'At Every Point, We got it Right'

Gordon Brown must prepare for bed each night mumbling this simple mantra to himself and perhaps he sleeps with one of those nighttime self-help tapes playing the same message from under his pillow. That way when he wakes up each day he has actually convinced himself that what he has done in the face of the economic obvious has been right.

It must come as some surprise then that despite all his evening preparations that the reality each morning is somewhat different. I mean, take away the spiteful snapping terriers in the other Parties who constantly fail to appreciate his economic genius, there are those daft sets of figures that just doggedly won't seem to tell the truth.

This week has been yet another bad one in a long succession but the news that Britain still wallows in contracting quarters GDP-wise was bad enough, then there was the news that Italy's economy is now bigger than ours while they are also set to announce the end of their recession, then Brown's good mate, Barack Whatsisname, has prevailed over a US economy that did not just emerge from recession but actually grew at a very acceptable 0.9%.

Britain remains in the dunce's corner.

The saving grace is that no one seems to think that the policies followed by our Government were wrong. From the day Northern Rock was saved, Brown seems to think every subsequent event was met with the right action and that Britain benefited for it. And guess what, it seems the public have agreed. True, there are those annoying issues like bankers earning stunning bonuses having caused the whole crash and the Postal Workers seem to defy all best advice to surrender their jobs, but on the whole the disaster of The Sun not supporting Labour has been averted and Britain believes Brown is the best man in a crisis.

Well that's what the tapes say.

What perhaps was not part of the script was that this week Brown had to go to Europe and start campaigning for Tony Blair to be EU President when patently he would prefer to sit in a bath of hungry piranhas with bovril smeared on his private parts. That was certainly not part of any script but it is the price you pay when you have been 'rescued' by Peter Mandelson. It's almost as bad as having to repay £12,500 on expenses for dry cleaning and such while McNulty, Smith, Blears et al get away scot free in the expense bonanza affair for selling houses.

That's the trouble with reality - it tends to be, err, reality. We could all like to keep saying the same things over and again to our bosses about how well we have done and how things are just around the corner, but there is no arguing with reality. If you do your job badly, reality says that the outcome is rubbish. For all the PM's self-help mantras and tapes, the fact remains that our economic position was nothing like how he described and has not responded to the stimulus he gave it afterwards.

Quantitative Easing (QE) is a classic example. The economic patient lay critically ill on the bed and intravenously money was fed in. Sadly it never got to the vein as an unforeseen valve led the money away to different bank vaults who have just used the money to go play 'casino banking' again and shore up their balance sheets as the FSA wanted them to do while hardly any of it has got into the real world where it was needed. Indeed, this week the Broad Money supply called M4 showed that the amount of money in the country is falling, showing QE has effectively gone down a drain. It has propped up our Government Debt market and that could be equally dangerous when the whole thing finally ends before we descend into being a banana republic.

Our real stimulus money for the wider economy was VAT decrease and scrappage plus a few minor things. Loan Guarantees are a mess because the Government has used the same criteria to lend as banks and the decisions still lie with banks anyway. Reams of form filling and economic data has meant many businesses have just given up on it. Oh, numbers look fine with some 200,000 businesses allegedly going for it but again reality says it was banks just getting the Government to underwrite existing debt - nice fiddle.

Meanwhile Toxic Debt has been the biggest winner. Thanks to our loans, guarantees, insurance and capital, banks have been able to write down debt positions to the point where it all looks cheap again. Guess what? Reality bites and all the banks are making hay by trading in them once more and bonuses are up again.

Our whole strategy was to save the banks and that's what we have done making rich people richer on the back of their failure. The rest of the country has suffered. Meanwhile heroes in Afghanistan die as we equip them poorly while fighting our wars, don't give them enough of the right transport and propose to send untrained reservists.

It's a script you could have been hard pushed to write as it was so patently wrong. Yet that's what happened and our PM still claims he was right. Despite the 47% rise in coffee houses in Britain in the last year, he still can't smell any.

Perhaps the whiff of Government Bull is too overpowering.

'It's A Way of Life'

'Victoria, it's a way of life'. Such was the plaintive yet patronising plea of MP, Margaret Beckett, in the face of the new regulations on MP Expenses. The poor lady has employed her own husband, Leo, since 1983 as per 'Personal Assistant' and she believes the new reforms stopping such arrangements will make potential MPs think twice about becoming one.

As I sat in the car, I expleted gently to myself on hearing the interview. Beckett is one of the Ministers responsible for bringing forward many of the new laws on employment in this country that has taken away a great deal of the power of an employer to choose staff according to its own needs. True, there needs to be greater transparency in employee selection and there needs to be a level playing field when it comes to race, sex and disability - I think all employers would agree with that, but much of the law is now getting far too onerous.

So why should MPs be exempt from their own laws?

The whole MP Expenses saga has revolved around this issue from the start, quite apart from them all feeding from a trough. Now we have Beckett trying to justify that the job of an MP is more than just any old career, it is a way of life. It made me cringe as 3 times in the last 20 working days I have got up at 3.45am to catch the first flight at 6.00am from Heathrow and in September I spent just 3 nights at home during the available working days.

I, as is Beckett and are all MPS, am in the upper quartile in terms of salary in this country, and it is implicit, if not explicit, that working hard is part of the territory and you have to make choices in terms of the balance you want in your life. You want to be in that earnings bracket, then working hard, long hours and being away from home goes with the territory. If you want a 9 to 5 job and no calls over the weekend, then choose something else. No one will think any the less of you for doing so and I respect all that do.

In doing this 'Way of Life' job that I have, if I were to employ an assistant I would have to show I have advertised the opportunity and given a fair chance to all people who apply against the criteria for the job I have mandated. I cannot just go and employ my wife to be that assistant without due process - that is the law these very people have created, and I actually think that is a good law. My wife would argue very strongly that I have chosen this 'Way of Life' and it is hard on us both sometimes but that is what we have chosen and we may have gripes but we would not choose another way to have our standard of living.

Then we get the issue around Capital Gains Tax (CGT) for MPs. Sir Christopher Kelly's recommendations have gone into territory that Legg refused to go and the Members Estimates Committee (MEC), chaired by Harriet 'Goody Two Shoes' Harman told him not to and that is into the issue of second homes. Kelly says that MPs should not be able to claim mortgage interest payments and should only claim for rented accommodation. There is an uproar about it already.

Just think about it. You come to Westminster with about every expense you could want paid for by the taxpayer. So you buy a home in London and watch the value rise as taxpayers' fund that home for you - not just the interest but the decorating, renovations, maintenance, cleaning, gardening, the TV, the meals your dry cleaning - every dam thing. Then, at your leisure, and as often as you want, you can sell that home, even buy others and sell them, as many times in a period as you like, and pocket the full profit, tax free.

Meanwhile, some clever MPs can live in a rented room and claim their family home is their second residence and get all the expenses paid on that including the mortgage - some go as far as employing their husband as well who may appear to be a professional porn watcher to boot. After all it is a 'Way of Life' and clearly it needs 'relief' from the stresses.

Bizarrely, in the ensuing phone in, members of the public began sympathising with MPs who no longer can employ family members.

To my mind, an MP's life is no different to mine - you have to go where the work is if you want the money. I dare say they want to be an MP for a different 'calling' to mine and that's fine but don't try to make out it is a career that should be exempt from laws that all others have to abide by and that they themselves have made.

I mean, we don't want all officials to be like Baroness Scotland, do we?

Social Networking Costs Business

Look out, the boss is coming. Make sure that Facebook page is hidden and make it look as though you are doing work.

