One thing that has puzzled me for a bit about the current mess is the intereaction between the Government and the Central Bank (Bank of England or BoE, in our case). So the government is raising money by selling Gilts, in quantities that I forget but of the order of Â£200b when I last looked. Meanwhile, the BoE is indulging in Quantiative easing, a process whereby it pumps money into the economy by buying various bonds, but mostly Gilts, of the order of Â£20b.
This appears, at least at first sight, to be pointlessly self-cancelling. The government is selling gilts to itself (unless we pretend that the BoE isn’ t an organ of the government – are we supposed to pretend that?).
On the other hand, perhaps the point is that only the BoE is capable of creating money out of nothing – maybe the government strictly defined has no mechanism to do this. So it is obliged to go through the slightly strange dance.