Let's not take the road to Harare to get recovery on track Today's radical monetary expansionists envisage the Treasury sending a cheque drawn on the Bank of England to everyone in the country. This is less radical than it sounds. It is the equivalent of a temporary tax cut financed by gilts which are then bought by the Bank. There is potentially one substantive difference. Suppose that the government never has to repay the money or to pay interest on it. Effectively the Bank will have made a gift to the government. Moreover, this splurge of money, because it is apparently costless to the government, could be presented as being permanent, and indeed bound to be repeated until it works - even though such a "helicopter drop" could in practice be subsequently reversed. If the government could pull off this trick of perception then consumers" response to the injection of new spending power could be greater than under the current policy. This is closely related to the second idea, namely to cancel the government debt that the Bank holds. It would retrospectively discover that it had made an outright gift. Again, however, this is less radical than it seems. For under the current QE regime, the debt has effectively been suspended anyway. The Bank and the Treasury are two parts of the same thing. When the Bank holds gilts, in practice the government is borrowing from itself - and paying interest to itself. The total amount of interest paid to the Bank which, at some point, the Chancellor can take to the Exchequer as a dividend, thereby reducing that year's borrowing, is currently about £30bn. Yet when the economy recovers, even if the Bank's gilts have been cancelled, or if the Government has acquired new money at zero cost and without the obligation to repay, if the Bank wanted to prevent an upsurge of inflation, it would still have to undertake the same actions to mop up the excess liquidity as it would to unwind QE. Most of these actions would cause market interest rates and hence the Government's interest costs to rise. So, compared to the current QE-financed deficits, neither helicopters nor debt cancellation would enable the Government to embark on expansionary fiscal policy with abandon. Moreover, as I argued last week, the foreign exchange markets would continue to constitute a powerful restraint. There are good reasons why governments are not usually made outright gifts. They would lose the incentive to control their deficits. That really does open up Zimbabwean horizons. This would be a heavy price to pay for securing only minor gains in the scope for expansionary policy. The Government has not run out of options for more conventional expansionary policy. It just needs to have the vision, determination and political courage to use them. The Chancellor does not have to embark on the road to Harare in order to set the British economy on the road to recovery.