By Claire West www.freshbusinessthinking.com

Unless we see banks start to lend again to small-to-medium size businesses we are going to see more companies going bust and rising unemployment.

Now I’m no economist but it’s obvious to me and just about whoever I speak to that the government’s attempts to date to rescue the economy quite frankly aren’t working.

Today’s cuts in interest rates, although they are now at historically low levels, won’t work on their own because of a number of reasons;

1. The banks aren’t necessarily passing them on
2. People are deciding to save rather than spend.
3. They have happened as a series of whimpers rather than a big bang

The promised increase public spending hasn’t yet worked, will take an age to come to fruition and is being kicked around like a political football.

The reduction in VAT didn’t work because, quite frankly it was a token gesture that got lost amongst the deep discounting and Xmas sales on the High Street.

The recapitalisations and part nationalization of the banks hasn’t worked as they are stockpiling what cash they have and are still very risk averse.

So what should they do next?

Well the latest phrase coming to the lips of commentators straight from the text books of economics is Quantitative Easing.

What is Quantitative easing?
Quantitative easing is a tool of monetary policy – it doesn’t necessarily mean ‘printing more money’ but it does mean increasing or releasing the supply of money.

According to Reuters, Quantitative easing is when “Central banks flood the banking system with masses of money, more than is needed to keep official interest rates at zero or a low rate, to shore up financial systems and promote lending. They usually do this by buying up large quantities of assets from banks.”

Obviously there is no guarantee that such a radical policy will succeed but it is probably worth trying as without it we’re in the ‘Brown Stuff’ already and sinking a bit lower wont make much of a difference.

Leadership is tested in adversity and  The "big clunking fist" that Blair used to describe Gordon Brown needs to be raised and he and his government need to start punching their weight – to take the boxing analogy one stage further we probably need to throw all the punches we have in our armoury without losing our balance.

What do you think Gordon should do next?

Let me know – email This email address is being protected from spambots. You need JavaScript enabled to view it.