Not "That" Green Thing.....

On Friday, I wrote this post discussing the alleged "green shoots" of US economic recovery. I remain sceptical of this equity market rally.

A reader commented on that post, but not about the economic angle. Instead, he referred to that other green thing, writing,

"Financial instutions played a big role in the economic recession. How about our financial tools and where we have been investing our money. I would like to take a different approach and request everybody to be more careful about investing their money to more eco friendly, green companies.

A new bank called (name of bank) is trying to accomplish it. I would invite everybody to take a place in this green movement."

I would invite everybody to observe the lunacy of this comment.

First, while financial institutions may have 'played a big role in the economic recession,' the reader missed the fact that Congress induced the two largest, Fannie and Freddie, to back mortgages to unqualified borrowers, plus passed CRA legislation to force commercial banks to do the same.

As to where we invest our money, that's a non sequitur to the first remark about financial institutions.

Most people invest for return. So-called green companies, if you can even decide what that term means, and how to measure it, are usually profitable because of some government handout or tax preference. Think ethanol. One of our government's larger, more stupid energy policy mistakes which boiled over, due to the law of unintended consequences, into food price inflation.

Once again, thanks Congress, and the Bush administration, for bone-headed, knee-jerk energy "policy" legislation.

No matter what your favorite cause, it's not going to change our economy without proper price signals. Subsidies, tax preferences, etc., only distort natural behavior for a while, typically with serious unintended consequences.

If voters really want high prices set on carbon-based energy, and watch the huge loss of jobs, both indirect and direct, from this policy, as well as the loss of a substantial amount of our ability to meet demands for heavy-duty, non-stationary power requirements, they should instruct Congress to do that.

But it's not going to spur much job creation. No matter how many loopy ads you see with actors portraying wizened old farmers and westerners criticizing oil companies, or claiming to build huge solar panel or wind farms that will create a whole new legion of jobs, think about this.

Wind and solar remain viable today due to subsidies. That means they don't actually work profitably yet. Even Boone Pickens has mothballed his big wind initiative as oil prices have declined.

So boosting the price of carbon-based energy will result in an immediate loss of economic activity and jobs which won't be replaced anytime soon by wind or solar.

The concept of a functioning, high-employment-at-family-supporting-wage-levels "green" economy or economic sector, without government subsidies, is a myth. It would take years to replace the energy sources, jobs and economic value currently created from carbon-based energy.

It is thus a mere footnote to observe that some bank ostensibly involved in this economic enterprise won't be doing much of value or scale anytime soon, either.