Where does it come from?

We can understand that when a country goes to the IMF for a bail out, as we did in 1977 and may again soon, the help is ultimately from donor countries. (As Daniel Hannan points out on his blog today with income tax rates so high it's often quite poor people in donor countries who are helping the other countries, but does the spending power go to the poorer members of the recipient country? Probably not, often it goes to producers who are not generally among the poorest. So it could be a redistribution from poorer to richer!)

What happens if all countries go in for fiscal expansion, which is what G.Brown wanted? Thee is no extra-terrestrial "bank" with intergalactic funds. There are some rich people in all countries with massive holdings of cash. If all this is spent across the globe, with no immediate expansion of output possible in all goods and services, the result must be inflation. The result will be a windfall gain for all gold producers and gold hoarders, and hardship for the poor in each society through rising prices.

Quite apart from the lunacy which says, "When in debt, borrow and spend!", the Brownian of credit expansion by everyone is a nonsense. Fortunately it is mitigated by the problem it is trying and failing to solve, an expansion of credit through a lack of confidence and a financial base from which to lend.

As wiser people have been suggesting, in our situation the need is not a flood of public money. The need is to sort out the hindrances to the flow of credit to business.