Tuesday, December 09, 2008

Green New Deal: where is the money to come from?

All rational human beings (a category that, unfortunately, does not include the Conservative Party) are agreed that Government must invest significant amounts of public money into energy conservation, renewables and the "Green 20", the identifiable parts of the green economy.

What we need to decide on is where the money is to come from. The Green New Deal group identify about 10 sources of funding, including pension funds, local government bonds, and investment of private individuals' savings. This is all well and good, but given the scale of the challenge that we face, both climatic and economic, direct Government investment is going to be necessary.

Keynes held that Government should borrow to invest. The question is, who are they to borrow from? One source is in gilts issues, but this is in competition with direct investment into the GND as above. For them to borrow from UK banks is a circularity, given the amounts of money we have recently lent to them. Maybe they are intending to borrow from foreign banks who are flush with money. I read that Lebanese banks have wisely refrained from indulging in the irrational lending splurge of other banks, and so are able to lend. But this would leave us in hock to foreign banks for many generations to come.

Which calls into question again the whole assumption that it is right and proper that private financial institutions should have a monopoly on the issue of new money, by lending it out at compound interest, solely for the profit of their corporation and its shareholders. The Green Party is very clear indeed on its oppostion to the privatisation of the money supply in the case of PFI. I cannot for the life of me see why there is such an absolute insistence on the part of some in the Party, both monetary conservatives and (amazingly) the very epitome of Green Left, that the supply of new money generally must remain in private hands.

Especially now that Samuel Brittan has murmured approvingly of Milton Freidman's endorsement of the right and power of Government to issue money.

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