The Capital Letter

The Green Bubble

View of the Walney Extension offshore wind farm off the coast of Blackpool, Britain, September 5, 2018 (Phil Noble/Reuters)
The week of February 8: the green bubble, the minimum wage, the deficit and much, much more, including the latest in our new podcast series, the Capital Record.

Yes, I am going to talk about bubbles again, but once again about one specific bubble: the bubble in anything (supposedly) green, particularly if it can be tied to the war against climate change.

Like many of the asset-price bubbles of our current moment, this one is not entirely irrational. Not only are green assets being “revalued” (to use a term that implies rather more calculation than is really the case) in the light of the general mispricing of risk that is the product of today’s artificially low interest rates, but, as I have noted before, buying green is supported by some arguments that have little to do with value, but a great deal to do with price.

There are, of course, those investors who believe that the climate “crisis” is sufficiently imminent that companies focused on staving off this apocalypse must be on to a winner. Clearer-eyed buyers, however, are looking at green assets in different ways. Some have noticed the immense emphasis that numerous governments are putting on climate change, emphasis that is creating a flow of money, much of it from taxpayers or extorted consumers, that will benefit businesses in the sector. Other asset managers are busy greening their portfolios in an attempt to attract investment from “socially responsible” investors, who, for good or bad (spoiler: mostly bad) now represent an increasingly important segment of the market.

In a report from August last year, the Financial Times, the Pravda of the Davos crowd, and, as such, an important cheerleader for socially responsible investment (it even has a section nauseatingly labeled “Moral Money”), noted:

Funds that invest according to environmental, social and governance principles attracted net inflows of $71.1bn globally between April and June this year, pushing assets under management in the products to a new high of just over $1tn, according to Morningstar.

Separate UK fund flow data from transaction network Calastone found that the amount of new money invested in ESG equity funds between April and July exceeded the combined flows for the previous five years.

Sustainable funds’ previous niche status means that their market share is still small relative to the $41tn held by all investment funds worldwide.

But growing public awareness of the climate crisis is turbocharging sales of ESG funds. The disruption caused by Covid-19 has accelerated the sector’s growth as investors look for sustainable business models that can withstand market shocks.

“From 2015 to 2017, little or no new money was invested in ESG funds,” said Edward Glyn, head of global markets at Calastone. “[But] real momentum has been building in the last two years in the appetite for investment products that align with savers’ ethical concerns.”

And much more money has poured into ESG funds since then.

As to whether this truly reflects “savers’ ethical concerns” rather than the ideological preoccupation and/or preening and/or greed of those who manage those savers’ money is a question for another time, although I suspect that I know what the answer (in most cases) would be.

Meanwhile, other investors are watching this trend, and regardless of their views on the climate, are merely hopping on the bandwagon. Buying what others are buying is not the worst investment strategy — at least if you can get out in time.

Some comparisons (inevitably) are being made with the dot-com bubble. Say what you will about that era, which featured way too much investment in absurdity, its defining feature was the appeal of the uses that could be made of a technology that represented a net step forward. That is a more difficult case to be made where spending on greenery is concerned. These dollars are often fundamentally misdirected (much more of it should be focused on adaptation, which would bring benefits regardless of what happens to the climate) or, in many other cases, are put to work to pay for the installation of premature (and almost inevitably less efficient) replacements for technologies that work perfectly well, even allowing for their alleged externalities, for now.

Bjorn Lomborg, writing in the New York Post:

Climate change is a real, manmade problem. But its impacts are much lower than breathless climate reporting would suggest. The UN Climate Panel finds that if we do nothing, the total impact of climate in the 2070s will be equivalent to reducing incomes by 0.2-2 percent. Given that by then, each person is expected to be 363 percent as rich as today, climate change means we will “only” be 356 percent as rich. Not the end of the world.

And a richer world will be much better equipped to deal with the effects of climate change than the world that those steering climate policy now seem set on creating — a grim, poorer, supervised place.


Climate policies could end up hurting much more by dramatically cutting growth. For rich countries, lower growth means higher risks of protests and political breakdown. This isn’t surprising. If you live in a burgeoning economy, you know that you and your children will be much better off in the coming years. Hence, you are more forgiving of the present.

If growth is almost absent, the world turns to a zero-sum experience. Better conditions for others likely mean worse conditions for you, resulting in a loss of social cohesion and trust in a worthwhile future. The yellow-vest protests against eco-taxes that have rankled France since 2018 could become a permanent feature of many or most rich societies.

