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Can Money Printing Pay For Green New Deal?

March 20, 2020

By Paul Homewood


This is a claim we are going to see more of in coming months, as governments ramp up fiscal support to deal with the coronavirus crisis:




The claim however is based on a fundamental misunderstanding of economics.

Let me explain:

If we take the UK as an example, the current position is that the government is providing about £350bn of special funding to mitigate the economic effects of coronavirus, for instance in providing sick pay and loans to keep companies afloat.

But here’s the thing – all of this money printing, whether fiscal or monetary, cannot increase economic output. All it does is lubricate the system.

Let’s use a simple example.

Assume we have a population of 60 million and enough grain to make 60 million loaves. Everybody gets a loaf a day. Now suppose something happens, a drought for instance, and we only have enough for 30 million loaves. No matter how much money the government printed, it would not change the fact that everybody only had half a loaf each. In other words, it cannot increase economic output.


How though does this relate to the green agenda, which wants governments to print money in order to fund renewable energy projects and the like?

Again, spending hundreds of billions on, say, solar and wind farms, does not increase economic output, because they are only providing what we already have, that is electricity.

What they will do though is consume a lot of resources, whether labour, capital, material or energy. This in turn diverts these resources from other uses, leading to a decline in economic output in other sectors. After all, green deal proponents even boast that their plans will create hundreds of thousands of new jobs.

And it is that diversion of resources which is the real cost we will have to pay.

The same applies to all of the other demands of the green deal, such as electrification of transport, hydrogen heating, carbon storage and heat pumps. They are all only replacing something we have already which works perfectly well, but will all demand vast outlay of resources.

Worse still, the green alternatives are not as efficient as the ones we have at the moment. For instance, there is absolutely no sense in taking natural gas, and converting it into hydrogen in order to burn it in the same way we do with the gas itself, particularly given that the conversion process itself consumes a lot of energy.

Economic growth comes from increasing productivity. New technologies, materials, production methods and so on gradually replace older ones because they are better in one way or other. If low carbon solutions really are better, they too will come to the forefront.

But until then, they should remain on the drawing board.

  1. Broadlands permalink
    March 20, 2020 7:14 pm

    It is ironic that the money being spent to control and eradicate the Covid-19 virus will also halt the reduction of the carbon emissions it has caused….the rapid reduction in carbon emissions that the ‘green’ politicians and policy-makers have been demanding we all do for decades. Is the danger of a model-projected climate emergency future worse than the danger of a life-threatening global viral pandemic? The Covid-19 is sending a wake-up call? It’s not about the money in the end. It will be costly either way.

    • Harry Passfield permalink
      March 20, 2020 7:24 pm

      The irony, Broadlands, is that the progress of the CV outbreak is based on computer models in the same way that M-M GW is. Should sceptics be worried? I am (and I’m sceptic about the source of the virus and how it got out. Perhaps the West should send a bill to China…).

    • ThinkingScientist permalink
      March 21, 2020 12:53 pm

      The epidemiological modelling for BSE predicted there were 500,000 deaths waiting in the population, justifying the draconian action. Never happened, failed computer modelling.

      When it was all over, it was found that more farmers committed suicide over the government actions in destroying their livelihoods than actually died from the CjD disease – see the late lamented Chris Booker’s “Scared to Death” book.

  2. Harry Passfield permalink
    March 20, 2020 7:19 pm

    The Green New Deal is Frédéric Bastiat’s parable of the broken window on steroids.'s_argument

  3. MrGrimNasty permalink
    March 20, 2020 8:01 pm

    The fact that the genocide slowing unfolded in plain sight in Myanmar in an age of video mobile phones in the remotest corners of the world, and that the WHO ever allowed CV19 to become a pandemic, shows that UN bureaucracies are incompetent, feeble, inexpert, unscientific, lacking in common sense judgement, and utterly unfit to dictate to us about anything.

    Money of course does not buy anything – it is just a token of human productivity – and the leverage of fossil fuels makes the human race very productive. With renewables as they stand, productivity will enter a circular decline until all the inherited productivity from fossil fuels has been exhausted. As I posted on WUWT:-

    “After a few years of their vision there will be no time for the luxury of human development and progress, no freedoms/democracy, no reliable food distribution or storage of perishables, no law and order, no health services, no heating, no sanitation, no trees, no wildlife (all ravaged for fuel and food)…”

    But there will be worthless £quadrillion notes blowing around in the gutters Venezuela style. Lots of money. Zero wealth.

