What options remain after rate cuts?

As expected, base rates are down half a point to 1.5% – so, yet again, drinks are on those lucky few with variable mortgages. I suspect they’ll hit 1% before Easter. Then what? “Nobody is talking about printing money” says Alistair Darling – but this is a little Brownie. Quantitative Easing – the equivalent of printing money – is being spoken about by everyone and can come in many forms. The Bank of England can start buying stuff – Treasury IOU notes, company bonds, or even shares. So you’d attempt to lower market interest rates by boosting asset prices. Darling is right: he can fund the deficit through issuing gilts, then have the BoE buy the gilts without another banknote printed. Or the BoE can order the state-owned banks to start lending more money to less credit-worthy people, thereby shovelling more cash into the system. But this is how Fannie Mae got into such trouble: private banks didn’t compete with non-commercial lending decisions and the state ended up taking a huge chunk of the mortgage system.