Saturday, April 20, 2013

Environment 1, Economy 0

According to a recent report in The Guardian (UK), the world’s wealthy have as much as $32 trillion stashed in off-shore accounts.

Why is all that money stashed in off-shore accounts? The obvious answer is that it’s avoiding the tax man, of course. The less obvious answer―the answer almost everyone overlooks―is that it’s cooling the economy and helping to reduce CO2 emissions and other forms of pollution worldwide.

Wait! What?

That’s right. Money acts as a lubricant for the economy. When you take away substantial amounts of lubricant, machinery starts to bog down. If you take away all of the lubricant, machinery seizes up and grinds to a halt. The economy works on the same principle; it needs plenty of lubricant (money) to keep the machinery running smoothly at top speed. When money goes out of the economy, the economy slows down, contracts and turns sluggish. You know, about like the global economy is doing right now.

More money circulating in the economy means more people have more money to spend on goods and services, which stimulates the economy. When demand goes up, businesses hire more workers to help them meet the increased demand. Taking money out of the economy produces the exact opposite effect.

Money taken out of the economy and squirreled away might as well not exist; certainly nothing would change if it ceased to exist. Money held in savings represents economic activity that’s already occurred; as long as that money is held in savings, it can’t be used to stimulate new economic activity. In terms of the economy, money is only useful when it’s spent. In terms of the environment, the opposite is true; unspent money represents reduced economic activity and a corresponding reduction of industrial pollution entering the environment.

Whether by intent or as an unintended consequence of rapacious greed, the world’s wealthy seem to be doing the rest of us a huge favor by reining-in the causes of global warming. How cool is that?