Skip to content Skip to main navigation

Business

Buying or selling? Get the right advice

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.

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.

What’s Your opinion?


Post a comment
Please login to post your comments, or connect with
33 Responses to
Reduce ACT GHG Emissions to zero by 2020
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).

monomania 10:38 pm 19 Apr 09

cscoxk said :

Monomania,

There are plenty of technologies that take greenhouse gases and other gases out of the atmosphere. Biochar for example. There are many examples of artificial photosynthesis in the labs where carbon dioxide and water are combined to produce liquid fuels. We know that geothermal works and we know that solar thermal works and we know that solar voltaics work and we know that windmills work etc.

The trick is to invest in the ones that give us the most energy for the least cost. This is best done through a market place.

We can get zero net emissions by 2020 if we invest enough and enough for the ACT is 600million per year for ten years.

All of the technologies you mention here cannot stand in the current market place. They all require a huge amount of subsidy.

These alternative energy sources are capital, energy and carbon intensive. It would require a huge amount of all three to replace non renewable energy sources. For instance, you will find it difficult to see any up to date study that measures the embedded energy in photovoltaic panels. Proponents say 2 years payback. A 2000 study from the ANU put it 8 to 11 years. It will be less than that now but why do you think they are so expensive. The benefit of carbon removal technologies remain to be demonstrated.

VYBerlinaV8_the_one_ 8:35 pm 19 Apr 09

It is 100% risk free if there is going to be a demand for energy at more than 1 cent per kwh. I think that is as close to 100% risk free as you can get. Risk comes about when you have loans that are not going to be repaid. If you know you are going to create productive assets then it IS 100% risk free.

I disagree. There are a range of risks that apply, including success of the technology on a large scale, being able to get the energy to market, and being able to manage costs along the way (this is one of the biggest risks). All of these aspects (and more) have their own many risks attached. Just creating a productive asset DOES NOT make something risk free. In fact, gaining a return on a capital investment is all about balancing risk versus return. Zero risk, very little return.

Also, your assertion about banks making money is misleading. Banks lead multiples of what they have on deposit elsewhere, but bear in mind that value is created every day, such as when we exchange our time for money by working, or when a company performs a manufacturing process on raw materials. Where does our pay come from, for example? Banks enable this. Reserve monetary policy has a range of economic outcomes, including deciding how much money needs to be printed to support cash requirements based on growing economies. Of course, banks contribute to the issue by lending for non-value purposes (my opinion, not an economic theory). I’m pretty sure your rule of 10% deposited with the RBA is incorrect, too.

Also, I’d be careful about talking about finance costs without being specific, as this can mean different things depending on the context. Without clarification, your assertion is meaningless.

Don’t get me wrong, I like your thinking, but it will need a lot more rigour if it’s going to stand up.

cscoxk 8:15 pm 19 Apr 09

Monomania,

The magic of investment is that you put money into an investment and you get back more than you put in. One of the difficulties with traditional economic thinking is that the equations they use to model economic systems are based on the equations of planetary motion! and they do not include the fact that you invest money and get more back. That is where the money comes from and that is why it can be done.

There are plenty of technologies that take greenhouse gases and other gases out of the atmosphere. Biochar for example. There are many examples of artificial photosynthesis in the labs where carbon dioxide and water are combined to produce liquid fuels. We know that geothermal works and we know that solar thermal works and we know that solar voltaics work and we know that windmills work etc.

The trick is to invest in the ones that give us the most energy for the least cost. This is best done through a market place.

We can get zero net emissions by 2020 if we invest enough and enough for the ACT is 600million per year for ten years.

cscoxk 7:59 pm 19 Apr 09

VYBerlinaV8

Banks DO create money by lending money they do not have on deposit. The main criteria they have to meet is that they must have 10% of the total money lent on deposit with the reserve bank. Most people do not understand how the money supply is increased and when you tell them that money is created by banks (including the Reserve Bank) lending money they do not have it is met with disbelief – but it is true. If the money supply is not increased this way then tell me how you think it is increased?

Of course in theory increasing the money supply through loans sounds sensible and rational but it is a positive feedback system which inevitably leads to more loans and more money being created than necessary. When loans start to go bad on a massive scale then money creation essentially stops which is why we get the credit crisis and governments handing out money for people to spend.

$300Billion is an estimate based on how much investment we need to produce all our energy from electricity produced by geothermal and solar thermal power plants. I know this is not “exact” but it is an over estimate of the amount of money needed and gives the order of magnitude of the problem. It is not going to be greater than this and potentially a whole lot less.

