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Reduce ACT GHG Emissions to zero by 2020

By cscoxk 19 April 2009 33

Most people do not know that we increase the amount of money in society by the banks lending money they do not have. That is, the banks – including the Reserve Bank – make loans of money even though they do not have it on deposit. As soon as they create the loan the bank deposits the money in the borrowers bank account and so the money supply increases. The reason we increase the money supply this way is that it is assumed that banks will only lend money to people or organisations who will pay it back and to pay it back it is assumed you have to make the money work for you. While this is good in theory in practice it leads inevitably to credit crises, inflation and the so called business cycle.

There is a way of increasing the money supply that creates money after we have built an asset that will pay back the money. On Wednesday I am presenting to the ACT Legislative Assembly Committee on Climate Change such a proposal. We can increase the money supply by building infrastructure that will reduce greenhouse gas concentrations while at the same time returning a handsome profit.

Find out more about this idea at http://stableproductivemoney.wordpress.com/2009/04/10/presentation-to-the-act-legislative-assembly/ and see how we can reduce the ACT net greenhouse gas emissions to zero by 2020 without requiring the community or the government to go into debt and with a decrease in the cost of energy.

The same method can be used to build any productive infrastructure that has difficulty finding funding because the benefits accrue mainly to the community not to business or governments funding the infrastructure through loans. For example it can be used to fund and build a light rail system in the ACT or to build our water infrastructure so that we have no need for water restrictions.

Once we start to increase the money supply using this approach we will halt the tendency for lenders to inadvertently encourage asset bubbles and we will reduce inflation.

If you think it is an idea worth pursuing come along to the presentation or send your support to committees@parliament.act.gov.au

If you can see flaws in the idea then comment here.


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Reduce ACT GHG Emissions to zero by 2020
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cscoxk 7:11 pm 20 Apr 09

Vonbare,

Unless we can come up with solutions where the average citizen is better off with reductions in ghg emissions I do not think we will get very far. That is, the problem is really one of the “tragedy of the commons” where each person knows it is best for the group if they do something but each will not do anything while the others are “looking on”. This applies to countries as well as individuals.

I have been working on a solution to this problem for several years. Initially the idea was for people who consume a lot of a resource to pay extra but the extra money goes to those who consume little. Those who consume little have to spend their money on ways to increase the resource through investment. This works well for water and it could work for reducing ghg emissions but the problem is too great and too urgent to rely on prices alone.

The global economic crisis has given us a once in a lifetime opportunity to change the way we increase the money supply so that it can pay those who consume little or contribute less to the problem. We need massive investments to solve the problem. The presentation on Wednesday outlines one way to do it while at the same time helping fix the credit crisis. The system is one where no one loses and a country can do it without waiting for others to join in with the knowledge that others will almost certainly join in once it is demonstrated to work. No one loses because good infrastructure returns more money benefits to a society than it costs to build.

The system I am proposing will

Reduce greenhouse gas concentrations
Reduce the cost of energy
Reward those who reduce their energy consumption
Stabilise the money supply

That is, countries who adopt it will get wealthier quicker than those who don’t. That means that others will soon join in.

I can make all the assertions I like but it will not be believed until we try it out.

It would be good if Canberra was the place to prove it particularly as it will cost nothing to the government or citizens except moral support.

Perhaps we could rename Australia to Brownland?

Pandy 6:31 pm 20 Apr 09

Greenland will therefore live up to its name.

Vonbare 5:11 pm 20 Apr 09

shiny flu,

Considering The Great Global Warming Swindle was aired firstly on Channel 4 and secondly in 2007 means it is pretty much obsolete. The science that has been released since then proves that climate change is not a lie, and is happening at a much greater rate than ever predicted.

