One prediction about the recession is for sure. It will end. Every recession in the past century (roughly 20 of them in all) did exactly that. It ended. It ended when demand stopped falling and began rising.

Those of us with old economics degrees lurking in the mental attic recall that credit bubbles turn into recessions when they lead to a collapse in demand. People stop buying goods and services. Businesses lose profits, lay off staff and are refused bank credit. Unemployment rises, and the vicious circle proceeds. That is what is happening now.

There is an obvious plan to counter it. It was put forward by John Maynard Keynes ostensibly to make a point - shower people with money or pay them for doing nothing - and has ever since been treated by policymakers as unsophisticated and rather silly. Proper macroeconomists do not dabble in such simplicities. The plan is excellent. If recessions are caused by collapsing demand, increase demand. Do not wait on tax cuts or lower interest rates. They all take time. Do not plead with people to spend, as the Japanese did while suppressing interest rates to zero, or as Iceland is doing with its patriotic slogan: "Spend for your country."

Get people to spend by giving them money, and just stop them saving it. Give them non-cashable vouchers for domestic goods and services that expire in three months. Drive them to the high streets, supermarkets, restaurants, entertainments, garages, anything that is not saving and has an employment multiplier effect. Only firms should be able to bank the vouchers. Demand must feed straight into business revenue, because revenue is collateral for credit. Without revenue, boosting credit is pointless.

There is no shortage of the requisite money in the Treasury. We know because anyone can get it if a banker. The government is obsessed with bankers. The whole thrust of policy is aimed at trying to get banks to offer credit. But this was last August's problem, and it conspicuously failed to stem recession.

Credit is still the obsession of public policy. The government is underpinning bank deposits and shares to the tune of a staggering £500bn in guarantees and £50bn in real money. The giveaway to banks must have reached its limit. Cuts to bank rate have little effect on the real economy.

The government has nationalised bankers, lunched them, told them how much to pay themselves. Now it has started bullying them, hectoring them and telling the public how awful they are. Christmas pantomimes are casting bankers as villains. Card games depict them as knaves. Mothers tell children that "a banker" will come to eat them up if they fail to finish their sprouts.

Some £1,000 for every man, woman and child in the land has gone into saving banks, the most extravagant policy of all time. Yet all this is aimed at forcing banks to do precisely what caused the credit collapse in the first place. It is aimed at making them lend to people and businesses which, with each passing week, are ever less able to pay them back. As the Guardian's economics editor wrote despairingly on Monday, "nothing seems to be working".

Having failed to halt the run on credit in September, the authorities are now trying to halt it when the disease has gone elsewhere, into the cash economy. Two points off the bank rate or an inter-bank guarantee are no good to a sacked shop worker. Give that £50bn, or even half of it, to every person in the land, and it does not matter what people do with the vouchers, provided they generate economic activity. They may be traded at a discount, but that does not matter since they can only be banked by firms by the end of the period. Vouchers are better than hurling money at banks.

The subsidies donated to stave off recession so far appear to have gone on restoring bank balance sheets, rewarding staff and lending overseas. Money being poured into projects such as Crossrail and the Olympics is going on fees to the rich, which also tend to be saved rather than spent. America is no wiser, in bailing out its least efficient car firms. It would make more sense to give people vouchers to buy cars of their choice, rather than have government choose which they may buy instead.

Just giving people money clearly sticks in the gullet of those who run the economy. The whole point in collecting taxes is to control their disbursement. The idea of Gordon Brown going into the street and giving the public their own cash seems undignified and somehow wrong. Yet Brown, Darling, Cameron and the rest seem comfortable giving vast sums to bankers - with no condition that the money be channelled into spending. The banks say thank you but understandably decline to lend to borrowers who are going bankrupt because the government (and Bank of England) has been careless of recession.

The reason for this indulgence of banks is that bankers are "the authorities". They are like chateau generals in the first world war. They talk the same talk as politicians. They head grand institutions that can supposedly handle billions of pounds. They "launder the giveaway" and make it seem respectable. Also ministers can blame them if, as has happened, nothing seems to work.

Such counter-recession policy, like last summer's credit policy, is always too little, too late. America earlier this year introduced a mild version of my plan, a $300 tax rebate. While the intention was sound, it suffered from being a rebate, not a restricted cash handout. The money could vanish into savings. It was too small and did not work.

A closer parallel is the gift voucher proposed by German Social Democrats. This is a €500 uncashable voucher with a two-month expiry, for every German over 18. Objections have been intriguing: "people might buy imports"; it "would not solve long-term problems"; it "might recall wartime rationing". In other words, none was substantive.

The authorities are too hidebound to tolerate eccentricity or simplicity. Giving people money (or borrowing to give it) suggests a loss of competence and control. It is crude and unsophisticated, without the jargoned nuances that have given macro-economic policy its specious intellectual beauty.

Even the Tories, who should welcome the vouchers as an in-the-hand tax rebate, cannot stomach the idea. The whole lot will go nobly into recession arm-in-arm with their friendly banks, rather than trust people to spend their own money rescuing the economy.

simon.jenkins@theguardian.com