Public Service Is The Place To Be

One of the most recession proof areas of the last 2 years of crisis has been the Public Sector. Makes you think we are a bunch of mugs in the private sector.

As unemployment hurtles upwards, very few jobs have been lost in the public sector as private firms have borne the brunt of the downturn in terms of laying people off and cutting costs. There are few firms in the private sector which have grown to any great degree while many have contracted or even disappeared. Meanwhile, despite a colossal budget deficit and borrowing now at 59% of GDP and rising, the public sector shows no sign of having to rein itself in - except of course if you are in the Armed Forces where there have been many crazy cuts as we attempt to fight two wars and have suffered as many casualties in Afghanistan as we did in the Falklands War.

The Sunday Times Appointments Section, barometer of how the job market is in terms of investment, has for some time been packed full of senior public sector appointments with salary packages that would make most business people look at least twice. The recruiters in this sector, like Rockpools, have been making a mint and the market for Health Interims is more healthy than the industry they supply - it's big, big business. Executives in the public sector are paid very well - far more than many of their private counterparts considering they create no wealth. Then there are the pensions. Let's not go there - I had a recent statement on my plans and frankly the prospect of retirement depresses me greatly. I can see myself never being able to stop work.

Workers in the Public Sector just don't get that point as they hassle for more pay citing the private sector as the yardstick.

It's not just redundancies - the public sector is like a vast sponge for money and it just keeps expanding. Latest estimates show that almost 1 in 4 jobs in the UK are in the public sector while the sector just absorbs more money and wastes a vast proportion of it on projects that deliver little and continually over run. In the MoD there is dreadful control of assets, huge contract overspends and then too few people at the business end with little enough equipment to do the job, while the civil servants back home pocket a share in a £48m of bonus payments. Injured troops or the families of the dead get precious little compensation for their losses when clerks in the MoD can sue for massive payouts for little than a bit of bullying or stress - try Helmand province for a bit of repetitive stress. MPs consume vast expenses for little to show for it and cannot see why the public is at odds with them - indeed, they want more pay and to continue to stand at the next election. The NHS is full of padding and overspends yet vital drugs are not given due to cost. Education is delivering mathematically sub-standard and illiterate graduates who cannot even get jobs - the list goes on. Yet we have not saved a penny despite a huge borrowing crisis.

Now we have the final insult. As soon-to-be 84% owners of RBS, we (the public) watch in sheer horror as traders and executives are to be paid over £1.5bn in bonuses from making profits that we (the public) have created for them by bailing them out and giving them free money to re-capitalise, none of which they have passed on to the economy.

It's a story that you could not write it's so idiotic and unbelievable. Globally £15 trillion has been spent on saving the banks and all we have done is lined their pockets by giving them profits as easy as spearing fish in a barrel. As Gordon Brown enjoys a resurgence in public opinion even though the public do not understand why we fight wars, his crony, Lord Myners, says that, 'Bankers should get into the real world'.

Let's just remind ourselves, this is the same Government that told us we could not get caught up in recession as our economy was so strong, then it would not hit us so bad for the same reason when it did and now of the G20 richest nations we are the only one still in recession which is the longest on record for the UK. Let's also remind ourselves that WE own a huge stake in most of the high street banks and WE are the major shareholders of these companies. WE have the capability to demand how they pay their people.

The Government continues to sit on the fence and just lob insults - as they should have done to have avoided the crisis we are in, they should ACT now. To hell with competition, stop the bonuses and reform banking.

Post Crash Experts

If only Alistair Darling and Lord Adair Turner had ever visited a front bar of a pub nowhere near the City prior to the credit crunch and financial meltdown, they would have got their chest heartlity prodded and been told in no uncertain terms that there was a massive hole looming in Britain's finances and that our economy had become unrealistically dependent on over-inflated asset values which were being traded spuriously to raise cheap money on the international markets.

Of course, none of us armchair sages would have had an earthly idea about why this was so dangerous, what these derivative products actually were, how badly our economy would be affected by asset value falls but we all new that what went up HAD to come down. There was a bubble inflated to maximum and it was going to burst - and boy, didn't it just.

These Governemt and associated 'illuminati' like Turner sat back murmuring how beautifully under control everything was. Even when things started to go worng like the 'discovery' of sub prime in America, no one linked this with the financial system in general - not even the bankers. As the crisis got worse, Ministers told us that it can't happen to us as we had a 'robust economy' and then that recession would hurt us less as house prices were more stable here. But the whole vicious circle of finance catches you up - all you needed was one small puff of bad gas and the whole financial system would collapse like a house of cards.

So now that it has all happened, Lord Tuner has had an epiphany. After all that education, years in the Consultancy business, heading the CBI and sitting on numerous Quangos, he has suddenly realised that bankers were in fact trading products that had no real implicit functionor even value other than for them to earn money and that these bankers had little understanding of the implications of doing so. Other, of course, than the fact that they could earn sensational amounts of money by doing so. Mr. Darling has also suddenly woken up and has smelt similar coffee and now espouses the same 20-20 hindsight wisdom as Turner. We are all finally singing off the same hymn sheet.

Not as such. What has either the FSA or the Government done to outlaw the trading of these daft products? Nothing. In fact, as we piddle about fiddling with bonus cultures and wondering if everyone will do the same thing or else one us gets left behind, the written down toxic debts are being 'traded' for vast profits right in front of our faces. Stuff that we now guarantee or have written down in value with our taxpayer cash are actually being used to create vast new profits for banks as if they have suddenly reclaimed some value. The embers of Lehmans and some 94 other banks that have failed in the US are being raked over for little nuggets to trade while Barclays do not even use a white cloth to hide their toxic debt that they suddenly make vanish and create a $3.9bn profit by doing so while at the same time they make 45 former employees millionaires - overnight with one click of the computer and a swish of the pen - it even makes their capital ratio look better it such a good magic trick.

Despite all this post-crash wisdom, nothing has been done. And nothing will be. But talk is good - it helps us taxpayers get used to the fact that we can blame people who have added over a million to our dole queue who will this year be getting multi-million pound bonuses after a short technical hitch to their money making. The fact that the sails are set fair for the next crash seems to ellude their feeble minds and that talking is not going to get the problem fixed. It will take one of the leaders to confront the issue and make sure that his/her country's economy is no longer so dependent on a few people making more money each year than an average worker would make even if they won the lottery jackpot at least once a year.

The G20 starts this week, my bet is that nothing comes of it that will change the behviour and machinations of banks substantially and we will all forget the crash until the next one happens again. Then the same sages can act as dumbfounded as they were with this one.

In a cruel blow to Odgers, the recruitment company charged with headhunting the new CEO for UKFI who manage our 'investments' in banks, they have been fired as they took on an ex-RBS banker.

They learned the bitter lesson that headhunters and recruiting managers should all take on board - just because you have experience of an industry, it does not mean you know anything about it.

Tit For Tat

The day the Pan Am flight was blown out of the sky over Lockerbie still lives on in my memory. It shook the world to its core and struck at the very heart of the free world that such a callous, cowardly atrocity could be enacted above our sovereign territory and so brutally.

It was a mere appetiser in terrorist atrocity terms when compared to 9/11 and to some extent Britain had been numbed to sensational acts of violence after years of IRA campaigns but Lockerbie was defining moment - and for many the connection to Libya was one that damned that nation, if not forever, then for a long time.

