The Next Financial Bubble: Global Warming

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Goldman Sachs by • estatik •.

by Ben Cohen

For those of you who haven't read Matt Taibbi's epic piece 'The Great American Bubble Machine' on Goldman Sach's historic role in creating financial bubbles, the full version is now available on Rolling Stone.com. It's difficult to stress how important this is, as it lays out a catalog of crimes that are astonishing in their scope, and sickening in their scale.

I recently posted a piece trashing Sarah Palin's Op Ed in the WaPo that attacked Obama's cap and trade plan for global warming. The post wasn't a defense of cap and trade (more an attack on Palin's complete lack of understanding about anything energy related), but the general idea that cap and trade isn't great is actually correct (but not for the reasons Palin ascribes).

Taibbi talks about the new Obama policy proposal in his piece, and as he understands it, the policy is being crafted not to curb global warming, but to make Goldman Sachs even richer.

The financial institution is intimately involved with the crafting of the legislation, and the structure basically sets Goldman up as the winner who takes all. Writes Taibbi:

The new carboncredit market is a virtual repeat of the
commodities-market casino that's been kind to Goldman, except it
has one delicious new wrinkle: If the plan goes forward as
expected, the rise in prices will be government-mandated. Goldman
won't even have to rig the game. It will be rigged in advance.

Here's how it works: If the bill passes, there will be limits
for coal plants, utilities, natural-gas distributors and numerous
other industries on the amount of carbon emissions (a.k.a.
greenhouse gases) they can produce per year. If the companies go
over their allotment, they will be able to buy "allocations" or
credits from other companies that have managed to produce fewer
emissions.

And the great thing for Goldman (which has been busy getting its fingers in every facet of the burgeoning industry) is that it is guaranteed to make a profit:

The "cap" on carbon will be continually lowered by the
government, which means that carbon credits will become more and
more scarce with each passing year. Which means that this is a
brand new commodities market where the main commodity to be traded
is guaranteed to rise in price over time. The volume of this new
market will be upwards of a trillion dollars annually.

Essentially, Goldman Sachs is setting itself up as a quasi public institution - it crafts the legislation, develops infrastructure to get rich from it, then watches the money roll in as companies pay them to offset their emissions. And the great thing about it is that all the profit goes back to them, rather than the government who enacted the legislation. It's basically a tax system that goes to Goldman, rather than the government. Instead of schools, a functioning health care system and roads, we get to pay for corporate executives flying to their 5th home in the Bahamas.

While I'm generally up for anything that curbs green house emissions, the thought of squeezing the middle classes to pay for Goldman's colossal bonuses is enough to make any sane person sick to their stomach. It's better than nothing (and certainly better than Palin's stupid ideas), but it's another giant rip off scheme that allows an institution responsible for devastating the economy to get rich again.