PS - the losers from this scenario seem obvious - capital markets (i.e. rich people) who have to make do with 3% rather than 6% interest rate returns...

Firstly, what I am proposing re QE as public credit relates only to liquidity provision ie that 'dynamic' credit needed for the circulation of goods and services and the creation of new productive assets.

In fact, bank shareholders in such a credit service provision model may well do better than in the conventional model, because they will only be providing the capital necessary for operating costs, not the BIS regulatory capital underpinning the banks' implicit guarantee.

Depositors are not in fact required for liquidity  provision at all if a clearing union architecture if used.

By way of example, I am in close contact with a South American Central Bank which (yesterday) launched the beta version of a system whereby VAT-registered businesses may discount their VAT invoices directly with the Central Bank, and thereby access working capital without private bank intermediation.

If it works - and it should - then it won't be long before the other South American banks jump on the band-wagon. The stranglehold of private banks here would prevent such a Retail Repo system in the UK unless they could think of a way in which they could own, control, or otherwise leech off it.

Secondly, and where investors-formerly-known-as-depositors would come in is the (static) credit embedded - through the legal protocols of conventional equity and secured debt - in existing or newly created productive assets, particularly developed land.

That's where property Unitisation comes in, and the resulting

 
Debt/Equity Swap could well be the game-changer identified as necessary by Taleb and Buiter, among others.

 

"The future is already here -- it's just not very evenly distributed" William Gibson