Sovereign borrowings are never “for free”. There are always opportunity costs, especially when there’s so much distortion favoring it.

Sir, you hold that “Fiscal stimulus can relieve monetary policy if invested wisely” “Governments must learn to love borrowing again” December 9.

“If invested wisely”, what a caveat, but so could private borrowing and investment help do. That is if they were allowed to access bank credit in a non-discriminatory way. As is much lower statist bank capital requirements when lending to the sovereign, has banks basically doing QEs acquiring sovereign debt, and this also implies bureaucrats know better what to do with bank credit they’re not personally responsible for, than for instance entrepreneurs.

It surprises when you state: “Central banks should not be blamed for loose monetary policy. As long as governments are not willing to expand on the fiscal side, central bankers are legally obliged to make up the shortfall in demand support” Legally obliged? Are you constructing a defense for all those failed central bankers that FT has so much helped to egg on? Because, as you yourself argue, “ultra-loose monetary policy has inflated asset prices and may be slowing productivity growth by keeping uneconomic businesses alive”, they sure have failed.

I also find it shameful to argue: “When governments can borrow for free there is little reason not to invest to the hilt.” What “for free”? The current low cost of government borrowing is the direct result of QEs and regulatory discrimination against other bank borrowers, and that distortion results in huge opportunity costs for the society. Also each new public debt contracted eats up a part of that borrowing capacity at a reasonable cost, which is an asset that should not be squandered away. Reading this editorial, which in summary begs for kicking the crisis can forward by any available means, makes me feel inclined to suspect you have no grandchildren.

Sir, finally, with governments borrowing to tackle “green transition challenges” you are opening up great opportunities for climate change profiteers, which will be exploited, you can bet on that. The more concerned you are with climate change the more concerned you should be with keeping all climate-change-fight financial/political profiteers far away. If not we will not be able to afford the fight against climate change, or to help mitigate its consequences.

Financial communism... that's what we have

@PerKurowski

Bank capital requirements based on credit risk serves no purpose, based on fighting climate change does.

Sir, Ben Caldecott writes: “The UN’s Sustainable Development Goals and the Paris climate change agreement will be unattainable unless banks finance solutions to these massive social and environmental challenges.” “Banks need a better climate change strategy” July 1st.

The current risk weighted capital requirements for banks are idiotic since these are based on the assumption that what is perceived as risky is more dangerous to our bank systems than what is perceived as safe. But these are also totally purposeless. I do not really favor this type of distortion but there’s no question banks would serve a better purpose if their capital requirements were based, not on credit ratings, but on Sustainable Development Goal ratings.

Obviously such capital requirements would automatically generate “loans that charge lower interest rates to borrowers who meet or outperform sustainability targets” just as the current ones generates lower interest rates to the sovereign and “the safe”, all paid by less and more expensive credit to “the risky”

Of course it would be of utmost importance in that case that the SDG rating agencies are not captured by any of the climate change fight profiteers that abound.

That said, before any climate change fight initiative, including the Paris agreement, what would be most effective is a high carbon tax, with all its revenues shared out equally to all citizens. Why has that not been implemented yet? The simple answer is that because for states that lives on cronyism that is of absolutely no interest.

Sir, if the world is to have a chance to afford successfully fighting climate change, or at least afford to mitigate some of its worst effects, we have to circle all our wagons in an effort to keep out of it all those who are just out to make monetary or political profits.

http://ourpiedaterre.blogspot.com/2015/04/my-proposal-for-this-earth-day-2015.html

@PerKurowski

One country, setting the example of a very high carbon tax, and sharing out all its revenues equally among all its citizens, would be a real game changer, in so many ways.

Sir you correctly argue, “Time is running out for us to halt dangerous rises in temperature…this is no longer a scientific or technological challenge, it is far more a political and social one.”, “How to rescue the global climate change agenda” December 27.

But when you hold “The depressing reality about climate change is that we could solve the problem, at manageable cost” that is not necessarily so. Sir, let’s face it, the truth is that there are way too many whose real interest, more than solving the challenges of climate-change, is to profit from the process, whether financially or politically, whether they are aware of it or not.

I’m as concern as anyone with the problem but in my case I really did not mind so much president Trump’s blindness, since I have always thought of the Paris agreement in terms of being just an interesting photo-op that would serve as a very dangerous pacifier.

So to align political and social incentives; to allow the market signaling how the problems should be best tackled; and to keep costly profiteering out of the process, I have for years thought the best alternative is a very high carbon/pollution tax which revenues are shared out in their totality equally among all citizens.

Why does that idea not meet more interest? The answer is clearly that the redistribution profiteers see that route as one that could very dangerously affect the value of their franchise, since there could be pressure for the revenues to be redistributed to all, a sort of unconditional variable basic income, should also for instance include all income generated by any existing gas/petrol taxes.