A brief summary of what we learnt in 2008:

1. Other greenhouse gases are also worrying
2. Arctic summer sea ice is in rapid decline
3. Warming is already having an impact
4. There will be definite climate changes no matter how much we mitigate now
5. Sceptics are still out there
6. We will have major international issues surrounding climate refugees as the 3rd world and developing countries are first ‘hit’

And what we’re still working on

1. How much warming and by when
2. Where to stabilise
3. Where the missing carbon is going
4. Whether warming worsens storms
5. How fast Greenland is melting

Questions:

a) do non-believers not believe because they are lazy and don’t want to change their lifestyles?
b) did you know that still in the 1970’s you could find scientific reports stating that cigarettes were good for you (and I wonder who funded those studies)

Cscoxk – if you get this to work I’ll be impressed and take back what I said at post#7. I do think, though, that you need to be able to describes the economics a lot more clearly, within the framework of how government and banks do business. All the best.

cscoxk 3:58 pm 20 Apr 09

VYBerlinaV8

Thanks for taking the effort. It has helped me understand where people have difficulty.

I am very optimistic because it is a win-win-win situation for all including the banks. If I do not succeed with the ACT politicians I will go to the banks because I think they have much to gain from a more stable money system.

I’m giving up now. The big posts are nice and all but they do little to respond (sensibly) to my underlying doubts.

Good luck with it.

Hells_Bells74 12:22 pm 20 Apr 09

Damn moneychangers!

cscoxk 10:55 am 20 Apr 09

harvyk1

I am not proposing how to reduce ghg concentrations I am proposing a method of financing ways of doing it. I have referred to many methods that will reduce ghg concentrations and if you read some of the references you will see considerable details. The issue is which is the most efficient way (cheapest). I suggest it is best to let the market decide.

The risk of not being able to find ways to reduce greenhouse gases is ZERO. We know how to do it. It is a question of financing it. We are not creating loans which of course are risky but I am not talking about financial risk because there are no loans. I am talking about the risk of not having a way to reduce ghg concentrations no matter how much we invest because our investments will not pay for themselves even when we exclude finance charges. I have shown that there investments that will pay for themselves many times over.

It is scalable if other countries increase their money supply this way. You may not have noticed it but that is exactly what the Chinese are doing with respect to their money supply. They are investing money on productive infrastructure not giving out money for people to spend willy nilly. They are certainly not going to the banks to loan them money the banks do not have but will create when asked.

I am proposing what the Chinese are doing but in a way that uses markets to do the allocation not government edict. Australia is doing the same as the Chinese with the infrastructure fund and I suggest that this, while better than handouts, is still inefficient as there is no market mechanism to do the allocation and I also say that there was no need to raid the future fund to pay for the infrastructure. It would be OK for the Reserve Bank to increase the money supply to pay for it. The problem is that governments are not very good at allocating funds in the most efficient way.

I have shown how to finance the investment needed. Increase the money supply by building an asset first rather than the way we do it now which is to increase the money supply then maybe build an asset. It is really that simple. It is a small adjustment to the money markets by providing a different way to increase the money supply. It is not a revolution.

I find it mildly amusing that people seem to think it is more than that and that it is crazy idea. If we had in place the method of increasing the money supply as I propose it and we then proposed the following imagine the outcry.

Increase the money supply by letting the banks lend money they do not have.
The banks now lend the government some of this money and charge the government interest on the loan.

Of course the government should pay interest on money the banks had in the first place but I draw the line at the government paying interest on money the banks are allowed to create with the blessing of the Reserve Bank.

Ralph 10:09 am 20 Apr 09

Love all this faith in government to make sound investment decisions.

harvyk1 9:24 am 20 Apr 09

I should also point out that for your plan to have even the remotest effect it would need to be something which can be scaled world wide. For an ACT only plan, assuming everyone in the world has a standard amount of GHG usage per person (assuming 7 billions people on earth, over the 300,000 living in the ACT) it would make a 0.004% difference to the worlds GHG’s.

harvyk1 9:19 am 20 Apr 09

cscoxk said :

No I do not know in detail how ghg reductions will be achieved. But I do know they can be reduced

That line is a corker, usually before someone sprouts off on how cleaver they are that they have found a solution to problem X they know what that solution is. (Even if it is of dubious scientific method).

This is akin to saying “trust me”.

Also you’re sprouting some really interesting accounting. When in the history of any project is there no risk? It means one of two things – 1. You don’t know what your talking about, or 2 – You have failed to properly assess the risk and thus the risk will bite you in the arse because you have failed to manage it.