6 cents is the current average wholesale price for energy at the factory gate of fossil fuel energy plants in Eastern Australia. 1 cent is the running costs for both solar thermal and geothermal plants – if we remove finance charges. My guess is that the price of energy will start to drop and fossil fuel plants will start to close down. Prices will not go up. I also think we should issue Rewards to the owners of fossil fuel plants to compensate them for destroying the value of their assets.

It is 100% risk free if there is going to be a demand for energy at more than 1 cent per kwh. I think that is as close to 100% risk free as you can get. Risk comes about when you have loans that are not going to be repaid. If you know you are going to create productive assets then it IS 100% risk free.

VYBerlinaV8_the_one_ 7:31 pm 19 Apr 09

I think you’re getting the concept of monetary supply confused. Banks don’t just ‘print money’, they lend based on a range of regulatory criteria. This is not same thing as the reserve bank altering monetary supply.

Also, your numbers and assurances have little supporting them. Where exactly is this $300b coming from? How do you know the final costs of energy? How do you know it will be ‘6 cents’ or ‘1 cents’. Markets will sell at the highest price the market will bear.

And to say something is 100% risk free is both naive and misleading. It just means you don’t understand the risks.

Frankly, I am wondering if I am feeding a troll.

cscoxk 7:14 pm 19 Apr 09

Great stuff. Deano in particular thank you for outlining your objections and let me try to meet them.

I will go through your summary but happy to go back to the others if the answers I give still do not convince.

* You do know in detail how the ghg reductions will be achieved

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

I do know that if Australia invests $30 billion a year for the next 10 years then we can produce enough energy from renewable resources using existing technologies of geothermal and solar thermal energy to satisfy all our energy needs. To see some calculations go to http://www.onlineopinion.com.au/view.asp?article=7662. I have more detailed modelling but they all tell the same story. It can be done. This is likely to be an overestimate of the amount of money needed but this is good enough for our purposes. Of course there are lots of other ways of producing energy than electricity but we are not looking at the details only whether it is possible.

* You do not know what is the best investment strategy but will trust the markets to work it out

Well yes. Markets are the best way we have yet devised to allocate resources. That is what they are very good at.

* Its going to cost $300 billion over ten years and you want to ask the Reserve Bank to just print this money

The Reserve Bank last year allowed the banks to print $170 billion dollars that did not exist. That is the M3 money supply increased by $170 billion in 2008. $300 billion over 10 years is only 20% of the current increase in money supply.

* You don’t believe pouring this amount of money into the economy will be inflationary even though this money is never removed from the system.

We are already putting in five times as much money. Rewards may inflate but not the general currency. Think it through. Inflation occurs when we print more money than we have things to buy. If we do not create the money until the asset is built then it cannot be inflationary. Rewards may inflate but not the general currency because it does not “appear” until there is an asset it can purchase. The main thing about increasing the money supply is not about economics. It is about ownership. I am saying that the ownership of new money should go to the general population who are living in a way that does not disadvantage the rest of us. Not to those who already have assets.

* You are going to give the majority of the money to the people who have the least use for it

The current system gives the money to the people who have the most assets and they have the least use for it.

We are giving the money to the people who contribute the least to the problem. They do not necessarily decide how to use the money but they can if they wish. There will be plenty of people around to advise them on the best way to invest. The only criteria for them is that must continue to invest in ways of reducing ghg. This gives a positive feedback system that will encourage sustainability. You reduce your demands for energy and we will give you Rewards that you must spend reducing your demand for energy.

* You believe it will be highly profitable for the community, who are the ones buying the energy to begin with.

If you sell energy for 6 cents that costs 1 cents then that is profitable. The profits go to the community because they are the ones who earn Rewards and so own the new infrastructure. It only costs 1 cent per kwh because there are no finance and repayment charges.

* You believe the scheme is 100% risk free

Yes. Because we know we can produce renewable energy. We know there is plenty of renewable energy available if we invest. We know that we can always sell energy – there is always a market for cheap energy. The only thing stopping us doing it today is the cost of finance. Remove the cost of finance and renewable energy is cheap. This is risk free because people will invest through a market place and we know people go for the best investment.

We need to increase the money supply to keep the economy growing. At the moment we increase the money supply by banks loaning money they do not have to people who already have assets in the hope that the borrower will pay them back. We do not create money in the hope that people will produce a new asset to pay the money back – just that they will pay the money back.

I am saying we can increase the money supply after the asset is built. This is much better than a hope that the money that banks create may produce a new asset.

We are not changing the financial system. Banks will still make most of the loans as they do today. It is just that banks have to have money on deposit before they can lend it and that seems a very reasonable request.