We have been here before. I can remember when everyone told us that word processing was the biggest drain of office productivity as everyone started writing their own documents instead of handing them to typists. Then we had the lunacy of email when we would send a mail to someone seated next to us rather than talk to them, then chat facilities like MSN started to catch our attention. Well now it's Social Networking.

In a recent study, social networking sites like Twitter and Facebook are estimated to cost UK businesses around £1.3bn of lost productivity according to research done by Morse, a systems integrator.

There are now cases of companies banning such sites from use on company networks, while many others are changing their Employee Handbooks to include notices that stop workers from using such sites during working hours and only on breaks. I worked at one company where virtually the entire sales floor had Facebook as their homepage and throughout the day people would be sending messages to one another via their pages yet they sat not a few feet away from each other. I felt quite the old fart for not using it and sniggering along to rude pictures and jokes circulating around - most likely about me.

However, in the Morse survey, around 76% of the people surveyed responded by saying their employer had yet to issue guidelines on the use of social networking sites during working hours. But more worrying was that around a third of those surveyed said that they had seen sensitive information posted, but 81% reckoned that they should decide what they should be able to post. This a warning bell for any company.

This particular issue is of great importance to companies. A growing problem to companies and individuals is what is posted on social networking sites. It could be sensitive data, it may be compromising pictures or it could defamatory remarks. The potential for lawsuits is growing and many users of such sites often post material without regard to the potential issues they may cause or worry about who reads it.

There is a real urgency for company HR departments and management to get to grips with their policy documents and ensure that they protect themselves as an organisation from the potential outcomes of postings by their employees.

There is a whole legal debate yet to be had about whether the information posted on sites like LinkedIn, Twitter, Facebook, Bebo, MySpace, YouTube et al is construed to be the property or thoughts of a company rather than an individual. In the case of LinkedIn, there is already a case in UK Law which ruled that the entries were governed by employer confidentiality and property clauses in contracts. If that is the case, then postings made to social networking sites during work hours might possibly lead back to the companies the people work for. It's best to make sure you are properly 'disclaimered' for such circumstances.

A further concern is that many people follow links on social networking sites despite the fact that 81% of those asked thought there may be potential security risks in doing so. It seems people cannot resist a good potential link and that is hugely dangerous for a corporate network.

It all points towards companies taking a real interest in protecting themselves both legally and technically against the growing use of social networking. Quite apart from the loss in productivity which is bad enough, companies are exposing themselves to potential security and legal threats which could amount to a far greater cost to the business.

It can be no longer the case of 'What goes on on tour, goes on Facebook'. Companies need to be aware of the potential threats to their business from social networking.

'My Farts Smell Better Than Yours'

I think most people would agree a fart is a fart. I suppose there are those connoisseurs of the subject who would claim that some are more powerful, deadly or obnoxious than others but in reality they are pretty unpleasant generally.

Why do I mention this odd subject? Well, I have just listened to the weekly puerile urinating contest which is euphemistically called Prime Minister's Question Time. It has been a dodgy old week for the PM as the news that the size of our economy has been over taken by Italy's was not ideal but the fact that we have now experienced 6 quarters of successive contraction of our economy denoting the most prolonged recession since records began has taken some precedence. It gets worse for the PM as he has been somehow persuaded to go lobbying in Europe to have Tony Blair elected as the first permanent President of the EU. It could not have got much worse when David Cameron fired a few salvos at him about the economy.

Perhaps the PM has led a sheltered life but he grimly clung onto the notion that despite the obviously dire economical position the country finds itself in, when he has repeatedly claimed that Britain had a superb economy and so would not be badly affected by any recession, he actually argued well at least it was better than if the country had followed the Conservative policies. To round that illogical argument off, he claimed that unemployment was ONLY 2.5m and that he had proved that for every decision he had made on the economy he was right and the conservatives were wrong.

It's the kind of daft thinking that comes from desperate people but sometimes you have to believe your own bull. He basically argued that he had 'farted' but at least it wasn't as smelly as Cameron's.

The fact remains that prior to the whole crash the bill for those claiming benefits for being unable to work was at an all time high while unemployment is now at a higher percentage than when Labour took office. Finally, despite all reassurances to the contrary, our recession continues to dog us despite the enormous amount of 'Stimulus' we had given it and we have not even tried to get rid of wastage on the annual public sector budget, let alone start prioritising spends.

It could be described as monumental hubris as opposed to sound financial acumen, yet that has been the path followed in order to get us into this mess so we should not be surprised that it is the same methodology used to try to rescue us.

The one moment of 'victory' for the PM was the announcement that the EC will not stand in the way of the plan to split up Northern Rock so that the profitable bit can be sold off while the smelly bit with all the dodgy debts in is retained and underwritten by the taxpayer. In doing so, the PM claimed this had saved 3,000 jobs by nationalising the bank and now the public could get some of its money back while underwriting the toxic debts of the 'bad bank' left behind.

For those of us with an iota of intelligence, we will have noticed that the first prospective bidder is none other than Virgin who actually made an offer for the bank when it hit the crisis. At that point, the Government argued that the deal did not inject enough capital in and so rejected it for nationalisation instead. A while down the line, Virgin will bid for the profitable bit and not have to provide any capital for the smelly part. It may be argued that the same deal could have been done at the onset of all this and the same number of jobs been saved as the public would have had to have underwritten the whole thing then and now. So we have paid £90,000 per month for Sandler's fees and much more for the army of consultants used just to get back to the same basic position. Some 'victory'.

It about sums up the whole economic policy of this Government - a whole load of knee jerk reactions costing £1.4 trillion which has not got us anywhere. The whole process of rescue has been one colossal 'fart'. But at least it smelt better than the Conservative's fart, had they indeed been in a position to exercise their muscles.

Small comfort as we view the potential cost of the economic mess we are in.

The Sage of Omaha

I dare say I was one of millions who watched Evan Davis' program on Warren Buffett last night.

I was probably not the only one who sat there, glued to the TV, pen poised above a notepad ready to scribble down the learning points from the 'Sage of Omaha' that would lead to my transformation into a multi-millionaire investor - make that multi-billion. Pithy remarks, wise anecdotes, shrewd insight, clever techniques and unique methods were the sorts of things I wanted to hear about. Instead, we found a homely old fellah living in a nice house, with a cheap car, a tiny office and none of the trappings of a man motivated by money. Indeed he had not only pledged to give it all away but his children seemed perplexed by the idea of it being passed down the family lineage.

I sat there at the end of the program and thought to myself, 'If he didn't seem to like money, why did he actually go out an make it?'.

Also, many of his investments seemed to be haphazard and almost suicidally hopeful as to believe that he could easily be hoodwinked or conned or, worse still, have no idea what he was doing. The phrase 'due diligence' was never used and seemed to be not in his vocabulary and there were at least two company purchases that he did in his career where he did not look over any financials or check any contracts beforehand. In fact, they interviewed the owner of a mobile home house builder who stated with surprise that he never met anyone from Buffett's company beforehand and the whole deal was done over the phone with the remark, 'Just send me any financials you produce each quarter'. For that, the former owner was hailed one of Berkshire Hathaway's greatest stars.

I am sure there is more rigour and greater acumen involved, but Buffett just came across as a strumming, would-be folk singer who just 'tap danced' his way to his small office each day as he loved his work so much. Indeed, when asked why he did not have much more than his 85 year old partner, Charlie Munger, on his staff, he replied, 'Why would I employ someone to just read the paper after me?'.

There is no doubt that during his career he worked a 'Lord Hanson' on some underperforming companies but it was clear that interacting with people about tough decisions was not his style - Rottweiler managements did not suit him. When he came up against bad ethics and mismanagement at one of his buys, Salomon Bros Bank, he personally pledged to the Fed that he would sort it all out and his word was taken as an invaluable bond to save the bank. Probably no other businessman in the world would have been taken so seriously.