Whilst I’m not a project manager myself, I have had to run many projects, and I’ve had to handle risks and the fallout when the risk couldn’t be mitigated.

I’m the last person to want to stifle progress, and a zero GHG by 2020 would be good. But for you to be taken seriously you need to have a bullet proof plan and be willing to show it to people, clearly identifying the risks and rewards, completely costed inc where your going to get the money to finance your dream (and as I know from personal experience people don’t just throw money at you because you have an idea, getting finance for a business is more difficult that simply getting a car loan), and make the time frame realistic. Set a date, not just a rounded year, and explain why you have chosen that date.

cscoxk 8:11 am 20 Apr 09

VYBerlinaV8,

You are 100% right when you say that we should not dilute the money supply. Now what does that mean? I take it to mean that we do not increase the money supply greater than the things there are to buy. If we have too much money in the system then we will get inflation.

As you say banks give loans if they think they will get repaid and they normally insist that the borrower has some asset against which the loan will be repaid. For people it is a job – for businesses it is tangible assets or guaranteed cash flows. We use this mechanism to increase the money supply. There is an asset backing the new loan but no asset backing the increase in the money supply. We hope out of all the loans that banks make enough new assets will be created to back the increase in the money supply.

What has happened time and time again is that too many loans are created and not enough assets are created. In fact the Reserve Bank acknowledges this with their targetted inflation. After awhile the system gets rid of the extra money created through inflation or through stopping increasing the money supply by slowing down the economy.

ALL I am saying is that there is another way of increasing the money supply other than through giving loans of money we do not have. We do this by creating special purpose money and GIVING it people who are REQUIRED to spend it building assets. If we insist on the asset being a productive one that will return more money than is invested in building the asset then we know that removing the restrictions on the new money we have created will not cause inflation.

What we are proposing is a way to direct resources as represented by special money to the construction of new productive assets and when the assets are built we turn the special money into unrestricted money.

The Reserve Bank can get the money supply under control. They can remove the need to control the interest rates and so free up the money market to work as it should without constraint.

The existing financial system stays as it is. Governments do not have to decide exactly how to invest the money. We can even arrange the distribution of Rewards to go to those who consume less and so encourage sustainability.

It is only a change to the way we increase the money supply but it will have profound effects.

Stop banks lending money they do not have on deposit. Increase the money supply after we have created a new asset to pay the interest on the money.

Of course we would not stop the banks lending money they do not have immediately but we would reduce the amount of money the Reserve Bank lends to banks and increase the fractional reserve amount as money from Rewards moved into the economy.

The process will be a smooth one and will not cause disruptions. It will give the government lots of ways of stimulating the economy in productive ways and so it will quickly reverse the recession.

Pandy 8:02 am 20 Apr 09

I just vomit up my cornflakes!!!

Gold!!!!

el 7:53 am 20 Apr 09
Pandy 7:48 am 20 Apr 09

Yawn.

Is it getting cold enough to turn-up my gas central heating?

As you say conventional theory has it that when you give loans the greater the risk the higher the return you should expect. Rewards does not create any loans and so talking about loan risk is irrelevant because there are no loans.

Firstly, are you talking about loans or investment? They are two different things, depending on which party’s point of view you take. There is more to risk and return than loans. What about the underlying assets the money is used for?

Everyone has trouble with the concept because they simply do not believe that we can create money without creating a loan.

Of course you can create money without loans. But if you do that, you are diluting the value of existing money within the system. This fuels inflation, which effectively means that everyone else’s money buys less value. When banks give loans, it is on the basis of money being returned, either through the work of an individual, or return on an investment made with the loan funds. It is backed by something. Creating money out of nothing is backed by nothing.

Don’t get me wrong – investing is profitable and environmentally friendly energy infrastructure is a great idea, but I still think you have your economics confused.

cscoxk 1:09 am 20 Apr 09

Monomania,

The main cost of renewable energy are the finance costs of interest and repayments to repay the capital we invest to construct a renewable energy source.

