Britain is running the risk of revisiting one of its darkest economic hours in the postwar period. That’s how bad it is, says opposition leader David Cameron. “If we continue on Labor’s path of fiscal irresponsibility, at some point—and it could be very soon—the money will run out,” Cameron said.

Alas, it would be a good thing if Britain could run out of money. At least then there would be a limit to government spending. But David Cameron is talking as if it is still the 1970s and the pound still has gold reserves backing its value. Today, the UK Treasury has bottomless pockets. Money, after all, is just numbers.

But just because the UK has unlimited money doesn’t mean that money will necessarily retain any value. You might have a pound in your pocket, but how much will that pound buy you? The answer: 33 percent less than it would have last year, at least in terms of anything that is imported.

The pound sterling is crashing. Against a basket of currencies, it has lost a third of its value over the past year—a fantastic loss for a major currency. But the long-term loss is even greater. One pound costs $1.40 today. When Winston Churchill was in office, that same pound cost about $5.

But back then, for every pound issued the government had to have a certain amount of gold in reserve. Not so today. Great Britain doesn’t even have gold anymore. Gordon Brown sold off the nation’s reserves back in 1999, at practically the nadir of a 20-year slump. Since then, the gold price has more than tripled.

What was Brown thinking?

“We thought it was a disastrous decision,” said Peter Fava, then-head of precious metal dealing at hsbc. “We couldn’t understand it. We brought up a lot of potential problems at the meeting.” Other consultants at the famous pre-gold-sale meeting also warned that Brown’s public announcement to sell the nation’s bullion was a blunder. Bank of England authorities told those present they had “little say” about what was going to happen and that they were “doing what they were told.”

“The auction process raised hysteria and a negative sentiment in the market,” says former gold dealer Dominic Hall. “Had the government sold a small amount quietly on the market every day, no one would have noticed. The Swiss sold far more without anyone noticing.”

But despite the warnings, Brown went ahead with his grandstand announcement to sell the UK birthright. Why?

Britain had decided to embrace fiat currency—a decision motivated by 100 percent greed.

The easiest way for governments to keep voters happy is through handouts. And the more dependent people become on government handouts, the greater the justification is for bigger government and more politicians. But without a perpetual money-creation machine, taxes eventually have to rise in order to actually pay for all the spending—quite impolitic.

To overcome the dilemma of actually paying for what you buy, governments around the world embarked on a grand perpetual-money-machine experiment. Today it is known as the post-Bretton Woods fiat money scheme.

Since fiat money is not backed by anything tangible, it can be created ad infinitum—or, if you are keeping up with the price tags for government bailouts, ad nauseam. During the days of the gold standard, if a nation expanded its paper money beyond the amount of gold it had backing it, the paper money became worth less—because people knew that if everyone tried exchanging paper for gold, someone would be left holding an unexchangeable piece of paper. The gold standard kept governments honest with their spending. Generally speaking, they could only spend what they had. If they spent more, their paper currencies would plummet in value.

But during the 1970s, many governments created more money than was backed by their gold supplies. The two biggest offenders were the United States and the United Kingdom. Instead of reining in spending and increasing production to earn more precious metals, these countries, along with most other industrial powers, decided to relieve their currencies—and their own spending limitations—of their golden shackles.

Policymakers reveled in this supposedly grand idea. Now governments could create extra money here and there—to pay the bills—and it wouldn’t be nearly as noticeable against other currencies, since they would all be printing extra money together. There would be no yardstick that would blow the whistle on what they were doing—except for that pesky gold bullion.

If governments printed too much money, the supply of paper currency would go up, but the global supply of gold would stay roughly the same (even with modern mining techniques, the supply of gold only increases around 2 percent a year). This would cause the price of gold to surge—and expose the scheme.

Thus certain central banks around the world—like those in the UK, the U.S., Canada, France, the Netherlands and Switzerland—made sure to periodically dump or lease their national stockpiles of gold into the market to prevent the gold price from rising too quickly and exposing their scam.

This is largely what caused gold and silver prices to plunge during the 1980s. When the United States and Britain abandoned the gold standard, investors rightly guessed that governments would eventually succumb to the temptations of the printing press, so they sold paper currencies and drove up the price of gold to record heights.

But what investors didn’t count on was the massive supply of precious metals that would be dumped on the market. As governments had removed the silver and gold out of their coinage, massive stock piles of precious metals were available to be sold off to push back down the price of gold and silver.

Gordon Brown’s decision to dump every last remaining ounce of British gold was his last great coup de grâce on the gold standard. If a nation was to go so far as to get rid of all its gold, then certainly, no one would believe that gold had any monetary value at all.

With no good yardstick, governments could borrow as much money as they wanted, and then—later, quietly—print whatever was needed to pay the bills.

But today, the perpetual money-creation machines are about to go into overdrive.

Britain’s economic crisis is “the most serious for over 100 years,” says member of Parliament Ed Balls. We are seeing “seismic events that are going to change the political landscape.” Mr. Balls says that events now in motion could resemble the 1930s. The Bank of England has also warned that Britain is facing “possibly the largest financial crisis of its kind in human history.”

British banks, consumers and government have binged on debt. They can’t pay it back, and few people will lend more. Thus Britain’s economic crisis.

So the UK government is about to embark on what may become the biggest money printing endeavor in its history. According to Bank of England Governor Mervyn King, the UK is about to begin a last-ditch effort of “quantitative easing” to stimulate the economy.

“Quantitative easing” is central bank code for printing up billions of dollars to pay for government programs, bailing out banks, and propping up asset prices—all at once. And if that isn’t enough, printing hundreds of billions.

It is astounding that conditions have gotten so bad that the UK is openly admitting it is going to create vast amounts of money out of thin air. “Quantitative easing” was something governments used to hide.

And why did governments used to hide quantitative easing? Because it is cheating the system. It is stealing from all those people and businesses that have worked hard and saved money. It makes savers’ money worth less, so the government can spend more, without officially raising taxes. And it is fraudulent because the government pretends that creating money out of thin air is a legitimate action that will not have major negative consequences.

The value of the pound could be about to get crushed again—despite the fact it has already fallen so much. And that means the purchasing power of the paper in Britons’ wallets is going to fall. Even if it isn’t fully reflected against other currencies, people will feel it when they buy their groceries and fill up their petrol tanks. And over the long term, they will see it in the rising price of gold.

A government policy based on cheating, stealing and fraud will not fix an economy. It will not repair a currency that has value only because people trust that it is a store of wealth.

What is “quantitative easing” a euphemism for? You be the judge.