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Economic opposition is a crowded scene. For the first time that I can remember, a Liberal Democrat shadow chancellor has made the running. I do not agree with everything Vince Cable says but he enjoys a high reputation and his manner is of a reassuring doctor — he tells you it is bad but offers prescriptions to make it better. The Tory boys do not have his bedside manner and sometimes appear to relish the gloom, which I am sure is not their intention.

Back to “printing money”. The Bank limited itself to a half-point cut to 1.5% last week, though taking us, as every schoolboy knows, to the lowest rate since 1694. That seemed sensible, despite figures on Friday showing an alarming plunge in manufacturing output. It leaves shots in the locker and time to think about other measures.

“Printing money”, to be clear, is not the same as printing money. This is not a cash economy. The value of notes and coins in circulation is £51.6 billion, less than 3% of £1.9 trillion of “broad” money in Britain, M4, consisting of bank deposits and the corresponding lending. Printing money means getting broad money growing faster through so-called quantitative easing.

How? One way is for the Bank to buy government bonds or commercial securities from banks or their customers. This creates a credit in the central bank’s reserve account, which can then be the basis for increased bank lending. It also drives down interest rates throughout the economy.

Or, in a situation where the government is borrowing large amounts, as now, it can “underfund” its budget deficit by issuing fewer gilts than needed, or by selling them direct to the Bank. The effect is to boost broad money, M4. Or, if none of this works, the central bank can lend directly into the economy, using the banks as its agents.

None of this is easy, or inevitable. The Tories have proposed a £50 billion loan guarantee scheme for small firms, which Cameron wants to “shake the prime minister” to introduce. But Treasury officials fear that losses under such a scheme could amount to £12 billion, making guarantee costs prohibitive.

Guaranteeing issuance of new mortgage-backed and other asset-backed securities, recommended by former HBOS chief Sir James Crosby, would work a lot better if other countries did it too; the closure of these markets is a worldwide phenomenon. So far, however, there has been little discussion about co-ordinated action.

The truth is that there are many helpful things that can be done but no single silver bullet. In the meantime, we should not forget one thing. The Bank has wheeled out some pretty big guns in cutting rates from 5% to 1.5% since October. Barack Obama sketched out his huge fiscal plan last week.

As the Bank put it when cutting rates on Thursday: “The committee noted that the recent easing in monetary and fiscal policy, the substantial fall in sterling and the prospective decline in inflation would together provide a considerable stimulus to activity as the year progressed.”

Policymakers need to be imaginative. But they also need to have faith in the fact that, in the end, policy will work.

PS: Thanks to the readers who submitted 2009 forecasts, to compare with the professionals. I now have a fat file to lock away and consult at the end of the year.

Amateurs are less afraid of looking silly than experts, so the range is wider. For gross domestic product it runs from a rise of 1.5% to a fall of 8%, worse than in 1931. There may have been confusion over the current account, some thinking of the budget deficit. Even so, pick from a surplus of £30 billion down to a deficit of £150 billion. Similarly, readers are split between Japanese-style deflation and the return of double-figure inflation.

Many think Lord Mandelson will be prime minister before the year is out, while others offered post-prime ministerial roles for Brown — debt counselling was a favourite. Nationalisation of the banking sector is expected by many.

The real winners will come in a year’s time, but books are on their way to David Appleby, for his Mandelson-Cable government of national unity, and Jonathan Grant, reminding us that “creative destruction” — pioneered by Joseph Schumpeter — is a feature of recessions. Some retailers dying this winter should have been put out of their misery years ago. Other businesses will eventually rise as these fall. We will emerge different but in some ways stronger.

david.smith@sunday-times.co.uk

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