Feeds

The FDRs of Green explain the gentle art of planet saving

Flunking economics the Green New Deal Group way

  • alert
  • submit to reddit

Intelligent flash storage arrays

To give one example, they say this about interest rates:

Meanwhile privately fixed interest rates, set by the British Bankers Association and known as LIBOR, have continued to rise – in defiance of the official rates set by central banks. This is the clearest evidence of central banks and governments losing control over a key lever of the economy: the power to set the rate of interest.

Umm, no central bank or government has ever been able to set long term interest rates. Even those that have tried have failed: for all that they've ever had is the power to influence short term rates through variations in the Bank Rate, the rate at which the central bank or the government will lend to the commercial banks. What then happens out there in the markets is influenced by this, certainly, but not controlled. Long terms rates can be (and have been) lower than short term, higher, much higher and the same: it all depends upon what everyone else thinks inflation (amongst other things) is likely to be in the future. That opinion, as you might note, is not always the same as the government's own thoughts on the subject, as Zimbabwe is showing us with great clarity.

As an almost trivial addition to this, LIBOR is not in fact "set" by the BBA. It's calculated and disseminated by them, certainly, but it is set by the markets themselves by looking at the rates at which banks are actually lending to each other. Their position is rather like stating that BP trades at £5.36 a share because the Guardian says so, rather than The Guardian telling us that everyone else thinks that, by their actions in buying and selling, BP is worth £5.36 a share. Interesting to note that one member of this group is in fact Larry Elliot, the Economics Editor of the Guardian, which is probably all you need to know about the value of the economics pages of the Guardian.

Siege economics revisited

Their analysis leads them on to propose three things for the economy: capital controls, credit controls and low interest rates. Credit controls sound rather benign really - we'll stop people wasting their money by buying houses say, and channel it all to industry instead. Well, yes, welcome back to the world of queuing at the Building Society for a year or two to try and get a mortgage: they seem to have forgotten (as if they ever knew) that the most efficient method of rationing something is price. Capital controls have to be there to stop everyone fleeing such a system (did you know that in 1979, before the last set of such was lifted, you had to have government permission to take more than £25 out of the country? Really, you did: about £76 in today's money and try a holiday on that these days).

Low interest rates are so that:

"Low interest rates mean that investments become significantly more affordable... The impact of low interest rates is therefore very clearly seen. They are vital if viable green alternatives are to be made available. Put simply, they make it possible to secure investment into new sources of energy, the jobs that create those resources and the future of our planet. Without them all these things may be in doubt."

They seem entirely blind to the concept of opportunity costs. It's true that an investment that yields 4 per cent when interest rates are 2 per cent seems profitable and when interest rates are 5 per cent it appears not. But that isn't the way that we do or should allocate capital. Whatever the level of interest rates, we want to do the most profitable things first: those that yield 15 per cent or 20 per cent, say. Only when we've exhausted those opportunities should we do those things which have lower returns. If we get suckered into doing those 4 per cent things before we've done the higher value ones then no, we don't turn a profit just because interest rates are low: we've lost those profits which we could have had. Changing the level of interest rates does nothing at all to change the fact that low returns are low returns and high are high.

Choosing a cloud hosting partner with confidence

More from The Register

next story
SECRET U.S. 'SPACE WARPLANE' set to return from SPY MISSION
Robot minishuttle X-37B returns after almost 2 years in orbit
LOHAN crash lands on CNN
Overflies Die Welt en route to lively US news vid
Experts brand LOHAN's squeaky-clean box
Phytosanitary treatment renders Vulture 2 crate fit for export
You can crunch it all you like, but the answer is NOT always in the data
Hear that, 'data journalists'? Our analytics prof holds forth
Carry On Cosmonaut: Willful Child is a poor taste Star Trek parody
Cringeworthy, crude and crass jokes abound in Steven Erikson’s sci-fi debut
Origins of SEXUAL INTERCOURSE fished out of SCOTTISH LAKE
Fossil find proves it first happened 385 million years ago
America's super-secret X-37B plane returns to Earth after nearly TWO YEARS aloft
674 days in space for US Air Force's mystery orbital vehicle
NASA eyeballs SOLAR HEAT BOMBS, MINI-TORNADOES and NANOFLARES on Sun
Astro boffins probe fiery star's hidden depths
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
Win a year’s supply of chocolate
There is no techie angle to this competition so we're not going to pretend there is, but everyone loves chocolate so who cares.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.