What will make the difference?
- 13 Jan 09, 11:24 AM
The question worrying everyone is what will make the difference. So says one government insider about the late night and long weekend meetings that have been taking place about how to get the economy moving again or, more specifically, how to get credit moving.
One part of that is the plan likely to be announced on Wednesday for the government to underwrite up to £20bn worth of bank loans to small and medium size businesses. It's a version of what the Tories call their national loan guarantee scheme.
Another part of what's being discussed still is the idea of creating a "bad bank". That was the Swedish solution for dealing with so-called toxic assets. In other words a special institution is created in order to absorb all the riskiest loans and therefore remove some of the anxiety that banks have about what may lay hidden in their balance sheets.
A third aspect is so-called quantitative easing - in other words, what we used to call the printing of money. Today Gordon Brown meets the man known in America as "Helicopter Ben". He's the chairman of the Federal Reserve, Ben Bernanke, who wrote a paper saying that in circumstances like the ones we're now living in it could make sense to in effect drop money from the air on the electorate simply to get them spending again and to avoid deflation. 
There is another way in which the government may try to revive the economy, which is another fiscal stimulus. All eyes are on Berlin today where Chancellor Angela Merkel's coalition government will unveil its own 50 billion euro stimulus - this after a long and fevered debate about what the German finance minister had dubbed "crass Keynesianism".
All of these options remain very firmly on the table as ministers try to answer that question: what on earth will make the difference?
