our relationship with water and the water cycle. Only by fundamentally re-examining our relationship with water, revaluing its many uses, and treating it as a local and global common good can we achieve a safe and just future.As the lead experts at the Global Commission on the Economics of Water, we see three areas that require transformation. First, we must consider the entire water cycle and how it is connected with biodiversity, the climate, human well-being, and ecosystem health – all key factors in socioeconomic and ecological prosperity. That means “connecting the dots” and promoting resilient relationships between water and food, water and energy, and water and the environment.Second, water and the water cycle must be governed as global common goods. The ongoing proliferation of water crises calls for a new economic framework based on a systems approach to the water cycle, societies, and economies. We must develop a better understanding of existing “lock-ins” (including property rights, bilateral treaties, and corruption) and other structural challenges that impede water reallocation for the common good.Moreover, an inclusive interdisciplinary framework – with a portfolio of new instruments and metrics – is needed to manage the systemic risks associated with the water cycle and its alteration by humans. Creating such a framework must begin by acknowledging water’s central role in driving economic, sociocultural, and environmental change.Lastly, we must bring everyone into the decision-making process – starting with marginalised communities – to develop new strategies for properly valuing water. When nature and freshwater are not valued in the marketplace, we still pay a price for their misuse, which increases dramatically when we cross planetary boundaries.The UN 2023 Water Conference offers a unique opportunity for the world to respond effectively to a critically important but neglected issue. Confronted with the world water crisis, we can either embark on a sustainable and just pathway or carry on with business as usual. The survival of human civilisation as we know it demands that we make the right choice. — Project Syndicate*l Quentin Grafton is Professor of Economics at the Crawford School of Public Policy at Australian National University.*l Joyeeta Gupta is a member of the Faculty of Social and Behavioural Sciences at the University of Amsterdam.l Aromar Revi is Director of the Indian Institute for Human Settlements.5bn people will face water shortage by 2050According to the first of a series of United Nations reports on the impact of climate change on water resources released last year, around two-thirds of the global population, or five billion people, will encounter water shortages for at least a month by 2050.The World Meteorological Organisation report assessed river flows, floods, and droughts on all continents. The findings are a mixed bag, but the report warns that water security will become increasingly uneven worldwide.The Great Lakes region of the United States is in better shape, while Brazil’s Rio São Francisco basin faces a challenging future. Climate change’s impacts are frequently experienced through water, including more extreme and frequent droughts, erratic seasonal rainfall, and more severe flooding, with cascading consequences for economies, ecosystems, and everyday lives.WMO Secretary-General Petteri Taalas said that there is inadequate knowledge about the distribution, quantity, and quality of freshwater resources, and the 36-page report aims to fill that gap and provide a succinct overview of water availability worldwide

Policymakers are racing to ease growth strains and a loss of confidence in the global financial system after the collapse of Silicon Valley Bank and as UBS Group agreed to buy Credit Suisse Group in a government-brokered deal.Over the weekend, the Federal Reserve and five other central banks announced co-ordinated action to boost liquidity in US dollar swap arrangements.Central banks opened spigots wide to keep the global financial crisis of 2008 from triggering a depression, using low interest rates and other measures to try to stimulate business activity.They kept rates low for years in the face of a notably anaemic recovery, then opened the faucets again when the pandemic struck: The Fed cut interest rates back to near zero and didn’t raise them until March 2022.It helped fuel a period of extraordinary growth in US financial markets, save for the short, sharp pandemic drop in 2020.The US stock market rose more than 580% after the financial crisis, accounting for price gains and dividend payments.It also led to a massive increase in debt taken on by companies and countries.From 2007 to 2020, government debt as a share of gross domestic product globally jumped to 98% from 58%, and non-financial corporate debt as a share of GDP surged to 97% from 77%, according to data compiled by Ed Altman, professor emeritus of finance at New York University’s Stern School of Business.The unparalleled era of easy money came to a screeching halt in 2022, as central banks shifted gears to subdue inflation: The Fed raised its benchmark rate from near zero to 4% in a mere six months.That speed led to worries that something in the financial system would break, as the tightening of credit revealed previously hidden vulnerabilities.Those fears seemed to materialise in the failure of two US banks, and the buyout of global giant Credit Suisse.The market turmoil that followed raised questions of whether chastened banks would pull back on lending in a way that could tip economies