A group of 450 financial firms attending the U.N.'s "last chance to save the planet" COP26 climate conference in Glasgow have generously pledged $130 trillion in capital to finance a global transition to net carbon emissions. That's more than 135% of the world's gross domestic product in 2021.
There's no reason to believe they would be so eager to do so if not for expectations that government mandates and handout incentives will continue to legislate fossil and nuclear energy industries out of business, to be replaced by politically favored "renewables" — principally wind and solar — and artificially drive transportation markets from internal combustion engines to all-electric vehicles which currently represent only about 3% of automotive sales.
This big government spending switcheroo from free market capitalism to corporate socialism, or state capitalism, doesn't come cheap.
Natural gas prices as winter heating requirements soon begin are up 100% in the U.S. (600% in Europe), and oil prices are at their highest point in a decade.
Nor should any of this come as any big surprise for our recently energy-independent nation which since went woke with a Democrat administration that has worked so aggressively to accomplish American energy poverty.
During his first days in office, President Joe Biden cancelled the Keystone XL pipeline and capped drilling permits in the Arctic National Wildlife Refuge (ANWR), while simultaneously giving President Vladimir Putin a pass to complete Russia's Nord Stream 2 pipeline under the Baltic to sell their natural gas to Europe.
Then, in response to politically painful U.S. pump and electricity prices, the Biden administration has pleaded with OPEC (climate be damned) to boost oil production.
Adding further lack of self-awareness to irony, White House officials recently asked oil and gas industry executives how best to moderate price increases.
During a Nov. 5 interview, Energy Secretary Jennifer Granholm, a former Michigan governor, declared it "hilarious" to think the White House could bring down energy prices. "Would that I had a magic wand," she mused.
However, many asset managers, banks, and rent-seeking crony capitalists regard that magic money that is being waved around very seriously.
As Wall Street Journal writers Joshua Rauh and Mels de Zeeuw observe, "Any government mandate that a large amount of capital must be swiftly retired and replaced creates a tremendous opportunity for financiers, no matter what the underlying reason."
Rauh and de Zeeuw ask us to suppose a government announces that all machines of a certain color, say brown, must be destroyed and replaced with machines of a different color, say green:
"Owners of brown machines aren't happy, but those who can finance the new green machines will profit handsomely. This artificial demand distorts the efficient allocation of capital and comes at a great cost to economic prosperity."
The free money and endless government subsidy model shed at least flickering dim light on why Rivian, an electric truck maker startup that has produced only 156 vehicles, is worth $120.5 billion, making it the world's fifth largest automaker based on hypothetical market value.
By comparison, GM recorded $122 billion in revenue and 6.8 million vehicles last year.
As a clue behind this monetary marvel, Rivian's prospectus noted that "regulatory requirements and incentives" as well as future bans on internal combustion engines are a business "tailwind."
In short, the company's theoretical value appears less a reflection of investors' confidence in the company than in confidence that a government bent upon forcing customers to buy electric vehicles (EVs) won't let it fail.
The Democrats' proposed $4 trillion spending bill, for example, includes a 30% business tax credit for EVs, a subsidy that will handsomely benefit Amazon which has ordered 100,000 Rivian vans.
EV consumers can also pocket a $7,500 tax credit for pickup trucks, vans and SUVs that had a price cap of $74,000 for pickups, along with an additional $4,500 bonus tax credit for EVs produced in unionized U.S. factories ... a coercive carrot for Rivian management to sign on.
Then there's Tesla, a company whose stock market capitalization just reached $1.03 trillion ... exceeding the next nine largest auto makers combined.
The House reconciliation bill would extend the existing $7,500 EV tax credit through 2031 and remove the 200,000 car per-manufacturer cap, which both GM and Tesla have hit.
So, what could go wrong with this guaranteed government gravy train?
Well, for one thing, reliance upon China for essential rare earth materials and computer chips to make it happen could go very wrong.
China owns or controls 80% of the rare earth minerals on the planet needed for manufacturing batteries for all those EVs.
President Biden announced that his administration is considering a 20-year delay of new rare earth mining operations in northern Minnesota. Such a postponement will make communist China richer and Americans poorer ... exacerbating a dependence that may be far greater than any we had on the Middle East for oil.
China is also an important source of semiconductors which underpin everything from EVs and mobile phones to artificial intelligence and advanced military weapons.
Whereas the U.S. continues to lead the world in high-tech chip design, about 90% of global chip exports now come from East Asia, and especially from Taiwan (which is under Beijing threat) along with the China mainland, South Korea and Japan.
Several globalist U.S. corporations and their China affiliates are complicating Washington's efforts to preserve America's lead in critical technology while aiding Beijing's quest for chip-sector dominance.
Among these are Intel Corp. which is backing a Chinese company called Primarius Technologies Co. that specializes in advanced chip-design tools that compete with U.S. primacy.
Pennsylvania Democrat Sen. Bob Casey, a co-sponsor of legislation that would screen outbound U.S. investments and the offshoring of critical supply chains and tech-industry resources to adversaries like China and Russia, warns: "For too long corporate interests have prioritized their bottom lines without regard to the broader American economy or our national security."
The same can be said for all post-capitalist economists — government included — who believe that free market demand structures should be replaced by socialistic politically-driven command-style edicts.
Larry Bell is an endowed professor of space architecture at the University of Houston where he founded Sasakawa International Center for Space Architecture and the graduate space architecture program. His latest of 10 books, "What Makes Humans Truly Exceptional," (2021) is available on Amazon along with all others. Read Larry Bell's Reports — More Here
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