My last blog was all about storage and how it will change the energy landscape. This time I had intended to write about the people who will benefit but economic events have distracted me. This time I write about why we might not see those changes any time soon. As I write we are taking another step in to anti-capitalism land (1) with: Japan considering a perpetual bond with negative interest rates (2). RBS and NatWest banks educating business that negative interest rates on deposits are on the way in the UK (3). While this foray in to anti-capitalism land may be good for the heavily indebted, any business that makes a profit is in trouble. Instead of incentivising people to pay their bills early retail energy will be paying customers to pay their bills as late as possible. If the craziness continues Matrica will be able to take a loan and use the interest it receives from the bank (negative interest) to pay its employees. ‘If it continues‘ is the key here. As far as I know such a situation cannot continue indefinitely (4) which means that anyone building up debt to pay the bills will get an emergency call on that debt at some point. When that happens any real assets they hold will be up for sale and since it will happen to everyone at the same time, there will be few buyers and prices will be low. This is true for business and individuals so why would a business, with this sword of Damocles (5) hung over it, invest in the future. If investing in storage leads to profits and in anti-capitalism land profits are punished then why would an energy company invest in storage? So there it is, the future is clean and better but to get to it we have to navigate a financial system that has turned its head on the tools we would use to get there and waits to pounce on anything that we create. If the irony has missed you then remember this, negative interest rates are created to force spending but that spending will not be investment in the future which is what we need (6). Unless, of course, you know better? Matrica will be investing in its future regardless of where we are in anti-capitalism land but we will do so in a way that means no-one has a call on it. Not to do so would be folly even if we are punished for it in the short term. In fact, as I write, we are currently releasing a faster version of our core product and beginning the implementation of plans for further improvements.
- I call it "anti-capitalism land" because as an investor in this land you would invest in the opposite of what you would invest in if capitalism were present. For example loss making companies that take on debt are rewarded. Profits are bad and get punished by the banks.
- http://webcache.googleusercontent.com/search?q=cache:pipOWyKTbjcJ:http://ftalphaville.ft.com/2016/07/14/2169712/the-perpetual-jgb-cometh/%2Bjapan+issues+perpetual+jgb+negative+interest&client=firefox-b&gbv=1&hl=en&ct=clnk or http://ftalphaville.ft.com/2016/07/14/2169712/the-perpetual-jgb-cometh for thoes with a subscription.
- http://www.bbc.co.uk/news/business-36889828
- If you know better let me know. However I cannot see how a system that will grow debt exponentially fast and so decreases the buying power of money exponentially fast can survive past the point when the buying power of money is halving on a daily basis.
- Sword of Damocles
- Capitalism comes with a lot of old wisdom, one example being "bad money pushes out the good". This refers to coinage where silver coins were hoarded as soon as coins with less or no silver (bad money because it has little or no real value) are issued. In anti-capitalism land we have to turn this wisdom on its head to get "good money pushes out the bad". The meaning being that as soon as you get any bad money (the stuff created in the financial system) you exchange it for an asset (good money because it holds its value). Another is "invest to grow your wealth" which again we have to turn on its head to become "taking on debt to grow your income" taking on debt is easier than investing and where investing involves risk, debt is risk-less in "anti-capitalism land" as long as you can get it of course.