Money Printing and Climate Destruction

tl;dr: Efforts to save the economy are going to accelerate climate destruction. The uncomfortable paradox.

As I write this, we are on the cusp of yet another stimulus bill from the US government. the Fed is meeting, and yesterday, they announced the extension of lending facilities through the end of the year.

From a political perspective, there’s really no option. There are already riots in the streets, but if food security becomes a real issue or if evictions really grow in number, things would be far worse.

So the money has to get printed.

Where does the money go?

We’ve touched on things like the Cantillon effect and how Black Rock and Pimco are making fistfuls of money throughout this process serving as chokepoint intermediaries.

So, sure the rich get much richer. No new story there.

But the issue is where the money goes.

And I think one answer, that is sadly becoming more evident, is that it goes to the destruction of the environment.

Why New, Easy Money Destroys the Planet

The printing of additional money simply serves to accelerate the velocity of economic activity. By making today’s money more valuable than tomorrow’s, we are all incentivized to spend it.

The question is: where do we spend it?

For some, it will be an increase in consumption purchases. New home sales are up. So are cars. All of these require the use of additional natural resources.

More wood, more concrete. More trees destroyed. More habitats impacted.

But I think it gets worse than that because of where the rest of the money goes.

By “rest of the money,” I am referring to people’s natural desire to save money and avoid the erosionary affects of inflation against their purchasing power.

So, now we have gold and silver at all-time highs. The largest gold mining companies in the world, Barrick and Newmont, are exploding, with Newmont at an all-time high.

It doesn’t take a world-class economist to figure out what happens next.

Gold mining companies get paid to, well, mine gold. So as they are flush with cash since investors are looking for ways to protect themselves by buying gold.

What will they do with it? Probably some stock buy backs, but probably do what oil companies did.

Start exploring and drilling in areas that used to be unprofitable.

The end result…many more of these.

Money flows into hard assets. The easier the money, like now, the more money will flow into known assets of value.

With more money and a limited amount of resources (only so many lots and so many diamond/gold mines), prices will rise, incentivizing producers to look farther, deeper, wider to uncover resources to meet growing market demand.

When easy money is flooded into an economic paradigm based upon the assumption that resources are “free” with no negative externalities, we all pay in one way or another.

The climate may pay the highest price of all.