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The climate scam is an attempt to save capitalism

15 Nov 2021 6 month(s) ago

Capitalist systems are ailing and the climate 'Great Reset' is a sinister attempt to find a way out.

The Glasgow United Nations Climate Change Conference is thankfully over. There was endless hot air about sustainability. China, did not send its leader: Xi Jinping, president of the world’s greatest CO2 emitter. But what investors should take notice of is that this push is not going away because the big financial players think it is a way to save the capitalist system, which they know is in deep trouble. There is no reason to have any confidence whatsoever that their machinations will succeed, but do not doubt their determination to push the would-be transformation: the ‘Great Reset’.

To understand the perceived importance of the climate change agenda it is necessary to start with what sustains modern economies: growth. Growth is the rate at which transactions occur. That rate has to keep rising for the system to keep going. In a capitalist system capital has a cost: a necessary return. R. Taggart Murphy’s classic book on Japan’s economic collapse, The Real Price of Japanese Money, superbly describes what happens when that return on capital is not met.

For a long time, achieving economic growth was easy enough. In the period after World War II, it came from a mix of population rises — the so called ‘baby boom’ — and technological advances, especially in manufacturing: the introduction of items such as fridges, cars, televisions. 

But those population increases slowed — fertility rates in most developed economies have fallen below replacement rates — and the technological advances intensified. There were spectacular efficiencies occasioned by advances in computerisation. Globalisation also drove down wages and prices in developed economies.

The production efficiencies raised the standard of living but, counter-intuitively, they were bad for ‘growth’. A fridge bought in the 1960s was expensive relative to incomes, so when they were sold growth increased because bigger transactions were involved. Fridges now cost very little compared with average incomes so the sales contribute much less to ‘growth’; the transactions are, in comparative terms, smaller. That pattern has been repeated across most industry sectors leading to global oversupply, lower costs and weaker economic growth.

The solution for the last two decades has been financialisation, whereby financial institutions generate money out of money. This kept the rate of transactions, or ‘growth’, intact. But it was largely achieved using debt, and it has run its course. The only way to stop a debt crisis has been to have interest rates at near zero and introduce Quantitative Easing, whereby the central bank effectively uses its reserve powers to print money.

So if financialisation cannot continue in the same way, how can the system keep ‘growing’? Answer: invent climate change trillions. In effect, the aim is to make money out of clean air, a new type of transaction.

The sums are eye watering; there is a lot of ‘growth’ to be had. The International Energy Agency has estimated the zero emissions target would cost $US150 trillion of total investment over a period of 30 years. To give some idea of the scale, global GDP is about $US80 trillion and global funds under management are about $US100 trillion. 

Bank of America notes that this $US150 trillion equates with $US5 trillion per annum, which is equal to the entire US tax base every year for 30 years. BloombergNEF claims that the total investment needed for energy supply and infrastructure could be as high $US5.8 trillion annually, which is nearly three times the amount invested on an annual basis today. 

These amounts cannot be provided either by governments or the private sector, so most of the funding will have to come central banks creating tens of trillions of dollars in Quantitative Easing, money printing. It will be transactions plucked out of thin air, or perhaps cleaner air.

The impact can already be seen. Local stock analysts now routinely give Environment, Sustainability, Governance (ESG) ratings because the big institutions, superannuation and insurance funds, include it as part of their investment practices. The Investor Group on Climate Change (IGCC), a collaboration of Australasian institutional investors (who wield the big money in the market) estimates that if Australia adopted Paris-aligned 2030 goals and committed to net zero, it could ‘unlock $131 billion in additional investment and job opportunities over the course of this decade.’ 

Critics of the climate change agenda consider it to be a financial scam designed to help the rich to get richer. They have a prima facie case at the very least, although it might also be asked: ‘when do the rich not get richer?’ The climate change agenda is not a battle between greenies and big business, mediated by governments. It is about making money, a game of financial survival. A desperate move to keep the system functioning that will inevitably fail. Ultimately, the centre cannot hold in any system that relies on printing money to succeed. But it is something that investors must include in their calculations.


Reader note: This is general reporting only and should not be considered in any way to be investment or tax advice. It does not take into consideration the investment objectives, financial situation or particular needs of any particular investor. For more information please read our disclosure statement.

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