The status quo is not working, and there is increasingly insufficient money to fund adequate public services in many countries. Let’s try a simple thought experiment.
Suppose that the Central Bank takes back control of the creation of money. Instead of most new money being created by banks as debt, it is just created centrally by the sovereign power – and then loaned at a very low rate to accredited banks to lend on to customers. Let’s call this very low rate delta. Alternatively, delta is taken as a levy on bank lending/debt creation activities – the effect is the same.
Now, if delta is small enough, I would suggest that there will be little or no effect on either bank lending or confidence in the currency. But the sum of a lot of all these small deltas can be quite large. All this money could be passed on to government and would be available either to finance public services or to provide the beginnings of a basic income – and maybe bankers would be not be quite so rich.
Of course, there would need to be adequate safeguards around delta to prevent unscrupulous use by politicians. In the UK, we know how to do such things, eg monetary policy committee.
So there is a magic money tree, after all. Of course, there are others, eg Tobin Tax on financial transactions, as mentioned in an earlier post Magic Money Trees.