Now that debasing the currency is official government policy, it surely cannot be long before Britain is stripped of its AAA credit rating?

In the face of an economy in freefall, the decision this week to embark on a programme of quantitative easing is probably the least-worst policy option. But it would be silly to pretend that it will not damage the public finances and overseas views of UK credit-worthiness.

Creating pounds out of thin air is no way to nurture faith in sterling. Purchasing tens of billions in gilts and stockpiling them in Threadneedle Street will eventually create a huge overhang that will unsettle future demand.

British public sector borrowing is soaring and other liabilities are piling up — a trillion of unfunded pension promises here, a trillion and a half of bank guarantees and loans there. Moody's warned the other day that the UK's top rating was now being “tested”.

Losing the triple-A badge would be largely symbolic. Japan has got by without it since 1998. Canada went without for eight years until 2002. But Gordon Brown would be wise to stay indoors if and when it actually happens. These moments of national humiliation can stick in the memory. Who can forget the TV footage of Denis Healey turning back from Heathrow in 1976 to grapple with a run on the pound? Or Norman Lamont on the steps of the Treasury in 1992 trying to put a gloss on sterling's ejection from the exchange-rate mechanism?

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive