It will end badly if we rely on the speculators and gamblers for a climate change solution

I am now in a very hot and humid Kyoto having left Australia yesterday in weather that was in some places 20 or more degrees Celsius above the norm for early Spring. The heat here and back home at this time of year is rather scary given what it portends. I also do not have much time today given I have been contending with various ‘moving in’ requirements. But I read an article on the plane last night which I think marks a divide between what ‘green’ progressives think and what I think is needed. I was talking to a friend the other day who remarked he was enduring what he termed ‘ecological anxiety’. In the week that followed, bushfires across Australia have started burning some months earlier than has been the typical pattern over a long period. There are massive ‘weather’ events now all around the globe and it is becoming increasingly difficult for the sceptics to dismiss these conjunctions as random or ‘we just haven’t had data long enough’ type ruses. Some ‘green progressives believe the solution lies in governments inducing the financial speculators to shift funds into ‘green’ investments so that profitability can be safeguarded. They also believe that governments will get more money to invest this way (through providing inflation-indexed sovereign bonds). Talk about a vision for increased corporate welfare. My starting point is that we should do everything possible to keep the speculators out of our policy moves to decarbonise. It will end badly if we rely on the gamblers for the solution.

In the UK Guardian article (September 20, 2023) – What green finance needs to speed the global transition to a net zero economy – we find an argument that is based on two premises:

1. Governments are unable to fund the transition to a net zreo economy.

2. So private sector funding is required and thus conditions must be created conducive to such funding.

Of course, I reject both premises.

The authors are attached to an investment fund and of course will spruik for increased private involvement assisted by lucrative policy inducements from government.

Any new way to structure up some on-going corporate welfare is always attractive to these blood suckers.

The authors want “instruments” created that:

…. will enable the private sector and private investors to channel more capital toward climate resilience and sustainable development.



While the public sector has an important role to play in this respect, scalable solutions require significant commitments of private sector resources. With the climate crisis already wreaking havoc on poor and rich countries alike, unlocking this largely untapped pool of capital has become an urgent priority.

There is the first erroneous premise.

The public sector has all the financial capacity that will be necessary to provide “scalable solutions” to the climate crisis.

The reason they are dragging their heels is because we (the voters) are too ignorant to insist and instead have bought the lie that our governments do not have enough money and will tax us into oblivion if they were to get it off us.

And then we read:

Yet as matters stand, many investors associate climate-centric investments with “social impact” and reduced profitability … The solution is to create climate investments that are profitable, liquid and accessible to all.

I have made this point before but it bears endless repetition.

To relieve my friend’s ‘ecological anxiety’ is not about getting an EV or putting solar cells on our houses.

The solution lies at the very heart of the viability of capitalism.

I am working on these ideas at present for my next book and next week I will write in more depth about the topic.

But I cannot see a way forward for the globe where we rely on the continuation of private profit seeking to solve the global issues confronting our very existences.

These UK Guardian authors seem to think that government should just help the private sector create ‘market solution’ that minimise dislocation from climate change but pump money into assets that they claim are going to reduce the carbon footprint.

So they want “retail-friendly, liquid, easily accessible instruments such as exchange-traded funds (ETFs)”, which are just more of the same.

They want climate supporting financial assets that are “profitable, long-term, climate-aligned” and would include:

1. “climate-resilient real estate and infrastructure – meaning assets in weather-proof, stable geographies that have low climate exposure” – in other words doing nothing to promote net zero but which increase speculation in land and housing and promote “greenfield developments” – meaning plunder more land for hectares of roof and concrete.

2. “green commodities” – more mining, more land lost – “we urgently need to boost production and lower the cost of securing these commodities”.

So if you are in the degrowth camp you will see that this approach is just more of the same.

3. “a sensible climate-aligned portfolio should include assets that provide a hedge against inflation and geoeconomic risks, such as short-term and inflation-indexed sovereign bonds and gold” – more corporate welfare.

They want governments to sell more debt and index it to inflation so that the public take the risk and the investor takes none given the debt will have zero credit risk (as long as the government of issue has its own currency).

And finally:

Again, there is an added bonus: greater investments in inflation-proof sovereign assets will allow governments to do more to finance the green transition.

So they want more corporate welfare but think that the funds that the private investors are transferring to governments in return for the risk-free indexed bonds will give the governments more money to spend.

The lack of understanding here is phenomenal.

Think about the causation.

1. Government issues its own currency.

2. It spends more than it taxes back (that is, runs a deficit) which then allows the non-government sector as a whole to accumulate the currency as saving.

3. The non-government sector might alter their financial portfolios and buy some bonds rather than hold the funds in bank accounts, for example.

The funds to buy the bonds came from government!

4. The bond sales swap reserve balances (cash) for bits of paper (bonds), which in operational terms just means numbers are swapped in the banking sector and on the government side the central bank would just reduce the reserve balances and increase the ‘government debt’ account balances with no material impact on the capacity of said government to spend more than they tax back or less.

