Empathise with the banker, trader or fund manager looking after other people’s money, whose performance on their behalf is continually assessed and reported as the basis for a position on a league table. Two options are on offer.
1. Invest in a start-up widget manufacturer creating new employment but only offering a return of 10-15% pa and even that is at risk, or,
2. Invest in “Alternative Markets – Dedicated to providing established green sippable alternative investments. Guaranteed investment opportunities with ROI ranging from 60% to 398%. Purchasing carbon credits to offset harmful emissions is a popular carbon reducing option. Investors can invest in companies that provide credits for carbon emissions, through forestry plantations for example, which are then sold on.”
Assuming both options are perfectly legal, which way is investment likely to be made?
What a terrible dilemma for the banker, trader or fund manager to be in! They know the carbon trading investment is purely speculative, the connection with forestry plantation is tenuous to bull-shit, it will create no new jobs and not benefit the real economy one iota. But still! So long as it could be expected to be worth more tomorrow than it is today, it would be difficult to turn down out of hand. And the connection to carbon trading is gathering momentum, so the expectation is positive. 398% may be a bit OTT, but evenso.
Not only would the fund manager’s job be on the line if they were minded to back the widget maker, but in fact they are not even likely to have that option open to them. The vehicles for such investments are few and far between compared to the huge markets for derivatives and other pseudo products. Lanchester quoted in Whoops! the International Swaps and Derivatives Association as estimating the ‘total size of the market as $54 trillion … close to the GDP of the planet and many times more valuable than the total number of stocks and shares traded in the world.’
So, pity the poor banker who wants to do a good job and invest in all the right things and contribute, as they used to do, to getting the real economy going and employing people. It’s now impossible. If only the regulators would separate real banking from the speculative activities of the financial sector. Then some investment might go where it was really needed, rather than where it is just a game. But governments fear to do that.
Maybe they’re worried they might be suspected of wanting to tax Bob Diamond and his friends next, and that would never do.