Interest-bearing consols were a favorite rent extraction vehicle for banksters and capitalists of old. Banks {like the Bank of England: privately owned from 1694 to 1946} issued credit-money, and capitalists invested saved money (capitalists call their savings "capital", to distinguish their glorious savings from your pittance), to buy interest-bearing government debt with no maturity date. The bonds never expire. You buy them once and they keep paying interest year upon year in perpetuity. The longest of long bonds. Good income-generator for 'investors' and their offspring, and grand-offspring ...unto the end of time.
But Turner is talking about zero interest consols, or very low interest -- just enough to cover the central bank's administrative costs. The consols would be issued by governments and purchased as assets by their central bank, which issues money to the bond-seller to pay for the bank's asset purchase. The government now has spendable money in its central bank account.
Consol-issuing governments can use the overt money to pay down their previous bond debts (e.g. in the eurozone), and/or to fund their present deficit spending (e.g. in the US). Overt funding does not replace "taxation", which remains the government's main source of spending money. It replaces debt-financing of deficit spending -- selling interest-bearing bonds to credit-issuing commercial banks to "get" deficit spending money.
Government money spending and allocation (the "budget") would still be under the control of Congress. But money issuance to "fund" the deficit spending that Congress budgets for, would be performed by the consol-issuing Treasury and the money-issuing central bank. The deficit spending money is "perpetually" non-repayable, so it is effectively issued as net positive sum "debt-free" money.
Positive central bank money can permanently pay down debt; whereas new loans of repayable commercial bank credit simply roll over old debt by adding even more new debt. Which is why since 1835 when Andrew Jackson paid off the US government debt, the debt has increased from $0 to $millions to $billions to $trillions. A trillion dollar debt is a million times bigger than a million dollar debt. None of the public debt was necessary. Technically, the US government could have simply issued its own money (like Lincoln did) rather than borrowed bank-issued credit. But politically, the bankers won, and the nations are now deep in debt to the banks.
In the final installment of this series, Part 3.3, we'll consider the "inflationary" consequences of overt money funding of government deficit spending, and government payment of a basic monthly income. And finally, we'll bring shadow banks into the equation, and see why radical reform of the existing institutional framework would more likely cause a collapse than prevent it.
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