Re:Global real interest rates and the ‘suprasecular’ decline...
by Robotbeat on Friday January 29, 2021 @09:23AM
(#25957454)
Yeah, one of the most powerful levers the federal government could have with respect to climate is to provide financing support for renewables. If you reduced the cost of capital for solar, wind, and batteries (or nuclear for that matter) to the price of 30 year US treasuries, it’d crush all fossil fuel power plants and provide a spur to the economy. In addition, cheap electricity would be a huge long-term boost to the economy, it’d drive electrification of transport/heating/industry, and the cost to taxpayers would be almost nil.
The Fed provides loans to banks who then provide loans to companies so that they can grow faster. It's about increasing efficiency, not about total possible upside.
However, there is a point after which businesses have enough loans for all the investments they have planned. Every single dollar after that is too much and does nothing.
The next step is to spend money in a way that creates more investment opportunities for those companies. In short you want to balance supply and demand.
The simplest spending target would be to pick a industry that is not in competition with private industry. My personal favorite are renewables and other infrastructure because you will not displace existing companies through government spending.
Carbon taxes also create an incentive to borrow more money and do productive work but they do gnaw at CO2 spewing private industry which is the entire point but there are vested interests that don't want to lose their money.