Measures to increase bank credit need to be stepped up. But in the meantime, the banking system needs to be circumvented. The Bank has a long history of lending directly to the economy, not just to banks or the government. It needs to expand the range of assets and investments it undertakes. For example, it could purchase solar panel installations for the nation, with newly created money. This would be highly productive, hence not inflationary, creating thousands of jobs, reducing electricity bills, and cutting climate emissions. There are many other options, including funding green R&D, nationwide broadband, Bank of England cycle paths in every city – you name it.
Critics are quick to point out that such proposals are not practical, as the Bank wishes to purchase "neutral" government bonds, and not engage in any form of allocation policy. If deemed necessary, any of the green spending programmes above could be arranged via an entity that conducts the investments and owns the rights, and issues equity that is guaranteed against default by the government (at no cost), and purchased by the Bank. But many such schemes create extra costs and bureaucracies, and often also debt and interest burdens. The beauty of the power to create money is that there need not be any debt and interest involved.
Money creation is a public privilege – so using it to benefit the public and the environment seems only right. There needs to be a debate about how QE money is spent. In our view, it should be injected directly into projects that create hundreds of thousands of jobs, and reduce our climate emissions. As for the argument that central banks should not make allocation decisions – it ignores reality. Throughout their history central banks have always made allocation decisions when they purchased private sector assets. The mainstay has been corporate securities, rediscounted by the central bank, based on a list of favoured firms. Even in its definition of QE, the Bank has included the possibility of buying "high-quality debt from private companies".
Direct green investments by the Bank also ensure that Britain will not breach any European laws that forbid government intervention in the economy: central banks are allowed to conduct their monetary policy without restriction.
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