Buffett likes to invest long term and he likes to invest big. He doesn't have any modern technology to monitor his investments, no office computer and he even rarely answers his mobile phone as Bob Diamond at Barclays famously found out. He doesn't visit his portfolio of companies and when he was led around the Microsoft's campus for half a day he joked to Bill Gates that he had seen more of Microsoft that any business he had owned. He doesn't monitor stocks and shares - he views companies as farms, watching how much they produce from the land rather than what the price of the farm would be.

He eats poorly, dining most nights at the same low grade restaurant, hates vegetables, and drinks lots of sugary drinks - indeed his daughter claimed she had never seen him drink a glass of water in his life. In the same vain as his friend Gates, he seems to thrive on just about anything a doctor says is bad for us. On top of all this, he lives in a leafy street in Omaha where his house of 50 years, bought for $31,000, is not even the best on the street and is his only property in the world. His car was bought by his daughter as she always did, at a discount because it was hail damaged.

So what picture are we building of this incredibly simple and likable man? To him investing seems very simple. The formula he and his partner use is obvious, repeatable and not rocket science. He may have started by punts on obscure, undervalued companies but he now tends to focus on household names like Coca Cola and Goldman Sachs. His engine is the cash business of insurance and his mantra is never to get into debt. But as much as he expounds a common credo you find he breaks his own rules all along.

The one thing I have always taken from Buffett is that debt is bad for business. He claims more smart people went out of business through 'leverage' or debt than unsmart people who succeeded and did not use debt. I like that mantra and I think it is something that most businesspeople should take seriously. Today, there is a huge focus on debt as being good - Buffett is one of the many cash businesses that has taken advantage of the depressed markets so dependent on debt to make $billions in tough times.

The other thing I took from the program cheesed me off. Buffett, despite the fact he will give all his money away and tells us to invest not speculate, has invested in the derivative products which he rightly labelled the 'financial weapons of mass destruction' that would tear down the financial world and did so. He now owns such products because he believes the fundamentals are right. That really did not square with the man's supposed philosophy and he visibly squirmed in the chair when Davis mentioned it. He was embarrassed. It was pure speculation and it had nothing to do with investing as clearly such instruments are not for long term investors. What he does believe, like most banks today, is that the whole market for such products has been 'written down' so much by taxpayer money that they are now all cheap again. The 'equity' that had been consumed by mad price spirals has been returned at much cost to everyday folk and he is ready to capitalise on it as any greedy bank would.

The one thing I asked myself at the end of the program was why? If he was indeed unmotivated enough by money as to give it all away so people less fortunate than him can benefit and to not live the life of a rich person, why would you capitalise on the misfortune of others so blatantly? And why, knowing who has paid for the market reset, would you play the market so cynically?

The answer is that if you want to make serious money in life, there is no other way, you have to profit on the misfortune of others. In fact, over on the other channel on 'Have I Got News For You' a capitalist credo was shown which I barely can recall but went something along the lines of, 'Inequality is a good thing as it makes sure that enough wealth can be generated to help everyone.'

That's the kind of circular logic that clever rich people use and believe in. It's the one thing worth writing down on your notepad. It's why bank bonuses are a good thing, allegedly.

That'll Show Them

George 'School Snitch' Osbourne is a complicated character. He looks like a cross between a snooty school bully who operates largely behind everyone's backs and something a little more sinister.

Then he opens his mouth and, while he is trying to make a point, garbage seems to fly out. Yesterday was a classic example.

In an attempt to boldly take on the City bonus culture he firmly said that he would curb bonuses to just £2,000 of cash and the rest in shares. That way the banks could use the precious savings, estimated so far as around £6bn of accrued bonuses, as money they could lend.

It was a daft policy on many counts.

Not least, he defined he would use the policy for this year only. In a recent reality test conducted by most citizens, it appeared that Gordon Brown and Alistair Darling were still, albeit by the skin of their teeth and arguably not for much longer, at the helm of the country. So the chances of it ever being more than just a stream of words from his well educated but inexperienced mouth was absolutely zero. Secondly, the fact was that despite the incredible sums of money poured into banks via new money printing, loans, capital and guarantees, lending is down by some £15bn. So the evidence shows that banks would just hoard the cash to make their balance look good if that was what they were compelled to do with it in the last resort.

But Osbourne missed a vital point in is idea, which was about as a worthy as that of an 11 year old winner of a class project. Banks are devious fellows and they would have paid the bonus in the form of some other precious and valuable commodity - en primeur fine wine or platinum or gold as good examples. True they all would have had to have large cupboards and the nous to realise the value but give these whizz kids some credit.

Far be it for me to say this was just political grandstanding but that's what it was. The trouble is that it was not very intelligent grandstanding from a guy with a lot of education but no common sense. It perhaps sums up the whole Tory challenge - a lot of wet wind and flannel but no real substance.

The danger is that we have people like Osbourne in high office and we start actually wanting Darling back.

What a nightmare scenario that would be.

When Savings Got A Bad Name

When I was young, my parents and grandparents drummed it into my head that I should always save some money. I followed their advice when I could, starting my first bank account as early as possible and setting money aside.

Their advice certainly helped me buy my first home soon after I started work as I had plenty for the deposit. Bizarrely, I followed the advice of a rugby playing mate and went for a 100% mortgage and a whopping life insurance policy on an interest-only mortgage despite being single - his advice was to blow my savings on material things that had no long term value. Later, after meeting and marrying an Independent Financial Adviser (IFA), I got things back in check. But it was only when she opened my eyes to what I would need in retirement without the buffer of one of those super company or public service pensions that I started to really save.

Over the last 10 years or so, there has been a huge focus on getting credit in Britain. Banks and credit card companies have fallen over backwards to literally throw cash at us, not just to buy homes but to fund a fantastic lifestyle of flashy cars, superb holidays, up to date whizz gadgets and big TVs and much more. We have never had it so good as we used our own financial instruments to supplement our dwindling (on average) household incomes. In the meantime, our level of real savings has been negative. It was almost crazy to save, in fact, so cheap was the money thrown at us.

Pensions probably fared worst but savings generally have been negative in comparison to our monthly income. Beyond my pension, my wife and I save with ISAs regularly and this year we cashed some of those in at a lowish point and then bought back in using a scheme I had no idea existed called OICs. By doing this we have fared very well and the OIC alone has increased nearly 40% so we have not lost anything during the crisis and our savings are still tax free.

It struck me though, that savings seem to be the last thing on everyone's mind. Although the level of debt on credit cards has actually come down by the odd percent for the first time in ages, outside mortgages, Britons have over £1 trillion of unsecured loans. In trying to kick start the economy, one of the first things that was focused on was rekindling the 'Asset Backed Security Market', or housing markets to us mere mortals. While it made sense to get money into people's pockets in the short term by leveraging their assets, it was clearly exactly the same plan that had got the nation into a financial mess. So long term, there has to be a plan to get Britain saving more.

The problem is that it is not as easy as it sounds - we all know the score. Just when I think I'm on top of things, the washing machine breaks down or the carpet gets stained, the floor needs repairing, the lounge suite is suddenly wearing. With all the juicy sales on all year round these days, there is a temptation to think we are getting a bargain all the time and if we don't spend we will miss out. Saving in a disciplined manner is a hard task in our current environment of materialism fuelled by cheap credit. At least when interest rates were high we could see our savings grow and we borrowed less. Now, my Halifax building society account offers zero interest on our balance and we have had to go elsewhere to get something for our small monthly savings - it's crazy.

