Changing the culture of saving is something the Germans are beginning to get

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As the FT notes this morning, Germany is considering issuing a €50 billion green bond at an interest rate of 2% later this week.

By pure coincidence, I suggested that the UK should fund its Green New Deal by issuing 2% bonds on this blog, yesterday.

Germany's proposal is causing consternation. That interest rate is 2.5% more than Germany is currently paying an average bond yield, which is negative. The argument is that to pay a premium of this sort will increase inequality, by providing a return to savers that is not available to others.

I have to say I disagree. The problem of increasing inequality can be simply solved: the holding that any one person may make of these bonds should be restricted. Indeed, such will be the demand for them that this may prove to be necessary, I am sure. So, for example, in the UK this could be achieved by only allowing them to be subscribed for through ISA funds and given that the sum involved is about the annual total invested in ISA cash accounts, and the rate would not be available anywhere else, this would work.

But, the issue is not about inequality. Nor is it about the €1 billion of costs that might arise, which is neither here nor there in the grand scheme of things. Rather it is about changing the culture of saving. A present almost all saving goes into second-hand shares and second-hand property, and therefore produces no productive games of the economy, at all. Nor is employment created. That is the real problem and is the real driver of inequality. If the culture of saving was changed and a return was paid because money was directed towards productive use in the creation of a Green New Deal, which at one level helps save us from climate change and at another level creates long-term, secure, well-paid, trade union protected employment, then very clearly something very significant would have happened which would have a benefit far beyond the payment of a slight premium on the interest rate.

Some people get this. Too many do not as yet. But the time will come when this type of saving will become the norm, thankfully.