Green Finance is set to be the most powerful financial restraint tool ever

National Savings & Investment (NS & I) has issued “green” savings bonds.

That’s terrible value. You would be ridiculous to put your money in it.

But it rather reveals what the purpose of “green” finance really is.

If you put money here, you will almost certainly lose money after inflation

You can’t expect NS & I to pay interest rates above the market. It has an unfair advantage over all other savings agencies in that it is fully backed by the Treasury. This probably didn’t make much sense to most of us until the financial crisis, at which point people began to understand that there are certain situations in which your bank could go bankrupt.

Therefore, you wouldn’t expect the new Green Savings Bonds to offer particularly exciting interest rates.

But even with that in mind, investing in that new product requires a great deal of commitment to the idea of ​​lending money to the government to spend on what’s “green.” At this rate, even considering the tax and security benefits of NS & I, it is almost certain that you will virtually lose money.

Inflation in the UK is currently in the range of 3.1% to 5%, depending on whether you prefer CPI (new gold) or RPI (old gold). Inflation measurement is a tricky business-everyone has different rates, which is also very political (If you want to understand the difference more, you can read more about it here).

But no matter how you look at it, 0.65% doesn’t even touch on the side in terms of compensating for inflation. For 0.65% to approach reasonable, there will be a fairly dramatic deflation within the next three years. Frankly, I don’t know what’s going on.

More importantly, you can already get high equivalent rates elsewhere. As various comparison services and savings experts have pointed out, you can get a three-year fixed-rate savings bond that pays almost three times as much. I still don’t want to lock up money at 1.8% for three years (it’s still well below inflation), but given the choice between 0.65% and 1.8%, it’s clear which one is better.

In addition, you can get 0.65% for some easily accessible accounts. Therefore, there is no need to lock in money for three years to get a savings rate that is well below inflation.And as Rachel Springer Those who want to get involved and save some moral element point out that “you can also look for interrelationships that support the cause of the region.”

In short, you can get a similar product elsewhere for a better price. It’s all very disappointing, consider a personal financial writer.

Green finance is the future, the future is financial repression

Of course they are right. This is a pathetic rate. I think you would go crazy to put money in it.

But what people probably lack to some extent is that this is the point of green finance. In fact, it’s the point of what is rather “green”.

With non-green investment products, what you care about is the money you can make. In theory, “green” investment products are of two interests. It’s the money you can make and the things you can do.

In other words, you get two benefits instead of one. And in the way the market works, the second benefit, “good deeds,” must be considered “in-kind benefits.” There is also its name-“Green-ium” (not “Premium”).

Well, there’s no such thing as a free lunch, so if you want to get a “green ium”, you’ll need to give some of your financial benefits. Many will gladly do so, but it’s worth opening your eyes to get into this.

That is the first thing to understand. The next thing to understand is that this “green ium” will be abused very often by the government in the coming years and even decades.

Simply put, the government is at the center of debt. The situation was already quite unlikely before the financial crisis, and the pandemic made it much worse.

The best way to deal with this debt is to inflate it. You can inflate it only if people lend you money at interest rates lower than inflation.

How do you do that? Somehow I need to keep the rate down. This is known as “economic oppression.” If they know they will suffer losses, it’s hard to do because people don’t tend to volunteer to lend to you.

We have seen one way to do that. Ask a friendly central bank to lend you money without asking. That’s what we’ve been doing since around 2008. But given that central banks intend to tackle inflation, it will become more difficult as inflation rises.

So what is the solution? As MoneyWeek’s favorite financial historian, Russell Napier Pointed out several times, You force the institution to own government debt. And the nice thing about labeling them “green” is that moral causes can be attributed to delegation (and to be honest here, “green” on almost all government debt. You can justify it by hitting the label in some way).

Your pension fund will make a valuable contribution to protecting the environment for future generations. There is almost poetry about it. It will surely be comfortable to see you actually lose money.

Anyway, the most interesting thing here is how successful this NS & I bond is. For individual rescuers like you and me, we don’t have a green mandate to deal with. Regulators don’t have to worry about checking how environmentally friendly our loan books are (for example, it’s likely to happen with mortgages), and we don’t have to worry about our personal brand in particular. No (well, most of us don’t) NS).

So I would like to know exactly how much value investors value in “greenium”. And I’m sure the Treasury will do that too.

By the way, this is a topic that will almost certainly be covered in discussions at the MoneyWeek Wealth Summit. Get your ticket here!

Green Finance is set to be the most powerful financial restraint tool ever

Source link Green Finance is set to be the most powerful financial restraint tool ever

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