Inducing the financial markets to shift funds into attractive (for profits) assets created by governments may help private investors increase their profits but it does nothing for governments in terms of providing them with additional funds to enhance their spending.

My rule of thumb is this:

1. If the financial markets are interested in something it is better for the rest of us to keep them at bay.

2. Do not allow ‘private profitability’ to be the guiding hand for moving our economies away from carbon usage towards net zero.

3. Actively seek to reduce production not shift it.

But most of all ‘keep the financial markets out’.


That is all I have time for today.

A longer related piece coming up next week after I have read a few more things.

That is enough for today!

(c) Copyright 2023 William Mitchell. All Rights Reserved.

This Post Has 6 Comments

  1. The markets found a solution to climate change a long time ago: electric cars.
    The 1% (who owns the car business) dreamt a sweet dream in which everybody would be forced to give away their cars and buy new electric, expensive and worthless cars.
    You can say petrol cars are a BIG problem and I agree with you.
    Except that electric cars are an even bigger problem, as there’s nothing “green” about them.
    They don’t cough away CO2, but the power station that generated the electricity that fed the battery of the car is burning fossil fuel and dumping millions of tons of carbon in the atmosphere.
    Battery operation is, in itself, a very inefficent process.
    The making of a car is also a very dirty process, that goes from the mines where the minerals are beeing dug out to the car dealership, where it is beeing displayed to the customers.
    Fuel cell cars are the closest to a solution to the car problem (in fact, only public transportation could be considered a solution), but the industry rejects them.
    The Toyota Mirai is the only fuel cell model I heard of, but there’s no way you could refill it with H2 in most parts of the world (and assuming that the H2 was manufactured with renewal energy).
    I heard some scientist say that many catastrophic events we are witnessing today may have more to do with the activity of the sun (that seems to be now in a very bad mood) than with fossil fuel burning.
    But, despite that, the fact is that we are burning carbon that was imprisioned millions of years ago in the deepest of the earth.
    That carbon was methane that was in the planet’s atmosphere and thanks to some algae, that carbon was taken out of the atmosphere and buried in the bottom of the primordial ocean.
    Taking that carbon out from its prison and releasing it back in the atmosphere is akin to filling it back with methane.
    Kind of stupid, right?

  2. Once one understands that the limiting factor to stuff being done isn’t a limitation of money, but a sufficiency of trained people, and understands that the money that helps to bring people into employment by its exchange quality, must be provided by the state and maybe additionally, but at interest, by banks backed by the state, then it’s not possible to be fooled by the idea that the govt is beholden to rich people to lend it money.

  3. Dear Bill,
    thank you very much for your extraordinary efforts to put us in the picture.
    May I suggest that words like ‘green ‘ and ‘climate change’ are soporific, and don’t reflect the gravity
    of our predicament.
    I can’t see how we are going to escape another mass extinction.
    I’m going to put a thumb-drive in a coke-bottle beneath my backyard, so I can say cheerio to some
    Hominin like creature, who evoves in 500 million years time, and fancies a bit of archaeology.
    Looks like it’s going to be ‘ Death, Taxes, and Mass Extinction ‘.

  4. Quite. As Randy Wray said on his MMT Podcast appearance on the GND in 2020: ‘The market caused the problem, the Market is not the solution. Forget the market.’

  5. It seems inevitable that the financial sector are pushing for inflation indexed green bonds to be issued. They see the writing on the wall and that governments are going to be forced to spend a lot on climate mitigation and they just want to grab that risk-free arbitrage rather than buy the ‘vanilla’ bonds that don’t have any inflation hedge. They also want to be seen to be contributing in some way to climate solutions, but don’t actually want to do anything helpful. No doubt they will get what they want because they have great influence on politicians from all sides.

  6. “All of this will call for a new kind of scholarship, a scholarship without any mission other than the discovery of truth, and one that will not tremble with fear when that truth is contrary to what one prefers to believe.” The Destruction of Black Civilisation, Chancellor Williams, 1987

    “The professor of mathematics in a college has to be more than a counting machine, or proctor of examinations; he must be a living man, acquainted with real human beings, and alive to the relation of his branch of knowledge to the technical problem of living and earning a living” The Education of Black People, W.E.B. Du Bois

    The problem with gamblers is that when they run out i.e., get bored, of gambles they usually just create new avenues to satisfy their insatiable desires.
    For example,
    “When the Hydrogen Council launched at the World Economic Forum in Davos in January 2017, it was the first initiative of its kind in the world – and still is. Comprised initially of 13 leaders from the energy, transportation and manufacturing sectors, in just over five years, the Council now includes close to 150 multinational companies representing the entire hydrogen value chain.” About page, Hydrogen Council

    I believe you and Thomas Fazi said it best…
    “Times of organic crisis can be frightening, but they can also be incredibly fertile. They throw dominant paradigms into doubt, expose the false claims made by elites and open up new horizons. They set the wheels of history – of which elites always claim to represent the end point – in motion once again. In doing so, they create huge opportunities for change – including progressive change, of course. The current crisis is no different.” Reclaiming The State, William Mitchell & Thomas Fazi

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