Direct Funding of Public Projects: One approach is for the central bank to fund public welfare projects directly. This could involve the creation of money to finance infrastructure projects, educational programs, healthcare, etc., thereby boosting employment and providing public goods.
Universal Basic Income: Another possibility is the direct allocation of newly created money to citizens through a Universal Basic Income (UBI) to ensure a minimum standard of living.
Public Banking: State-owned banks could be tasked with directing newly created money toward loans for local businesses, housing, and other projects that directly benefit communities.
Negative Interest Rates: While controversial, negative interest rates could encourage spending and investment in the real economy instead of hoarding or speculative financial investments.
Green Investments: Money creation can also fund sustainable energy projects, contributing to long-term welfare by addressing climate change.
Risks and Challenges
Inflation: Excessive money creation can lead to inflation, eroding purchasing power and potentially hurting the very people it aims to help.
Political Risks: Directing money creation toward public welfare could risk politicizing central banks, which are typically designed to be independent institutions.
Economic Distortions: Deviating from market mechanisms to allocate capital can sometimes lead to inefficiencies and misallocations of resources.
Debt Sustainability: While direct public financing might not increase the debt-to-GDP ratio, it might raise questions about the long-term sustainability of such policies.
