Tight fiscal policy offset by ultra-loose money is the only option for Europe, the US, and Japan.
However, at The Cobden Centre, Professor Kevin Dowd says that calls for further monetary expansion are cuckoo, and James Tyler, Chief Executive of Tyler Capital, describes the article as Monetarist whitewash.
Contemporary economic thinking takes too many aggregates, amongst other faults (see for example Money, Bank Credit and Economic Cycles, pp 519-583): monetarists ignore the structure of production. A consequence is policy advice which is bound to cause worse problems later.
As Hayek said in his Nobel lecture (and by "inflation" he means an increase in the money supply, not the consequent affect on prices):
The continuous injection of additional amounts of money at points of the economic system where it creates a temporary demand which must cease when the increase of the quantity of money stops or slows down, together with the expectation of a continuing rise of prices, draws labour and other resources into employments which can last only so long as the increase of the quantity of money continues at the same rate - or perhaps even only so long as it continues to accelerate at a given rate. What this policy has produced is not so much a level of employment that could not have been brought about in other ways, as a distribution of employment which cannot be indefinitely maintained and which after some time can be maintained only by a rate of inflation which would rapidly lead to a disorganisation of all economic activity. The fact is that by a mistaken theoretical view we have been led into a precarious position in which we cannot prevent substantial unemployment from re-appearing; not because, as this view is sometimes misrepresented, this unemployment is deliberately brought about as a means to combat inflation, but because it is now bound to occur as a deeply regrettable but inescapable consequence of the mistaken policies of the past as soon as inflation ceases to accelerate.
As Kevin writes:
The reason the economy is doing so badly is because the banking system is still broken, and the economy will continue to do badly until the banking system is properly fixed. Some of us have been hammering on about this for years.
I am put very much in mind of a quote from Churchill:
I must point out ... that the British nation is unique in this respect. They are the only people who like to be told how bad things are, who like to be told the worst, and like to be told that they are very likely to get much worse in the future and must prepare themselves for further reverses.
We should tell the British people that the state of the economy is worse than they think and that it is going to get worse yet when, inevitably, our monetary binge ends. A compounding factor is that the vast majority of economic commentators lack an adequate theory of capital, and so they will tend to give the wrong advice, even as things deteriorate. People must prepare themselves for future reverses.
The good news is that the intellectual climate is changing. For example, on Thursday, the Institute of Economic Affairs is holding an event, Why today’s political class needs Ludwig von Mises, with speakers including yours truly.
For those who think economics is too complex, a good place to start is Peter Schiff's How an Economy Grows and Why It Crashes: Two Tales of the Economy. More detail may be found in The Cobden Centre's Primer.