Today, George Osborne announced a £100 billion support package for the UK economy. He used a well-worn military metaphor to describe the initiative - he is going to "deploy new firepower" to confront the rapidly escalating eurozone crisis. The Telegraph talked of an even larger number - £140 billion - that Osborne would use to "kick-start" the "stagnant economy".
The Bank of England is also in on the game. Another round of quantitative easing is on its way. The BoE has also prepared a "funding for lending" scheme that offers lower interest rates to banks that issue more loans. This scheme hopes to generate £80 billion in new loans.
Moreover, the government has offered a guarantee to underpin the scheme. The Banks won't lose a penny. All loses will be sucked up by the taxpayer. Her Majesty's Government can produce £80 billion to subsidize the banks literally out of nowhere. But if something goes wrong; then the taxpayer is on the hook.
These initiatives, along with the numbers, have left me dazzled and confused; £80 billion, £100 billion, £140 billion; lending schemes, subsidized interest rates, quantitative easing, emergency liquidity support. So many new ideas, bizarre acronyms, and upbeat press statements. But what does it all really mean?
We know that these initiatives never work. How do we know that? Recent experience should give us a clue. The BoE and the government have been using these methods to kick-start the economy for five years. Yet during those five dreary and difficult years the UK has failed to growth in real terms. Credit to private sector firms has contracted, investment has fallen, and unemployment has remained high. Living standards have declined, inflation has risen and we are no closer to exiting this crisis than we were the day Northern Rock collapsed.
Printing money only serves to destabilize the economy. It is cheap trick, the last resort of discredited politicians. It never ends well, and we should have learnt this by now.