Yet politicians obsessively focus on climate. Growth-killing “fixes” would delight a few job-secure academics, but they would lead to tragic outcomes of stagnation, strife and discord for ordinary people.

Most voters aren’t willing to pay for these extravagant climate policies. While Biden proposes spending the equivalent of $1,500 per American per year, a recent Washington Post survey showed that more than half the population was unwilling to pay even $24.

And for what? If all the rich countries in the world were to cut their carbon emissions to zero tomorrow and for the rest of the century, the effort would make an almost unnoticeable reduction in temperatures by 2100.

I have seen more attractive investment scenarios.

And this (from the Financial Times) is not a particularly reassuring development for investors either:

Move over earnings per share. Board directors are now under greater pressure to consider issues from climate change to diversity when deciding on the size of bonuses for company chiefs.

The number of companies globally that include environmental or social metrics when deciding executive pay awards has doubled since 2018, with about a fifth of 6,500 businesses examined now considering these factors, according to a report from ISS ESG, the responsible investment arm of Institutional Shareholder Services.

And nor is this (as set out by Daniel Lacalle, my emphasis added):

The “green” policy in Germany has doubled bills for households while the price of wholesale generation fell, and in 2017 it still had over 52% of its electricity mix and 88% of primary energy consumption from fossil fuels. The German “energiewende” has already cost more than 243 billion euro between taxes and “renewable subsidies” since 2000, and greenhouse gas emissions are almost flat since 2009. Even worse, the impact of net job creation in the energy sector has been negative. Between the job losses in traditional companies and the bankruptcies of local solar names, job creation has turned negative. Germany once had a goal of 500,000 green energy jobs by 2020. After peaking at just below 380,000 a few years ago, the number is now approaching 350,000 and this means that the net [employment] effect… will be a 20,000 loss.

Doubtless Jen Psaki will be able to explain how something like that could not happen here.


The energy sector is key in the decarbonization process, but will not achieve it through perverse incentives and accumulated costs that penalize the efficient in favor of the inefficient, subsidize the expensive, and tax the competitive ones…

The best technological tool to improve the environment is a combination of natural gas, nuclear, hydro, and renewable energy. But renewables are intermittent, while consumption is continuous. We cannot forget the billions required in grid connections and support to maintain an intermittent and volatile mix.

The energy policy of the United States must comply with the principles of safety, diversification and competitiveness. All these can only happen with higher liberalization and competition, not less.

Technology replacement and energy transition should be achieved through competition, lower costs and efficiency, the same way as crude oil ended with whale oil, not because it was decided by a committee, but because the cost was lower and the benefits for consumers evident.

Security of supply must be achieved, also, from a flexible and diversified energy mix which must be cheap and efficient, not via subsidies and higher fixed costs, but through the tax incentives that prevent “fake demand signals” and prevent overcapacity.

Energy is the cornerstone of the future of any nation. Destroying competitiveness would likely worsen the current crisis. The U.S. has the tools, using all technologies, to ensure an abundant and cheap energy supply. Anything else would bring it to repeat the mistakes that Europe made a few years ago.

Another Spoiler: The U.S. will repeat the EU’s mistakes. Rejoining the Paris agreement was foolish enough, but much more (as we see from the Keystone and oil and gas leasing decisions) foolishness is on the way.

Lomborg is, as he explains, a believer in climate change, and he does see a role for spending, but he recognizes that the climate warriors have got things the wrong way round:

We should spend tens of billions to innovate the price of green energy below fossil fuels. Spending trillions on enormous and premature emissions cuts is an unsustainable and ineffective First World approach.

It’s also an approach rooted, like rather too much of the climate movement, in premodern asceticism as well, of course, in that perennial desire of a ruling class (or a ruling class in waiting) to control human behavior.

As for examples of how the green bubble is manifesting itself, just open the financial press and take your pick. Electric vehicles! SPACs that are going to invest in electric vehicles! Electric air taxis! And there are plenty more to choose from, including this doubly enlightening example, “doubly” because many climate warriors, at least those in government, like to claim that market-based solutions will provide many of the answers to the solution.

Yet (via Bloomberg Green):

The European Union is considering curbs on speculation in the world’s biggest carbon market where record prices have lured hedge funds in search of profits.

