Managing risk is the job of mothers and fathers, who hope their children will learn well and move forward productively into a challenging world. It is also the job of financial managers responsible for investments and depreciation schedules that measure asset value in decades. Risk is the connecting point between Scripps, the 30-year Treasury bond and global warming.
Scripps Institution of Oceanography, at the University of California, San Diego, has a pedigree as good as the U.S. dollar. The National Research Council has ranked Scripps first in faculty quality among oceanography programs nationwide. The plan by Florida’s Gov. Jeb Bush to wedge another Scripps in the middle of environmentally sensitive lands at the edge of the Everglades has sharpened public awareness of the California-based research institute.
But it is the oceanographers, not molecular biologists, comparing a 40-year record of ocean temperatures around the world with a computer model predicting global warming who correlate with what ails the 30-year Treasury bond.
Today, the market yield on the 30-year Treasury bond is nearly the same as a money-market fund, despite more than a year of periodic increases in the benchmark by the Federal Reserve.
This is unusual. Long-term yields should follow short-term rates upward, to offer investors a better return for banking on America’s future.
But today’s yield on the bond is so low that if it were a patient, it would be hospitalized for low blood pressure.
On Feb. 17, Scripps oceanographers presented data to the annual meeting in Washington, D.C., of the American Association for the Advancement of Science providing what they called “the first clear evidence of human-produced warming in the world’s oceans,” a finding they say removes much of the uncertainty associated with debates about global warming.
Scripps scientists express with muted restraint the warning that decision-makers need to take climate change seriously.
What is more sobering than future scenarios of drinking-water supplies vanishing, or the destruction of crop-growing seasons caused by the alteration of oceanic currents is to witness Congress ready to open the Arctic National Wildlife Refuge to oil drilling at the same time as Republican senators from Alaska are edging toward support for curbs on carbon-dioxide emissions, which they have long opposed. The effects of global warming in Alaska are so rapidly accumulating that the Wall Street Journal reports oil companies may not be able to drill in ANWR because, “The runways of the nearest airport . . . are often underwater now after fall storms.”
It used to take a two-party system to make Congress look like a dog chasing its own tail, but the lack of a coherent energy policy to wean America from dependency on fossil fuels is alarming—especially to long-term investors.
Scripps scientists involved in the recent study, conducted with the Lawrence Livermore National Laboratory, said, “In all of the ocean basins, the warming signal found in the upper 700 meters predicted by the models corresponded to the measurements obtained at sea with confidence exceeding 95 percent.”
“Our position has been the same for a long time,” says Bill Holbrook, spokesman for the White House Council on Environmental Quality. “The science of global climate change is uncertain.”
What is certain is that in early February, 2,600 oil rigs were boring for energy worldwide, an increase from 1,800 in 2002.
In Fortune Magazine, veteran oil analyst Matthew Simmons notes the skyrocketing demand from the world’s fastest-growing economy, China, and concludes, “to keep up supply the world will need to build new rigs at a rate not seen since the ‘Liberty Ship’ drive of World War II.”
Just what we need: another war-time effort to wring oil from an exhausted planet that is belching its response at the same time the United States, the world’s superpower, is making itself more dependent on unreliable sources of oil that jeopardize our economy and whose collateral effects help China rise as a competitor in the race for economic hegemony while turning biodiversity to mush.
In its denial of global warming and in its refusal to reform the nation’s energy policies, the Bush administration is engaged in a form of command and control harsher than the worst regulation ever imposed on business or the consumer.
The Bush administration is confident it has all the answers. But the 30-year Treasury yield tells another story. The insurance industry has already settled on the fact of global warming. Markets, when they are truly free, do not lie.