If it wasn’t so terrifyingly serious it would be almost endearing – like the sort of solution to insolvency that any inventive small schoolboy like William the Bad would have taken, courtesy of his John Bull printing set.

Gordon Brown is seriously considering printing money – increasing the money supply. They call it ‘quantitative easing’.

This is how it works. There’s an important national company in trouble – or it could even be the banks needing yet more funds. The Government could buy the company, taking it into state ownership or buy the banks’ ‘toxic debts’ for the taxpayer. These are the debts that are probably irrecoverable.

The Government would have to borrow money to do any of these things – and the UK’s borrowing debt is already far beyond any historical precedent.

But there is another way. The Government could simply roll the presses of the Royal Mint for long enough to produce the required amount to buy the troubled company or fill the banks’ coffers again in exchange for unstable debts.

The state would own whichever, possibly worthless, commodity it had bought – with no increase in borrowing to pay for it. The company or the banks would have the cash – perfectly acceptable currency. They would use this cash for some purpose which would add to the money supply in general circulation. In the case of the banks, this would be money to lend – to small businesses and homeowners in loans and mortgages.

Neat, isn’t it? And it is this ‘solution’ that Dear Prudence is currently considering.

So what’s the problem? If the state were a bank – which it virtually is these days – the problem would be its ‘liquidity ratio’. When the largely unregulated banks recently collapsed, they did so because of virtually total easement on the requirement to lend against only a safe percentage of assets. So when borrowers defaulted and the pyramid of hedging imploded, they were themselves in irrecoverable debt. They had no liquidity.

If the state prints money it is in effect knowingly taking the same risk the banks took with such disastrous consequences. There will be no assets to set against the new money printed. It’s a confidence trick which, if the truth be told, all money is anyway. Within safe limits, however, confidence generally holds and we get by.

Printing money is the most desperate last throw for a state to make. It brings us closer to hyperinflation than we should sanely consider. In the 1920s, post First World War Germany increased the money supply, hit hyperinflation -  and there is living memory in the UK of German citizens literally barrowing Deutschmarks to pay for the smallest item of food. In the 1970s Argentina took the same route and got to the same place. And in the 1990s, Japan – as Brown may now do, refused to admit the lessons of history.

An increasingly possible nightmare is that Brown may print money, fatten the money supply and then call an early General Election, maybe in June. He would hope to win – or to lose narrowly – with the country gulled into a deceptive sense of relief in the greater availability of worthless money. And he would hope to win before the foundationless edifice comes tumbling down. But of course he would also hope that this wouldn’t happen. Every gambler does.

If the Prime Minister prints money, whichever party wins the election the country wll be stuffed.

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