The whole market seems geared against savings. There is little focus nationally on pensions and saving for retirement and my wife's IFA business has changed dramatically over the years with structuring and restructuring credit as being her main business versus investment and retirement planning. She firmly puts this down to the attitude of Government, banks and people - it cannot be any one of those alone, it has the right combination and time. At this time, saving for the future is not a priority generally and the whole market is geared toward lending more.

In her opinion, as it is mine, the whole credit crunch was an accident waiting to happen.

Warren Buffett calls it 'capitalism overshooting periodically'. At the height of the crash he invested $5bn into Goldman Sachs and is now sitting pretty. My meagre funds went into the OIC. I am no Buffett but thanks to equally sage advice I have ridden out the storm well. Like Buffett, my pension is down around 25% still, as are his overall assets, but in reality my whole financial situation is as good as it could be in the face of what we have experienced and my pension is clearly for the long term. I am now focused on saving as much as I can. We reduced overall credit card debt to zero by releasing our Halifax savings to make sure we paid no interest while I have been putting as much as I can into my pension.

But how many others have done the same? In fact, the whole panic that has gripped us has seen the focus shift toward getting credit back to previous levels. Britain will soon get back to borrowing more and saving less. Surely, at some point that vicious upward spiral has to end and let's hope it is not as spectacular as last time.

My point here is not a swipe at the Government who have their share to blame. It is not even at the banks who fuel their cash by lending more in their bizarre world of finance. It really is a swipe at us, the public. It really is time to save and invest as the future could get nasty if we don't. Pensions should be brought to front and centre for every working individual and, personally, I don't think retirement planning should be voluntary. I think there should be massive tax incentives to save, instead we get tax on pension dividends, I think insurance premiums should have no tax attached, I think there should be no tax on savings generally.

Realistically, the Government should plan long term - the more we save, the less we will burden the state in our old age. It just makes sense.

Current finances in the country are a mess and it will take a bold Government that thinks long term in this way. However, it really is not rocket science. The more we all save today, the less vulnerable we are to downturns, the less of a burden we will be on the State and the less the system will incentivise us to borrow as banks will see the profit in investments over debt in the end - hopefully.

I have a feeling that pigs may fly first, but I live in hope.

Podcasting Our Way Out Of Recession

In the face of the heinous postal strike, our glorious leader has embraced modern technology and launched his latest piece of 'reassurance propaganda' on YouTube to show that, contrary to all indicators, the economy is behaving exactly as it should and he's on top of the situation.

Rather like the superb 'legal' promise that he and his team would halve debt by 2015, he has now pledged that Britain will have an upturn by the turn of the year. No, he was specific, he did mention 2010 for those sceptics amongst you. He got right to the point. Part of the deal was that he would reform banking and make those suddenly, vilified types embrace the kinds of values that we all share - 'hard work, responsibility, integrity and fairness'.

Of course, it does make you wonder why he tolerated such people who earned millions and did not adhere to those values beforehand, but hindsight is always 20:20, is it not? The hollow words of Lord Mandelson must chime in his ears of how Labour did not mind people making loads of money under their regime. How that has come back to haunt them all.

Another piece of late hindsight is that he will clamp down on lending sharp practice like credit card people and those who raise interest on loan repayments putting people into difficulties. He must not use a credit card himself as interest rates on such instruments have always been at least 10 times that of base rate interest, and some are multiples of that again. It is again, one of those stark moments of realisation for the poor PM where he finds out what is going on in the financial world. There is a good reason why the financial industry is almost without exception very well off and that is because they have carte blanche to do exactly as they like. It's nice of him to change this now but, to be frank, if he ever gave a damn other than saving his political neck, he would have stepped in long ago. It is not as if this is an issue that has arisen recently - it has gone on for years.

Just like the whole banking bubble which is busy re-inflating as we speak.

The final call to arms was that he was working with an international melee of leaders to ward off a Second Great Depression. I should imagine he has missed a few headlines as most other countries, including Italy, have returned to growth while Britain languishes bottom of the league table for economic dunces. He pleads that 'It would be suicidal to put recovery at risk by suddenly cutting off the funding and investment that is supporting young people, families and businesses'.

The funding and investment he talks about is pretty pathetic. While VAT is reckoned to have had a £12bn stimulus to the economy, profiling how it helps us is in real terms would be an interesting exercise. You see, even in modern monthly bills, power, fuel, insurance, food and school things are high on the agenda which are not affected by the VAT decrease. Meanwhile, consumer items are and that was the aim, to keep the High St going. It wasn't to help families and young people.

Over 1m of the unemployment number are now young people - this whole recession and crisis has affected them worse - so where is this mythical help he is giving to them? As for support to businesses, apart from copying the Continental scrappage scheme on a minor scale, he has done little beyond complex loan guarantee schemes to help business and overall business lending is down by nearly £15bn.

The vast majority of any stimulus money went into saving the very industry he now vilifies - how clever was that?

Perhaps he should have thought of that before he gave them a blank cheque to save their businesses, decrease the value of toxic debts so that they are now bargains again and allowed the banks to rekindle their feeding frenzy at the trough of easy money. Not one single, stupid bank was allowed to fail, sending the one message they all wanted to hear to them - 'If the brown stuff hits the fan, then we will get bailed out. So let's party like there's no tomorrow, we have zero liabilities'.

Perhaps, podcast rhetoric would have been unnecessary had the PM thought of all this before he handed out our hard earned cash to save those greedy bankers and gave the proceeds of all those who earned their money through, 'hard work, responsibility, integrity and fairness' to them to help them preserve their current millions and earn more millions again.

It's like Communism in reverse.

What a fitting epitaph for the biggest failure of a PM we have had, perhaps ever.

Spelling It Out

I have been asked by one of my blog readers, what do I mean when I say 'There is a shortage of houses to be sold at £10m+. Go figure.'

It's a good point. What I mean is that the top earning and most wealthy individuals of this country and those who work here but are classed as non-domiciled for tax reasons have been the least affected by the financial crisis over the last period - in fact, they have mostly benefited from it. There is a good reason for that and why Britain is still in recession despite the fact that super-wealthy people cannot find enough £10m+ homes to use their money on. It's because our bank bailouts ensured that the way these people earn their money was not just preserved but actually the whole system has been 'reset' at taxpayer cost so that they can earn far, far more from the kinds of products that mean nothing to us and society in general.

Our Government, very different to Governments of France, Germany and Japan, poured almost all of their 'stimulus' money into saving the banking system. Germany, for instance, put €10bn into directly subsidising wages so that workers were not laid off and into major education rejuvenation projects and technology plus stimulating directly, and substantially, the car industry. In contrast, we have really provided little stimulus and what we have provided mostly went down the throats of banks in the form of Quantitative Easing who used it for their high risk casino banking.

That is the reason why we have remained in recession and why the only way out to service our long term debt will be to make the low earners disproportionately less well off as tax increases will be aimed at those first.

It's hard to spell it out any clearer - but there is a tiny percentage of very wealthy people who helped cause the crash who are far better off because of our Government's policies on economic rescue. Sarkozy and Merkel told Brown he was wrong in trying to bail banks out too readily, they have been proved right.

This year over 100 banks have failed in the US and not a single saver has lost their money - nearly every one of those banks were small regional players that did not participate in the activities of the greedy banks - yet they took the brunt of the economic catastrophe. Meanwhile the newly revitalised investment banks like Goldman Sachs and JP Morgan Chase are talking in terms of record profits and bonuses.

The solution to our problems are actually making the problems worse.