EU emission permits jumped to an all-time high of 40.12 euros on Thursday, extending their gains to about 70% over the past year. That gain, in part, has been down to large-scale investors speculating in the market. Europe’s cap-and-trade program, started in 2005, is the region’s key policy tool to cut pollution.

The European Commission, the EU’s regulatory arm, could introduce a limit on the number of CO2 allowances that can be held by investors in a central registry of the Emissions Trading System, according to people with knowledge of the matter. Doing this would prevent financial investors holding too much sway in the market.

That could be done during a revision of the Markets in Financial Instruments Directive planned later this year, the people said.

Putting a price on carbon incentivizes energy intensive industries to switch to less polluting technologies. Should prices jump too quickly though, it threatens a smooth transition to industry powered by clean energy.

Europe [The EU], which wants to become climate-neutral by 2050 under its ambitious Green Deal strategy, is currently drafting laws to implement a tougher carbon-cut goal for 2030. The new regulations are set to strengthen the EU ETS, boosting the scarcity of permits. Speculation by financial investors risks putting more strain on companies and could fuel opposition against speeding up the environmental overhaul.

Decarbonization on the scale and at the pace planned by the EU, U.K., and, doubtless, Biden’s U.S., cannot be achieved within a conventional free-market framework. What lies ahead is a high degree of central planning and the regulatory onslaught that will inevitably come with it. That will certainly represent rich pickings for the more skillful or well-connected rent-seekers, but it is not, to put it mildly, an ideal environment for investors.

Which will mean that, sooner or later, bust will follow bubble, something explored by Ross Clark in The Spectator:

Scottish Widows [A UK life insurance and pensions company] is committed to net zero alright. For years, the endowment policy I had with it was worth pretty well just what I had paid into it. Although, on second thoughts, maybe Maria Nazarova-Doyle, head of pension investments at Scottish Widows, wasn’t referring to the returns on its policies when she said this week: ‘Moving to net zero will protect savings against climate-related risks and uncertainty and offer longer-term sustainable growth by accessing low-carbon transition opportunities.’

The firm says that as an interim target it wants to halve the emissions from its share portfolio by 2030. What exactly it means by this isn’t clear. I’m not sure my share portfolio emits any emissions whatsoever – the cardboard file detailing my investments sits in my office with no signs of smouldering. But if Scottish Widows means that it intends that it wants to halve the stated emissions from the companies in its £170 billion book of investments, that does sound pretty easy to achieve: sell the oil companies, miners, manufacturers and buy stuff like wind farms.

But does that help the planet, or merely result in a load of overvalued green energy companies?

Yet another spoiler: the latter.


I am sure the future belongs to clean energy. But then so, too, in the late 1990s did the future belong to the internet. That didn’t, however, mean there was much of a future for the many dotcom companies whose shares were being bought up willy-nilly by eager investors. A few of those companies survived and thrived and have become the giants of today. Most went bust.

I don’t doubt the same will be true of clean energy companies. A few of those whose shares have been booming in recent months will become the big players; most will go under. And it will be anyone’s guess which will be which.

I suspect, however, that what we have seen so far will be just the beginning of a boom which will last several years. It’s not a Gamestop which will burn out in days. Green energy surely has more legs than Bitcoin. But when the bust comes it will be big – bigger, perhaps, than the dotcom bust. It won’t be so much a case of stranded assets as ones which evaporate overnight. But just look at that promise from Scottish Widows: ‘to protect savings against climate-related risks’. No word, I note, about protecting savings against investment fads.

And that (along with largely pointless or misdirected climate regulation) is by far the biggest climate-related risk to the financial system and, for that matter, the economy. Not that the regulators or the ESGrifters using “risk” as the justification for so much of what they do will tell you that.

The bursting of a bubble is never a pretty sight, but the bursting of this particular bubble might prove instructive.

To quote, as Andrea Mitchell would doubtless claim, William Faulkner: “If it were done when ’tis done, then ’twere well/It were done quickly.”

The Capital Record
We recently launched a new series of podcasts, the Capital Record. Follow the link to see how to subscribe (it’s free!). The Capital Record, which will appear weekly, is designed to make use of another medium to deliver Capital Matters’ defense of free markets. Financier and NRI trustee David L. Bahnsen hosts discussions on economics and finance in this National Review Capital Matters podcast, sponsored by National Review Institute. Episodes feature interviews with the nation’s top business leaders, entrepreneurs, investment professionals, and financial commentators.

