Achieving zero emissions requires a significant amount of capital investment. One way to obtain the necessary funds is by “releasing” capital in real estate. I propose that banks shift some loans from Compound to Simple Interest to make capital available. This would eliminate interest on interest, freeing up current repayment amounts for reinvestment. This, in turn, would accelerate the circulation of capital.
With compound interest, the interest becomes stationary as house equity is still to be repaid.
“When a loan is repaid, the bank has no capital value left on its books. Using simple interest, the bank can still make a profit of $5,000. However, when using simple and compound interest, the profit is the interest payment. The difference between the two is that with simple interest, interest on interest is never paid, so the amount due is lower. On the other hand, compound interest means that interest is added to the principal amount, making the overall loan more expensive. Therefore, simple interest is better as it is cheaper and more straightforward.”
Significant savings can be achieved through simple interest throughout a loan's lifespan. These savings can benefit both the lender and the borrower, providing them with additional funds to invest elsewhere. However, the real inspiration lies in the fact that these funds can be directed towards renewable energy projects within their local community and on their rooftops. This benefits the homeowners and contributes to a greener, more sustainable future. Similarly, banks investing their funds to reduce emissions in companies and government are crucial in environmental conservation.
This approach can be refined and extended. A side benefit is to tame inflation, make housing affordable and lower the cost of electricity.
One of the most reassuring aspects of this proposal is that it will not require any new taxes, including a price on emissions. This means the financial burden will not be shifted to the homeowners or banks. Instead, it offers a simple and feasible solution that can be implemented without causing any additional financial strain.
A variation can pay producers to phase out gas and coal.
