Richard Murphy is, as we know, one of the architects of the Green New Deal. He insists that it should all be funded by bonds. Bonds held by private investors as part of their pension arrangements.
There is the occasional problem with this. For example, he’s thereby insisting that pensioners should be taking equity risk without gaining equity rewards which doesn’t sound very sensible.
He’s also just dead set against there being a secondary market in such bonds. Because he’s keeps insisting that any tax privileged investment must be into new investment. Well, OK, it’s an idiocy* but that’s what the plan is.
But then we get this:
Just a point about your idea about your green new deal ISAs – the whole point about the stock market is they provide an exchange and liquidity. Would your ISAs be illiquid? Or would the secondary market be provided by the Government and if so who would establish the price?
Richard Murphy says:
January 6 2020 at 12:51 pm
What’s the price of a bond redeemable in cash at the end of the term, with a penalty for early redemption, as is familiar in the savings market?
And what’s the cost to the government of that?
So every Green New Deal investment plan would be subject to the risk of early redemption. At a price, to be sure, but still subject to that risk. You know, exactly the thing that killed the Woodford fund, is harming the M&G property one and so on. People can come and demand their money back when they like – at that price – and the fund has to liquidate assets to repay them.
We’ve just created a liquidity mismatch akin to that in the banking system – but without the central bank support for it – and Murphy wants us all to be compelled to invest in these things? For our pensions?
*It’s an idiocy because the secondary market, that ability to exit, reduces the cost of capital to the project or economic adventure.