The flight was bound to the USA and it was an American airline and so many of the 270 victims were US citizens and so this hit both countries with an equal intensity. In Ireland, we had long differentiated the fact that the Government and the vast majority of citizens had distanced themselves from the extremists within the IRA and its sister organisations - they were rogues, dissidents, terrorists. What made Libya different was that the rogue behaviour went right to the top - to its Dictator, Col. Gadaffi.

It came as a huge surprise to most people in the UK and the US, I am sure, who were old enough to remember the old Libya and you didn't have to be that old to remember that President Clinton regularly dropped bombs on Libya, when in the aftermath of 9/11 that Libya was hurriedly, without warning or question, welcomed back into our protective net. Gadaffi had apparently denounced terrorism and that was good enough for anyone. As if the British Government has no memory or conscience about those whose lives were so cowardly taken that terrible night above Lockerbie, they started feeding on Libya's prizes almost immediately.

As soon as Tony Blair could get his fresh face there, Brown since and Straw at the helm, it seems, we, Britain, have been negotiating with the former rogue state, happy to sell the legacy of those who died over Lockerbie for some oil. A 'Prisoner Transfer' deal was struck, and to the annoyance of the Scottish Justice System, who had found Megrahi guilty of the crime and sentenced him to life in prison as the crime was deemed to have been committed on Scottish soil although the bomb may have exploded over England, the Lockerbie bomber's 'transfer' was added into the agreement.

OK, so technically he was recently released on compassionate grounds - he was dying. But what are the families and friends of the Lockerbie victims going to think? For most of us, a life sentence meant that you end your life in prison. What about the feelings of average Scottish people or British generally? What about the feelings of the Americans? Cut it whatever way you want, that bomb exploded above Britain and a British judicial system convicted and then released the bomber - in the eyes of Americans, not the Scottish alone. If the Americans had had their way, Megrahi, would have been tried in a US court and either be dead now or long forgotten in a US jail where his chances of survival would have been slim long before his fatal illness struck. In particular, the man at the FBI who led the whole investigation to find Megrahi was infuriated.

In an apparent tit for tat move, President Obama, is welcoming Government officials from Japan and China prior to the forthcoming G20 talks in Pittsburgh. But all he has afforded the 'Special Relationship' so far is a chat by the coffee machine and he has rebuffed attempts to have some showpiece talks. Just about every US citizen would have been reviled to have witnessed the scenes when Megrahi returned home, a national hero of a former rogue state having been convicted of killing 270 people, and more reviled to have seen a Scottish flag waving in thanks. It will not be lost on US officials and citizens that Gordon Brown is himself a Scot.

The whole sorry saga of Britain's frenzy to get oil deals and sell out justice for the 270 people who died at Lockerbie is a disgusting indictment on modern politics. I condemn the Americans for their own part in suddenly allowing Gadaffi back into the mainstream with no caveats but Britain just could not wait. To us, it wasn't about forgiving terrorism, it was about trade and big money - and we all know how our 'Champagne Socialists' feel about big money these days.

In many instances, I believe our Government has blood on its hands for lots of other reasons. In the case of the Lockerbie bomber, I think it has behaved shamefully and is a disgrace to all people who remember the Lockerbie bombing and the cold-blooded shooting of PC Yvonne Fletcher on the streets of London and then watched her killer just walk away under diplomatic protection.

The matter has been conveniently and expertly brushed under the carpet as per usual in this country. But to their credit, the Americans have not forgotten and it looks like Britain has gone down a notch or too in the pecking order of world politics as Obama deliberately avoids directly meeting Gordon Brown and his flunkies.

Good on Obama, good on America. We deserve it.

The Stakes Are Getting Higher

President Obama is determined to do something, Gordon Brown is ‘appalled’ but no one has seemed to have gotten the real message of what is happening in the newly invigorated financial system.

More intelligent people than me, such as Joseph Stiglitz, the Nobel Laureate in Economics, have pointed out that the bank bailout has effectively wiped the slate clean for banks and they can now resume their high risk activities with new, cheap, even free money. In fact, Stiglitz presents the argument I put forward yesterday with real credibility – that now banks have been written a blank cheque they can gamble more freely and with less conscience as they now know that the Governments will never let them fail. With the odd exception as we celebrate Lehmans Day.

Stiglitz asserts that Obama’s failure to rein in Wall Street will lead to further disasters and we hear only talk of potential curbs on bonuses and tighter regulations but not one single country is prepared to take the lead as they don’t want to be the loner that effectively rings the bell on their financial centres by spoiling the party unilaterally. All the big leaders are talking up the importance of the forthcoming Pittsburgh G20 meeting but the chances of getting any consensus for concerted action is slim. Someone, somewhere will sense an opportunity to win on this and it will only take one to not toe the line.

In a snippet in the Guardian yesterday, Bethany McLean who authored the book ‘Enron: The smartest guys in the room’, argues that far from financiers losing too much, they in fact lost too little. Meaning, on a personal and even company level, we bailed them out to an extent that it did not hurt – not one iota. In fact, like Stiglitz, she argues, with the exception of Lehmans, the lack of loss has embolden banks to be more aggressive in their ‘talent acquisition’ activities, salaries and bonus schemes as now the stakes are much higher and the potential rewards much greater as we exit the financial crisis and experience the inevitable bounce back.

Both of these observers claim that there should have been wider losses than Lehmans and in the UK there should have been at least one, if not more of the financial institutions we so gleefully bailed out that should have been left to fold. Only then, they claim, could the banks have really been convinced of the folly of their system. In the real world, bondholders, shareholders and those involved in the derivative contracts should have been left to face the consequences of their mistakes as most of the casualties in the business have done during this recession. By allowing these special cases we have given an unfair business advantage to companies who already have business by the short and curlies. The same people who would have no qualms about shutting down companies who default on their loans to them. However, that opportunity as been missed and now all we can talk of is curbing bonuses when everyone knows that banks will find a way to pay the high rewards for the high risks, somehow.

It means that banks are more than ever gearing their strategies and reward schemes to short term profits. This newly fine-tuned mindset is based on the simple maxim that if there are incredible short term rewards to be gained for taking huge risks which ultimately makes the rest of us pay for them in the long term, then unless there is an obvious barrier placed, they will take them. Banks are now working in the secure knowledge that we cannot let them fail and that they will get their free rein as Governments are so dependent on them to sustain economic growth. In short, the Governments want the rewards of the high risks too and are prepared to stake our taxes as collateral should the bets not come off. It is a highly dangerous joint strategy and, while the growth figures may look fine in the short term, in the long term it means that we are all progressively worse off. Amid burgeoning deficits and borrowing, there will be ever greater cuts in public spending and higher taxes in order to pay for all this, while the business world will be a great deal more uncertain with much higher unemployment.

Some argue that as early as 2010 could see the next financial crash, we can only hope that is too early as Britain will not have peaked in terms of unemployment by then and the effects of cuts in public spending to reduce the budget deficit will have not even kicked in. There could only be one course of action – the ‘TUC way’ which is to raise taxes, and then some as the need for cuts would be immediate and huge. While the TUC has a point about the super rich avoiding paying tax, to the tune of perhaps £1bn, it is still a drop in the ocean and it will mean higher tax for all above average earners under any such new scheme. One can only hope that we can get a few years in of decent recovery before the next crisis hits but it surely will.