I am proposing a way we can get rid of finance charges of interest and repayments. This immediately makes sources of renewable energy profitable.

I know it is hard work but please listen to http://stableproductivemoney.wordpress.com/2009/04/10/presentation-to-the-act-legislative-assembly/ or even come along on Wednesday at 2pm to heckle and ask questions.

cscoxk 1:00 am 20 Apr 09

VYBerlinaV8

As you say conventional theory has it that when you give loans the greater the risk the higher the return you should expect. Rewards does not create any loans and so talking about loan risk is irrelevant because there are no loans. The risk is that on average we will not be able to get back over the life of the asset more money than we invest. The risk of that occurring is zero if we allocate the Rewards through a market place. The average person in the ACT will receive $1500 each year in Rewards but will have to spend it on infrastructure that reduces greenhouse gas emissions. Buying renewable energy is not allowed but buying part of a windmill or solar thermal plant is. Initially, people are likely to invest in ways of saving energy such as a solar hot water heater or more insulation which will save you $1500 in energy costs within a few years. People are not stupid and they will look for the best place to invest their money. I believe there is zero chance that on average the cost will be less than the return the investments make remembering we do not have to include interest charges or repayments. If you cannot think of any place to invest your $1500 I and many others will buy it off you for a discount – my guess is that the discount will be about $500 so you will get $1000 real money for $1500 in restricted Rewards money.

Banks DO lend money they do not have on deposit. The confusion arises because most of the money they lend they HAVE on deposit and so loans of existing money gets confused with the small amount they lend that they do not have. This is one of the reasons why we increase the money supply through loans because it exists and seems to do a good job of preserving existing capital.

I am NOT saying that banks go out of business or reduce their lending. In 2008 banks increased the money supply by $170 billion. If we assume that the total lent was the GDP of one trillion then they lent $830 billion in existing money. When Rewards money gets converted to real money then it will be available to banks to lend so there is no change to what banks do or the total amount they lend. The ONLY difference is that the increase in the money supply comes through the creation of productive assets instead of a loan. Banks will still lend one trillion each year – it is just that there will be delay in the Rewards money coming into the money market.

Everyone has trouble with the concept because they simply do not believe that we can create money without creating a loan. We have been so conditioned with that thought that we accept it as fact. Loans are different from money. Loans are a promise to repay in the future. You can repay with an asset or you can repay with money but the fact you can repay a loan with money or the fact that you received money when you took out a loan does not make the two the same.

Money is a representation of “value” or a convenient way of exchanging goods or services. When we have money in the bank it is a representation of value. It is not a loan.

The way we currently increase the amount of money is through banks making loans with money they do not have. However, it doesn’t have to be that way. We can increase the money supply when we have produced a productive asset. Rewards is one way to do it.

Think increasing money supply without loans and it suddenly becomes clear. I have tried to explain it further at http://stableproductivemoney.wordpress.com/2009/03/24/a-better-way-to-increase-the-money-supply/ where I go through how you could build an electronic money system.

Also do listen to the presentation again http://stableproductivemoney.wordpress.com/2009/04/10/presentation-to-the-act-legislative-assembly/ and in particular the bit where I say

“the money we invest through Rewards will be returned to the community from the income generated from the investments.”

I am not talking about getting something for nothing but talking about getting a return on investment to pay for the investment – which is what investors do every day of the week.

shiny flu 12:33 am 20 Apr 09

It’s quite clear the global warming is just a big lie/fib/boo-boo/left-wing-fantasy. Scientific research says quite clearly that it is a natural process and even a FILM from a film production studio called The Great Global Warming Swindle says that global warming doesn’t exist. John Howard, John McCain and our faithful world Jesus/God’s BFF Dubya always dismissed it so it must not exist. It really is that simple.

Clearly a move toward zero emissions is a move towards communism/socialism/totalitarianism. Do you really want to give up freedom? Are you trying to force us out of our right to our lives the way we want to? It’s obvious you hate Australia and democracy if you want us to even think about this Global “LIE” Warming, hence distracting us from the omnipresent terrorist threat.

I’m just trying to be fair and balanced…










… (sarcasm).

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