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2023 | OriginalPaper | Chapter

7. The Great Leverager

Author : Stefan Brunnhuber

Published in: Financing our Anthropocene

Publisher: Springer International Publishing

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Abstract

In this chapter, we describe how the playing field of the market is changing significantly. If we do not meet unchecked risks and unmet opportunities, the political and economic costs will rise to an intolerable degree. An approach of financialisation and securitisation can help us to better hedge these future challenges. If we start implementing a parallel digital currency system as described in this book, we can identify multiple new financial territories, unexpected positive second-round effects and potential for greater welfare and well-being for all of us.

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previous chapter Upgrading the System

next chapter Three Overarching Topics

We can take this argument one step further: whereas at a micro-level the price (interest rate) of a good or service determines decision-making, at a macro-level it is the quantity of money (QE) that determines the price. Meaning that, macroprudentially, the amount of money injected into an economy drives prices and not the other way round.

State debt relative to GDP (which is one of the Maastricht criteria) is a statistical artefact that is based on the average debt load of the EU member states historically but is not backed up by any empirical evidence on growth rate or well-being.

All PPPs also involve further specifications: (1) forms of performance contracting, which clarify ownership and certain activities (delivery, building, management); (2) risk-hedging instruments, which include asset-backed securities (ABSs), credit default obligations (CDOs) and swaps following pre-agreed key indicators (see below); and (3) defined equity shares of private sector involvement. See Saha et al. (2018).

SPVs involve asset-backed securities, various forms of specific derivatives, credit default obligations (CDOs) and a small number of more specific swaps. In particular, they mobilise and channel private capital, increase market efficiency and allow price discovery and transparency in order to hedge these risks. Most financial engineering of this kind is standardised to allow for cross-sectional comparison, or consists of customised over-the-counter (OTC) products that make it possible to provide individual solutions for market participants. In either case, they represent market-based solutions that make it possible to better hedge risks and open up opportunities. See Lannoo and Thomadakis (2020).

See https://www.credit-suisse.com/about-us/en/reports-research/global-wealth-report.html; https://www.forcegood.org/ketan-patel-and-lawrence-ford (Liu et al., 2022).

Bozesan, M. (2020). Integral investing: From profit to prosperity. Springer.CrossRef

Brunnhuber, S., et al. (2021). Hedging planetary risks: From weapons of mass destruction to tools of massive social and ecological innovation. Cadmus, 4(4), 103–114.

Eurodad. (2018). History RePPPeated: How public private partnerships are failing. Accessed from https://www.cenfa.org/wp-content/uploads/2018/10/Eurodad-Report-Oct-2018.pdf

International Monetary Fund. (2015). Fiscal monitor. International Monetary Fund. Accessed from https://www.imf.org/en/Publications/FM/Issues/2016/12/31/Now-Is-the-Time-Fiscal-Policies-for-Sustainable-Growth

Lannoo, K., & Thomadakis, A. (2020). Derivatives in sustainable finance. CEPS/ECMI. Accessed from https://www.isda.org/a/KOmTE/Derivatives-in-Sustainable-Finance.pdf

Laszlo, E. (1996). The systems view of the world: A holistic vision for our time. Hampton Press.

Lessenich, S. (2019). Living well at others’ expense: The hidden costs of western prosperity. Polity Press.

Liu, Z., et al. (2022). Financial inclusion and green economic performance for energy efficiency finance. Economic Change and Restructuring.https://doi.org/10.1007/s10644-022-09393-5

Saha, D., et al. (2018). 2017 private participation in infrastructure (PPI): Annual report. Accessed from https://ppi.worldbank.org/content/dam/PPI/resources/ppi_resources/global/PPI_2017_AnnualReport.pdf

Title: The Great Leverager
Author: Stefan Brunnhuber
Publisher: Springer International Publishing
Book: Financing our Anthropocene
Print ISBN: 978-3-031-23284-8

Electronic ISBN: 978-3-031-23285-5

Copyright Year: 2023
DOI: https://doi.org/10.1007/978-3-031-23285-5_7