The only effective way to stop these high risk bets from being placed would be to go to the source of the issue which is the free flow of money based around derivative products which are effectively a work of fiction. Only when we take away such products from the system will we get some stability in it which can be sustained. It will inevitably mean a slowdown or stagnation in growth but you cannot have it all ways – if the system has no real growth in it, you cannot just create it based on no good principles. It is better we find a way to grow our economies based on sensible risk than to get ourselves repeatedly into the same mess while just a small number of people reap incredible rewards for which we have to pay over the long term.

The wide consensus of opinion is that political leaders have learnt few lessons from this economic crisis and that their collective inaction has allowed banks to gear themselves for even more risk. On the anniversary of the Lehmans crash, we have the bizarre sight of the restructuring adviser for Lehmans, Alvarez & Marsal, putting the remaining Lehmans funds back ‘in play’ and they have hired many former Lehmans traders to do so. It is not just a high risk strategy, it is totally counter intuitive to the role of liquidators whose sole purpose is to maximise the remaining assets to make some return to creditors, shareholders and the like. It is as if people view the remaining monies as lost anyway, so they may as well buy a bunch of lottery tickets or back a horse at the 5.30 at Kempton Park. It is that stupid but it is precisely indicative of the new era we have created. Far from learning from their mistakes, the banks think they now have the secret formula to beat the casino. Only there is no formula but there is an unlimited benefactor who will supply all the money they need should they incur incredible loses – the taxpayers. They are now, in their own eyes, unbeatable.

The other obvious learning point from the Lehmans crash that has not been heeded at all is that banks build up their structure like an intertwined morass of interdependencies which makes any kind of proper accounting and scrutiny almost impossible. Lehmans had a web of over 3,000 companies which owed each other enormous sums of money and we have the idiotic situation of British subsidiaries suing American ones for hundreds of billions of dollars while liquidators try to unravel the ball of string that was Lehmans structure. It is a feature of the whole financial industry to build such impenetrable webs and makes the nirvana of banks having some kind of ‘Living Will’ a complete pipe dream. There is a strong case that the situation has got over complicated and is designed to keep prying eyes out and to shield the fact that banks are not really making any profits at all but playing some over elaborate game of ‘fantasy trading’ in order to generate virtual profits. It all looks great on the computer screens and spreadsheets but does not have the same credence in the real world.

As I sat on the plane at an unearthly hour, the music over the tannoy was ‘Road to Hell’ and there was prophetic line in there about credit being just bits of paper which I forget but it seems very apt – it goes on to say ‘This ain’t no technological freeway, this is the road to hell.’ I’m sure it wasn’t written with all this in mind but it might just apply.

It will take a bold politician to break this Mexican stand off as the G20 leaders all look at one another to get a nod of synchronisation before they all move together in perfect harmony. It will be like herding cats. Even then, I think we will barely have paper over the cracks rather concoct real remedies to the ills of the financial world but I believe that’s because they believe they cannot afford to change it and sacrifice growth.

In this foolish and unholy alliance, the bankers know they have the upper hand and a blank cheque. We have created the conditions for catastrophic failure for the future.

Putting Money In The Right Places Not Where Your Mouth Is

A study by IAB labour market has concluded that Germany will not suffer the same scale of job losses as the UK. The main reason is that Germany pumped money into wage subsidies which supported employment.

It's more than that. I sit here having spent this and the last few weeks in Germany and it is clear there is a profound difference to the way in which Germany has spent money to stimulate its economy and how the UK has. There are obvious things - Germany and France are pulling out of recession and there are signs that it is sustainable. Germany put money into wage subsidies for firms to help stop widescale, automatic redundancies which has been the first port of call in the UK in response to the recession. Germany and France put around €5bn into the car scrappage scheme to stimulate sales rather than dither over helping mothball factories and then go to scrappage in the UK at a paltry £300m. Angela Merkel pledged €6bn into the wage subsidy scheme but she fought, along with France, the wholesale and unlimited bail out of banks much to Gordon Brown's annoyance in the G20 meetings. The results have been impressive with no huge increase in unemployment and an early exit to the recession while Britain reels at 2.4m unemployed (some say the real figure is 6m) and this will peak at over 3m before the year ends - as yet there is no sign of the end of the recession for the UK.

Germany got it right - we didn't.

Don't React, Think

Another of my New Scientist articles caught my eye. Notice how Government's over react to situations rather than think them through - the soundbite is better than the diligence in most cases as it sustains or wins votes. But you only have to look at Britain's reaction to swine flu to understand we have committed huge resource to try to cover something which could have been contained far more easily and with less cost, and we have simply saved no more lives by doing so. That is one example - another would be how, in the face of a rail disaster we pour millions into rail safety. The result is that we have no more rail disasters in 2008 over 2007 saving a few lives. Meanwhile around 279 deaths happened as a result of trespass and suicides on the rail network in 2008, around the same amount as 60 years ago.

In other words, we tackle the headline, not the real problem costing far more.

We could get onto road saftey but that is its own nightmare deserving far more airtime while all the heightened security, a war with Iraq and spend after 9/11 did not stop 7/7 occurring under our noses. There is now clear evidence that George W. Bush actually got briefed on a threat to hijack US planes just a month before 9/11 and his recation was, 'You have covered your asses, now go.' The subsequent spend on two major wars has got us no further in making us safe - if anything, we are far worse off.

So back to the point. While Germany put specific money like €10bn into education which has to be spent by the end of 2010 on refitting schools or new interactive learning techniques to lay a foundation for the future, Britain chose to put huge sums into bank bail outs without any idea how much was required or when it would stop. In fact, we knee-jerked into taking Northern Rock into public ownership before we had even time to think and then plunged incredible sums into banks and a further £175bn into Quantitative Easing without any idea what the real results would be. Germany and France were right on their game - specific sums for specific effects and no wanton bail outs with incalculable effects.

Guess who is in the better position.

But there is far more. Eminent economists like Kenneth Rogoff argue that we have thrown money at the problem of the banking system with little thought, especially when it comes to regulation. You do not have to be a genius to realise that banks worldwide are now using easy and cheap loans from Governments to fund incredibly high risk debt swap and the likes as they did before but now under the umbrella of taxpayer guarantees should they fail again.

What does it do? Obviously, it will bring vast, short term profits which banks will want to pay high bonuses on - and guess what we have got? Rogoff goes into far more detail but basically he highlights the knee jerk reactionism by the US and UK over Northern Rock and Lehmans as examples of reacting without thinking which has caused a cascade of similar, more profoundly expensive mistakes.

Time and again, we see that Governments react with short term thoughts that have major effects in the long term. Germany and France campaigned against some of the stupidity Britain went for and they have been the quiet, unassuming winners because they put their money into the exactly the right places to get the desired effects.

At the time, Merkel was seen as the ditherer while Brown was seen as the superhero flying from country to country to save the world even if he did inexplicably go through Brazil. Merkel has proved to be right, choosing the thoughtful and precise approach. Brown has a dog's dinner on his hands thanks to his knee-jerk responses to crises. The difference being is that Merkel knows pretty much how much it has cost to get out of the recession - Brown has zero clue and we will pay yet more as banks behave in the same way as before the crisis.

