Martha Kearney's week

By Martha Kearney Presenter, BBC Radio 4's World at One

Desperate times require desperate measures.

In private conversations ministers are no longer talking of recession, but deflation.

At the heart of the crisis is the fact the banking system is not working. So how can lending be increased?

The chancellor insisted this week that he wasn't going to 'print money'

The measure of last resort is "quantitative easing" (QE), a phrase which has crept into our editorial meetings of late but was not on everybody's lips six months ago, it has to be said.

This is sometimes described as printing money to bring greater liquidity into the system.

The chancellor has said QE is a purely hypothetical option, but I understand this is under active consideration.

Ministers have been studying how it worked in the past and point out that this was the only lever not used in the 1930s.

So when might we see it introduced here?

Risk of deflation

"We're not there yet," I was told, "But in Japan, there was too little easing too late."

Government sources have also been studying the United States where quantitative easing has been happening behind the scenes for a while and publicly from mid-December. They believe it came too late in the process there too.

The Bank of England would buy government bonds or commercial ones from the banks, exchanging illiquid assets for cash to increase liquidity.

In normal times this increase of the money supply would fuel inflation, but the risk now is of deflation according to one highly placed source, who maintains that it would be the Bank's statutory duty to begin QE as part of its responsibilities on monetary policy.

There are some indications that the banks which took capital from the government are lending more, but the underlying problem is that so many lenders have disappeared from the scene like the Icelandic and Irish banks.

The government argues that this is exactly the wrong time to take money out of the economy by reducing the levels of government expenditure.

There is no appetite in government to set up its own bank, but I understand it may well use Northern Rock, the bank it owns, to increase lending.

At the moment there is not much demand for mortgages, but ministers are worried that when it picks up, there will be a big capacity problem.

All of this is an acknowledgement that lower interest rates on their own are failing to boost the economy. Meanwhile, savers are being badly hit.

Save, save, save

In 1961, Vivien Nicholson, a Yorkshire housewife won