Yahoo Finance – Treasury Secretary Janet Yellen called for a “wholesale transformation” of carbon-intensive economies at the UN Climate Change Conference (COP26) in Glasgow recently, urging the private sector to capitalize on an opportunity to help developing nations transition to a carbon-free economy. Still, others are looking for a public and private partnership to finance the whopping costs of this transformation.
A recent Bank of America (BofA) Global Research Report found that, within a 30-year period, global carbon emissions could reach zero at a cost of $5 trillion per year – for a total of $150 trillion to tackle climate change. The study explores the extent to which climate change can be battled and what the costs of such efforts would look like.
How much will it cost?
BofA writes the cost of this grand climate change plan will be $150 trillion over 30 years – some $5 trillion in annual investments.
What GDP benefits will be achieved by all this spending?
The IEA also has a productive outlook for their net-zero scenario, where the change in the annual growth rate of GDP accelerates by somewhere between 0.3% and 0.5% annually on a sustained basis over the next 10 years as a result of a shift to a green economy.
The global central bankers’ financial plan.
BofA looked at three separate global central bank spending plan cases – depending on how much private or central bank spending would be applied to climate change.
- In the first case, the Fed, ECB, and other central banks would absorb all 100% of the required spending,
- In a second scenario, they would absorb only half or 50%, and
- In a third case, central banks take up only a fifth or 20%.
See these three scenarios of the climate change spending plans below.
As BofA states, the climate change green bond purchases could result in only a 1% to 3% inflation per annum shock. This, presumably, this inflation is on top of any current inflation pressures already baked into the economy from past central banks and government fiscal policies.
Aside from whether the science says any of this is necessary, just how realistic are these plans?
First, let’s lay down a few global economic parameters. How much is the global GDP, its growth rate, and the approximate global money supply?
- Global GDP in 2021 is about $94 trillion – see here.
- The global GDP growth rate is about 3% – see here.
- Since debt is money, the monetary supply is computed from the percent of the global debt to GDP ratio (356%, see here). Hence the global money supply (public and private) could be approximately as much as $334 trillion.
Let’s spitball some high-level numbers. Let’s assume zero inflation and zero growth over the next 30 years to see the additive effect of this climate change plan. We shall use the 100% scenario, where the central banks would absorb all costs. We shall also assume the best-case scenario for growth projections of 0.5% per annum of the $150 trillion climate change plan. We could say the following.
- $150 trillion spending in additional currency debasement.
- $110 trillion in additional climate change GDP (compounding the 0.5% growth rate over 30 years). Another way to look at this would be to say the plan only projects a 73% efficiency rate of the money spent to obtain GDP.
- In other words, $40 trillion in additional currency debasement.
- Of the current money supply of $334 trillion, this represents about a 12% currency debasement.
- If one takes the more conservative growth climate change growth scenario, one would need to double the negative effects.
Using the formula of “Value of Money = GDP / Money Supply,” the true cost of this plan would mean that, on average, a person would lose about 12% of their standard of living over the 30 year period (or double in a more conservative scenario).
Again this is on top of the already ongoing currency debasement. Americans will most likely lose 20 to 50% of their standard of living in the coming few short years – as this climate change currency debasement is front-loaded. Those who have hedged this currency debasement with assets would make out the best (the rich), and those who can not, will be the losers (the poor) – though if you are ultra-poor, you may not care. Truly a Great Reset.
Of course, climate change alarmists would say this is a small price to pay to save the planet. What could go wrong?
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