Regulation and reformation of the financial system was the key if £billions were to be thrown at it. We have none and we are faced with the sight of banks paying a thin layer of superstars bonuses that make it look as though we are rich again. Instead we are paying off debts that will last until 2032.

This is not an issue between employer and employee as Darling would have us think, this is about what banks are really earning, what they can sustain and what we have paid them to survive. We are the 'Masters of the Universe' but we need politicians to enforce it. It's our money, after all.

Why Germany And France?

We could bore ourselves silly recalling Gordon Brown's fateful, progressively more desperate, words of how robust our economy was, how it we could out-run a recession, how we would handle one better than others and why we would recover first. The fact remains pretty much all the clap-trap he gave us was complete horse manure - and not the sort bought on MPs' expenses.

Rather than labour the point, let's just say he called just about every point in the credit crunch and recession wrong and that his understanding of economic matters was not as cerebrally enlightened as he led us all to believe. So much of all that leads to ask, well if he called it all so wrongly did he get the cure right? If not, have we spent all those £billions correctly or were they all wasted?

Two things this week brought this question into sharp focus. First, there are now doubts over whether Quantitative Easing (QE) is having the desired effect of getting us all spending with abundant credit again - as I blogged yesterday, there is now evidence that between banks missing lending targets and their hoarding of new money there is little stimulus reaching the likes of consumers and small businesses in terms of increased credit. Secondly, France and Germany have announced that they have, technically speaking, exited the recession. It must come as a hard blow to Brown's fallen economic ego that these two countries, who have typically led Europe in terms of their consistent economic sense and who fought him so hard on the issue of unlimited bail outs, have broken free of the grips of the financial chaos well ahead of Britain.

In fact, as France and Germany announced growth in their economies, Britain enjoyed a further significant decrease in its economy. So why did Gordon Brown call it so wrong and how little did he understand the pillars of sand upon which he had built what he thought was a robust economy?

Relative Cause and Effect

There is no doubt that the US and the UK had built much more unstable economies over the 10 years. The French and the Germans had struggled in relative terms over the same period, Germany particularly with the post-wall integration issues while France seemed to constantly wrestle with demons from within. We, meanwhile, enjoyed a bonanza pretty much built on thin air. Property prices began to rise on both sides of the Atlantic at alarming rates and many people dipped into their new found net worth by leveraging the equity increase in their mortgages - we effectively became our own banks. It caused a credit bonanza on an unprecedented scale as each new debt taken out was traded and traded again for incremental commissions each time and there seemed an unlimited supply of money.

What this illustrated for Britain was how important the finance sector is to us. Many assume that as it is contributes just 9% to our GDP it is not significant but the reality is that it was the pillar on which our whole system and people depended. As a society we saved negative amounts of what we earned and over the 10 year growth period our average household incomes had actually decreased in real terms - we were supplementing our incomes with our equity gains and that was purely finance driven and at the heart of which were our houses. As the world frenzy for cheap and unlimited money continued, the gamblers in the finance world thought they were cleverer than logic - they traded any old debt and in fact, there was no need to check the worth of an asset as while values rose if a repayer got into trouble they could just leverage more borrowing on each increase in asset value.

It was an upward spiral based on flawed thinking.

So when the bubble popped, US and Britain felt it hardest as we had been by far the most stupid. The other countries like France and Germany had stumbled and nearly lost banks but the reality was that their exposure to the whole 'scam' had been less due to their more conservative approach to simple things like mortgages, where in Germany around 60% deposit is required.

The cause and the effect of the credit crunch were much more exaggerated in the US and Britain.

Other Dependencies

Brown's frustration must have been that if there had been no credit crunch, then Britain was actually well set in terms of handling a recession - in theory. Germany, in particular, and France are the heart of the manufacturing engine in Europe. Their fortunes depend heavily on exports and so when the global economy dipped sharply, they were hit very badly. So much so that at the start of the year, while the British economy dropped 4.9%, the German economy dropped 6.7% and correspondingly, the fall in output was far greater too.

But any economist would tell you that as a recession ends, there is much sharper gains to be had as restocking occurs. Also, France and Germany quickly turned to within to stimulate demand and they introduced scrappage schemes immediately for their car industry that ensured that home sales never really dipped and so they weathered the storm more sensibly while Britain dithered.

Britain, meanwhile, more heavily dependent on the finance sector, saw a much slower recovery and this week we see that this recovery is merely banks recharging their batteries at the expense of taxpayers while the stimulus intended is absorbed by wounded balance sheets rather than getting money into the economy. It was really flawed thinking to believe that pumping so many billions into banks was going to mean an automatic resumption of the 'good times' but this has been the hallmark of the response to the whole crisis - wrong assumptions and undesired outcomes which seemed all too obvious from the amateur economists' armchairs and front bars.

Were The Bank Bails Out a Waste?

Individually, it is easy to identify that the knee jerk saving of Northern Rock was an unmitigated disaster and still is. For banks in general though, we had little choice but to act. However, the sheer quantity of money and immensity of the guarantees and loans required showed just how completely defunct our system had become purely because banks had strayed so far from the basic formula upon which all banks are founded - liquidity. It was as if the whole banking community had lost the ability to add up or to spot the obvious - the whole system had to collapse because it was trading on air not solids.

But getting back to how the countries tackled the issues they faced, Britain really did little more than Germany in terms of stimulation. We decreased VAT and this accounted for around a 1.6% of GDP stimulus while Germany pumped in around the same with around 2% next year while France was less bullish with just 0.7% of GDP. Our boost stops next year while Germany continues to recognise that it has to be a sustained boost.

In an odd quirk it is reckoned that the German and French social security systems helped consumers more than in the UK. As Britain sought to get glamour in loud shouts about how it was 'saving the world' and the PM was shuttling across the world on a fruitless journey for publicity, his continental counterparts just got on with the job logically and quietly. They became Brown's combatants at the G20 by forcing through toned down bank bail outs and wholesale squandering of money and they proved to be, annoyingly, right.

But here is the rub - as Britain pumped £billions in to save the banks, the Germans and French pumped some €5bn into the car scrappage scheme against the paltry £300m we have, of which, only £180,000 has been used to date. Meanwhile we have spent an estimated £1.5trillion bailing out the banks and this is the massive difference in approach in terms of % of GDP used.

Germany and France focused defined sums of money into specific key areas while protecting consumers well while Britain squandered £billions saving the necks of the very people who ruined us while umming and ahhing over whether to save any industries which would have provided direct stimulus to the economy and consumers.

It Was The Economy, Stupid

The problem stems back to Brown's belief that the British economy was in good stead and stable. It simply wasn't - it was built as a house of cards and every corner was a potential weak point as each depended on the unlimited supply of money which relied on no one questioning underpinning asset values, in simple terms. It was so obvious that it makes you scream but more gifted people than me seemed to think that all the great mathematicians of the past clearly had no idea how to add up - they knew best.

And they knew best because they were getting incredibly rich and the nation appeared better off. Indeed we seemed to be - every new gadget was bought voraciously, we bought second even third properties here and abroad, we holidayed more lavishly, we ate more at restaurants, became coffee and wine snobs foregoing staples like beer and tea and we shopped more avidly - like there was no tomorrow. And that was the formula - tomorrow never came. No matter that our wage packets were diminishing, there was always an endless supply of credit, loans, mortgages - all cheap at that and easily accessed thanks to the increased value in our homes. If the debt get on top of us, we simply took a little more money out of our 'banks' and postponed the whole thing.

