When I clicked on this, I first thought "Oh, it's the 'put a small transaction tax on the financial markets' idea that sounds clever at first until volume plummets because the tiny margins on arbitrage get clobbered", but no, what this idea lacks in practicality, it makes up for in volume.

Let's see, what happens when people get interest-free loans, but get charged to use banks? Is anybody else thinking "loads of cash under the mattress"?

Let's see, normally, the relationship between taxes collected and money spent keeps, at least in theory, overall government influence on the money supply roughly around equilibrium - and where it fails to do so, at least we have some idea how much that equilibrium is tilted. If the government just spends however much it likes because the concept of government budgeting is now meaningless, it's pretty easy to end up with either hyperinflation or that .1% growing significantly. Of course, if we did connect the amount of money removed from circulation with the amount reintroduced by the government, we're back to regular taxes.

Let's see, what would the introduction of interest-free loans - basically, free money - do to inflation? If you're thinking "everybody would borrow as much as they could", we're thinking alike. Now, how does free money affect inflation? It increases it? So it sounds like the promise of stopping inflation may not be so realistic.

Let's see, what's their solution for the sudden influx of free money and unrestricted spending causing runaway inflation? Give out loans, but in fairy gold? Great, the money's gone, but the debt remains. We've just created a scenario where people are forced into taking on as much debt as they can qualify for just to keep up with where they were yesterday. And this is better how?

tl;dr: I have a recirculating fountain. By siphoning off a little of the water that goes through the pump, I can extract several times the water that's in the fountain itself. Because math, apparently.