Economic Barometers

Talking to business colleague of mine recently he told me a family member of his works in an upmarket estate agents. Business seems to be pretty good in that stratosphere, but they have one real worry - there simply aren't enough houses in the £10m+ bracket coming on the market to satisfy the demand.

In a sentence that about sums up this recession and financial crisis. The brunt of the hardship in this tough time has been endured at the low end of our earners. Over a million people in the 2.5m unemployment figure are classified as young and already we are talking of a 'Lost Generation'. One firm, who have fared well in this recession, has spent £200,000 on a graduate entrant scheme where in all their history they have drawn from the local labour pool of 18 to 25 year olds to man their sales desk engine. Now they start graduates there instead - it's a great investment in the future but a sad indictment of the times we are in and no incentive for young people to get a good education as it does them little favours.

What it seems is that those people who are rich may have had their net worth dented but their income stream only paused minimally - they are still exceptionally rich and earning a very strong monthly and annual incomes. At the lower and middle ends of the scale is where all the negativity has bitten hard. The stark reality is that while kids may have a lost out, there will be a new tranche of 45+ year olds who were made redundant who may never find equivalent work and earnings again - to add to those woes, they will not have sufficient pension resources to survive either. The future for those 'baby boomer' offspring is bleak.

While Prince Andrew puts out a plaintive call to protect the 112,000 people who are non-domiciles, who pay no tax in Britain he may as well have added those corporations who hide part or a majority of their wealth offshore. When Lehmans bank collapsed it left thousands of subsidiaries many housed in offshore territories known as tax havens - there can be only one reason why banks love doing this.

Small businesses, who constitute 97% of the companies in Britain, who employ over 13m people and who pay a disproportionate amount of the tax revenue in this country will be where the Government goes to get more - where VAT decreases have had least benefit and where bank lending has decreased by £14.7bn during this crisis. It will be the base level tax that will be increased most, rumoured to be a further 7% shortly while those who have demands of 50% will find ways around the system by using tax avoiding accountants and lawyers.

It all stems from the first port of call in the financial failure - to save the necks of rich bankers with no strings attached. Now we are looking spiteful in attacking bonuses but that will not stop banks making vast profits on high risk activities associated with products that benefit no one but banks themselves.

Politics takes a different view. No one wants to home in on the problem and admit responsibility, so conveniently parties like the BNP blame all those people who do not have Celtic ancestry or have skin of a different colour. If only people like Griffin knew that the Gallic races are not of these islands either but that is the domain of unintelligent brutes, they shape history as they like to suit their needs - that's why in their eyes Jews either deserved what they got or it never happened. It is when the country and crisis hits us and we see our lot diminished we look to the daft answers.

The answer is that there is a shortage of homes to be sold in the £10m+ bracket. Go figure.

It Runs In The Family

Prince Phillip is famous for engaging his mouth before his brain; Prince Charles has a habit of talking to flowers but generally the Royal Family try to avoid commenting on things that happen in the real world.

That's because they are apt to put their foot in it.

It's only right that they have their say. After all, they are only the Constitutional heads of the country and they consume tax like any other wasteful public body, so why shouldn't they weigh in and leap to the aid of their friends in rich circles?

Prince Andrew is a Falklands war hero and all round good egg. He seems the most unlikely of the family to suddenly lose his marbles and speak out on an issue that patently rankles everyone who is not a banker in Britain. It is a sad demise for our hero Prince as he has lost a bit of his street cred by suggesting not only that we should not demonise bankers but that their vast bonuses are 'minute in the scheme of things'. I suppose a person who personally banks at Coutts & Co might say that.

He should learn from his elder brother, Charles. He has found that by speaking to plants you can say what you like as at least they don't answer back.

It Can't Affect Us Chickens

'Nightmare on Downing Street' could be the title of a new movie on the life of Gordon Brown. It would be a sad story of a man who just could not interpret simple facts and kept muttering to himself, 'It can't affect us chickens'.

Despite the most pessimistic of estimates by the most gloomy of economists who predicted that we would, Britain has failed to emerge from recession for a record sixth successive quarter. The hollow words of our Chancellors, past and present, as they pointed toward how strong Britain's finances were, how we could avoid a recession, how a recession could not affect us so badly and how fast we would emerge from recession are lost in the vapour trail left as France, Germany and Japan left recession status last quarter.

The fact seems a nightmare in itself. Despite spending £175bn on creating new money and £1.4 trillion on bank bailouts, our economy shrank again by 0.4%. There may be some revisions up or down but the reality is that this contraction defied all best estimates. We are getting into the habit of getting sums wrong and forecasting badly as our team seems to continually under estimate our borrowing requirements as each month we have to go cap in hand for more money.

There cannot be any shying away from a stark truth. The country's finances are a mess and the remedies chosen to right the situation are either wrong or simply have not worked. Meanwhile, in the banking sector, which we handily threw a massive lifeline to, they are partying as if there is another credit crisis to come. Banks are reporting plenty of profits, hiring new whizz kids on guaranteed bonuses and swelling their bonus pools, telling us that this is a good thing.

It is now abundantly obvious that Britain's bailout plan actually tackled only one part of the economy - banking. What's worse it righted the part of the sinking ship that had directly caused the credit crunch - it has not had any effect on the kinds of banking required by real people. It has given unlimited chips to the casino bankers to go back to the table and blow it all again, as they inevitably will and then come back to ask for more. Each time they do, the gun they use to point at our heads will be ever more deadly as Britain fast runs out of ways to raise the money.

The chilling fact is that after 6 successive quarterly contractions, Britain is now lurching toward severe danger levels of finance. As of this week, Quantitative Easing is spent and in the new year the VAT decrease is reversed. There is only one place left to go as the Government repeatedly defy the facts of having to make cuts and that is to go back and raid the taxpayers' pockets again.

With an election due in June, it's not good practice. But as time runs out for our finances, Britain needs money and fast. The time for action is actually long past and each day we avoid making tough decisions on saving money or finding new cash will costs us more in the long term.

The economy has been compared by Vince Cable as a person suffering a heart attack and we are now stabilised and preparing for recovery. I would say there is a severe danger of MRSA in the analogy.

This Government has been guilty of monumental mis-management of our finances and their remedies in the face of almost ruin have been wrong. At some point the penny may drop for them but until then, any recovery we have will just be a prelude to another crash. In our analogy to a heart attack victim, should the victim recover, sending them home to continue to eat, drink and smoke in the same way as before will only bring on another heart attack.

In our case, we haven't yet left hospital and we are already smoking again.

Blair For Presidency?

It's a frightening thought that Tony Blair may be the inaugural President of the EU. Good to see France and Germany have seen sense, at least.

Meanwhile Silvio Berlusconi has put his flashing synthetic teeth and plastic smile behind our pious ex-leader, currently busy on his Faith Tour, writing fiction, after dinner speaking and advising boards on matters of globalisation that he has demonstrated he knows so much about.

Well if you can ruin a country, the next step has to be to ruin a Continent.

Just what Gordon Brown may think, I don't know but perhaps........

The Danger Of Big Debts

I blogged only this morning on Alistair's Darling's dogma about borrowing to rescue Britain from the recession - 'borrowing to grow' is the mantra that he and the PM repeat endlessly.

I had a discussion with someone today about my negative response to this sentiment. And I tried to explain, beyond Alan Greenspan's gloomy view about borrowing too heavily as to why I believed it is not the only way out. I acknowledge that running a business is not the same as running a country but certain principles about debt are true no matter how you look at it.

Today, Government debt has been easily 'sold' as bonds as the main buyer in recent months have been ourselves - Quantitative Easing (QE)has allowed the UK to buy its own debt and so make it look very attractive. QE is drawing to its conclusion and the Government has indicated it will not spend any further than the £175bn already spent. Some speculate that when our bonds go on the wider market there may not be the enthusiasm by institutions and other Governments to buy our debt so willingly.