  4. Broadlands permalink
    March 20, 2020 8:02 pm

    “The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.” HL Mencken.

  5. Robert Christopher permalink
    March 20, 2020 8:19 pm

    This article illustrates well what so many do not appear to understand: when the financial system does not reflect reality on a large scale, it will collapse. If Economics graduates avoid this obvious conclusion, either they are incompetent or are addicted to political power of the worst kind.

    I would expect that it is up to £350bn, as we don’t know when this will end, and the large figure isn’t without its dangers. I have seen estimates of May, September and, for the Southern Hemisphere, early next year. All guesses, but they suggest that the summer will help conquer it. It also depends on the public being able to hold two seemingly opposing views: we need to be vigilant and it is possible that it could be conquered soon (but only if we are all vigilant). Also, if such a large figure is planned, some current projects should be canned, such as Heathrow expansion, HS2 and 5G. There is agreement that the World will be a different place, so wait and see what we want.

    Carbon storage? We used to have a coal bunker: does that count?

    A domestic supply of Hydrogen would allow Carbon (Dioxide) Capture and Storage. But, as well as the inefficiencies, the storage would be more dangerous than fracking: much, much more! But that wouldn’t matter, would it? 🙂

    Remember, viable industries pay taxes, not need subsidies.

    • Robert Christopher permalink
      March 20, 2020 8:49 pm

      Another expense to curtail: foreign aid.

      And does anyone think we can get a credible Brexit agreement? Announce that we will go WTO with the rEU. It will save money; give more time to prepare; and lower the risk of Wuhan Flu (Kung Flu?). The way they demand to fish in our waters when Cameron didn’t get a peep out of any of them: did they forget that they had fishing boats in our territorial waters?

  6. Phillip Bratby permalink
    March 20, 2020 8:21 pm

    We are always being told that this country has a poor and declining productivity record. What we are not told is that it is because of these millions of green jobs replacing thousands of fossil fuel jobs.

  7. Tony Budd permalink
    March 20, 2020 9:54 pm

    On the same basis, Paul, I’d be interested to see how the relative costs would work out if all wind- and solar-farms were not connected to the grid but were all used instead to produce hydrogen by electrolysis. I know it’s wildly inefficient, but at least it would remove the intermittency problem: if the sun’s shining or the wind is blowing a gale you make a lot of hydrogen; if not, so be it – no demand for back-up. And of course it would be a good way to store energy, with no need for carbon sequestration which there is with natural gas-to-hydrogen production. I know it wouldn’t stack up, but the figures would be interesting.

    • Graeme No.3 permalink
      March 21, 2020 5:42 am

      But the wind farmers want to be paid regularly. Firstly for power delivered, secondly for not delivering power, and lots of lovely subsidies all the time.

      Intermittent low pressure hydrolysis is about 35% efficient, so the hydrogen would be very costly, Even high pressure hydrolysis (using potasium hydroxide solution) cannot compete with H.P. steam conversion of natural gas to hydrogen.
      CH4 + 2H2O —> CO2 + 4H2
      16 36 44 8 (or 15.4% yield of hydrogen)

  8. MrGrimNasty permalink
    March 20, 2020 10:51 pm

    One tiny example of the sort of unforeseeable/unintended consequences from just a relatively minor perturbation. Toilet paper is actually one of life’s luxuries made possible by our productivity. In the ‘green’ future, supply disruption or having to prioritize heat or food over comfortable bottom wiping, and sanitation could be a thing of the past!

    • Russ Wood permalink
      March 21, 2020 1:20 pm

      Well, in the worst depth of Zimbabwe’s insane inflation (10 Billion dollar notes!), it was noted that it was cheaper to wipe with the ‘dollar’ notes than to buy toilet paper with them!

  9. Mack permalink
    March 21, 2020 12:06 am

    “Can money printing pay for green new deal?” No, waste of time and money. Next!

