Sir Mervyn King wanders into the computer room at the Bank of England. He stoops to check the printer is full of paper. Then he types Control P and hits Return. Another £50bn chugs out of the Bank and into the streets. Hey presto, economy saved.
Quantitative easing (QE) doesn't really work like that, of course. No money is printed, merely credited to the accounts of big banks and pension funds in the hope their balance sheets will loosen, that enterprise will flow. But we are now £325bn into the QE experiment and evidence that it is working is thin on the ground.
Defenders of the policy mostly have to rely on the argument that you can't tell how bad things would now be had Sir Merv and Co not been so willing to act.
But that's uncomfortably close to the reasoning bankers like to use to defend their pay: if you hadn't given me this absurd amount of money, something very bad might have happened. Uh-huh. The Bank can point to lower gilt yields and higher prices of other assets as successes of QE, but do those represent value for money?
Here's the Bank's chief economist, Spencer Dale, discussing the scheme in 2009: "A critical issue will be the extent to which movements in asset prices and market spreads are translated into lower borrowing rates faced by businesses and households. Equally important will be the extent to which the additional liquidity and lower borrowing rates act to spur the growth of broad money and credit." The Bank doesn't seem to be pushing this line much. No wonder. Its figures show small- and medium-sized firms are finding it more expensive to borrow now than in the first dose of QE in 2009. Ros Altmann, of Saga, suggests five alternative approaches:
1 Drop new money from a helicopter, so people can spend it;
2 Use new money to underwrite small business loans and spread some of the risk that lenders take;
3 Use new money to lend directly to small businesses starved of credit and wanting to expand;
4 Set up a new lending institution to lend to growing firms;
5 Use newly created money to fund infrastructure projects alongside pension funds.
These might not work, but it would be easier to see where the money was going, rather than just let it be swallowed by the system.