The reason is this, in my view. Anybody looking at loaning a person or a business more money will look closely at how it is run. If the lender (effectively the buyer of the bonds in our debt) sees that the person or business is not making efforts to create cash of its own, then there are warning signs about the long term ability of the person or business to keep up the payments on the debt. For an individual, a lender will look at income, savings, assets, prospects, other loans and current spending habits - indeed, new mortgages are rumoured to require much more rigorous scrutiny of how income is disposed of before assessing how much can be afforded. Business has the same scrutiny - the last thing that any lender wants to do is to lend money for an expensive lifestyle or wasteful use of money by a business. So if the MD wants a loan to buy a yacht to take customers around the Mediterranean while business is bad, the lenders will not be keen, just as Citigroup could not buy Corporate jets during the credit crunch.

What lenders would certainly want to do is to see how an individual or business accommodates their lifestyle or business to service the debt. If an individual receives the money and blows it on champagne and high living, the lender will not be happy as this is not helping the servicing of the debt and may well end up with the individual getting into more difficulties financially. For a business, if the business does not look to its own cost line, income or cashflow to maximise the use of the money, lenders, particularly in austere times, may not believe the business is going to be able to keep servicing the debt without coming back to ask for more.

A good example of this for our Government is the fact we borrowed, yet again, at much higher rate than previously forecasted in September, once again missing our forecast on borrowing and requiring us to borrow yet more. This lack of understanding of our own 'business' by the Government has to make lenders think twice about our long term ability to run the 'business' that is Britain. Further, we are not growing - despite spending astronomic sums pushing our borrowing sky high, Britain's GDP contracted again last quarter when other countries emerged from recession. Time and again, our Government has repeated the views that Britain's economy was strong and resilient to the recession and we were not overly reliant on the house market.

Time and again, the Government has been wrong.

Like a bad management team in any business, a lender will take a dim view of those managers who do not fundamentally have a good grip on their business. It is clear that our finances are run more in hope than in knowledge and lenders cannot lend endlessly against such poor management. The fact that there is a clinging belief that growth will come so just spend more, is a sure symptom that our 'management' has little clue as to what is going on.

But there is another big issue. The Government's stubborn refusal to cut costs is a major factor in putting doubt into would-be lenders' minds. Just like a person who takes a loan and blows it on champagne and good living, lenders will want to see where our money is going. If all we do is support the lifestyle of rich bankers, it has to be a worrying sign. The fact that we have written an open cheque to underwrite banks' bad business for the future is another serious issue - this is not supporting growth, this is supporting liability - to a lender for a mortgage this would be akin to another loan having a preferential or equal charge on your assets, this would have to limit the size of available loans and the appetite of the lender to risk it. Further, the Government just keeps avoiding the issue of making efficiencies and saving money. We need to show that we can create cash to help service debts so that if the economy remains in recession for longer, we can at least cover part of the 'miss to the forecast' if nothing else.

Finally, there is the taxpayer. While we are the 'collateral' for the loan as Britain has few assets left to sell, if growth is slow or the debt burden gets too high, then the Government will keep turning to us to get more of the money in tax to service the debt. If unemployment continues to grow, less tax is taken and the burden on the welfare state increases as a result, then we can borrow money to pay for the 'miss in forecast' but the debt servicing on the increased borrowing comes from increased taxes. It isn't rocket science. Lenders will observe that as time goes on and the tax burden increases, the appetite of British people to continue paying will decrease and this spells danger to the country's ability to service the debt.

Today, the Government are acting as if there will never be a time when it cannot go to the open market and raise money or take it from taxpayers. I think that lenders will start taking a dim view of Britain's ability to repay soon. From my own perspective, I am getting more shirty about where that increase in tax would be spent - if it is on wars I don't agree with or MP allowances or bureaucracy and inefficiency, I will not be happy to pay it.

I believe that making cost savings on our budget is essential to the country's good let alone to prove we can manage ourselves. We have too much flowing through the public sector and too much inefficiency - we can easily save money if we want to. We must prioritise what is important and cut costs where we can meaning some services will be affected, that's just a fact. Only when we have our house in order will be be able to see where we can invest money that we may have to borrow to create growth. Today it is just pure guesswork and it has almost exclusively been wasted on the financial sector.

Given that everyone pounds on that the financial sector is only 9% of our GDP is has taken a disproportionate amount of money on a grand scale to bail it out. This means that our dependency on this sector is far greater than its contribution to our wealth would suggest. That also suggest that we are pouring money down a drain in saving it - this is not good news for would-be lenders as right now we are funding lifestyles in the banking sector as much as if the Government borrowed £100bn before the crash and handed it all back to us in tax cuts to spend on what we wanted - they wouldn't have done it as it made no sense. But that's what they have done - but the billions have gone to a small percentage of people to not just save their careers but to make them far richer than they were before. It is that stupid.

In simple terms, if Britain were an individual wanting a mortgage and it had a budget and sources of income as it is today, our finances would not stack up. The lender would want to see how we adjust our spending and plan to grow and to be right on top of our 'managing the debt' before lending us more money.

Because the prospects right now are not good. We need to staunch the losses we are making as a nation to slow down our rate of burning money which is fuelling our requirement for more debt. Until we get that balance right - Britain is a bad debt in the making.

As Easy As One, Two, Three

Alistair Darling is a formidable politician and a fine Chancellor. His record proves it. Yeah.

So when he tells us that the route out of our borrowing situation - not mess - is as easy as one, two, three then we should believe him and start doing a Jackson Five jive. Like his Lords and Masters, Brown and Mandelson, he believes the prime way out of the mess we are in is to borrow to grow.

Hands up all those people in business who have borrowed to grow. A fair number I would suggest. Hands up all those businesspeople who have borrowed to grow in a recession. Not many. Typically in business we borrow to survive when in a recession as growth opportunities are fewer unless you can find a little opportunity niche that you can exploit.

Granted running a country isn't like running a business but there are only so many things you can spend the borrowed money on to incent growth. So far, we have seen the massive bank bailouts as the main form of spending, hence borrowing. This has been the vast majority of what we have spent. We have also reduced VAT which is due to end but retailers would say this has helped stave off the worst of the economic recession. In business to business companies like mine, VAT decrease make not a jot of difference.

So if we borrow more, we can theoretically invest to produce growth. I would really like to understand exactly what the Government is going to invest in right now to stimulate growth other than to entice consumers to do what they did before which is borrow heavily to fund their spending. Already, people are facing some austere spending cuts as job uncertainty grows. Credit card and unsecured debt across the population is dangerously and unsustainably high, wages are set to not grow and possibly decrease, and taxes are set to increase. It really does not take a genius to work out that growth is really going to have to be 'false growth' in order to stimulate the economy.

The Chancellor's wish list is that we borrow more, try to reduce spending while maintaining priorities and increasing taxes which will all stimulate growth - one, two, three. The growth will produce a richer economy which will make it easier to pay off the debts.

Right. Meanwhile, across the pond Alan Greenspan is warning that US debt is now dangerously high at $1.4 trillion. He warns that there comes a point when the economy runs away from you and you continue to borrow more money just to service the interest on the debt as the growth rate just eludes you enough to need to borrow more just to try to catch it. In 2014 it is estimated our interest bill on our debt will be £60bn per annum which is equivalent to the entire NHS budget at current rates.