In the fourth episode, Anthony Scaramucci of Skybridge Capital joins David to talk about what role we need government to play in a society that protects free enterprise. Anthony yearns for the good old days of the 1950s, and David offers some counterviews.

Sound and Vision
Daniel Tenreiro spoke with Miami mayor Francis Suarez in a discussion sponsored by National Review Institute (which you can watch on YouTube here). Suarez has made a high-profile push to lure tech and finance businesses out of San Francisco and New York. He’s had surprising success so far: Hedge funds Elliott Management and Icahn ES have relocated down south, as have a number of prominent venture capitalists, including Keith Rabois and Shervin Pishevar.

And the Capital Matters week that was . . .
It began (not for the first time) on a bleak note with David Eisner and Tom Reed pointing out that which cannot be pointed out enough: deficits matter:

If we had 100 years, or 50 years, or even 30 years to pay off our low interest debts, there might be some truth to the President’s declaration about the deficit and low rates. Or, if we were using long-term debt to finance productive long-term assets with bipartisan support, like a national infrastructure initiative or education-expenditures of this size might generate sufficient growth to act as an economic counter-weight. But, to suggest we can keep incurring unlimited debt, regardless of economic need, because it is simply cheap to finance is a dangerous myth.

First and foremost, there is no real market for 50- or 100-year Treasury bonds. When rates dropped early in 2020 as a result of the COVID-19 pandemic, and investors fled into safe Treasury securities, the previous administration’s Treasury Department aggressively explored the issuance 50- and 100-year debt to finance the recovery package and learned that, while investors love U.S. debt, they love it mainly in short term durations.

That is why, of the $21 trillion of U.S. public debt outstanding to the public, as of December 2020, the average duration was 70 months — less than six years.  Bonds (10- to 30-year duration) represent less than 15 percent of all Treasury securities owned by the public. Less than 10 percent of total debt issued in any year (more like 2-5 percent) is 30-year duration. There is not enough demand for 30-year bonds, let alone 50- or 100-year maturities. Arguing that we can finance numerous, multi-million dollar plans with low-cost, sustainable, long-term debt is fantasy . . .

Indeed, and if I had to guess, when things start to unravel, they will unravel very quickly.

Erin Hawley highlighted how President Biden has transformed an agency designed to control regulatory power into one that will enhance it, just another reminder that the Biden and/or his handlers have a very good understanding of how the machinery of government works, and will use that understanding to push their agenda forward:

Tucked away in the avalanche of President Biden’s early executive actions is the little-noticed but momentous creation of a new regulatory super-agency. Under the guise of “Modernizing Regulatory Review,” the Office of Information and Regulatory Affairs (OIRA) has just been given, through executive fiat, the charge of using federal regulatory authority to achieve administration goals. OIRA’s transformation from a check on agency excess to a pro-regulatory arm of the federal bureaucracy has significant implications for the power of the administrative state, and ultimately, for how Americans are governed.

OIRA began as a check on agency authority and is best known for ensuring that agencies consider the costs of any proposed regulation. As part of the Paperwork Reduction Act, President Carter created OIRA within the Office of Management and Budget to review agency reporting requirements in order to reduce government-imposed paperwork. Later, in an attempt to rein in governance by agency rule, President Reagan assigned to OIRA the additional task of reviewing draft and final regulations to ensure that projected benefits exceeded projected costs.

The past few administrations have all affirmed OIRA’s mandate to ensure responsible regulation. The Clinton administration retained the net-benefit approach to regulation, requiring OIRA to review regulations to ensure that benefits exceed costs and that regulations are supported by a “compelling public need.” President Obama similarly required the office to minimize regulatory burdens and ensure that “benefits justify . . . costs.” President Trump went even further by invoking a two-for-one policy whereby any proposed regulation would be offset by two revoked regulations and a regulatory cost-ceiling policy whereby any proposed regulatory cost would be offset by deregulation.

Under each of these administrations, OIRA performed the important function of ensuring that regulations were worth the cost. By and large, the office succeeded. A quantitative review found that OIRA had served a deregulatory function across administrations, imposing a significant check on the “most liberal agency proposals.”

No more, it seems.

Demian Brady argued that President Trump’s tax overhaul made the U.S. tax code even more progressive than it already is (very):

Leading Democratic politicians such as Senate majority leader Chuck Schumer, House speaker Nancy Pelosi, and President Joe Biden have frequently complained that the Trump tax cuts were nothing more than a giveaway to the 1 percent, further rigging the tax code for those at the top. But the biggest unreported fact about the Tax Cuts and Jobs Act (TCJA) is that it actually made the tax code more progressive.

