The latest effort of the Bank of England, that banks can draw on cheap money from the Bank of England only when it is leant to business, is an attempt to influence V or velocity. Because up to now quantitative easing has increased the money supply but it has simply died in a stagnant pool of no movement. Also the intention is to increase Y, and Y does include investment goods. MV=PY does not of itself suggest the dymamism of the economy. The reason an economy can borrow to pay off debt is because borrowing to increase demand during a slump has a disproportionate effect in getting business responding. In this cycle the money curve is somewhat flat, the demand curve thus raises output far more than prices. When an economy is running nicely, to add demand is to basically raise prices.
At this time some economies are stuck in a euro that has a value level well above their ability to be competitive, leading to an over-emphasised slump. A single currency needs a trans-European regional policy in good times and bad. To come out of the euro, however, and into a comparatively worthless currency, might help recovery but might, equally, lead to local hyperinflation. A long time ago it was known that the State debasing currency had an inflationary effect. But as A Treatise on the Alteration of Money, by the Spaniard Juan de Mariana (1536-1624), shows, it was also known that debasing a currency had beneficial effects of generating trade. The book lacks the theory that was to come about in the Enlightenment, but it carries within the ethical issue of the State (usually the monarch) debasing the coinage. What the scholastics did not know was that a high value metal, a rare metal, was not itself important, but that rarity itself was. So what was needed was the ability to make inflexible the supply of money. This was achieved when notes and coins included the promise to pay based on a gold deposit, but actually it didn't even need that deposit. It just needs to be able to pay up if the currency collapses.
The book is an example of the 'prehistory' of economics, before the capitalists and mercantilists, but the very fact that countries had currencies drew the curiosity of Aristotelian type observation [Aristotle founded truth in earthly experience rather than in Platonic heavenly idealism, but he was no scientist and so did not experiment correctly - observation is not enough]. So, of course, historians observed the effect of monarchs being naughty and debasing currency, noting an increase in trade at times, and inflation of prices at times. It all was written about in a general kind of way, as within this treatise.
But we have this legacy of naughtiness of currency debasers, whereas we should regard these issues as technical. It is just as unethical for the Germans to restrict the euro (suits its exports wonderfully) on some lecture about economic efficiency and house keeping, as it is to allow the complex economics of the continent to work flexibly. Still, the Chinese are unethical in the way corrupt state capitalism operates, that is a combination of one-party backhanders, private firms functioning, suppressed unions and wages, and a currency held down in international value artificially. Although wages are rising, and the economy should catch up with the rest of the world in terms of price differences, this period of Chinese state sponsored growth has seen huge surpluses in China by which Western consumption has been upheld by debt, with the debt running into property prices. Now with the collapse - and you cannot insure against collapse and so all those money supply-expanding derivatives vanished too - the various governments of the world funded the desperate banks and now the governments need desperate funding. The old view that the State is the one institution that cannot go bust is being tested.
The only way out of this is perhaps the biblical method of 49 years and clear all the debts. Creditors won't be very happy, but that's tough. Apparently the Romans were the first civilisation to insist on debt repayment, but as an empire it forgot how to innovate and ran out of new land and sources of slaves, and we all know what happened to it. Some countries today have to default; banks have to collapse (whilst protecting private savings). The world needs to start again in some places. There is a good argument to nationalise all personal account banks - the banking collapse has led to State takeovers in terms of ownership but not to the extent of rewriting the rules.
We know that these are the real ethical questions, but the important matter is to get the technicalities right. The ethical behaviour of banks in their derivative making profiteering is the topic of the time, and banks ought to undergo new restrictions. But the State can debase its currency because that is a means towards growth, with an ethical positive, but at present it is one of the least effective ways of generating growth without restoring demand as well. And one of the best ways to generate demand is State spending on projects, and secondly is by giving more not less to the poor, as the poor spend what they get whereas the rich will just save it. So, ethically, and practically, the poorest should have more because that will get demand up and more of the poor back to work. Restricting the poor's money to make work more attractive is daft because it doesn't increase work. Pay the poor more (working and not) and the jobs will start to come about, and people will always want to be productive.
Mariana, Juan de (1536-1624), Acton Institute (2011), trans. Brannan, P. J., intro. Chafuen, A. A., A Treatise on the Alteration of Money, Sources in Early Modern Economics, Ethics and Law, Grand Rapids, Michigan: Christian Library Press Academic.