There comes a time when you need to stop borrowing and cut your cloth for the economy you are in. That does not stop you from investing in growth - it is just a realistic look at what you can really afford. It means that some of your grandest plans will have to be re-thought, some of your pet projects put aside. It means you have to make a rigorous look at the layer upon layer of wasted management and bureaucracy. It means you have to look hard to gain efficiencies, it means that some services will have to be downgraded and cut. It means some businesses will have to be allowed to whither and die. It is just a fact.

Britain has gone through an unprecedented period of 'false growth' where we believed we were prosperous but we were not as well off as we thought. We have to rein in spending across the board - at a personal and Governmental level. We have to make certain sacrifices which some people will not like - but there is far too much fat in our public sector and we are letting far too many people into our country. That is not a racist remark - it's a simple fact. I have no time for people like the BNP, they are dangerous and a subversive influence with no credence in modern politics. But they will gain a foothold if we do not face stark facts in this country.

13 years ago, Blair and his Government trashed the issue of immigration at election time and swept to power. Like so many other things about that wave of 'Cool Britannia' the issue came back to haunt them in their laissez-faire style of Government. Like so many other issues, like the economy and the banking system, they now look to blame the previous Government for current problems. It really is a time when the reckoning is long overdue.

It would be good to hear from people like the Chancellor the truth about our situation, what he actually proposes to do to in real measurable activities to remedy it and then get started. If he thinks that just talking will solve it as is the traditional method of politics, then it will be as easy as one, two, three but we will be no further forward. However, if he looks a little further afield he will see that countries like France and Germany have got to the very heart of the problems and are now functioning nations out of recession as we still wallow in it. He will learn quickly that applying vast sums of money only pays dividends if you apply it in the right places.

Stuffing it into the pockets of bankers was our biggest mistake and will be the most enduring. As these rich people wave two fingers at us and make vast profits again off the back of our kindness and stupidity, Britain is no better off. Borrowing more money will not help us now - we should have never have blown so much in the first place.

I fear for the situation we are in. As Sir Howard Davies put it recently, we do not have a clue how bad the situation really is. What we do know is that debt is probably the biggest issue this country and its people face. As any small businessman will tell you, there comes a time when your business needs more cash at a much faster rate than it can grow - we call that throwing good money after bad.

Right now, Britain faces exactly that situation. For every new pound borrowed, we had better know exactly how we will spend it and how much it needs to return and in the meantime we need to find how we can create more money from savings ourselves - long before they raid the pockets of the people in taxes. Because right now, as a taxpayer with a stake in all this, I would really like to know where my next pound will be spent and it had better not be to give more support to rich bankers, support the immigration of more people, fund vast inefficiencies and bureaucracies in Government and the public sector, pay for wage rises to politicians, fund vast allowances for the same people or on wars which we should not be fighting.

It's my money, and I want a say. I think we are all in the same boat.

'Never has so much money been owed by so few to so many'

The words sound like Winston Churchill, but they are in fact those of Mervyn King, Governor of the Bank of England. At last, a senior, credible figure has come out and highlighted that what Governments and regulatory authorities are doing are merely tackling the symptoms of the financial problems. The causes remain undisturbed.

It's of no real surprise that only yesterday, RBS disclosed that they had hired 11 new traders in their Investment Banking division each at guaranteed salaries which will cost them £5m in the next year. Current executives are on track at RBS to pay out millions in bonuses to themselves as the bank wallows in the resurgence of its fortunes while still being 70% owned by us. How can it justify this in the face of what it has gone through?

Simple really, it doesn't have to.

Having being royally bailed out by mugs like us, RBS and all the other banks here and abroad are enjoying the fruits of the same reduction in values of distressed or toxic debt - the very debt that ruined the lot of them. With sleight of hand and a little alchemy, some banks are realising vast profits and making a few people multi-millionaires by just juggling names on paper while in the debt swaps and 'collaterallised this that and the other' derivative markets, the traders are making a killing on the very things that we had to come in and guarantee, write down or prop up. Cheap and free money, through things like Quantitative Easing, is pouring into the system and the banks are loving it - it's a dream come true. Not only were they bailed out when it all went wrong, but they were recapitalised, given a load of free cash and no one stopped them from doing what they were doing.

You get Lord Turner, looking increasingly marginalised as he mutters to himself about 'Tobin Taxes' and products which serve 'no social purpose', trying to draw attention to the fact that banks are conjuring money out of nothing. Then you get Lord Myners wandering around as if he knows something and thinks it is all about institutions who aren't challenging hard enough on fees. But what surpises me, and I dare say most other sane people who look at this from the outside, no one has got anywhere near the root of the problem.

The world of finance is running itself in a market where it can take nothing and make millions out of it. In that environment, no one will challenge each other on fees as there is no need to - vast profits are being made by everyone. There are no losers. There is no zero sum accounting involved - everyone makes money.

Has the penny dropped yet for anyone? Mervyn King seems to finally get part of the problem while Turner has alluded to it. The world of finance is a closed shop where the world of debt takes on a life of its own - it's like a roulette table with a ball for every possible number on every turn. There are no losers - it's only a question of how much you can make and that depends on how much cash you can get your hands on. To an outsider like me, it's obvious. You cannot keep making money out of nothing - not everybody can be winners. But that is precisely what is happening. The whole bonus culture is like sub-prime, it's just a manifestation of the flawed system. So much money is being made that there is so much extra after shareholders have been rewarded, costs met, tax paid that at Goldman Sachs this year $22bn will be divided up amongst staff in bonuses on top of other emoluments.

The penny hasn't dropped yet? Goldmans say this is from fees on mergers and the like but a close look at the whole market would suggest that activity on that front is not fuelling this vast resurgence. What is at the heart of it is exactly what was at the heart of the crash. Trading thin air for profit.

Mervyn King suggests that banks should be split so that riskier business is separated from the stable side of banks. I have argued this on my blog until I am blue in the face it is so damn obvious. When he says it, naturally it has credibility but when these banks fail, it is not their traders who get fired. In fact they are all taking on more traders at higher salaries and golden handshakes in the face of failure. It is the backroom staff and tellers in the branches who get shafted to pay for the losses - they are the short term safety valve.

This time around the losses were on such a scale as to bring the whole system to its knees and not any amounts of cuts would save them. So the world did the one thing that has guaranteed it will all happen again. We simply bailed them all out and did not reform the industry in the process. Not only have they now been propped up, but the reduced toxicity of the debt instruments they trade means the world is cheap and even bigger profits are to be made. And now they have the one thing they missed before - a limitless lack of liability which has been transferred wholly to taxpayers around the globe.

Mervyn King has said it all, 'The belief that appropriate regulation can ensure that speculative activities do not result in failures is a delusion.'

It has to be a fundamental reform of the entire banking system. The decoupling of risky and stable banking business would sideline the 'casino banking' as it is appropriately called and this would no longer have any Government protection. No longer would we have idiots like Brown saying we had to bail out the rich bankers as money would not flow to the ATMs. There would be no reason to do this as the whole system would become disconnected.

The penny hasn't dropped yet? If we follow Mervyn King's thinking, decoupling would end 'casino banking' as it is entirely inter-related to the stable banking business - it depends on that business for its supply of cash and debts to be traded. Without it, there are no real financial products for them to trade - Turner was spot on that count. Investment banking would have to get back to what it was meant to be doing - frankly, most people in the industry will have long forgotten what that was.

King has had an epihany after this crisis. It took a while - only his whole career. He says he finds it hard to see why limitless liability should be the domain of banks alone. He's right - we made banks the 'special industry' in the process of this crash. Meanwhile, businesses all over the world have suffered and crashed without an iota of liability being transferred to anyone other than those who should bear it. Why did Governments not save them?