Indeed, recent data published from the Internal Revenue Service find that the share of income taxes paid by the top 1 percent of filers increased under the first year of the TCJA, while the share of taxes paid by the bottom 50 percent of filers decreased.

These findings come straight from an IRS report that breaks down the tax share of income earners for tax-year 2018 — the first year of taxes filed under the new provisions. Among its changes, the TCJA lowered tax rates, nearly doubled the standard deduction, and expanded the child tax credit.

The IRS data show that the top 1 percent of filers, those with adjusted gross income of $540,009 or higher, paid 40.1 percent of all income taxes. This amount is nearly twice as much as their income share.

How desirable that is, beyond a certain point, is debatable. When it comes to income tax, the idea that most taxpayers have some skin in the game, even if only a token amount, is not a bad one, but, whatever one’s view, the idea that the rich are not paying their “fair” share is clearly, as Brady demonstrates, nonsense:

We now have a tax code that increasingly shields low-income earners from any income-tax liability and requires that individuals pay an increasing share of taxes as they move up the income ladder. To illustrate just how much the progressivity of the tax code has increased over the past 40 years, consider that in 1980 the top 1 percent of earners bore 19 percent of income taxes, the top 10 percent of earners bore nearly half of income taxes, and the bottom 50 percent paid 7 percent. That’s twice as much as today.

The debate over the increase in the minimum wage raged on, with Robert VerBruggen drawing attention to the CBO’s bleak assessment of what it could mean for jobs and the budget. David Harsanyi took issue with some Biden (and Paul Krugman) mythmaking about the minimum wage:

During his Super Bowl interview on CBS Evening News, President Joe Biden declared that “all the economics” of a $15 minimum-wage hike were good. What he meant to say was, all the politics of a $15 minimum wage are good. The economics are highly debatable.

Indeed they are.

And Andy Pudzer and Jon Hartley unveiled some hidden costs of a minimum-wage hike:

In January, economists David Neumark and Peter Shirley issued a study on the employment impact of minimum-wage increases. It assembled the “entire set of published studies” and “identified the core estimates that support the conclusions from each study.” It found “a clear preponderance” in the literature that increasing the minimum wage negatively affects employment, particularly with respect to “teens and young adults as well as the less-educated.”

Sanders’ claim that a $15 minimum wage would reduce budget deficits is based on partisan research, at best grossly misleading and at worst simply wrong. Including such a provision in a budget-reconciliation bill would make a mockery of the Byrd rule and open up the process to significant future abuse. It would also seriously reduce job opportunities for the people who need them most.

Perhaps Democrats might consider spending more time on the negative impact their proposed federal minimum-wage hike would have on the teens, young adults, and the less-educated that the CBO and NBER studies found are most adversely affected by increasing the minimum wage — particularly those in poorer parts of the country. Let’s not forget we are recovering from a recession that disproportionately hurt businesses with hourly workers. That’s one reason we need a COVID-19 relief bill in the first place.

Jessica Melugin looked back at the disreputable history of antitrust, concluding with 2001’s Microsoft case:

Perhaps it is easiest to see the dangers of today’s antirust actions against Big Tech in U.S. v. Microsoft. Microsoft raised the ire of regulators by including its Explorer browser free of charge with its Windows operating system, which brought the cost of a browser from $39 for Netscape Navigator to zero, the same price consumers pay for many of the services of today’s tech leaders. That was bad news for Netscape, but good news for consumers.

Real-world market developments during the course of the Microsoft trial also called the wisdom of the case into question. The computing world was shifting online, but the browser’s relative importance was no longer what prosecutors had made it out to be. Data and advertising were quickly becoming far more important to profits than including a free browser with an operating system. The move to mobile devices, the rise of search, monetized advertising, the Internet of things, voice-controlled technology, social media, widespread wireless Internet access, and online commerce all make the desktop “browser wars” look antiquated. Market forces acted faster than litigation proceeded, and it’s hard to imagine how that won’t also be the case for antitrust litigation against firms such as Amazon, Apple, Facebook and Google.

The flawed nature of these cases is a strong argument against expanding antitrust regulations. Consumers won’t thank the antitrust enforcers for repeating the mistakes of the past.

