THE FUTURE OF MONEY Bernard A. Lietaer - library.uniteddiversity ...

As this same reasoning applies to all financially motivated
investments, it collectively creates the well-known pressure by the
financial system for short-term returns at the expense of any longerterm
consideration - including long-term sustainability.
When a corporate executive complains that financial pressures force
him to focus only on the next quarter's results, he is the victim of the
Near-Seeing Glasses. When the Chinese say they cannot afford
cleaner energy production technologies, they are really saying the
costs of the long-term future economic consequences discounted to
today are negligible compared with the immediate cost savings made
possible with the 'dirty' technologies they are planning to use. When
a homeowner decides it is too expensive to install solar panels for
heating the household water, she is implicitly saying that the cost of
purchasing electricity or gas from the grid in the long run discounted
to today is cheaper than the initial capital outlay required. When we
build a house cheaply without appropriate insulation, we are really
making the trade-off between the higher heating costs in the future
discounted to today and the higher construction costs.
Relationship with interest rates
In the explanation of the Discounted Cash Flow technique, we
made an assumption that the discount rate used is identical to the
interest rate of the currency. In reality, the discount rate, which
should be used, is the 'cost of capital of the project'. Without getting
unduly technical, there is not one but three components to that cost of
capital:
· the interest rate of the currency involved;
· the cost of equity;