BOOM as at 22nd December 2019

A BOOMING CLIMATE BUSINESS  — COP25

 

The United Nations Climate Conference called COP25 was just completed in Madrid. We all know that Greta Thunberg sailed across from America to attend. But who else was there? BOOM readers should sit down to receive the facts. Otherwise, they just might faint from shock.

There was a grand total of 26,706 participants registered for COP25 which was (obviously) the 25th such annual meeting. There were 13,643 people representing nations. There were 9,987 representatives from “observer organizations” and 3,076 journalists.

The grand total was about 4,000 more than the previous meeting called COP24.
The nation with the most number of delegates registered was the African nation of Cote D’Ivoir. Their list comprised 348 members. The Democratic Republic of the Congo (DRC) came in at second place with 293 registrants. Africa also sent a delegation of 165 from the Congo.  The biggest drop in delegation size from the previous year came from Guinea, with a mere 159 people compared to 406 at COP24.  China had 76 registered. Bangladesh registrations were 143, almost twice as many as China. But China has 10 times the population of Bangladesh so go figure.

Despite all these concerned delegates, observers and journalists the conference was unable to reach a consensus. They moved decisions under “Rule 16” of the UN climate process to next year, COP26.  And matters involving the reporting requirements for transparency and “common time frames” for climate pledges were all also moved to the 2020 conference, COP26.

In other words, almost 27,000 people traveled to Madrid (most by aircraft burning fossil fuels), stayed in lavish accommodation that needed to be heated by fossil fuels, ate well at many restaurants (with food supplied and transported courtesy of fossil fuels) and then agreed to do it all again next year. All in a quest to save the planet from ……… fossil fuels.  Go figure. It would have been better if they had all stayed home.

At least Greta sailed to Spain in a sailing boat made of carbon fiber, plastics, rubber, canvas, steel and aluminum (all made using fossil fuel energy based supply chains), presumably equipped with a diesel engine for backup and steered by GPS navigation systems using intercontinental satellite systems. Getting back to basics can be difficult.

ELECTRIC CAR SALES PLUNGE

While the COP25 talks were in process, the sales figures for cars worldwide were collapsing. This should presumably warm the hearts of the delegates. However, the drop in electric car sales was particularly noteworthy, especially in China.

In November, China’s electric vehicle sales plunged 43.7% on the previous year. In October, they plunged 45% from the previous year. While this has been happening, Tesla shares have been rising sharply in America. Go figure. China is supposedly Tesla’s big future market opportunity. China makes up about 30% of all global new car sales. Their market is bigger than the total for the United States.  And China is by far and away the biggest market for electric cars. Their electric car market is more than 3 times bigger than the market in the USA. So Tesla may have to find another growth market somewhere. How about Mars?

STOCKS PREFERRED TO BONDS

Three weeks ago on 1st December, BOOM wrote — ” ….. it is worth noting that over the last 8 weeks, there appears to be a growing preference for investors to move towards stocks over bonds.”

That comment has borne fruit.  The preference for stocks over bonds especially in the US financial markets has continued to grow since BOOM made note of it. Stock indices have moved significantly upwards while sovereign bond prices have traded sideways. Stocks are even being preferred to junk bonds which continue to rise in price but at a slower pace. This preference for shares is intriguing. Perhaps share buybacks are a principal cause.  Share buybacks in the US S & P Index amounted to US$ 176 Billion in the third quarter, a rise on the quantity that was purchased in the second quarter.

In economics, things work until they don’t. Until next week …………  Make your own conclusions, do your own research.  BOOM does not offer investment advice.


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EMAIL: gerry [@] boomfinanceandeconomics.com

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HOW MOST MONEY IS CREATED

BANKS CREATE FRESH NEW MONEY OUT OF THIN AIR (but they always need a Borrower to do so)

THERE IS NO SUCH THING AS A DEPOSIT
BANKS PURCHASE SECURITIES, THEY DON’T MAKE LOANS

BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY
Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how the banking system and financial sector really work.

https://www.youtube.com/watch?v=EC0G7pY4wREhttp://

How is Most New Money Created ?

LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans).

From the Bank of England Quarterly Bulletin Q1 2014    —
“Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.

“Most money in the modern economy is in the form of bank deposits, which are created by commercial banks themselves”.

Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models.

On 25th April 2017, the central bank of Germany, the Bundesbank, released a statement on this matter —

“In terms of volume, the majority of the money supply is made up of book money, which is created through transactions between banks and domestic customers. Sight deposits are an example of book money: sight deposits are created when a bank settles transactions with a customer, ie it grants a credit, say, or purchases an asset and credits the corresponding amount to the customer’s bank account in return. This means that banks can create book money just by making an accounting entry: according to the Bundesbank’s economists, “this refutes a popular misconception that banks act simply as intermediaries at the time of lending – i.e. that banks can only grant credit using funds placed with them previously as deposits by other customers”. By the same token, excess central bank reserves are not a necessary precondition for a bank to grant credit (and thus create money).”

The Reserve Bank of Australia (Australia’s central bank) has also contributed to the issue in a speech by Christopher Kent, the Assistant Governor on September 19th 2018.
“…… the vast bulk of broad money consists of bank deposits”
“Money can be created …….. when financial intermediaries make loans
“In the first instance, the process of money creation requires a willing borrower.”
“It’s also worth emphasizing that the process of money creation is not the result of the actions of any single bank – rather, the banking system as a whole acts to create money.”
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MOLS Denmark



 

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