into recession.It also left the Fed facing even greater difficulties in balancing its inflation fight against the damage aggressive monetary policy can cause.Lending rules were tightened after the collapse of credit markets in 2008, especially for the largest banks, leading to bolstered confidence in the financial system’s resilience.But no banks were unaffected by the interest-rate changes: At the end of 2022, according to the Federal Deposit Insurance Corp (FDIC), banks had suffered $620bn in losses on their holdings.JPMorgan Chase has estimated the US economy faces a potential hit to gross domestic product of a half to a full percentage point from diminished credit growth in the aftermath of the latest banking-sector troubles.The worst outcome would be a giant bank failure that would dry up the flow of credit and almost guarantee a recession.Credit Suisse’s crisis came shortly after the failure of three US regional lenders and underscored how some less well-managed financial institutions have struggled since the era of rock-bottom interest rates came to an end.Its demise may push other banks to lower their risk profile, which means issuing fewer of the loans that enable economies to grow. That would make it harder for central banks to keep raising benchmark rates to cool red-hot inflation without causing recessions.Investors have been abandoning bets on more rate hikes and now see US rate cuts coming as early as the summer.European Central Bank president Christine Lagarde said on March 16 that the financial market turmoil could hit credit conditions and dampen confidence. However, she said the banking sector is “in a much, much stronger position than where it was back in 2008.”

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The leader of a powerful paramilitary force in Sudan has put himself at the forefront of a planned transition toward democracy, unsettling fellow military rulers and triggering a mobilisation of troops in the capital Khartoum last week.General Mohamed Hamdan Dagalo commands tens of thousands of fighters in the paramilitary Rapid Support Forces (RSF) and has amassed considerable mineral wealth. He is also deputy leader of Sudan’s ruling council, which took power in a coup more than a year ago.Recently however, Dagalo, widely known as Hemedti, has pulled away from military colleagues and found common ground with a civilian political alliance, in moves that could establish him as a major figure even after the democratic transition.Central to Hemedti’s disagreement with the military is his reluctance to set a clear deadline to integrate the RSF into the army, two military sources said, referring to a stipulation within the outline deal signed in December that paves the way for a two year civilian-led transition to elections.The sources said the standoff led Hemedti to bring additional RSF forces in recent weeks to bases in Khartoum from Darfur, the western region where the group emerged from the so-called Janjaweed militias accused of atrocities during the early 2000s.Concerned about his intentions, the army under ruling council leader Abdel Fattah al-Burhan stationed more soldiers in the capital on a state of alert, the sources said.Speaking to RSF troops earlier this month, Hemedti said his forces would never fight the army, but “our problem is with these people who are clinging to power” — an apparent reference to Islamist-leaning elements of the former regime that retain influence in the army and civil service.The reasons for the troop movements have not been previously reported. Spokespeople for the military and RSF did not respond to requests for comment.While tensions have since cooled, Hemedti’s underlying differences with the army have not been resolved, and the risk remains of a confrontation that could tip Sudan, which sits in a volatile region between the Sahel and the Horn of Africa, into deepening instability.Hemedti and other military men are unlikely to be able to stand for election in the short term. But in a country where power has long been held by the Khartoum elite, Hemedti, from a nomadic camel-herding background, is trying to become “a force to be reckoned with in the national power structure,” said Suliman Baldo, head of the Sudan Transparency and Policy Tracker, an independent think-tank.In a BBC interview last year, Hemedti said he would not stand by and watch the country fall apart, but denied having leadership ambitions. His office did not respond to questions submitted by Reuters.A handover of power to civilians under the outline deal could restore billions in Western aid and restart an economic and democratic opening that was halted when, in October 2021, army and RSF officers deposed the fledgling civilian government that had followed the overthrow of former president Omar al-Bashir.The main signatories to the outline agreement are Burhan’s military and Hemedti’s RSF on one side and the civilian Forces for Freedom and Change (FFC) coalition on the other. The two sides had shared power in the aborted transition between Bashir’s overthrow and the coup.Hemedti has increasingly aligned himself with the pro-democracy civilian movement in speeches. On the other hand, Burhan has delayed a final signing of the transition agreement by pushing to broaden it and bring in former rebel groups and pro-military civilian factions.On March 11, the army said accusations it was reluctant to hand over power were “open attempts to gain political sympathy, and obstruct the process of transition”. Later that day, Hemedti and Burhan met, according to a statement by the ruling