Revisiting The Greenback Idea - Its Time Has Come

 I first broached the idea of the Greenback as a thought experiment in this post dated February 1, 2008.  It stated: “The money supply of the United States shall be indexed to the production of renewable energy and the dollar shall be renamed the Greenback”.

It was an idea ahead of its time.  After 15 years, it is finally happening, albeit in a minor and roundabout way: ESG bond issuance is becoming increasingly common and popular. Alas, it is also used as a way to “greenwash” a multitude of environmental and portfolio sins. Still, it’s a step in the right direction.

Today, I will quantify my Greenback suggestion.  

Renewable energy currently makes up 12% of all US energy production/consumption (2021 data).  I propose that annual Greenback money supply growth should not exceed the incremental annual growth of this renewable energy percentage. For example, if renewable energy grows from 12% to 13% in a year, Greenback supply growth should be limited to 1%.

Yes, it’s very different from today’s monetary regime and will pose a huge problem for the Permagrowth socioeconomic paradigm. Actually, it will put an immediate end to it, which I believe is necessary to avoid an environmental and human habitat collapse.

In one crucial way, the Greenback is similar to the US dollar: it, too, is tied to energy. The dollar has been tied to crude oil (and increasingly natural gas) ever since FDR’s meeting with Saudi Arabia’s King ibn Saud aboard the USS Quincy in 1945. (The minutes of that meeting are still sealed 77 years later, by the way.)

The US Dollar Gets Tied To Crude Oil, USS Quincy, Feb.1, 1945

The Greenback’s benefits:

• Promotes real economic development, instead of mere expansion.
• Eradicates inflation.
• Encourages fiscal responsibility.
• Makes monetary policy steady and predictable.
• Boosts scientific R&D.
• Hastens transition to a Green and Sustainable economy.
• Allocates scarce capital more rationally.
• Last, but not least, it allows for a drastic reduction in defense spending, the vast majority of which goes to safeguard oil and gas supplies and their global transportation routes. Imagine the benefit of even half of the annual defense budget ($600 billion) going towards building a renewable energy infrastructure. 

The dollar as it exists today is an anachronism. Long live the Greenback!

PS To be clear, the Greenback is not a new currency.  It is the regular US dollar, but “anchored” to renewable energy, instead of oil and gas.