Tomorrow was never going to arrive, was it?

Our economy had been bolstered alarmingly by all this to an extent that it could handle a recession, even higher interest rates but as long as property values rose, we were laughing. Nothing could stop that - except of course the money tap being turned off. The credit crunch was the 'Black Swan' in the system, according to apologists. The concept that a single, rogue and random event entered the system and proved to be the one thing that would bring it down. It wasn't a black swan at all, it was pure logic. The moment just one person questioned the value of underlying assets and then asked who was doing the due diligence and the whole thing imploded. It was simple accounting, adding up and logic - nothing more.

Sub-prime was just a manifestation of the whole banking flaw, it was not the cause.

Subsequently, we have the FSA squeezing out Independent Financial Advisers and making 30% of them leave the industry as they fingered bad guys but it was the clever people in the financial system who, unchecked, just traded anything for profit with no questions asked and became unfathomably wealthy in the process.

Britain's problem is that our over-reliance on that financial system to underpin our economy was our downfall and it is also the reason why it is taking far longer to recover. Unemployment has yet to peak and is already at 2.4m and the Fiscal Stimulus money will end next year - the pot is then empty. The danger is that if the German and French experience is a false dawn and they lurch into negativity again then the news is very bad for us. We need their recovery to drag us out of the mire too.

People who argue that our GDP is not dependent on finance as a contribution know little about how the economy works. The flow of money affects everything and so our economy became like a clogged engine, unable to operate without the financial lubricant. All that money came from the wrong sources and these are lessons we should have learnt, understood and applied new methods to avoid the problem in the future.

The problem is that in our blind, knee jerk haste to patch up a broken system, little thought was put into what caused it an so how to avoid it again because we had so little understanding of our own economy. Just take a quick glance at the renewed call for bonuses in banks here and the US and the soft regulatory response and you will see that little has been learnt and far less has changed.

We may yet recover, but we just have primed the system for the next fall.

10 Trillion Reasons Why there Should be No Bank Bonuses

After the impassioned plea by bank CEOs for our understanding as to why investment bankers and the like should be awarded unfeasible bonuses in likening them to star performers on the football field or in movies, sobering reality arrives in the form of a report prepared by the IMF for the G20 Summit in September.

The IMF says that the cost to Governments globally for the Credit Crunch - remember not taxpayers but investment bankers caused this - has been $10 trillion so far. Think about that - it 10,000 times $1bn. The bulk has been coughed up by rich countries, 92% of it, but a large chunk has fallen on developing nations who can least afford it, as their clever little bankers wanted to share in the bonus bonanzas too.

The profits that banks are whining about bonuses on are just a few 10s of $billions and fail to make any, even minor, dent in the incredible losses they have drummed up.

There have been $1.1tn of capital injections, $1.9tn of asset purchasing, $4.6tn of guarantees and $2.5tn of liquidity provision - numbers which defy belief and the ability of most calculators to comprehend. It seems bankers can't either.

You see, they would have us believe that we should forget all that cost that has to be met by us, even though a chunk will be reclaimed when the economies recover, supposedly. They would also have us believe that the clever people who created this mess really deserve our largesse in the form of vast bonuses and that we should kneel at their feet, kiss their backsides and not get uppity when they pay hundreds of thousands and millions to themselves for the risks they take.

Another taste of reality from the IMF, whether you believe the actuals or not is neither here nor there, the fact is they say there are more problems ahead. The IMF reckons that government debt will be 239% of GDP by 2014 in Japan, it will be 132% in Italy, 112% in the USA and 99.7% in the UK - slightly out from Darling's estimates. While this may seem excessive as it means a doubling of the current debt situation in the UK, but Darling hasn't got a prediction right so far, horribly undercalling debt at every try to date.

The IMF bemoans a 'lack of policy credibility' which is making fiscal expansion less effective and is increasing interest rates and risk. I would say that by instigating largely the same fiscal policies as before seriously increases risks - but what do I know?

Money Well Spent

MP expenses are a thing of the past - the line has been drawn and the blood has been let. The show is over, folks. Move on, nothing to see here.

The Assembly expenses hardly got a mention even though in Wales they recently voted to stop paying for second homes there, even though the vast majority of Assembly members can commute there by car or train pretty easily as the gruelling schedule of the mechanics of Welsh Government was not quite as demanding as Westminster. But the expenses gravy train must go on.

It was good to see yesterday that the whole thing still has some legs left. After all, we had only really been exposed to second home allowances, we hadn't really got to the bottom of the vast amount of frivolous spending that goes on such things as travel and offices for those 600+ jokers on the make in the West End. Top of the list came the travel spend of the Prime Minister.

You might have thought that the prudent financial genius of an ex-Chancellor would be quite cautious about the cost of travel - it certainly looks it as he seems to have been wheeled through hedges in a barrow by the look of his suits most of the time. However, of the staggering £9.4m spent by only ministers last year, the PM's share alone was over half.

Where the hell did he go and by what means?

Well there was that fantastic, historical political dash across most of the world just prior to the G20 Summit - that was a snip at £744k alone. We still scratch our heads as to why he had to go to Brazil and Chile on that trip but then we remember that his flying partner, Peter Mandelson, had a few 'regulars' to see over there. It was a trip that saved the world, of that we can be sure.

Meanwhile, the expenses of his country house, Chequers, have been published too. The PM has clearly diverse tastes in entertainment and does not need to watch TV as the likes of Bruce Forsyth, David Walliams and Matt Lucas all came to visit while his good old chum and adviser, Fred Goodwin, visited not six months before he was cast out like the knighted criminal he was - banished with a fat pension like a common thief.

Of course, most of this is chickenfeed when compared to his predecessor who was so obsessed with travel he was contemplating getting a presidential plane to be designated 'Blair One' - he can almost personally afford one now under his new pious regime, after dinner speaking and non-executive non-jobs. He and his ministers used to keep RAF jets waiting on the tarmac at Brussels airport as ministers whooped it up and were not kept to the rigours of scheduled flights or use of the Channel Tunnel.

Let's be honest about it, shipping 27 idiots around the globe prior to G20 saved us a fortune really as we have spread the resultant bill over our outgoings for the next 20 years. And Peter M had a lovely time in his 'second home' of Brazil.

Jaqui Does Expenses

Jaqui Smith's marriage is 'strong' - she will not be doing a 'Tessa' and ditching her husband after he was caught viewing porn films. Good for her.

I still think MPs just don't seem to get it. It has nothing to do with porn films, it's about abuse of public funds. The fact that she and her husband, who incidentally 'works' for her according to her expense reports, regularly claim for films watched on TV, porn or not, is the crux of the issue. For most people on business trips, what you do in your private time in your hotel is entirely up to you, just don't expect to expense it, whether it is 'Surf's Up' or 'Debbie does Dallas'. The fact she claims her first residence is a room at her sister's house in London while the family live somewhere else, is just another minor blip.

More Bad News

Over the weekend we got the more revelations of Labour Ministers with their snouts deep in the trough of expenses - this time it was Geoff Hoon who was making sure he 'was ok, Jack' - he of the famous 'they're not alright, Jack' activities which allowed an army he dispatched to Iraq to arrive without the proper equipment, like desert boots.