Simple, they did not understand the nature of the financial system and why the whole crash occurred. Still today, Gordon Brown will tell you it was sub-prime that caused it. He is 100% wrong, sub-prime was only a symptom of the warped financial system. Because he doesn't understand it and he gets advised by the people who caused it, he will never fix it. Bonuses have little to do with it. The clue is in the vast profits the banks make on so little actual revenue. Goldmans' numbers give the clear sign - about a quarter of their revenue is net profit. Barclays keep turning debt designated as 'most toxic' into £billions of profit in a single transaction that makes investors and former staff multi-millionaires overnight. The embers of Lehmans, the largest corporate failure in history, their open derivative positions are being snapped up cheaply in the sure knowledge that the buyers will make billions.

The penny has yet to drop. I can't spell it out enough. You cannot make a profit out of nothing - there has to be a flaw in the system to do so. It is simple to the layperson. Conjuring tricksters, bunko boothmen, spivs and conmen have hijacked the financial system and we are their insurance policy. The crash will happen again - go figure.

Free Willie

Oh will someone put poor Willie Walsh out of his misery.

I blogged last month about an article in BA's HighLife magazine about how videoconferencing was 'perceived' by users as not to replace the benefits of flying to meetings. It was a piece of wanton propaganda as clearly they had taken slim evidence from middle managers and not looked at the issue from the point of view of the recession, the cost, high management's viewpoint about extensive unnecessary travel within their companies and the environmental issues. It basically said that videoconferencing and the like did not replace business travel - a sweeping statement.

Poor Willie - after just launching a new Business Class-only service for a £5,300 flexible round trip from London City Airport to New York on which only 32 people can travel, he asserts business people only fly because they have to. That much may be true, but if they have to travel, what on earth would compel them to take such a flight, at such a cost when it has to stop at Shannon on the way as it cannot get off the ground with a full load of fuel to make the full trip? I would argue, that long before a businessman would consider such a trip, they would have exhausted the far cheaper options out of the main airports by all other airlines, assuming that videoconferencing does not cut the mustard for their purposes at the start.

It seems he misses his own point. Such a service is pure luxury and the domain of the super rich firms who have no regard for money - like City banks. While we may bleat about bonuses, the range of travel options to such elite are ultra-luxurious whether they lose money or make it, good times or bad. That service really is only for the too-rich and stupid. The fact it uses Concorde's old flight number is a terrible lack of knowledge as to why Concorde was meant to be effective - it got there faster than anything else. This service arrives after normal ones.

Two major attempts in the last few years to tackle the Business Class-only market failed dismally at a time when there was more money around. This really is a dreadful use of BA's valuable resources at a time when staff are being squeezed for every penny of saving and customers are having parts of the offering withdrawn and being sold back to them at premiums.

Willie really is not doing a good job for his airline.

Thatcherite Britain Returns

Stubborn, suicidal union versus clueless, stoic management, backed by a Thatcherite Government.

Sounds like the 1980s? Nope, welcome to Britain 2009. In the face of multiple strikes which to be frank have seemed to have made no difference to an already sporadic service, Royal Mail's Golden Boy multi-million pound management team came up with a brilliant idea which will really solve the problem. Hire 30,000 temporary staff.

Well no doubt the Government are happy on two counts - 1) their stoic Thatcherite stance in the face of leftie Unionism is holding steady and 2) 30,000 off the dole queue will do no end of good to the tragic unemployment figures. It could have been a plan from the Iron Lady herself. But it is her deputy - Lord Mandelson who plays this Iron Lady. Calling the strike suicidal, he wears the mantle of free market capitalist well, even down to saying he has agreed to arbitration when the Union says he hasn't. Perhaps the letter telling them so was in in the post.

It's a really pathetic situation. All across Europe, the old public owned postal behemoths have largely carried on functioning, but for us we have a combination of bright ideas to sell off the profitable bit and leave the millstone around the ever welcoming taxpayers' necks. As Sir Howard Davies said of us all recently, we have no idea of how bad our crisis is and sure enough, as our ever generous cheque book keeps on paying up, we have no idea how much such stupidity will cost us in the future.

Mandelson loves playing God. He loves sucking up to rich Adonis's in the vain hope he can be one. But this has been rank stupidity after daft management. It stems simply from appointing management who have nothing to lose, because when matched with Union leaders who equally have nothing to lose, it is a game of chicken where neither party will turn as neither have a vested interest. In between stands a large workforce who are going to get royally shafted because they think everyone has their best interest at heart.

It's Thatcher's 80s all over again. Substitute Leighton and Crozier for Ian McGregor and Mandelson for Thatcher and you wouldn't know the difference but for the hairstyles. Meanwhile, unlike a homegrown steel and coal industry, every single person depends on the postal service. This is not suicidal, it's downright needless and stupid.

Facts, Hercule, Facts!

As Peter Sellars' Inspector Clouseau used to shout at his ever patient assistant, Hercule, 'Facts, are what we need!'.

I love a good fact. For instance, did you know that if the entire population of the world were collapsed to just 100, 50% of the currency would be held by just 6 of them. That's the kind of shocking fact I like - 6% of the world's population hold 50% of the currency. Iceland reckoned they could name the 6 individuals who took their country to the brink of bankruptcy, I would like to know the names of the 6 individuals in the shrunken world population who hold 50% of the currency and if they are doing anything for dinner to tonight.

Here's another. The Mall, a large shopping centre in Washington DC is 1.4 times larger than the Vatican City. I would say it's likely that at any time, The Mall contains more Catholics too and I wonder if it has its own Pope? Perhaps it will be the subject of the next Dan Brown book - 'The Pin Code' does not quite have the same ring.

Another. The top 8 most developed countries speak a Germanic language and all such countries are in the top 20. I have to say I was a bit surprised on that one as I had no idea Japanese was a Germanic language but perhaps they have a different list to me. Anyway, ve ask ze qvestions.

Saudi diplomats have 367 outstanding parking tickets in the UK. I dare say if one of us owed a parking fine in Saudi we would have a limb lopped off which is food for thought for Boris Johnson. However, I shall bring that up at my next parking fine and plead precedent.

Turtles can breath through their backsides. That's nothing special really as most politicians can actually speak through their backsides. I can't think why evolution would have dealt that interesting card to turtles but you never know when these things come in handy, perhaps when you are stuck in a pond with your backside in the air? I don't know.

Walt Disney was afraid of mice. Well that stands to reason as the mice he became famous for all had to wear gloves. I heard that Disneyland in Paris was shutdown last week as inspectors found a large mouse in the kitchen.

Male and female rats can have sex up to twenty times a day. Pathetic, I would be only warming up. However, over an 18 month period, a pair of rats could have up to 1 million descendants. I dare say that if I announced I had won the Euromillions Lottery I would have the sum number in 18 minutes.

It took approximately 2.5 million blocks to build the Pyramid of Giza, which is one of the Great Pyramids. Imagine the builder on that, 'Oo, mate, that's gonna cost yer. Them bricks aren't easy to find, you know.' It is a commonly held belief that when constructing Milton Keynes, a roundabout was put in where every navvi had put their tea mug down on the map.

Peanuts are one of the ingredients of dynamite. I can believe that, they used to cause explosive wind in a friend of mine. It's always a friend in these stories, isn't it?

Two final facts - there are more nutrients in the packaging than there are in the contents of a packet of cornflakes. Some would say that the packaging tastes better too. It is impossible for a solar eclipse to last more than 7 minutes and 58 seconds. I like that - there has to be something finite about this Universe.

And finally, for one the chaps. Christmas is coming and did you know that women who read romantic novels have sex twice as much as those who don't? Get down to Waterstones fast, boys.