Our planet that I often refer to as our pied-à-terre needs a champion that decides to go down this route to set an example to follow. My grandchildren are Canadian so I would love Canada showing the way.

PS. This is exactly what I proposed how Mexico City should tackle its serious pollution problems in a letter you kindly published in May 2016.

@PerKurowski

Climate-change fight profiteers capture governments (and perhaps FT too). Only citizens can really fight climate change.

Sir, you write “The UN issued a stark warning last month on the scale of the challenge, noting that even if governments act on their plans to cut or slow emissions, national pledges so far add up to only a third of the reductions needed to meet the goals of the Paris accord. Negotiators meeting in Bonn this week are supposed to be crafting rules to ensure countries step up their efforts.” “A sharp reality check on the climate challenge” November 15.

Forget it! The Paris agreement was just another great photo-op. If you really want to be able to do what it takes to save our pied-à-terre, you have to keep out the few big green profiteers able to lobby governments (and perhaps You too), and incorporate all the citizens in that quest.

How? Huge national carbon taxes with all its revenues shared out equally to all citizens. The moment a citizen gets a check and is himself turned into a small profiteer of the fight against climate change (and of the fight against inequality) all changes.

Sir, you have published a letter of mine before describing this type of solution, but you might be mightily targeted by those green profiteers too. So beware!

@PerKurowski

An adequate carbon tax has little to do with costs and much to do with the elasticity of the demand for carbon

Sir, Dr Robin Russel-Jones opines that a revenue neutral carbon tax will not work because of difficulties in “reaching agreement on the level of taxation.” "Support for carbon tax: let’s not get too excited", June 29 

The “market price for carbon credits of less than €10 per tonne of carbon dioxide… provides little incentive for businesses to control their emissions or invest in renewables” and “a carbon price of $166 per tonne of CO2…[based] on “societal costs generated by the burning of fossil fuels, calculated by the IMF… would put fossil fuels out of business”

No, the adequate level of carbon tax will depend on the elasticity of the carbon demand… and the only way to find that one out is by taxing. Put whatever carbon tax like for instance $40 per ton and see what happens. 

Dr. Russel-Jones, Chair of Help Rescue the Planet writes: “there is no reason to think that a business group in which fossil fuel interests are well represented will come any closer to solving the above conundrum than the UN has.”

Yet some of us also argue that there is no reason to think that those profiting from the business of protecting the environment would do so either.

That is why we need the carbon tax that pays out all revenues to the citizens. That aligns the incentives for the fight against inequality with those for protecting the environment, by means of market signals, and so without any hanky panky!

@PerKurowski

To sell the Paris Climate Agreement as a real solution to our pied-a-terre’s environment problems, that’s a disgrace

Sir, Pilita Clark writes: “Mr Trump has exposed the fragile nature of the Paris accord. Countries face no legal obligation to meet any emissions-reduction target in their national climate blueprints, including the US. Nor is there anything legally to prevent them from submitting weaker plans” “US dithering exposes fragility of Paris accord” June 1.

If so then all those who sell us the illusion of the Paris Climate Agreement being a real solution, are more in fault hanging on to it, than Trump reneging it.

I have of course not read the Agreement. Who has read it all? To me this type of global agreements too often just feeds crony statism. To me this type of global agreements becomes too often just another photo-op for politicians.

To have a chance to really dent the environmental problems of the world, we need to come up with incentive structures that are green-profiteers proofed. Otherwise we will most probably not be able to afford it.

My preferred solution is to send the right market signals by means of for instance carbon taxes, and distribute all those revenues to all citizens in order to compensate for the increased costs. That would help many citizens to contaminate less, while affording to do more of something else they could want.

Another example: The Economist writes: “Climate policy, a jerry-rigged system of subsidies and compromises, in America and everywhere, needs an overhaul. A growing number of Republicans want a revenue-neutral carbon tax. [Like the one I suggest] As this newspaper has long argued, that would not only be a better way of curbing pollution but also boost growth. A truly businesslike president would have explored such solutions. Mr Trump has instead chosen to abuse the health of the planet, the patience of America’s allies and the intelligence of his supporters.” “The flaws in Donald Trump’s decision to pull out of the Paris accord”, June 1.

The question is then: Why does The Economist not denounce the Paris Climate an Agreement for what it is, a political convenient illusion of a solution? Just because being against Trump trumps all other considerations?

http://ourpiedaterre.blogspot.ca/2017/04/solutions-that-share-out-all-benefits.html

@PerKurowski

To make saving our pied-a-terre affordable, we need to keep the climate-change-fight profiteers at bay

Sir, I refer to Martin Wolf’s “Inconvenient truths and the risks of denial”, November 2.