At least he was cosy and ok in his nice 3 homes.

Geoff is one of those incompetent Politicians who keeps returning like a bad penny in the Mandelson fashion. He, as usual, insists he has done nothing wrong in claiming second home allowances for his family home in Derbyshire while enjoying an apartment in Admiralty House for free while serving time as one of the worst Defence Secretaries in memory - he also was claiming for rent of an apartment in London at the same time.

It isn't that he thinks he has not broken rules - that is not the point. The fact of the matter is that he seems to think from a common sense, decency or moral point of view that it is perfectly fine to have the country pay for 3 homes - 2 of them in London while serving as a paid for Politician.

Hoon and Smith are prime examples of people without the moral fabric and ethics to be in charge of policy making because they are too busy making sure they can bend rules sufficiently enough to make an extra bit of money - that takes a crooked mind to do so and that has no place in Government.

Oh No, It's Darling This Time

And Alistair Darling is at the same game - getting free accommodation at 11 Downing Street, he he is claiming allowances for his home in Edinburgh and his flat in London. You may slightly forgive him that he has been a bit forgetful lately, after all he has just missed another 2.7% of deficit rise he forgot about when he last predicted it. Due to his calculator and memory malfunctions he now estimates that by 2015 our deficit will have grown a further £40bn. He and Gordon Brown have stood Canute-like against the tide of Credit Crunch and Recession shouting things like 'it won't affect us as we have a stable economy' at the start and all the way through denying it will affect us harder than most as the IMF has repeatedly said. Suddenly, Darling has admitted the recession is in fact worse than they had predicted and hence yet more borrowing is required.

I wonder how much this wishful thinking and incompetence we are a) going to put with and b) ultimately cost us?

Having just hosted and attended the successful G20 summit, Brown is revelling in his second stint as 'Superman' but how can all these leaders get the sums right to put us back on track when countries like Britain simply cannot add up their problems properly? It really is a guessing game and it hardly inspires hope and confidence that we will properly address the problems if the underlying accounting is complete rubbish.

For all the good the G20 summit has done in getting a common direction, the actual sums involved are a joke if the constituents are guessing the extent of their problems. But, like expenses, the attention to detail is simply not there or cared about. Saving their political skins and making a few bob on the taxpayer account is number one priority.

Always has been, always will be. We need transparency and people we can trust in power - it's not about docking wages or paying money back, it's about fraud.

Job Done - What's Next?

'This is the day the world came together to fight back against the global recession, not with words but with a plan for global recovery and reform,' said Gordon Brown at the end of what many believe was an astonishing G20 summit.

Astonishing in that just 24 hours earlier, the French were threatening to walk out, the Germans were unhappy at the size of bail outs and China did not want anything that ruined their chances of re-stimulating their economy. Rumours abounded that Barack Obama himself acted as a mediator between the French and Chinese to get agreements.

So What Did We Get?

There were a lot of floral words and nice commitments but the really meaty bits which had a plan attached, was the $1 trillion stimulus package and the consensus on regulation going forward which should be a great deal tougher than before. The French and Germans will feel very cosy after all this, as the stimulus package seemed somewhat restrained given a similar amount was pledged as part of the last stimulus package in the US alone. The good news is that the money goes to the IMF who will in turn pledge around $100bn to help bail out the struggling nations.

Beyond that, we were into the world of platitudes - promote global trade and reject protectionism and build an inclusive, green and sustainable recovery seemed like noble aims but in practice will be very hard to achieve and nebulous to measure. While my theme of transparency was not referred to there was a reference to reforming the international financial institutions under greater scrutiny, looking at bonuses more carefully, financial accounts, tax havens, hedge funds - in general, a far higher level of scrutiny.

Are We Really OK Now Then?

I think everyone realises that the summit could not wave a magic wand and put all to right. But this is probably a distant second. There is broad agreement on a way forward on funding, stimulus and regulation and those are pretty crucial. It was certainly a case of 'Look after your own' in that there was little hope given to less well off nations who were sitting, quite literally open-mouthed, waiting for the developed world to remember them and so the word 'protectionism' to them has a different meaning. But that said, at least we have some way forward.

I think there is a general relief that the magnitude of the new stimulus package is far less than we all worried about. There seems to be an air of restraint and that comes as a blessed relief to taxpayers who waited to see just how much of their future earnings and well being were staked on their behalf.

In some respects we got away with less of a sting than we thought.

Of course, I am far to thick to realise quite where the IMF gets all its money from if we don't have it to give to them and given that we may have to go back there, cap in hand, at some stage, it seems a bit pointless handing over what we haven't got. But that's just my naive self talking. I am sure someone can put me right on that - maybe its like EC rebates.

Hope At Last

What the G20 summit did prove is that in a world of terrible divides, there is the power to drive us to come together with common commitment to tackle issues when they threaten us all.

It is a tragedy that it had to be something which in reality is trivial, to do so. Trivial in the sense that it is the future prosperity of the developed world that was at stake caused by the greed of the minority - if only we could have been meeting to give $1 trillion to the poor, starving and diseased of this world or tackling the consumption of our natural resources or the level of CO2 in our atmosphere - all with the same level of collective commitment to the common good.

Instead it was all about self-preservation. As much as I am happy we got a consensus, once again it will be one of the major missed opportunities of the decade as there will be unlikely a time when the same people meet to discuss other agendas.

Life, indeed, does go on.

Some Good News, At Last?

The average price of homes rose 0.9% last month according to Nationwide. Mortgage approvals rose from 32,000 in January to 38,000 in February. It could be signs that the economy has some 'green shoots' at last - or are they?

The measure of Quantitative Easing (QE) as started by the Bank of England last month has yet to take great effect and so the positive movement cannot be put down to that measure. Besides, in a volte face by Mervyn King in the face of unexpected and bad news of a rise in inflation, it seemed this was no longer the vogue idea.

In response, for the first time 14 years, an auction of National Debt failed as the markets got spooked.

As the G20 country leaders get into full swing today, there will be another crucial time in the City as the next debt auction takes place and the markets will be wary of the outcome. To keep the housing market moving, the theory is that some of that cash has to cascade down to house buyers in the form of more liberal lending terms.

The Dangers

While this is generally received as a good thing, we have yet to agree upon a new structure and strategy for the regulator, the FSA. One of the huge problems that we have faced was the crazy and far too easy terms of lending on houses that got us all delving into our mortgage equity to spend. Northern Rock was not the only bank to lend at over the asset value in its 125% Together mortgages and most banks who lent anything over 80% loan to value (LVT) in the last year or so have seen their buyers actually go into negative equity.

Perhaps it is time to set out the rules properly about sensible lending policy at banks like a cap at 80% LVT so that we do not make some of the same mistakes again. It really is time that household disposable income came to the fore as the fuel for lending rather than the hope of equity growth and release.

Or am I asking too much?

Money Well Spent

Well it was too much to hope for. After my last article, my faith in humanity was misplaced and City workers have once again covered themselves in honour by taunting G20 protesters with £10 notes.

There really is not much you can say. Quite what the waving of a £10 note is meant to say is unclear but that is about the sum of the matter. If that is the standard of intelligence and morals we have recruited in the Financial world then it is little wonder that we are in our current position.

