The secret history of helicopter money
If you really want to see a property bubble at work, then get into a time machine and go back to Tokyo in the late 1980s and early 1990s. It was a fearsome business, impoverishing more people than it enriched and funding Japan's aggressive business expansion around the world as the bubble inflated land prices.
Grandparent mortgages - paid off by the generation after next - and hugely expensive tiny sleeping tubes: that is what happens when property bubbles get out of control (so watch out, George).
They also eventually pop. Japan's zombie economy was the result, and all the slightly breathy excitement about 'recovery' in the UK rather ignores the likelihood that we are in the same zombie position as they are.
One radical Japanese solution has been what they call 'helicopter money', which is where the central bank or Treasury simply creates the money - the way it used to be done - and it is distributed straight into the economy to get demand moving. This is what Adair Turner has been advocating here, and there was a fascinating discussion posted yesterday between Turner and other economists which came to the conclusion that it was worth trying.
Now, here's the odd thing. Here are influential economists discussing the practicalities of helicopter money creation - but where are the politicians? It is as if they are somehow above the practical business of creating money, as if it was somehow impolite to discuss how this is normally done (the banks create it in the form of loans) and how it could be done.
It is as if politicians were the unreformed men who avert their eyes at the grubby business of household work - wiping bottoms, stenching blood, washing dishes, holding up the sky.
This matters, partly because politicians ought to discuss a practical solution to our difficulties. And partly because, if it isn't discussed - then how can the details be properly debated? For example, where should the new interest-free money go?
To the banks? We tried that with quantitative easing and they just sit on it, or use it to fund bonuses - which raises house prices.
To people directly? That is what they tried in Japan, and they just spent it by paying off debt.
To provide very low-interest loans to small businesses? We have no infrastructure capable of lending it locally - the banks have proved themselves unable to do so.
To the Green Investment Bank to provide very low-interest loans to sustainable energy infrastructure? Maybe, but would it have the economic impact?
To community banks and community development finance institutions? Experience in the USA suggests that they can use it effectively within about a month. But our CDFI network is probably too small still to take all of it.
Would it be inflationary? Yes, unless we also prevent banks from creating money (this is another discussion). But it matters very much how much work the new money could do before it creates inflation. Or, to put it another way, it only creates inflation when it reaches the rich. So it makes sense not to let it trickle down, but let it bubble up. Don't helicopter it; plant it.
The other odd thing is how faulty the economic history is around this forbidden, whispered aspect of economics. Commentators point out that Milton Friedman suggested something similar in 1948. He certainly did, but because he was still under the influence of the great American liberal Henry Symons - the doyenne of the original liberal Chicago school of economists.
The other history which is never mentioned is that we did all this in the UK once before, almost exactly a century ago, under the Chancellorship of David Lloyd George. At the outbreak of the First World War, and to avoid a run on the banks, Lloyd George issued £1 and 10 shilling notes direct from the Treasury and continued to do so until 1919.
The first ones were rushed out within days, printed on postage stamp paper and were known as 'Bradburys', after Sir John Bradbury whose signature appeared on the bottom.
There are huge conspiracy theories around all this, thanks - it seems to me - to the failure of mainstream economists to discuss the way that money is created. There was nothing very special about the banknotes, which simply mimicked Bank of England notes in smaller denominations. But it did set a precedent for the Treasury to create money directly, if necessary, and to do so free of interest.
Incidentally, if you want to know where money usually comes from, you could do worse than look at the new book by my colleagues from the New Economics Foundation, together with a preface by Sir Charles Goodhart, formerly of the Bank of England.