Now's the time for Osborne to spend some of his hard-won credibility Some of the scope for action is monetary. The scheme unveiled last week to provide cheap funding for the banks was a welcome, if belated, step. I suspect it will need to be enlarged. And quantitative easing will need to be extended. There may even be scope to cut interest rates. After all, the Japanese managed to cut them to 0.1pc. But in a depression, monetary policy has its clear limitations. Keynes likened it to pushing on a string. If people and businesses don't want to borrow, you cannot force them. That's where fiscal policy comes in. Some relaxation of fiscal policy now would not necessarily imply that Osborne's Plan A was wrong. The world scene has become much uglier. What's more, by sticking to his Plan A, the Chancellor won credibility. But credibility is there to be used. Osborne is treating his credibility like a Ming vase. Someone, somewhere needs to spend more. You cannot cut your way out of this. Reducing one person's deficit tends to increase someone else's. The only collective solutions to the debt problem are a burst of inflation or economic growth. The former has its severe drawbacks. Accordingly, every effort needs to be directed towards stimulating growth. The Chancellor cannot borrow more without limit. If an expansionary programme were done in the wrong way, there is the risk of a big rise in bond yields and a loss of consumer and business confidence which could even make matters worse. But there is a right way. It centres on public investment. The government is able to borrow on the markets at a real interest rate of virtually zero. There must be plenty of projects with returns in excess of that. Moreover, this would be one of the best ways of stimulating private sector investment spending. The idea that if it chose to borrow a few more billion the gilt yield would zoom up is poppycock. Most market participants fully understand that a prolonged bout of depression is no way to reduce the debt burden. As time goes on without any meaningful reduction in debt and with the prolonged experience of depression visibly running into popular resistance, the markets will come to fear the other solution, namely inflation. One of the Treasury's stock of all-too-ready ripostes is that there simply aren't the spade-ready projects available. That is exactly what they said two years ago and used as an excuse for not drawing up plans then which would have been available now. The answer is the Nike one - Just do it! In any case, it is not as though they have to conjure completely new projects out of thin air. Just cancelling the planned cuts to existing investment spending would be a good start. The third approach is structural reform designed to increase the return on investment and boost business confidence. There is a whole raft of possible measures including reducing regulation. Gradually, government is stirring, but progress is painfully slow. Of course, a fair amount of any demand stimulus would leak abroad through higher imports. But for the world as a whole there are no imports. At this week's G20 meeting in Mexico we should be pressing for expansionary policies elsewhere in the world. This is not easy when you say that there is no alternative to austerity at home. The idea that nothing more can be done to get us out of this mess reminds me of the attitude towards the war effort of Prime Minister Asquith during the First World War. Once Lloyd George was in charge it turned out that umpteen extra things could be done. A government of Asquithians must learn to be more like Lloyd George.