Where will the credit come from?

The UK housing market is a monster. Last year, lenders extended mortgages amounting to £257 billion. That is equivalent to about 19 percent of GDP. Despite this huge inflow of credit, property prices nose-dived.

The year before, mortgage lending was much higher. In 2007, banks lent some £363 billion. The credit crunch extracted some £107 billion worth of lending out of the property market.

Here we come to a little difficulty for Brown and Darling. This year, they want to borrow £120 billion in order to finance the government deficit. If the housing market is going to recover, it needs to find a similar amount of credit. They also want to keep interest rates close to zero. Then there is the private sector, who also has a potentially enormous demand for credit.

How does the government intend to reconcile these competing objectives? It is going to ask the Bank of England to print money.