Green Easing - Save the planet while saving the economy

So we are now 4 years in to the worst recession since the 1980s, 1970s, 1930s, records began? and it seems like we are going to be stuck this way for a long time. Governments, individuals and companies around the world have racked up massive debts during the boom years, but they are now struggling to pay them back. For years central banks have targeted price stability (low inflation), but there is a growing realisation that stable prices can also mean stubborn debts, and so the previously unthinkable is now becoming a reality - that central banks pursue a higher rate of inflation in order to reduce the real value of old debts. Although the BoE have continued to state publicly that their inflation target is 2%, the reality in the UK is that we have had nearly 5% inflation (RPI) since early 2010.

The Bank of England have already created £275bn of new money through their quantitative easing programme, which they used to buy Government bonds from private banks (asset purchases). The theory is that the banks will then have more cash to lend to small businesses. The reality appears to be that banks don't really want to lend to the sort of companies that want to borrow. If a higher rate of inflation is now palatable, could there be a more effective route to injecting cash into the economy and encourage nominal GDP growth?

If we are going to print money, I feel it should be used to purchase assets that will bring long term positive benefits to the country. I think residential solar power plants are particularly well suited to this idea, and a green quantitative easing programme could replace the existing Feed In Tariff scheme (which has nearly run out of money).

Green Quantitative Easing

£200Bn Green Easing Target: Install 10GW of residential solar plants per year, for the 8 years to 2020.

The idea is still pretty rough around the edges, but I think in principle it could work really well to generate growth whilst hitting our climate goals. The solar sector has shown they already have the ability to hit this level of installations, by installing nearly 126MW in the week before the Feed In Tarrifs were cut. This is an annualised rate of 6.5GW, and not far from the 10GW which would be needed. What are your views on this? Disclosure: I have put my money where my mouth is, as I have recently invested in a Solar Panel business through my company, Fubra Limited.

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