  10. March 21, 2020 12:08 am

    That should be common sense to anybody. Sadly it is not. I have watched prices rise in my own country for the last couple of years. It’s astronomical. Certain items have gone up 50% in 6 months. They think people don’t see it but for Joe and Jane Average, it gets harder to survive by the month. Money printing has a price.

    • Phoenix44 permalink
      March 21, 2020 8:47 am

      Actually MMT accepts there could be inflation. It believes inflation can be controlled by taxation though. Thus when faced with declining real incomes because of inflation, they propose taking more of that declining income in tax.

  11. Graeme No.3 permalink
    March 21, 2020 5:50 am

    The advantage for the puppets (politicians) is that it looks like they are “taking decisive action.” The advantage for the Sir Humphries is that they get more public servants (you can’t let that money go without people checking its use, you know). See the size of the UK public service before and after WW2.
    More money means inflation, so everybody wants a pay rise (CLUE sound of MerryGoRound). More control needed hence more public servants. Eventually everyone works (officially) for the State; now how did that work out?

  12. NeilC permalink
    March 21, 2020 6:08 am

    The new green deal is one step forward and ten steps back for civilisation

  13. March 21, 2020 7:35 am

    The money will not be printed or minted in fact it will not be created at all. It will be virtual money only existing on the cloud as zeroes and ones of computer storage.
    After a decade of austerity when we were told that there is no magic money tree. Suddenly they have found a money forest.
    They have been really hyping up the climate fear, With each month there has been more and more fear mongering. You could hardly turn on the news with out them telling you that we were doomed unless we saved the planet and this meant net zero carbon. They were slightly less specific in spelling out that this meant shutting down the entire economy.
    But now they are shutting down the economy an the excuse we are given is a virus.
    Every death from heart attack to a stroke will be recorded as a death by covid-19
    Ovid is from the Latin for sheep and 19 is the ancient number for surrender
    so Surrender Sheep.

  14. Phoenix44 permalink
    March 21, 2020 8:42 am

    These claims are based on Modern Monetary Theory, a Left-wing attempt to allow governments to increase spending without increasing taxes. In the MMT world, taxes control inflation. It has now been adopted by the Green Left.

    As you point out, it is nonsense. If we increased spending on the NHS by £200 billion, that still means £200 billion less of resources elsewhere – every extra nurse is one fewer teacher say. It misunderstand what “money” is in this context, and what inflation is (it treats it as a general number, not an average of rates on individual items).

    Oddly, MMTcan only be used by governments to buy Leftie stuff – there’s no reason if it works works the state couldn’t buy us all an iPhone, BMW and home cinema but strangely that’s never what we are promised.

    • Russ Wood permalink
      March 21, 2020 1:23 pm

      In R A Heinlein’s “Stranger in a Strange Land”, his human ‘Martian’ was very excited to discover that money was “a way of keeping score”. So the Left’s MMT is a case of “I win” and “you lose!”.

  15. Ivan permalink
    March 21, 2020 10:11 am

    “Now suppose something happens, a drought for instance, and we only have enough for 30 million loaves. No matter how much money the government printed, it would not change the fact that everybody only had half a loaf each. In other words, it cannot increase economic output.”

    If this was a fair characterisation of the situation, then this is unarguable. But usually it isn’t like that. Keynsianism, ie, printing money to get over recessions, is quite respectable these days. You only end up as Zimbabwe if you take it far too far. Many people argue that Britain was over-austere in the last decade and could have gone further.

    Ultimately there is a quite reasonable argument that you can’t spend unlimited amounts of money on more expensive energy infrastructure without reducing standards of living. The difficult question is when we get to that “too expensive” point.

    • Phoenix44 permalink
      March 22, 2020 8:29 am

      That’s a total mischaracterisation of Keynes.

      Keynes said we should borrow (not print) money to ensure that productive capacity is not lost during a downturn. He also said that we should repay the borrowing in upturn, so that over cycles our borrowing does not increase.

      The Left and the Greens love the first part and then forget the second part, and even then misunderstand the first part

  16. Tim Spence permalink
    March 21, 2020 11:17 am

    Sometimes a 1GBP is worth $1.20, a few days later it’s $1.14, a month later it could be $1.25. Nothing has changed really apart from the market perception which translates into an exchange rate.

