Green New Deal Bonds Must Pay 3% – Because That’s Not Available Elsewhere

Richard Murphy, the would be architect of the Green New Deal, tells us that the whole thing could and should be financed by Green Bonds which will pay 3% interest. Because that’s just not available anywhere else.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]But suppose the Green New Deal was funded by Green ISAs, backed by a Green Investment Bank and paying 3% a year – which is almost impossible to get anywhere, but which has almost no net cost to the government as a means of funding right now.[/perfectpullquote]

Almost impossible to get anywhere?

Really?

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]United Kingdom’s Dividend Yield: Actuaries Share Index: FTSE 100 data was reported at 4.370 % pa in Nov 2018.[/perfectpullquote]

Hmm.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Moody’s Seasoned Aaa Corporate Bond Yield is at 3.45%[/perfectpullquote]

So we can get better than that in either equities or bonds. So much for it being a great deal for the investor.

But wait, you say. Green bonds will be guaranteed by the government! There’s no possibility of capital loss!

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]UK Govt Bonds 30 Year Note Generic Bid Yield
1.45GBP[/perfectpullquote]

But if government is guaranteeing then that’s government doing the borrowing. And why would government – for which read you and me – want to borrow at 3% when we can borrow at 1.45%?

That is, Richard Murphy’s scheme for financing the Green New Deal either ends up with investors being offered a really shitty deal or, at the same time, government paying twice what it needs to to borrow money. Which is really pretty good, the Senior Lecturer has devised a deal which is worse for everyone.

Well done there, well done.