The knowledge problem, as first noted by F.A. Hayek, is that the information needed for successful centralized economic planning is distributed widely among households and firms. It is knowledge a central planning authority needs but cannot obtain. In this context, it is the central banks inability to know where and how much money creation is needed.
Hayek was completely wrong. One bank through which all transactions flow would know exactly what Hayek claims can't be known by such a bank. Secondly, who said anything about central planning? Yes, the Positive Money people are insufficiently up to speed on direct democracy and the fiscal sphere versus the Fed model of a monetary authority (the so-called central planner in Hayek's view).
A better plan is that a direct democracy would vote for the amount of money to be created for public expenditure into the whole economy. The central bank would then be able to dial back that supply if price inflation were to become a problem due to insufficient supply of whatever goods or services are behind that inflation. Of course, with the data the bank would have, the People could simply be informed in real time too and vote to allocate more resources to increasing the supply of goods and/or services needed.
Therefore, there's a difference between what the Positive Money people are pushing and the better alternative to the Fed model. Get the message through to the Positive Money people. I've tried. Maybe they'll start listening now, as their plan isn't going to go anywhere.
RLCC: Monetary-and-Banking-Reform Platform for The United States: http://www.realliberalchristianchurch.org/monetary-and-banking-reform-platform-for-the-united-states