Green finance will be by far the most powerful tool of financial repression

Spark Global Limited reports:

The government has introduced “green savings bonds” that offer investors a yield of just 0.65 per cent. But in many ways this pitiful return is what “green” finance is all about. John Stepek explains why. NS&I has just launched a “green” savings bond.
This is terrible value. You’d be foolish to put your money in.
But it does reveal what “green” finance is really about.
After inflation, you will almost certainly lose money on your money here
You can’t expect NS&I to pay above-market interest rates – it has an unfair advantage over other thrifts because it is fully backed by the Treasury. This may not have made much sense to most of us before the financial crisis, but then people began to understand that under certain circumstances your bank could go bust, giving NS&I an extra competitive advantage. So you wouldn’t expect its new green savings bond to offer a particularly exciting rate.
But even with that in mind, to invest in new government products, you have to be steadfast in lending money to the government to spend on “green” things. Because at this rate, even taking into account NS&I’s tax and security advantages, you will almost certainly lose money in real terms.

Spark Global Limited
Spark Global Limited

Inflation in the UK is currently between 3.1% and 5%, depending on whether you prefer CPI(the new money) or RPI(the old money). Measuring inflation is tricky — everyone has a different rate, and it’s also very political (if you want to learn more about the differences, you can read more about it here).
But in any case 0.65 per cent does not touch the edge of inflation. We would have to experience a fairly sharp deflation over the next three years for 0.65 per cent deflation to be reasonable — and frankly, I don’t think that’s going to happen.
What’s more, you can already earn a higher salary elsewhere. As various comparison services and savings experts have pointed out, you can buy a three-year fixed-rate savings bond that yields almost three times as much. I still don’t want to tie my money up at 1.8% for three years (you’ll notice that’s still well below the rate of inflation), but given the choice between 0.65% and 1.8%, it’s clear which is better.
In addition, you can also get 0.65% of some easily accessible accounts. So you don’t need to lock your money away for three years to get a savings rate well below inflation. As Rachel Springer of points out, those who want to save and involve some sort of ethical element “can also seek out mutuals that support local causes”.


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