"Nevertheless, these numbers present a dilemma for policymakers. If the economy continues to shrink, or fails to recover, what are the necessary "next steps"? What is left in the policymakers' arsenal?As things stand, the answer is "not much". Interest rates are already remarkably low. Both Labour and the Conservatives accept that the budget deficit cannot continue to grow. That, then, leaves so-called quantitative easing, whereby the Bank of England buys gilts (government IOUs) in the market. ..Quantitative easing is very imprecise. Knowing whether or not it is proving successful is tricky: its effectiveness depends on faith as much as pure economic reason. ...First, QE works merely by boosting people's expectations. ....(Second)In other words, QE enables borrowers to bypass the banking system entirely. ....Third, and most obviously, it works because foreign investors are losing faith in the UK economy, can hear the hum of the printing press in the background and choose, in their droves, to sell the pound,....."