council.Under pressure from Western and Gulf powers, the process of finalising a framework for forming a new transitional government before elections has since shown renewed signs of momentum.The sides are due to meet this month to hash out details of military restructuring, but there has so far been no indication of when the RSF will be merged with the army, and what role Hemedti would play in the enlarged armed forces.The army wants to see the RSF, which by some estimates has up to 100,000 fighters spread across one of Africa’s largest countries, integrated under their control by the end of the new transitional period, the two military sources said.Many in Sudan’s pro-democracy movement are uneasy about Hemedti’s prominence in the new transition push.Resistance committees that have led anti-coup demonstrations blame the RSF for leading the killings of dozens of protesters in June 2019, a charge Hemedti denies.They also point to Hemedti’s role in the war that escalated in Darfur after 2003, during which he rose as a leader in the Janjaweed militias.When protests raged against Bashir in 2019, however, Hemedti joined the putsch against him, setting himself against Bashir’s Islamist base.At the signing of the outline deal in December, Hemedti apologised for violence by the state towards communities throughout the country, without elaborating.Four FFC leaders told Reuters that Hemedti currently appears to share their goal of ushering in a civilian government and their opposition to Bashir loyalists including in the military. They requested anonymity as they were not authorised to speak for the coalition.Their willingness to work with Hemedti or Burhan is conditional on progress, one said, adding that they would return to their opposition roles if either reneged on the agreement.Since the 2019 uprising, Hemedti has used his place on the ruling council to take the lead on economic issues, steer a peace deal with many of the rebels he fought in Darfur, and nurture foreign ties with countries including the United Arab Emirates and Russia.His domestic influence is apparent in Darfur, where violence has escalated despite the signing of a peace deal in 2020.A UN panel of experts report published in February said elements from the RSF, as well as rebel groups, were involved in recent violence.Hemedti has visited often, gathering tribal leaders to sign ceasefire agreements, donating cars to government agencies, and sponsoring sports championships.Any final transition agreement would likely bar Hemedti and Burhan from standing in the first post-deal elections, one international diplomat said. But Hemedti, still in his late 40s, has time on his side.“He wants to reinvent himself as not a militia leader, but a statesman,” said the diplomat. — Reuters

Some US regional banks’ efforts to raise capital and allay fears about their health are running up against concerns from potential buyers and investors about looming losses in their assets, five sources with knowledge of the discussions said.First Republic Bank and PacWest Bancorp are among the banks that have been speaking to peers and investment firms about potential deals in the wake of US regulators taking over Silicon Valley Bank and Signature Bank this month amid a flight of depositors, sources have said.First Republic’s shares have fallen 80% since March 8, when the crisis started, while PacWest shares are down 65%.First Republic declined comment. PacWest did not immediately respond to a request for comment.The five sources, who work at or with major banks and private equity firms and examined such deals, told Reuters that they have decided not to participate for now for fear they could be hit with losses in the investment portfolios and loan books.They requested anonymity because they were not authorised to discuss the confidential deliberations publicly.The investment portfolios where the regional banks have parked the deposits of their clients comprise mainly Treasuries and other securities, such as mortgage bonds.They are worth less than what the banks value them on their books because of a steep rise in interest rates. Some of the loan books of these banks are also underwater, due to high rates and concerns about an economic slowdown.The sources said they were reluctant to participate in these deals without a government backstop on the losses or a more favourable outlook on interest rates.Reuters could not determine whether any banking regulators had been asked by suitors to backstop the portfolio losses and whether they would do so.The Federal Deposit Insurance Corporation (FDIC), which insures deposits and manages receiverships, told banks mulling offers in the auctions for Silicon Valley Bank and Signature Bank on Friday that it was considering retaining some of the assets that are underwater at the failed lenders. Such a backstop, however, is typically reserved for banks taken over by the FDIC.An FDIC spokesperson did not respond to a request for comment.Credit ratings agency Moody’s Investors Service Inc estimated on Friday that unrealised losses on First Republic’s investment portfolio represented 37.7% of the cash and stock it set aside to absorb losses and warned it would also be difficult to sell some of its residential mortgage loans without a loss.