It will be a monumental effort of restraint for anyone not to respond to such arrogance.

Far worse, innocent people like my wife, who works at the edge of the City, and people like her will be the ones likely to get hurt in any flare up of anger not the idiotic cowards who wave their money from the windows.

If enough shame has not been brought upon the banking industry already, then surely this must be the last straw. It has cost us all personally a great deal of money to save the careers of nobodies like that. If I had a choice I wouldn't give them the time of day, much less the money I earn.

I hope Obama, Brown and all the G20 team take a long hard look at what they are saving and preserving. It isn't worth it.

It doesn't make you proud to be British or have friends in the banking industry.

G20 - Hopes, Fears and Humble Pie?

When a similar Summit was held in London a few years ago, City trader-types thought it was funny to photocopy money and lob the copies out of their office windows along with bars of soap at the mass of protesters below. It caused an angry reaction which resulted in a good deal of property damage.

This time around, Banks have sent around internal memos urging restraint and recommending that employees should turn up to work today and tomorrow in casual clothes for fear that besuited people will be automatic targets of the wrath of the protesters on their way to the G20 Summit at ExCel in Docklands.

How strange it is that the very people upon whom the traders poured scorn and fake money the last time around are the very people who have pledged real money over the next 30 years in taxes in order to save their very careers.

A modicum of humble pie would not go amiss.

Our Hopes

After Gordon Brown's rather forlorn round the world trip on a mission to nothing, G20 kicks off for real tomorrow and Brown has reassured us all that there will be a broad consensus on the strategy and actions in order to lead us out of the financial chaos we are in. The likelihood of getting such a general agreement was dampened when the French threatened to walk out of the Summit before it had begun as they disagree fairly diametrically with the UK and US approach to the problems faced. It is good news that President Sarkozy is on his way now, hopefully with the lovely Carla in tow.

As much as we all may be angry with how this disastrous situation has come about and however much we may disagree with the enormity of some of the solutions, the one thing I am sure we would all hope for is a broad agreement on what to do about it.

Gordon Brown refers a lot to Protectionism and I think he needs to be clear about what he means here. On the one hand we are concerned in Britain that British jobs were taken at places like Lindsay Refinery and on programs like 'The Apprentice' there is a definite swing toward doing things to support British business; we also need free trade between borders in order to help get our economy ticking again. But that isn't necessarily what the PM means - he wants more flow of capital and credit into the British economy as literally hundreds of billions have been withdrawn from our money markets in recent months and lending has dropped sharply. It's lending to other banks, of course, but he wants to get that into the wider economy to fuel more accessible mortgages and resurrect the housing market. This is what fuelled our economy over the last 12 years and the PM wants to reset the clock to August 2007 to get it all back to normal.

I don't think that will be achievable. Every country has a duty to get its own house in order and some have suffered more at the hands of the global markets than others. President Obama wants a global response but he was clear in his bail out directives on capital projects - American construction, American steel, American labour. He would have been stupid to have said anything different.

What we would all like to see as well is some kind of global consensus on how banking should look for the future. It is more than clear that the system was not just broken but it was flawed from the beginning - it needs radical change and a re-focus on the core duties of banks which is to provide capital and credit. We would like to see more active, watchful and powerful regulatory authorities which have a global remit to not just monitor wrong doing but to look at business models, profiteering, bonuses and business ethics to ensure we do not have the sleepy old yes men of last time. It is a tragedy that our FSA is being remedied by the same executives who presided over the mess we are in - we need new people, fresh ideas and a commitment to facing banks down not pretty words.

No matter what Lord Turner and Hector Sants say, the FSA had all the remit to tackle banking previously - they just chose to ignore what was going on.

Transparency is a word I like. I would like to see a more transparent banking system that we can see and understand. That people invested in banks in Iceland is all very well but they should have a clear view of how these banks act and what risks there are. How we do that? I don't know but it is tragic that the 300,000 or so investors at Dunfermline Building Society had no idea their savings and investments were at risk through the suicidal business activities of the society's executives. Somehow we need to see that.

Transparency means Government and Public Service too. We have been disgusted locally over the state of public servants' ethics and it is time we got a clear view what our elected and unelected officials get up to, who pays them outside of us, how they spend our money, why they pick fights with other countries and how they account for failure.

The last year has brought into sharp focus the difference between responsibility and accountability at the top level - not one senior politician has accepted the accountability for the actions or inaction.

The culture of greed has almost destroyed us - it is even apparent in the music of the young. We have become a 'must-have' society and it has made us all spend far beyond our means. We have been invited to leverage our assets to produce more money which has fuelled a frenzy of profiteering and a bonus culture which has literally driven us to the point of ruin. It would be something if we could get the G20 countries to agree that the bonus culture at the top end is curbed which will lead to more sensible lending - it means a reduction in personal debt is a priority rather than enticing us to grab the money being pumped into our economies to increase our borrowing.

That has to be suicidal.

Our Fears

The worst that can happen is that the G20 countries walk away with only a statement which does not address any of the above but that they issue some carefully worded platitudes which really mean there was no agreement on anything. The next few months could be crucial for us all and we need these people to agree on at least one course of action in unison - perversely, even if it is the wrong one.

I fear that the G20 group will look upon the protesters and believe they are not representative of a wider opinion. We all deplore mindless violence and unpeacful protest - the whole protest is at risk of being hijacked by those looking for a fight. But this time round, there is a profound and fundamental opinion pervading in our society that believes that much of what we see today could have been avoided and that it was the very people who are assembling in London who slept on the job to ignore the signs. With due respect to new guys like Sarkozy and Obama, our fear is that we aim for a return to the status quo and not to radically change our system so that this cannot ever happen again. Without tackling this, we will be cursed with more booms, followed by ever increasing troughs.

If, in 3 or so years time, we are all remortgaging to leverage regrowth in our assets, then G20 will have failed. We must find a way to get back to sensible borrowing based on household income and avoid the lunatic lending of the last 12 years.

The problem with capitalism is that it is great when things are going well - we talk of honourable projects like reducing carbon, funding new projects to find fuels and materials that will conserve our resources and of helping others less fortunate than ourselves. The moment capitalism fails, it tries to patch itself up at any cost. There is a huge risk that all the good work to drive environmentally based projects and awareness will, at worst, dissipate and, at best, get set back years as we clamour to pump precious capital and money into a system that failed us so badly at the cost of all else.

The cries of the developing world have been drowned out by the siren calls of international rescue packages designed only for developed countries. At a recent African Nations Summit, the theme was that Africa did not cause this problem - it did not bring down the banks or financial system. Its problems have remained constant while we fly around our cliquey groups, mustering resources and taxpayers' money to rescue the few elite people many of who were personally richer than the combined wealth of millions of African people.

My biggest fear is that we consume far, far too much of our money saving a few rich people at the cost of a generation of Africans desperate for our help.

Humble Pie

I have talked of the banking community viewing the protesters very differently from before. This time round, real money in tax pledges have saved the necks of the arrogant people who threw the photocopies of cash out of their windows. Today and tomorrow, they will avoid eye contact and being recognised by the protesters for fear they may get a piece of their mind - and it would probably not stop at mere words.

