Money printing would not be inflationary until demand became excessive, but by that time the problem is solved (or at least unemployment would be moving back where it was a year ago). As to the idea that bond markets take a dim view of governments that print money, bond markets can distinguish between irresponsible and justifiable money printing. The US Fed has printed unprecedented amounts in the last few months, yet long term US treasuries are more popular than ever. Those purchasing them clearly do not expect excessive inflation in the US any time soon.

As for the idea that large amounts of money need to be printed, it should be remembered that government borrowing is deflationary, while government spending is reflationary. Indeed they may very nearly cancel each other out. Thus the total that needs to be printed is nowhere the amount that would otherwise need to be borrowed.

This morning (new years eve), have a look at the outstanding contribution the nations wind turbines are making to our electricity supply. At 09:15 they are supplying a glorious 4 MW out of 42, 797 MW of generation.

http://www.bmreports.com/bsp/bsp_home.htm

Then look at the reason why on the Met Office pressure chart.

http://www.metoffice.gov.uk/weather/uk/surface_pressure.html

One thing I find both irritating and distressing about the current situation is that no one in government or, I am sad to say, on the Conservative front bench has the guts to stand up and say “sorry chaps, this is going to be really painful”. We need to have someone tell the country that cheap credit will not return, that vast amounts of existing credit must be repaid and that current house price reductions are not a temporary blip but a reflection that a one-bedroomed basement flat in Islington was never really worth more than £175,000 even though someone paid £350,000 for it.

I hope 2009 will be the year other politicians are prepared to follow your lead, Mr Redwood, and be honest about just how bad the situation is. I can only guess at the figure, but looking at the amount of credit card debt I would say that something like £1trillion currently in the UK economy is pretend money and must be removed before we can say we are living within our means.

My fear is that the government will just print more money in the hope that will hide the problem. Hide it, it might; remove it, it won’t.

And on that cheery note, thank you, Mr Redwood, for informing and stretching my grey matter in 2008. Having been the only one of your contributors to wish you a happy birthday this year, I hope I am not the last to wish you a very happy New Year.

http://euro-med.dk/?p=776