“Such a crystallisation of losses, if it were to happen, would very materially weigh on the bank’s profitability and capital,” Moody’s said.One banking executive who studied a deal with First Republic estimated that marking-to-market the California-based bank’s mortgage book in an acquisition would spell a large hit for the acquirer.The government would have to facilitate such a deal, the executive said. It could do so by providing some leeway to the acquirer’s leverage ratios that determine the bank’s debt levels, or backstop it in other ways, the executive added. The executive was not aware of any such discussions.Another complication in cutting a deal with regional banks is the uncertainty over the interest rate outlook, said a lawyer who works on transactions involving banks.The Federal Reserve will decide tomorrow whether it will raise rates further in its battle against inflation. Those studying deals and trying to assess the future value of regional banks are hoping for clarity on how aggressively the central bank will move to raise rates further, the lawyer said.It is unclear how long some regional banks can muddle through without a deal.While new liquidity backstops created by the US Treasury and regulators last Sunday are keeping the regional banks afloat, the crisis has eviscerated their profitability and made it difficult to continue with business as usual, banking analysts say.Bank of America analysts wrote in a research note on Friday that the $30 billion in deposits that First Republic’s major peers moved in solidarity to the troubled bank helped stabilised its funding base but did little for its earnings given the flight of some of its customers.“Beyond the accounting mark, the ultimate value that a potential buyer will be willing to pay will also be influenced by their assessment of the potential impairment to the First Republic client franchise,” the analysts wrote. — Reuters

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The world’s water crisis can no longer be ignored. Unless we manage water properly, we will neither tackle climate change nor meet most of the Sustainable Development Goals (SDGs).Last year’s unprecedented floods, droughts, cyclonic storms, and heatwaves showed what is coming. But while such disasters garner plenty of attention, the underlying water crisis does not. Water-related challenges – whether there is too much or too little, or whether it is dirty and unsafe – are already fuelling chronic food and health insecurity in entire regions. Every 80 seconds, a child under five dies from a disease caused by polluted water; and hundreds of millions more are growing up stunted and with diminished lifetime prospects.Making matters worse, we have entered a vicious cycle in which the interaction of the water crisis, global warming, and the loss of biodiversity and natural capital exacerbates all three. Wetland erosion and lost soil moisture risk turning some of the planet’s great carbon stores into new sources of greenhouse-gas emissions, with devastating consequences for the climate.No country can rely on its own territory for more than half the rainfall it receives. Everyone’s fresh water ultimately comes from precipitation, which depends on the presence of stable oceans, intact forests, and healthy ecosystems in other countries and regions. Yet the capacity of both land and ocean systems to generate water is being destabilised.As co-chairs of the Global Commission on the Economics of Water, we are calling for collective action to overcome the water crisis. We must marshal a response that is bolder, more integrated across sectors, more networked at the national and global levels, and more equitable than previous efforts. Our work shows that this will require a new “economics of water,” as well as a comprehensive strategy to address seven key points.First, we must recognise the global water cycle as a common good, and manage it accordingly. Since everyone is ultimately connected through water, we must work together to break the vicious cycle and put water back on a sustainable trajectory. That will require a vision based on justice and equity for all communities everywhere.Second, we must adopt a mission-driven approach encompassing all the key roles that water plays in human well-being. That means treating safe water for domestic use as a human right, and acting collectively to stabilise the global hydrological cycle by managing water use in industry. To ensure food security and resilient food supply chains, and to preserve biodiversity and natural carbon sinks, we will need a revolution in both green (rain-fed) and blue (irrigated) water management.In addition to mobilising diverse stakeholders, we will need to use innovation policies and industrial strategies to catalyse solutions to the water crisis. We should scale up investments in water through new public-private partnerships that are as ambitious as those that got us to the moon 50 years ago; but we must attach conditions to ensure that collectively created value is shared widely.Third, we need to stop underpricing water. With proper pricing and targeted support for the poor, water would be used more efficiently in every sector, more equitably across every community, and more sustainably both locally and globally. But our decision-making also must account for water’s non-economic value, to ensure that we are protecting the broader ecosystem on which the water cycle (and human societies) depend.Fourth, we must phase out some $700bn of annual agriculture and water subsidies – which often fuel excessive water consumption and other environmentally damaging practices – and reduce the leakages in today’s water-delivery systems. Doing so would free up significant resources with which to incentivise water conservation and support the poor directly.Fifth, we should establish Just Water Partnerships (JWPs) to ensure that low- and