    The truth is, a country can print as much money as it likes, and we do, and provided the markets don’t perceive any nefarious activity you can get away with it. The USA has printed more money than exists in the rest of the world. The UK does not shy away from a bit of Quantitiive Easing and puts Venezuela and Zimbabwe to shame. The reason Venezuela and Zim are punished by the markets is because they are basket case economies and in the final analysis all parties to a transaction have to agree a price and that the money has value and justifies the deal.

    So money remains a leap of faith, it’s value is a token of that faith. It can’t possibly cost more than 50p to print a £50 note, so someone has made £49.50 before it leaves the central bank.

    I and many other Thatcherites were horrified when she threw manufacturing under the bus in favour of the service sector, it defied all sound conservative thinking. Since then, things have gone downhill and stayed down. If there is ever a day of financial reckoning for our sins I think that UK Ltd. might become like Venezuela. A Green new deal is the most ideal candidate to bring that reckoning on.

    5 Million masks from China have just landed in Belgium, I wouldn’t be surprised if they were made in Wujan, nothing surprises me any more. When a major world economy cannot turn its hand to manufacturing protective masks, well it’s time to give up.

    • Robert Christopher permalink
      March 21, 2020 4:04 pm

      Thatcher did not throw manufacturing under the bus. Automation increased, so the Service industries grew. More could have been done, but that has been true since Harold Wilson’s ‘white heat of technology’ speech at the 1963 Labour Party Conference.

      • Tim Spence permalink
        March 21, 2020 4:32 pm

        Manufacturing was abused by labour and Harold Wilson onwards, and as a result the product quality suffered, example; cars like the Marina. It was also the age of Union power, down tools and power cuts. But Thatcher fought all that, neurtered the Unions and put us back on the right track, but then undid all the good work with several gigantic errors, not least of which was closing so many coal mines, and the above mentioned switch to service sector. The chief source of UK income is the 30% GDP of invisibles created by the city. Thatcher abandoned manufacturing hoping the burgeoning service sector would take up the slack. She surrendered to the back stabbing cabinet that would throw her out after she objected to Maastricht.

    • Phoenix44 permalink
      March 22, 2020 8:35 am

      Sorry that’s all just pseudo-economics. FX rates are set in many ways but the key is relative interest rates. If I put a £1 in the bank fir one year and get 10% interest, in one year I have £1.10. If I put $1 in the bank at 5% then I get $1.05. Thus if today the FX rate is 1:1, in a year it will be 1.10:1.05.

      Interest rates can then be translated into other returns.

      As for manufacturing, there’s nothing very clever about low value, low skilled widget (or mask) making just because its “manufacturing”. It takes more skill and thus you get higher pay to finance, insure, asset manage, pension manage, buy, write the legal agreements, consult on the engineering etc etc for the widget factory than making the widgets.

  17. ThinkingScientist permalink
    March 21, 2020 12:50 pm

    If you want to know what Zero Net Carbon looks like – its like what you are living in now with no flights for the general public, no holidays etc except that you would additionally have vehicle restrictions and intermittent power supply. Oh, and electricity would be much more expensive.

    • March 22, 2020 10:42 am

      And there would be no change in weather trends.

  18. tom0mason permalink
    March 21, 2020 3:58 pm

    “Can Money Printing Pay For Green New Deal?”
    Yes it can! It depending on what level of cash and pension depreciation the population will stand. Eventually however, just printing money to cover expenses will increasingly cause the cash to become worthless, spurring inflation pressures, and lenders will become ever harder to find as they shy away from a depreciating currency. Eventually socialism does what it always does — runs out of other people’s money, other people’s wealth i.e. when there’s nothing left to steal.
    So yes “Printing Pay For Green New Deal” is perfect for the left and their normal ideas on how to run an economy into the ground (especially those tutored by the Fabian’s LSE’s ways ).

  19. March 21, 2020 11:31 pm

    The fundamental exchange mechanism of humanity is barter, i.e. trade of goods and/or services. Money is a human invention that makes barter or trade more convenient.

    Natural economy (i.e independent of convenience of paper money) mandates that increased prosperity for society results only from increased productivity.

    • Phoenix44 permalink
      March 22, 2020 8:37 am

      Yes, the man washed up on a desert island with five suitcases each with £1 million in is poorer than the man with the worst paying job in the world.

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