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Wouldn't it be nice to be able to log into your firm's bank account and simply add a few zeros to the fleet budget?
That is essentially what the Bank of England started doing to the national kitty today, through its deceptively innocuous-sounding policy of "quantitative easing".
QE basically adds up to printing money which, even for a central bank, is very much an action of last resort. In the current situation, it is rather like knocking a few extra holes in the bottom of the Titanic. It might just settle the ship back down, stop the bulkheads overflowing and put things on an even keel. Or it might send everyone to the bottom all the faster.
Well might the Chancellor solemnly urge the Bank of England to exercise great caution. Once this particular genie is out of the bottle, it is historically very hard to get it back in. If we go back to my fleet budget example, you can imagine that every other department would soon be demanding equal treatment. In no time at all, the business would find itself in a highly inflationary situation.
People have been fascinated by the dangers of "free" money for centuries. QE even has a counterpart in folklore, in the tale of the magic porridge pot. The pot provides its prudent young owner with just the right amount of oaty goodness each day provided that she always utters a secret phrase when it's time to stop. But when her incautious mother gets hold of the device, she forgets the magic words. Boom! Porridge Armageddon is unleashed on the world.
We're promised that the Treasury and the BoE are quite sure what the magic word is, although I'm guessing it isn't "prudence" because look where that's got us. No, to mix the bedtime metaphors, the bank's Goldilocks economists are sure that they can hit a monetary sweet spot between the too cold porridge of deflation and the too hot porridge of hyperinflation.
Like the Wizard of Oz (which was itself a parable about money - Oz coming from ounce, the measure of gold), the Government believes it will be able to print now and pull the right levers later to stop the flood of cash at just the right moment.
This 'nice' kind of inflation is like a tame tiger. It erodes the burden of debts and encourages people to keep spending. It also drives middle income earners towards the security of certain benefits such as company cars.
And, to that extent, it's one cheer for quantitative easing. For the rest, we've now all been enrolled, whether we like it or not, in a highly risky experiment which, whatever the pundits say, has been tried before and which has rarely if ever gone according to plan.
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