And it looks as if their least worst option is to inflate their way out of it. They're simultaneously spending lots of money they haven't got, and slashing interest rates to way below inflation. Cue for collapse of sterling.
At this point, long after the smart money's made its exit, Laban wonders if it mightn't be a bad idea to convert his savings into Euros. Gordon seems intent on driving the pound down to 1-1 parity (and then Euro entry), so why not preserve a little value ?
Trouble is, it looks as if the European Central Bank's got the same idea.
Mr Sarkozy said the goal of restoring France's dilapidated public finances to good order could wait for better times. "Not doing anything now would have cost us much more. We're not going to sacrifice the present for the future. This crisis is an ordeal, a painful ordeal and a terrible ordeal, but we have to keep faith," he said.
Italy needs a stimulus package even more badly but is having to tread with care as markets fret over some €200bn of Italian state debt that must be rolled over next year. The yield spread on 10-year bonds has risen to 123 basis points over German Bunds. Giulio Tremonti, Italy's finance minister, insisted yesterday that state bonds were at no risk. "Buy them. They are absolutely solid".
Mr Trichet signalled for the first time that the bank is considering some form of "quantitative easing" (QE), the term used to describe the emergency measures pioneered by Japan during its Lost Decade and now being adopted by the US Federal Reserve.
"We are supplying liquidity on an unlimited basis. We will continue to look very carefully at the situation of the market and if needed we will take new decisions," he said, when asked about QE measures.
I really hoped the historical memory of Germany, the strongest Euro economy, would prevent the ECB attempting to inflate its way out of trouble. Seems not.
a) where should a man with some cash put it ? The garage is already full of tins of beans.
b) in the hyperinflation of Weimar, who profited ? What investments preserved value ?
UPDATE - thanks for the helpful advice. Commenter Dawn suggested that in Weimar it was the professional clever-clogs with government contacts ("government power brokers") who could make big profits.
And what's this ? Jonathan Weil :
If you had considered betting against Fannie Mae and Freddie Mac this summer -- that is, when the Securities and Exchange Commission wasn't banning short sales of their stocks -- the biggest risk wasn't that they would surprise investors by turning in a good quarter. It was that Treasury Secretary Hank Paulson or Federal Reserve Chairman Ben Bernanke would show up before Congress to talk up their stocks and squeeze the shorts.
Your worry is the same if you're thinking of shorting Morgan Stanley, Goldman Sachs Group Inc. or Citigroup Inc. All Paulson might have to do to separate you from your money is call a press conference. And if you bought toxic mortgage bonds, just before Paulson canceled Treasury's purchases of troubled mortgage-related assets, you've felt his sting already.When the government let Lehman Brothers Holdings Inc. die, there at least was the sense, for a day or so, that somebody very large wasn't too big to fail. Today we understand better: The government is picking winners and losers ...
So, for the time being, the clearest path to making money in the public markets is to know in advance what the government plans to do next with which companies, and when - and then trade on it. Let there be no doubt: Plenty of people with access to such inside information are enriching themselves this way now.