But that is just what the antitrust enforcers will do, cheered on, regrettably, by some on the right as well as, inevitably, the left.

The concluding section of John Fund’s tribute to the late Jerry Ellig, a regulatory economist, covered some similar ground:

In a 2019 Journal piece, he and Gramm argued that concerns about the power of Big Tech companies need to be evaluated, knowing that efforts to break up oil and railroad trusts in the 19th century had unintended negative consequences. Thus, calls for more regulation of Big Tech should be viewed with care:

“There are legitimate policy concerns involving Big Tech, such as claims of censorship. But history shows little evidence that breaking up big tech companies or regulating them as monopolies will benefit consumers. Before policy makers repeat the failed experiments of the past, they should determine whether trustbusting is really about protecting consumers or merely about expanding the power of government.”

I think we know the answer to that question.

Jordan McGillis examined the implications of the cancellation of yet another pipeline, this time as part of the withdrawal of approval for a bigger project at Jordan Cove, 150 miles southwest of Portland, Ore., which included a pipeline, liquefaction plant, and shipping terminal:

The real resistance to Jordan Cove is over climate. No matter how respectful of the local environment, no matter how beneficial to the community, Jordan Cove was bound to face fierce opposition because natural gas violates our new climate catechism. Building a pipeline and export terminal abets global warming — or so the argument goes.

What the opponents of Jordan Cove misunderstand is that LNG shipped to Asia would largely serve their cause. Shipping gas across the Pacific increases the likelihood that China and Japan will reduce their reliance on coal. China, despite its pledge to be carbon neutral by 2060, burns a quarter of all the coal used globally, despite making up less than 20 percent of the world’s population. Japan, wary of nuclear energy after the fiasco at Fukushima Daiichi, now uses more coal than it did 20 years ago. The U.S., on the other hand, has reduced coal consumption by 45 percent since 2008 thanks to domestic production of natural gas. But to Oregon’s activists and those taking control of U.S. policy this month, no analysis beyond “hydrocarbons bad” is admissible.

Richard Morrison posed a question about ESG disclosures:

Dozens of companies, including some of the best-known consumer brands, recently signed on to a new system of rules for reporting on environmental, social, and governance (ESG) topics. These charter supporters of the “stakeholder capitalism metrics” have pledged to disclose firm-level information on everything from workplace injuries to greenhouse-gas emissions. While issued by the World Economic Forum’s (WEF) International Business Council — which is not usually popular among advocates of free-market economics — these guidelines are at least voluntary. Whatever Davos-style errors are rolled into this “stakeholder” framework, it demonstrates that government regulation over many of these areas is ultimately unnecessary. Will policy-makers take heed?

We know the answer to that question too.

I looked at the EU’s increasing closeness with the Beijing regime, whether on trade or climate:

The notion that China can be relied upon as a negotiating partner when it comes to climate has always been an absurdity. China’s regime does what it wants. If sticking to an international agreement, particularly with a counterparty lacking the sort of clout that Beijing respects, would run against what the regime regards as being in China’s (or, more importantly, its own) interest, then that agreement will not count for very much, if anything. Ask the people of Hong Kong how the Sino–British Joint Declaration on their future is holding up.

As for any suggestion that China will be inspired by the moral example that the EU is setting, well, call me skeptical, but I reckon that authoritarians engaged in genocide are unlikely to be moved by moral example . . .

Steve Hanke and Dick Lepre offered up a history lesson:

In 1997, Fannie was purchasing mortgages that had loan-to-value ratios of 97 percent. By 2001, it was buying mortgages with no down payment at all. And by 2007, Fannie and Freddie were required by HUD to show that 55 percent of their mortgage purchases were for low- to moderate-income home buyers. In addition, 38 percent of all mortgages purchased had to be from underserved areas — usually those in inner cities, and 25 percent had to be for loans that had been made to low-income and very low-income borrowers.

The call for “social justice” had taken over housing policy. As a result, a housing bubble of unprecedented size was created, and like all bubbles, it popped. Among other things, many people who were the intended beneficiaries of U.S. housing policies were badly burnt. And, yes, the foreclosures mounted, balance sheets were shredded, and, with that, we witnessed the onset of the Great Recession.

Not only did the federal government’s housing policy trigger the Great Recession, but as night follows day, the government formed a commission to conceal who the culprit was — namely, the U.S. government itself.