My biggest hope is that we will have a banking system that breeds people with sense, compassion and real purpose instead of self-seeking, greedy, arrogant and repugnant people who in the face of losing billions still feel they are owed millions. I hope that the current crew not just eat some humble pie but that they remember in future that it is our money and our future with which they play. Accountability, going forward, should be the watchword and next time around let us all hope that the law helps us redress any excesses instead of mere moral indignance.

I hope, perhaps unrealistically, that the G20 Summit will be a platform from which the world will change for the better. I don't expect it overnight but some time in my lifetime is not too much to ask.

Forfar 0 - Dunfermline 1 billion

I have been past Dunfermline a few times at the other end of the Bridge at Queensferry but I mostly know it from my curious fascination of listening to the Alexander Gordons reading out the football results. Much more about the place I cannot tell you other than the fact its building society went belly up with around £1bn of toxic debt.

Fortunately Nationwide has stepped in to buy the good bits but the debt is all ours - we the generous taxpayer. For some time, apparently, the CEO of the Society, Mr. Faulds, has been ranting at what he calls the 'faceless mandarins' at the Treasury to try and get a bail out sorted. As the glorious leader chaired the G20 summit after his rapid worldwide shuttle tour (what a waste of a round the world ticket), the Dunfermline gave up the ghost and went belly up after efforts by the FSA to get things sorted.

And so we end up with another £1bn of liability and another bank down the toilet - the Nationwide picks over the juicy bones and life in 2009 goes on.

Chalking One Up To Experience

The good news is that all savers and mortgage holders plus the staff at the Dunfermline are safe. The bad news is, of course, the taxpayer picks up the tab once again, but we should be used to it by now - I mean, what's one more billion other than a rounding error these days?

It's Mr. Faulds I feel sorry for. He had to shout and scream at the FSA and Treasury to get them, to listen. Presumably his shout was. 'Err, hello guys. Another one down the pan over here. Help me out here, I've spent money I did not have and bought debts I shouldn't have and killed a perfectly decent company and now I want someone else to pick up the tab.'

Ach, I just is a bit embarrassing this happens under our glorious leader's nose just when he is saving the world again. It just had to be his local, didn't it?

Along with Local Authorities investing their balances in foreign banks, quite what the Dunfermline was doing buying £274m of debt from Lehmans and GMAC is a little surprising. Then having around £500m of buy-to-let mortgages and daft business loans adding up to a total liability for dumbness in excess of £900,000 is beyond most of us. The cost of the debt from defunct banks alone was way more than could have been covered by their profits so this was just simply suicidal business practice.

The obvious is howling at me. As most Building Societies don't operate in such risky ways, surely regulators must have seen an exception floating by or were they too busy being 'low touch' as per the PM's asking? And secondly, why on earth are we saving companies from simple gross incompetence?

This may be a microcosm of the RBS situation and maybe we should have applied the same process but once again, the public are shown just how poorly let down we have been by authorities and how they continue to expose us to liabilities we cannot pay for.

Sorry, Gordon Can't Answer The Phone Right Now.....

Well I ask you. All I was trying to do was to call and tell him to stop wittering on about 'Global Confidence' and Gordon wouldn't even take my call. But at least it brought a smile to his otherwise dour face.

As GB gibbered on about 'It is time for the world to face the crisis as one', having just muttered something about 2009 being the year when the world 'came together' to tackle the economic crisis, my head was starting to spin. As he then went on to warn about 'creeping protectionism' I began to lose the will to live and so I decided to call him. Thankfully the call interrupted his drone and brought a smile to everyone's face - even his.

Word Games

Protectionism seems to be in the 'in' word at the moment. The Chinese Premier used it in his speech which upset GB as he had laid first claim on it and threatened to impose sanctions on China if the word was not retracted with a formal apology before his speech. In rushed behind the scenes diplomacy, it was decided that the country with a budget surplus could use the word first, although those with borrowing higher than 57% of GDP could have second use.

There are further talks going on to agree on the meaning of the word after Japan and China had imposed tariffs on imports to keep their local products first in sales yet were using the word liberally. There was vague agreement that 'protectionism' could be applied to banks only lending to companies and consumers in their own country which was seen to harm global trade and exacerbate the problems. Most nodded ascent on this point and so Mr. Brown ploughed on with the point, "The thing we know about protectionism is that it protects nobody and least of all the poor."

Many nodded their heads sagely before saying, 'Eh?'

Protecting Jobs

GB's point was that it was high priority for political and business leaders to rise to the economic challenges and act to help those worried about losing their jobs. I may be a bit thick here but isn't that part of the point about protectionism? Anyway, the PM pushed on regardless to applaud the US in the main for pumping money into the economy as part of 'The largest ever Fiscal Stimulus' to which there were many in the audience who tittered at the economic innuendo, several were openly embarrassed and at least one Financier shouted 'This is outright financial pornography' before storming out throwing his papers in the air in revulsion.

"We have a choice what happens next," GB said stridently. "It is time for action and it is a time for having the confidence to act......It is trust that we have to rebuild as a result of the credit crisis and the failure of the banking system."

I love it - as usual GB was distancing himself from the cause of all this which he has put down to the sub-prime scenario in smalltown America. The fact that Governments and Regulatory bodies just sat by doing nothing does not seem to enter his mind or his conscience. Once again, we see fingers pointing solely at the banks, yet hardly a bank in the last 10 years could have survived the most simple test of liquidity if the derivative scam had suddenly ground to a halt. Trust, I would argue has to be rebuilt in the Political system too - the one that told us we had a rock solid economy that would not be affected by a recession, would survive better than others if it did and had a bedrock built on the value of people's homes.

It would be just nice to see Brown just show a bit of humility, puff out his jowls and admit he blew it.

G20 and Away!

So it is all eyes on the G20, the global economics equivalent of the Olympics and coincidentally being held in London, probably at some hastily erected new building to keep in spirit of the Government bringing forward large spending projects because we are short of a few. There seems to scepticism about whether there can be a collective, global action to tackle the economic problems.

If Brown is anything to go by, his blatant protectionism was shown when he threatened to launch law suits on Icelandic banks if they did return savers' money. As noble as that may have seemed, it was hardly a nice gesture to a country that was quite literally going bankrupt and equally if you are prepared to allow foreign banks to lend you must allow them to take deposits if they need to - and if they hit problems well that's the rough and the smooth surely?

I have great sympathy for private savers but what on earth were Local Authorities doing putting money into foreign, less protected accounts just to earn a shaving of a percent of interest more? Who allowed them to do this in the first place and who in these Local Authorities is qualified to make such investment decisions? And it wasn't just a few spare quid it was nearly £1bn of rate-payers' money? Why was it not paid back to the rate payer to invest themselves and asked for only when they actually needed it?

I don't know - I'm no expert but I can't help feeling Brown's rallying calls are signs of a growing desperation to help Britain out as our economy is so dependent on foreign investment in the City particularly, without it Britain could well be a spent force in the world of high finance. It also seems it's pretty much one way - GB seems to be saying invest in us but we are not going to do anything for you, but I may be wrong.

One last line of hope from GB was a touching reminder of the global commitments to climate change policy and helping Third World countries. Well, the wasted money put into propping up the fat cats in the banks might have been much more happily received in parts of starving Africa. Once again, epitomising the New Labour years, we see wasted opportunity.