The current system where banks are given the right to print money and then lend it to the government and others and the government pays interest on it when it borrows it is so crazy that most people do not realise that is what happens because it is so ludicrous. But that is the current system. Of course the government should pay interest on money it borrows that existed before they borrowed it but the government should not pay interest on money that did not exist until it was lent.

We need to create a system where the increase in money supply is guaranteed to produce a productive asset. That is why we distribute Rewards widely and we let the market in infrastructure assets determine where the money is invested.

VYBerlinaV8_the_one_ 5:54 pm 19 Apr 09

Nutjob.

el 3:50 pm 19 Apr 09

But Deano, couldn’t we then harvest the gasses to create electricity?

1. Harvest gasses
2. Print $300 billion to build infrastructure to make use of said gasses.
3. ??!?!?!?
4. Underpants.
5. Profit!

Deano 3:37 pm 19 Apr 09

monomania said :

The only way the ACT could become carbon neutral by 2020 is if every one of us actually threw ourselves on swords or took some other method to remove our footprint from the territory.

Nah, our rotting corpses would still continue to emit green house gasses.

monomania 3:23 pm 19 Apr 09

Sorry Kevin, I just don’t get it. I’ve always been skeptical about the idea that Australia should lead the way, throw itself on an economic sword. Look at us world.

How do we become as you suggest carbon neutral let alone negative. What’s this magic technology that would allow this to happen. Just wishing it to be won’t make it. Don’t you think that there would be rewards enough to the developers of energy producing technology. They have been trying ever since people in the middle ages worked to invent perpetual motion machines.

The only way the ACT could become carbon neutral by 2020 is if every one of us actually threw ourselves on swords or took some other method to remove our footprint from the territory.

Deano 2:49 pm 19 Apr 09

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

OK since you asked…

This approach is 100% under our control and is guaranteed to work.

Never worked in the government then, eh?

I took the amount of energy Australians are likely to consume in 2020 and assumed that we would need to produce all this energy as electricity from non polluting sources.

Your first error in reasoning. Electricity is not a direct replacement for all current forms of energy. There are different efficiencies involved in converting electricity into other forms of energy compared to the other energy sources currently in use.

It is easier to reduce investment than increase it.

You’ve definitely never worked in government then.

We do know that markets are an excellent way of allocating resources because well designed markets allow innovation to flourish.

Um, have you been reading the papers recently?

We give individuals and businesses Rewards to be spent in the market place in inverse proportion to the amount of Energy they consume.

So you give the people causing the biggest part of the problem the least amount of resources to fix it. And what encourages people with low energy usage to spend their ‘Rewards’ – they are going to get the least return from them.

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

Ah but where does this ‘income generated from the investments’ magically come from. It comes from the community that buys the energy produced by these investments – even if it was 100% efficient and no money escaped overseas, the best you could hope for is a zero net gain.

The investments will generate the money to pay for the infrastructure.

Ah, so you’ve invented a financial time machine so money generated in the future can be spent in the present. Cool!

If we do this we will increase the money supply without causing inflation

So you’re not an economist then either. Increasing the money supply without increasing economic activity will lead to inflation. Replacing one form of energy with another does not increase economic activity.

renewable energy will be produced and will be very profitable because there are zero finance charges.

Um, profitable for whom? Weren’t the profits going to be returned to the community to pay for the investments? So we are going to make a profit from ourselves.

It also means that those who consume less get more wealth.

No, the Rewards are worth less to people who use less energy because of the restrictions on how the rewards can be spent. To someone who uses zero energy, the rewards are worthless.

So to summarise:
* You do know in detail how the ghg reductions will be achieved
* You do not know what is the best investment strategy but will trust the markets to work it out
* Its going to cost $300 billion over ten years and you want to ask the Reserve Bank to just print this money
* You don’t believe pouring this amount of money into the economy will be inflationary even though this money is never removed from the system.
* You are going to give the majority of the money to the people who have the least use for it
* You believe it will be highly profitable for the community, who are the ones buying the energy to begin with.
* You believe the scheme is 100% risk free

In fact, why don’t you just invest all of the money into developing a perpetual motion machine, it would be just as effective

R. Slicker 1:01 pm 19 Apr 09

Care factor zero.

futto 11:55 am 19 Apr 09

I do not pretend to know in detail how the reductions will be achieved

.

That is where I stopped reading.

This local council can barely keep the roads sealed and the hospitals running. I feel the chance of a carbon neutral 2020 is as likely as a no waste 2010

1 2 3

Related Articles

CBR Tweets

Sign up to our newsletter

Top
Copyright © 2017 Riot ACT Holdings Pty Ltd. All rights reserved.
www.the-riotact.com | www.b2bmagazine.com.au | www.thisiscanberra.com

Search across the site