The Financial Crisis Inquiry Commission determined that the root of the housing problem had been “deregulation” or lax regulation, greed and recklessness on Wall Street, predatory lending in the mortgage market, unregulated derivatives, and a financial system addicted to excessive risk-taking. No mention was made of HUD’s National Homeownership Strategy (read: affordable-housing strategy) and its mandates to the GSEs to purchase substandard mortgages that had been pushed on people with no possibility of repayment. It was a classic Washington cover-up.

Turning back the clock to affordable housing in the name of “social justice,” an idea that Friedrich Hayek dubbed a mirage, will end in tears, just as it did during the Great Recession.

Guess who seems ready to turn back the clock.

John Constable cast an eye over Biden’s plans to expand offshore wind power:

Fossil fuels are of low entropy. They are, in the technical, thermodynamic sense, highly improbable, being dense stocks of energy, the improbability of which can be rendered in a multitude of changes to the world in accordance with human wishes, improbable changes that we call wealth. And if the low-carbon candidates to replace those fossil fuels do not have similarly favorable or superior physical properties, no amount of policy support will be able to compensate for the deficiency. Nature cannot be fooled. Reality matters.

But what is the reality of renewable energy? In one of his first actions as president, Mr. Biden has expressed the wish to “double” offshore wind in the U.S. by 2030, an ambiguous phrase that probably means he and his advisers wish to see twice the current development portfolio of offshore wind capacity to be operational within a decade, or 18,000 MW rather than the present 9,000 MW in an advanced stage of preparation. The attraction is easily explained. The U.S. already has a great deal of onshore wind power, 112,000 MW, subsidized through Production Tax Credits and mostly located on and around a line running from North Dakota to Texas, a broad belt characterized by strong winds, cheapish land, and low construction costs. Unfortunately, it is also distant from the main corridors of demand on the East and West coasts. Offshore wind along the coasts therefore seems like a tempting option for expansion, but is it wise?

Once again, I think you know the answer.

Marco Rubio did not think much of Biden’s child-care plan:

America’s families are in crisis. The pandemic has placed major strains on American families, as shown by rising household debt numbers. But even before the pandemic, Americans were getting married less and having fewer children than ever before, and the cost of living for middle-class families was far too high.

The immediate task of pandemic relief must be to help restore families’ financial health. That’s why I support and have called for President Biden to increase the latest round of stimulus checks from $600 to $2,000 per person, including children.

I will gladly support more pandemic relief for families. But while President Biden and Democrats in Congress claim to support them also, buried in their $1.9 trillion spending plan is a proposal that would create a new program to give monthly cash payments to parents, not just for the pandemic, but permanently.

Their plan would send all parents checks totaling up to $3,600 per child and hand out new subsidies for day care. No questions asked and no strings attached.

That is not pro-family policy, no matter how much Democrats will claim it to be . . .

Writing from New Mexico, Paul Gessing saw where Biden’s energy policy was going, but was unconvinced (#understatement) by its logic:

In the last month, New Mexico and the United States as a whole have witnessed unprecedented attacks on the traditional energy sector. Nationally, President Biden’s ban — for now, just described as a pause — on new oil and gas leases on federal lands has been well documented. So too has his revoking of the permit for the Keystone XL pipeline.

While such decisions are undoubtedly popular with radical environmentalists and their well-funded allies, it is hard to see how they — or anyone likely to follow them — will achieve the reductions in CO2 emissions necessary to make any difference to the climate. Look, for example, at the impact of the Keystone XL pipeline decision. With no available pipeline, Canada and its oil producers will simply load their oil onto trains or trucks, relying instead on modes of transport that are more risky and less energy-efficient. Indeed, doing so will involve higher greenhouse-gas emissions than the pipeline would have, especially considering the pipeline developers’ recent promise to use only renewable energy to operate the project.

Overall, less than 10 percent of American oil and gas comes from federal lands. Cutting production from them won’t have a real impact on producers on private and state lands, nor will it reduce demand for foreign oil. Nevertheless, this new policy could end up inflicting significant economic pain on an already shaky U.S. economy.

Even if a relatively small amount of U.S. oil and gas production comes from federal lands, bans or restrictions there will have a disproportionate effect on a good number of states and their economies (like my own in New Mexico). Half of New Mexico’s oil and gas production — much of it fracked — is on federal land. Long-term curtailment of oil and gas drilling on federal lands would devastate the state’s budget . . .