I do not read scientific projections on global warming, it suffices me to see what harm is done to our delicate pied-a-terre to know its wrong and that it should stop. But I also know that could be a much costlier than needed process, if we are not able to keep the climate-change-fight profiteers at bay. And I also know that we would be much more effective in our efforts if we could engage other social causes in the quest, like that of decreasing inequality.

That is why I am all in favor of for instance very high carbon taxes, with all its revenues paid out to citizens by means of a Universal Basic Income. That would decrease carbon emissions, allow supplier of cleaner energy sources to compete more and, to top it up, help our economies by reviving demand.

Sir, all those incredible over 500 percent gas/petrol ad valorem taxes in Europe, would do much better placed in the pockets of European citizens, than managed by European bureaucrats, capturable by their own and other special interests.

@PerKurowski ©

Cement generates carbon - tree stores carbon. Is that something for houses in China?

Sir, I refer to Gillian Tett’s “Can China’s buildings turn green?” April 23.

What I have understood talking with friends who might just be besserwissers as unknowledgeable on these matters as I am; China uses a lot of concrete when building, and cement generates massive amounts of carbon. If they built more houses with tree then they could instead be capturing carbon.

Is it so? Who knows, in the fight against climate change, we must be very careful, there are many climate change profiteers.

And that, to keep profiteers away, is why I am supporting a big tax on gas, distributed by means of a Universal Basic Income. That would also align the incentives in the fight against climate change with those in the fight against inequality.

@PerKurowski ©

The fights against climate change and inequality would both benefit much from a Basic Universal Income union

Sir, Martin Wolf, discussing the seemingly accelerating threat of climate change writes: “If carbon pricing were to deliver the desired shifts in investment, it would require credible commitment over the long term. But commitments for the long term can barely be credible.” “Why fossil fuel power plants will be left stranded” April 6.

That really depends on how carbon pricing is structured. The real challenge is to keep at bay the climate change profiteers, be that governments, be that private companies.

In my country Venezuela, were the subsidies for domestic gas (petrol) are monstrously large, but where there is an imbedded resistance to high gas prices, that could be solved if the government paid out all domestic gas revenues directly to the citizens in equal parts… and that at a cost that would not be larger than 2 percent tops.

In the same vein I have also suggested that if all funds derived from carbon pricing, or carbon taxes, were to fund a Universal Basic Income scheme that fights inequality, then all the incentives are perfectly aligned, and it would be politically very difficult to eliminate it.

In fact all the fight against inequality should also proceed with the basic principle of keeping the redistribution profiteers at bay, and Universal Basic Income helps to do that.

An added advantage is that separating the redistribution flows from the taxes needed to fund the governments operations, would bring much added transparency to fiscal matters, and thereby make life more difficult for demagogues.

And of course the resulting flows would help to sustain the demand needed for economic growth.

PS. The Universal Basic Income could also be additionally funded by means of a Pro-Equality Tax

@PerKurowski ©

John Dizard has provided us with a very important wakeup call on energy storage batteries

Sir, I think that everyone that wants to fight climate change, but feels that is best done by keeping the climate change profiteers at bay, need to be very grateful for John Dizard’s “Lack of economic rationale is a feature of battery-storage hype” April 4.

I myself am guilty of having preached, to friends and family, the benefits of new energy storage batteries without really checking up on their real costs. I will immediately go silent on this without further checking up.

@PerKurowski ©

Having carbon taxes fund Universal Basic Income schemes would align the fights against inequality and climate change

At least in the 1980s (I do not know of the before and after) high European taxes on gas (petrol) were defended by the need to protect the environment, while at the same time, at least in Germany and Spain, the much dirtier coal was being subsidized. And the resulting tax revenues are of course huge.

Stephen Foley writes about how investors should adapt their exposures to fossil fuels given all declarations of war against climate change. ”Even oil barons are giving up on fossil fuels”, April 4.

But the taxman needs also to adapt. If we consume less gas/petrol tax revenues will go down, so it is not farfetched to think that those hungry for tax revenues to manage, will again exploit the environmental argument to increase taxes… though they must know that puts their tax revenues on a sort of unsustainable path.

I believe though that climate change is best fought on its own merit, which means keeping the climate change profiteers, whether private or governments, at far distance.

In my own country Venezuela, as a tool to get rid of monstrously large gas subsidies, I have been proposing that all the net income the government derives from the domestic sale of gas, should be paid out in equal parts to all citizens, so as to keep the redistribution profiteers at bay.

And if the whole world did the same, using carbon taxes as a fundamental source of income to pay for a Universal Basic Income, that would not only help to increase fiscal transparency, but also beautifully align the fight against inequality with the fight against climate change.