At the end of a letter in the Financial Times, an economics Prof. for whom I have a lot of respect, Richard Werner, says government should borrow from private banks. I’m puzzled.
Given that the government / central bank machine can create money ex nihilo at no cost and in limitless quantities whenever it wants, why does need to go begging to private banks? Private banks will obviously take their cut, and to what benefit for the country as a whole?
Werner’s exact words:
…it is high time for lenders to realise that they need to kick-start the bank credit money supply, and can do so immediately by stopping the issuance of government bonds and instead funding the public sector borrowing requirement by having the Treasury enter into loan contracts with the money creators – the banks. That would constitute true quantitative easing of the kind I called for in Japan in the 1990s and it would create a full-blown recovery within six months.