middle-income countries can invest in water access, resilience, and sustainability, in ways that contribute both to their national development goals and the global common good.JWPs would help to bring together several financing streams, not only by re-channeling inefficient domestic subsidies toward better uses, but also by enabling multilateral development banks and development-finance institutions to leverage public finance and crowd in more private capital. The economic returns on these investments would vastly exceed their costs, especially if JWPs are designed to maximise synergies with initiatives to address climate change and achieve more inclusive growth.Sixth, we should support more dynamic innovation to extend the reach of scarce water resources. Again, such investments will yield high returns. Going to the moon produced advances not only in aerospace but also in nutrition, electronics, communications, materials, and software. Likewise, focusing our attention on the water challenge means doing many things differently, which will lead to creative breakthroughs across many sectors.For example, fortifying freshwater-storage systems will require us to reimagine how we manage wetlands and groundwater resources that have been dangerously depleted. Developing an urban circular (recycling-oriented) economy for water will create a new logic for treating industrial and urban wastewater. Adopting precision irrigation, drought-resilient rain-fed farming, and less water-intensive crops will move us toward more sustainable food systems and higher incomes for farmers. And water footprints in manufacturing can be reduced, including through the reuse of water in producing critical materials such as the lithium we need for widespread electrification.Lastly, we must reshape multilateral governance for water. The current system is highly fragmented and inadequate to the challenge. One useful tool is trade policy. By incorporating water-conservation standards in trade agreements, we can encourage more sustainable practices and discourage wasteful water subsidies. We also must use multilateralism to develop skills and capacity globally, and to protect the farmers, women, indigenous peoples, and consumers who are at the frontlines of water conservation.We still have a chance to convert the water crisis into a global opportunity for economy-wide progress and a new social contract with justice and equity at its centre. Failing that, we will no longer have a safe Earth system.— Project Syndicate* Mariana Mazzucato, Founding Director of the UCL Institute for Innovation and Public Purpose, is Chair of the World Health Organisation’s Council on the Economics of Health for All and a co-author (with Rosie Collington) of The Big Con: How the Consulting Industry Weakens Our Businesses, Infantilises Our Governments, and Warps Our Economies.* Ngozi Okonjo-Iweala, Director-General of the World Trade Organisation, is a former finance minister and foreign minister of Nigeria and a former managing director of the World Bank.* Johan Rockström is Director of the Potsdam Institute for Climate Impact Research.* Tharman Shanmugaratnam, Senior Minister in Singapore’s cabinet, is Chair of the Group of Thirty.

Disruption is coming to the agriculture sector. Around the world, livestock farmers are leaving the land, policymakers are targeting the harmful environmental and social effects of industrial meat production, and consumers are shifting away from meat to embrace healthier, more sustainable alternatives. With the sector approaching a crossroads, decision-makers in government, industry, and civil society will need to heed the lessons from major transitions in other industries and start preparing.The preparation will require a careful inventory of farmers, workers, and consumers’ needs. While farmers are growing older and leaving the land for other pursuits or retirement, the agriculture sector is struggling to attract new entrants – and not just in richer industrialised countries. For every farm manager under 40, there are three over the age of 65 in Europe; and from Sub-Saharan Africa to Asia, Latin America, and the Caribbean, the number of older people living in rural areas is increasing while the number of young people declines.At the same time, farms are becoming larger, and small farm operations are being squeezed. Owing to the challenging economics of farming and the power of a small number of giant industry incumbents, farms are being consolidated in the name of efficiency and economies of scale. As a result, the European Union lost more than one-third of its farms, and 40% of its livestock farms, from 2005 to 2020. Policymakers are thus left to consider whether and how to protect family farms, and how to avoid the risks of animal-welfare violations, poor working conditions, and diseases that are inherent in industrial livestock farming.Policymakers are also waking up to the compelling body of evidence about industrial meat production’s environmental harms. While agriculture accounts for nearly one-third of all greenhouse-gas emissions, livestock alone (particularly cattle) contribute nearly 15%. Moreover, animal agriculture is the main cause of deforestation and biodiversity loss. Forests are razed to free up land not just for animal grazing but also for the additional crops needed to feed those animals. Beef production alone takes up some 60% of land used for agriculture, even though it contributes less than 2% of total calories consumed globally.While livestock and agriculture have traditionally been excluded from most emissions-reduction