It was just before Christmas when Mervyn King assembled a team of about 10 officials, including executive director Paul Tucker and chief economist Spencer Dale, at the Bank of England. Their brief was to work secretly on a policy to flood the economy with money in a last-ditch effort to boost demand.
The Bank had slashed interest rates but that would not be enough to stop the economy slipping into freefall. Yesterday the Bank announced it would start pumping up to £150bn into the economy. Although terming this "quantitative easing" King and the chancellor, Alistair Darling, at one stroke catapulted Britain into new territory.
Bank officials, joined by a crack team from the Treasury, spent the past three months scouring text books and consulting counterparts around the globe to make sure they got the new policy right, and Gordon Brown and Shriti Vadera, the business minister, took an active role in its formulation.
In the Treasury, Dave Ramsden, the chief economic adviser, and Robert Woods, head of macroeconomics, got their teams working on the details, checking out what had happened in Japan, which struggled with deflation in the 1990s, and consulting with the US treasury and Federal Reserve. They also talked to the Swedes, who had suffered a banking crisis in the early 1990s. The Treasury's debt management team and the semi-autonomous debt management office, which manages the gilts market, were also involved.
Unlike the banking bail-outs, which involved frantic, all-night sessions in Whitehall, this was a more considered process, taking about three months.
It was Ben Bernanke, the Federal Reserve chairman, who, talking of quantitative easing, used the metaphor of dropping money from helicopters, earning himself the nickname "Helicopter Ben", though he was quoting the economist Milton Friedman.
King talked about quantitative easing in a speech at around the same time, at the annual meeting of central bankers in Jackson Hole, Wyoming. But his interest was more academic; at that time King was focused on inflation.
Late last year when interest rates were being cut, the Treasury and Bank decided the time was right to set up a framework for quantitative easing.
David Blanchflower, the monetary policy committee member who was alone last summer in warning about the severity of the arriving recession, had presented the idea of quantitative easing in a speech in January, as he realised that cutting interest rates close to zero was unlikely alone to revive the economy.
The Bank has now stolen a march on Helicopter Ben because it has started quantitative easing before the Fed. "They've broken the dam for everyone else," said Graham Turner, head of consultancy at GFC Economics.
Copyright Speakers Corner 2017