Central banks and politicians are waging an invisible war on the environment
If printing money solved all problems, there would be many more successful countries. It certainly doesn't solve the current environmental crisis.
IN THIS ISSUE
Inflation, or a decline in purchasing power, is one of the most pernicious drivers of global emissions. This week, our sole focus is how increased money printing hurts the environment. This topic is critical because countries have been printing more than ever this past decade, and we face an inflection point in combatting global emissions. Central banks have added climate change or the environment to their mandates, but despite this public talk, their monetary policy actions are inflicting real damage.
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HOW MONETARY POLICY AND GOVERNMENTS ACCELERATE EMISSIONS
Loose monetary policy from central banks and excessive government spending can increase a country’s money supply. Central banks impact the money supply through various monetary policy tools, including quantitative easing and open market operations. As the money supply increases, the value of that money declines. We have all been reminded of this with the most recent wave of inflation.
Central banks and politicians publicly champion the environment, but let’s examine just two ways in which the same decisions that drive inflation increase emissions simultaneously.
Increased money supply accelerates consumption, growing emissions.
Declining purchasing power increases the environmental footprint of using a given good over its lifetime.
INCREASED MONEY SUPPLY ACCELERATES CONSUMPTION/EMISSIONS
Note: Key data sourced from Visual Capitalist.
Your money buys you less every day than the day before. This is the nature of a fiat economy as the money supply steadily increases. We can pretend it doesn’t have to, but almost no one in power wants to reign in spending. Honestly, there will almost always be politicians willing to increase spending, and they will often win, or those competing with them will then make the same or greater promises to win. As money enters the economy, it stimulates increased demand and increased emissions at a higher-than-expected trendline as suddenly people are purchasing that new car or taking that trip. Sounds great. Who loses in this scenario? Well, the cash sitting there becomes worth less every day (see above). This further incentivizes people to spend that cash, driving further emissions above trend in a vicious cycle.
Everyone loves free money, except the environment.
INCREASED MONEY SUPPLY INCREASES EMISSIONS OF GOODS
Now that we understand how consumers interact with an increasing money supply let’s examine corporations.
Many people lament the decline in artisanal work, asking how we let it disappear. The steadily increasing money supply means no one can afford to make things that last anymore.
In a hard money economy, someone could sell you a table for $100, and they would have roughly $100 when they retired (there are several time value of money arguments that we’d love to discuss in the comments). In our fiat economy, $100 is only worth $50 at retirement (if they are lucky). That means they probably need to sell you two tables, so they can’t spend as much time on it, and that first one can’t last as long. We understand the above is a simplified explanation of a century of monetary, competition, and globalization trends that also play a factor, but hopefully, it’s still a helpful comparison.
This trend has played out at the corporate level, where nothing lasts anymore. There are many examples of the average lifespan of goods declining, so we can spend less time on that and more time on the impact of this on emissions.
People much more intelligent than us have gathered significant data on how manufacturing and transport emissions for a given appliance end up being 20-25% of the total lifecycle emissions. Other studies can show a lower number, as usage emissions are higher due to a region’s carbon-intense power grid. The manufacturing and transport percentage will increase as grids decarbonize since heavy transport and manufacturing decarbonize at a slower rate. This means not buying several versions of the same thing becomes more important. For many products, manufacturing, and transport represent almost the entirety of the emissions (that table isn’t hurting anyone right now).
There is a step change in emissions when buying several versions of the same good, having the new one delivered to your house, and disposing of the old one, compared to having only one version of that item a few decades ago.
Cheap money has us replacing the same items in our house more than our parents, and the environment is worse for it.
IN PARTNERSHIP WITH ROSE & MCCLARTY
A big part of lowering emissions is providing energy efficiently. The firms responsible must constantly tell their story to clients and stakeholders. Rose & McClarty assists them with copywriting, content strategy, social media, and content writing.
Learn more and get in touch with their team using the link below.
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It’s that simple - we collect job listings to help accelerate the sector. If we can provide intros to companies that are partners, we would be happy to do so. Feel free to reach out to check.
Manager, Sustainability ESG, Deloitte
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