schemes, policymakers in Denmark, the Netherlands, and New Zealand are already working to close this gap, and many other countries will soon follow suit. The question now is not whether there will be increased regulation of the livestock industry, but what shape and form it will take. Farmers and companies alike should be prepared to adapt to changes that are now inevitable.Finally, consumers, too, are shifting away from meat and dairy. Over the past decade, the average person’s meat consumption has decreased by almost 17% in the United Kingdom and by 11% in Germany. Notwithstanding a recent slowdown, there is still growth in the uptake of alternative proteins – a food source that produces only a tiny fraction of the negative environmental and animal-welfare effects of traditional meat products. Plant-based meat and milk sales are already trending up across the board in the EU, but also in countries like Thailand and South Africa. When these products reach taste and price parity with meat, their uptake by consumers could accelerate very quickly indeed.Public policy also has a role to play. Livestock farming tends to be heavily subsidised in many countries, owing to the sector’s low margins and high levels of debt. As sales fall, declining revenue is likely to have significant welfare implications for farmers and other workers tied to the industrial meat-production systems.Given the complexities of these interacting trends, policymakers and corporate leaders need to start getting in front of this issue now. The experience of other sectors that have begun decarbonising – not least energy – shows that a planned and guided transition is always better than an ad hoc, unmanaged process.One need look no further than last year’s farmer protests in The Netherlands or New Zealand to see how abruptly climate policies can be disrupted when workers and communities feel left out. Unfortunately, we still have only a limited understanding of how best to integrate policy and corporate action to reduce food-system emissions while also protecting livelihoods. Since resisting change is not an option, policymakers and corporate leaders would do well to start thinking about how they will manage it in the coming years. — Project Syndicate

Credit Suisse, one of the largest banks on the planet, has been bailed out in all but name by the Swiss government to the tune of £44bn, with the promise of more to come if needed.For much of the last week, the Swiss giant had been hammered by speculation over its future after its management was forced to admit on Tuesday that its earlier accounts contained “material weaknesses”.A few days days before, the California-based Silicon Valley Bank (SVB), a smaller-scale provider of banking services to the state’s huge tech industry, had failed, prompting a rush to bailout this bank by the US government.Speculation has since swirled around USA’s smaller, regional banks, with financial market traders believing that the combination of rising interest rates and (potentially) poor management choices that did for SVB may also now be afflicting other banks.Another, smaller institution, specialising in cryptocurrency lending — Signature Bank, had failed a few days previously. Smaller banks, like SVB and First Republic, had their regulations substantially relaxed in 2018, allowing them to take greater risks with their assets.This, analysts say has left them especially exposed as interest rates have increased, and their customers are withdrawing money to place it in larger institutions.Regulators have to close down these US regional banks banks following mass withdrawals of customer deposits from them.Clearly, the events have shaken investor confidence and will likely lead to tightening liquidity across global debt markets. Still, the impact will likely be limited for most rated banks in Gulf Co-operation Council (GCC) countries, according to Moody’s Investor Service.This, it said is due to structural features including their broad franchises and large government presence across the banks’ balance sheets.Also, GCC banks are not materially exposed to the failed US banks and are not as susceptible to large losses from held-to-maturity debt securities. The spillover effects of the US bank distress are still developing, however.Banks in the six nations of the (GCC) generally have broad franchises across retail and corporate banking. GCC banks are strongly interlinked with their respective sovereigns.For the most part, the footprint of governments in the region can be found right across banks’ balance sheets — as borrowers, depositors and as main shareholders, creating a supportive and interlinked operating environment. Most GCC governments are highly rated. They maintain equity stakes in the banking systems, both directly and indirectly through public-sector institutions, pension funds and companies.They anchor the banks’ funding profiles through inflows of stable deposits, which have increased thanks to higher oil-related government revenues in 2022, Moody’s noted. Governments also provide lending opportunities to GCC banks that are playing a pivotal role in implementing the governments’ economic diversification agendas in the non-oil parts of the economy — where they conduct bulk of their lending activities — which are supported by government spending.All these factors ensure GCC banks remain core to the regional economies and will protect them against sudden market shocks.Bank bailouts need not indicate yet another global financial crisis. But if history is anything to go by, they should still have us all worried!