Privileges of the private banking sector distort the economy

The damage done to the economic system by the tremendous support offered to banks by governments is much more serious than just misdirected lending, reads the letter by James Skinner in Financial Times, 19th Oct 2014.

Here is a short extract:

There is nothing to prevent governments from taking back from the banks the right to create money. If they did so, it would be possible for a large proportion of governments’ budgeted expenditures to be met by issuing new money to be spent (not lent) into the economy by the governments as a substitute for taxation and borrowing. Among the major benefits of this change would be a massive cut in both taxation and borrowing, together with the direction of investment where it is most needed – the Green Investment Bank could, for example, be given equity resources on a similar scale to Germany’s KfW.

Read the whole letter here.