Even if the Biden administration and states such as New Mexico make a concerted and focused effort to reduce CO2emissions (an open question to say the least), the United States won’t be able to halt climate change. Any CO2 reduction we make is only displaced by a doubling from China, who seems more serious about developing its own economy than the Biden administration and many “blue” states like New Mexico are about theirs.

President Joe Biden and New Mexico governor Michelle Lujan Grisham telling us to pay more for energy while destroying thousands of energy jobs is a hard pill to swallow even if we were to make serious progress toward achieving our climate goals. But to do immense damage to the U.S. and New Mexico economies while allowing American progress on CO2 emissions to be undermined by our economic and geopolitical rivals in China is woefully misbegotten.

Pieter Cleppe looked at the tragic fiasco of the EU’s latest disastrous grand project, centralized vaccine procurement:

Perhaps the most important reason for the EU’s slow vaccine rollout was the failure by the European Commission to secure contracts with pharma companies as rapidly as others did. While the U.S. and the U.K. concluded a deal with Pfizer for its COVID vaccine in July 2020, it took the European Commission until November to sign a similar deal. (This happened despite reporting from the Wall Street Journal in July that the vaccine had been proving very promising.) The U.K. also agreed to buy the AstraZeneca vaccine in May, while the EU dragged its feet and only placed an order for the shot in August.

It must be mentioned that this was after four European countries — the so-called Inclusive Vaccines Alliance (IVA), consisting of the Netherlands, Germany, France, and Italy — had been negotiating separately from the European Commission with AstraZeneca and had succeeded in reaching a preliminary agreement in June. At that point, German chancellor Angela Merkel ordered her health-care minister, Jens Spahn, to hand over this responsibility to the European Commission bureaucracy and even to apologize. In one analysis, Bloomberg points out that “Merkel’s hand prints are all over Germany’s vaccine failings.” That the Commission then took another three months to sign off on the deal with AstraZeneca is yet another failure to add to the already troubled legacy of Merkel, who long ago announced that she won’t be seeking reelection in the fall.

So, Merkel, the “leader of the free world,” the “indispensable European,” does it again. Another disaster to add to the others that litter her dismal career.


It very much looks like the reason for the delay was that the EU Commission was not only trying to impose more legal liability on the drug companies but also trying to negotiate the price down — ultimately paying 24 percent less for the Pfizer shot and 45 percent less for the AstraZeneca vaccine than the U.S. did, and a lot less than the U.K. did — so that it could then boast about how being outside of the EU is such an expensive affair. Never mind that obviously, the cost of delay — financially, let alone in human terms — outweighs the money saved on the vaccine price. Israel, for example, paid 2.3 times the EU’s price and only has a population of around 12 percent of Germany’s, but obtained 40 percent more vaccine doses than Germany (despite the latter being home to the Pfizer/BioNTech). Indeed, a study estimates that the cost to EU economies from the slow pace of vaccination and prolonged lockdowns compared with the U.S. and U.K. has been € 100 billion . . .

The Biden administration is either oblivious to, or uncaring about, the contradictions contained within an agenda designed both to spur economic recovery and increase the regulatory burden on business.

Robert O’Quinn had more:

President Biden and labor secretary–nominee Marty Walsh (Boston mayor and former president of Laborers’ Union Local 223) favor the special interests of Democratic constituencies over the welfare of American workers? If three early actions to overturn deregulatory reforms at the Labor Department are indicative, the answer is yes. The Biden administration appears poised to expand radically the regulatory state that is especially burdensome for small businesses. Indeed, war on business at the Biden Labor Department has already begun . . .

His conclusion:

There will be fewer opportunities to work as an independent contractor, less retirement security for private-sector workers, and higher health-insurance costs for the self-employed and workers at small employers.

So we ended the week on a bleak note too.

Finally, we produced the Capital Note, our “daily” (well, Tuesday–Friday, anyway). Topics covered included: Tesla bets on Bitcoin, Reddit sees its valuation double, Chinese hedge funds beat foreign competitors, the technology industry’s increasing returns to scale, NASDAQ’s mission creep, COVID and cars, Washington State’s (proposed) wealth tax, France’s wind-power follies, the Piggly Wiggly short squeeze, Daniel’s interview with Mayor Suarez, Bitcoin as a hedge, TikTok sale goes awry, a look at Central Bank Digital Currencies, passive funds and bubbles, snacking from home, vanishing green jobs, regulating social media, and the value of SPACs (or not).


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