A new Asset Purchase Facility will see the Treasury and Bank of England inject £50bn directly into the economy this week.
All parties are concerned that monetary measures such as repeated interest cuts have thus far been ineffective in combating the downturn. The Asset Purchase Facility will see outstanding loans to banks and other creditors being bought up by the Bank of England.
The Facility is seen as a significant step towards the much discussed quantitative easing; the "nuclear option", whereby new money is put straight into the economy. This week"s plan, however, will see company loans being exchanged for government bonds, which would not constitute new money.
Quantitative easing, which would likely begin in the event that swapping debt for bonds failed, would meet severe political opposition. However, there is an increasing consensus regarding the necessity for a new, drastic approach to an ever-worsening situation.
