Feb. 19--The Monetary Policy Committee crossed a rubicon at its meeting earlier this month when it resolved to move ahead with quantitative easing.

It is a move born out of anxiety now that it has become clear that interest rates alone will not reignite the credit markets.

The Bank of England will be fighting the battle to restore credit conditions on two separate fronts. It is already seeking to improve the cash position of the corporate sector by directly offering to buy commercial paper and corporate bonds.

As Britain does not have a mature commercial paper market, it is in effect challenging companies to issue commercial paper -- short-term notes issued by companies -- and offering to buy them up for near cash.

It is aiming at the primary market, newly issued corporate paper, in the first instance. But it could also buy in the secondary market, improving the liquidity there and perhaps forcing down the overall cost of borrowing. In essence it is recreating the old City process of accepting and discounting commercial bills, which faded away in the 1980s.

The second leg of the Bank's strategy is to exchange government bonds for cash. The great fear is that this will result in an inflationary bubble as the Bank prints more money than is sensible. The hope is that sufficient barriers have been erected against such an outcome.

Firstly, the Bank wants assurances from the Debt Management Office, an independent Treasury agency, that it will not simply issue substitute gilts to replace those bought by the Bank. That would put Britain on the road to perfidy.

The second barrier is the independence of the Bank of England itself. Quantitative easing is a matter for the MPC, so it requires a resolution of members, who have been charged with holding UK inflation at or about 2pc. If the MPC believed that its expansion of the money supply was going to lead to a burst in inflation it would have to pull back.

The difficulty with all this is that it is not a precise science and the Bank will be acting in the dark without a great deal of empirical experience. Such a scheme did appear to work in Japan in the 1990s, after it had exhausted the interest rate options.

But Tokyo is not London. Were the surge in the money supply to fuel a consumer boom, another take-off in housing or some other unexpected bubble, the MPC may find it much more tricky to put the genie back in the bottle.

FALL GUYS: Almost every financial crash precipitates a clampdown on the excesses of the period.