Value on the edge of a cliff — when wealth suddenly vanishes without trace — Part I

In the shadow of the blooming Covid-19…

Under the huge shadow cast by the Covid-19 pandemic and its impacts, one can sense the beginning of the beginning of an intuition, wafting and swirling around what is commonly called “Planet Finance”, that wealth, money, currencies, value, assets, debt, stocks, bonds, commodities, anything and everything tradeable on stock exchanges, anything investable in, and markets themselves, are no longer what they used to be, without anyone having yet any sense of what they could have been and even less what they could become in the future. One word fixates anxieties: DEBT. Solid ground is caving in. What was taken for granted floats in a mist of uncertainty. What is this about? How can we think this through? Is there anything an investor, a fund manager, a banker, the CEO of a large corporate or of a tiny SME, a politician, or just an ordinary citizen in any country might rely on and make sense of?

  • Mark Carney, Bank of England governor, François Villeroy de Galhau, Banque de France governor, Frank Elderson, chair of Network for Greening the Financial System (NGFS, 34 central banks): “The catastrophic effects of climate change… destroy wealth… insured losses have risen five-fold in the past three decades… The enormous human and financial costs of climate change are having a devastating effect on our collective wellbeing.” (The Guardian, 17–04–2019)
  • Mark Carney (The Guardian, 13–10–2019): “Companies and industries that are not moving towards zero-carbon emissions will be punished by investors and go bankrupt… Mark Carney also told the Guardian it was possible that the global transition needed to tackle the climate crisis could result in an abrupt financial collapse. He said the longer action to reverse emissions was delayed, the more the risk of collapse would grow.”
  • Sarah Breeden, Executive Director, International Banks Supervision of Bank of England’s Prudential Regulatory Authority (PRA): “A climate Minsky moment, where asset prices adjust quickly with negative feedback loops… could be as high as $20 Trillion” (Official Monetary & Financial Institutions Forum, London, 15–04–2019)
  • Global Investor Statement to Governments on Climate Change (477 investors representing over US $34 trillion in assets — just under half the world’s assets under management): stressed “the urgency of decisive action… There is an ambition gap… This ambition gap is of great concern to investors and needs to be addressed, with urgency” (26–06–2019)
  • 2nd Transition Forum — Shifting to Sustainable Lifestyles, Monaco, 26–27 June 2019–250 finance, business & NGO participants: “We all agree it’s very urgent… But how?” No one there had any clear idea how to.
  • Investors that manage US$47Trillion demand world’s biggest polluters back plan for net-zero emissions — “Climate Action 100+, an initiative supported by 518 institutional investor organisations across the globe, has written to 161 fossil fuel, mining, transport and other big-emitting companies to set 30 climate measures and targets against which they will be analysed in a report to be released early next year. It is the latest step in a campaign by climate-concerned shareholders to force business leaders to explain how their targets and strategies will help reach the goals of the 2015 Paris agreement.” (The Guardian 14/09/2020)

The value of thinking straight

In GBU, we observed that those trillions injected into stimulus packages, by whatever names, amount to no more than a post-modern cargo cult. We all know that no cargo plane would ever land on the mock-up landing strips cleared by some Pacific islanders in the wake of WWII in the naïve hope that they could entice, seduce even, further planes to keep coming and disgorge their cargoes of mirific goods. We are rational people. We do not believe in childish magic. Yet, some already call those trillions “magic money”, since they appear suddenly from nowhere. That tsunami of magic money raises many unanswered questions. Have those trillions still any value left in them? What does this surge mean for the money we use in everyday life, the wages, the salaries, the mortgages, the investments, tiny or large, properties bought or sold, the ongoing running of businesses? In the wake of that flood of magic money, what is meant by value nowadays, and in the future?

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Dr Louis Arnoux

Dr Louis Arnoux

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Louis is the catalyst and main author for the Fourth Transition Initiative and Cool Planet Foundation.