Misplaced Priorities

I was accused by someone who read my blog on London 2010 and my chance meeting with a homeless person that I had lost a sense of perspective and implied I had gone soft.

I understand the point the person was making -without banking and bankers we would have no system for trading and the fabric of our world would collapse. The fundamental point that you need a system for transferring credit and money around to make the world grow and get better - that's obvious.

However, I think we lost all sense of perspective not just in the last two years but over the last 15 years or so. We have missed enormous opportunities to get to grips with problems and get our priorities right yet so much of the last 15 years has been about greed and gain - and usually involving a relatively small amount of people.

As well over 1 billion of the world's population struggle and starve, in the West we fight wars about control of oil that really benefits the US and UK in the main, whose combined population is around 400m but in reality it benefits just a slim percentage of those populations. The banking system is allowed to trade amongst itself for 12 clear years and create vast profits based around fictional products that ultimately depend on their over-inflated view of our properties and then we when they get it wrong and lose it all, we actually get told we have to pay the entire bill so that these people can maintain their standards of living and once again earn the vast profits and salaries they are used to.

Meanwhile the world passes by the homeless person I saw on the train in London - it passes by the millions in Africa who look on in total amazement that we would waste so much money saving the skins of so few people in order to preserve our way of life and forget about those we have left behind.

The polarity of our world is more than just two white caps of snow - it is about those who have and those who have not. I am not in favour of communism or even full scale socialism but I am not in favour of allowing besuited creeps in fast cars being saved when they are abject failures and fraudsters.

The global bailouts are thought to be totalling more than $11 trillion - it will not go down as the price paid willingly to save our world as Gordon Brown would put it but the cost of the missed opportunity to do something more fundamental for a world lost in its own self-importance and greed.

I don't think I am being soft in my view or misunderstanding the point. There was a time when banking was an honourable industry because it did what it was supposed to.

My father used to describe compulsive gamblers as the sort of people who would sit in the pub and bet on the hair colour of the next person who entered the door. Go take a look at the range of products you can 'buy' in the world of banking today and it's no different and has little to do with reality but much more to do with the spinning wheels of a casino.

We have just funded the whole thing to perpetuate. That makes us all culpable for that missed opportunity. Here is the rub, if the Government had issued a tax before all this happened to go pay for feeding Africa or the homeless we would have rose up and told them where to go. But because it saves the fortunes of a few thousand bankers we have, without question or complaint, paid the lot and there will be more to be paid.

So run that question by me one more time. Who is the soft person who misunderstands?

London 2010?

I am not sure what point I'm making here but bear with me.

Yesterday, on a tube train in the bowels of London, I was sitting in a crowded carriage, travelling from Kentish Town to Bank. At Camden Town at young man with gingery hair and beard, supported by a crutch got on. I vaguely noticed him as he steadied himself as the train pulled off.

"I know you're thinking, it's another homeless person," said the man. He was no more than 30, looked not scruffy but not smart in a mock leather jacket. His voice was clear, bearing no discernible accent and he sounded intelligent. "But I am just collecting to get enough money to get some food and a place to sleep tonight. I know it's not you're problem and I am not here to force you or make you feel guilty but if you could spare some money, I would appreciate it."

As he spoke, he made no eye contact and kept looking at the carriage floor. In his free hand he held is woolly beanie hat and he limped through the carriage holding it ahead of him. The lady next to me and I dipped into our purse and pocket respectively. I felt a coin in my pocket - it was bigger than most and I knew it was a £2 coin. I hesitated a second as I had a few smaller coins but as the man passed me, he must have known that I was reaching into my pocket yet he did not offer the hat to me. I pulled my hand free and I dropped my £2 coin into his hat and he said, "God bless you" to the lady and I.

He made his way to the next part of the carriage and used his clearly well rehearsed patter on the people in there.

Several things crossed my mind as I looked back at my crossword. I was struck by the man's humility and humbleness - and the fact he was not transferring his problem onto us or blaming us. He just needed some money. Another thing struck me - the act of giving him anything made me feel no better or worse - I neither made eye contact with him nor attempted to engage him in conversation; it was a perfunctory donation on my part and, financially, I was only marginally worse off. I don't know why I chose a £2 coin and I had no idea if it was the going rate or whether I was being wildly generous.

I had no idea what the cost of maintaining myself in food and shelter for the night if I was in the same position. I was intrigued that such a unscruffy looking man with an intelligent voice and manner could be a homeless person - he did not look drunk or on drugs, he was not dirty or smelly; he clearly had some pride in his looks.

His patter was well honed and his delivery was good - he made no attempt to engage with people or to make them feel uncomfortable or guilty. His manner was non-pushy and there was no implied threat; it was simple and easy to understand. There was no attempt to make you feel sorry for him or to get angry with the intrusion into your journey. The man had a gift to to get what he needed without need to resort to emotional blackmail. It was actually quite skilled.

With all that going in the man's favour, I wondered how could such a person be homeless and down on his luck. He had more things going for him than against him. Yet he was homeless and £2 or any coin meant something to him.

Last night, I looked up that there are estimated some 1 million, of which 400,000 are known as 'hidden', homeless people in Britain and up to 2008 this number had trended downward. London is one of six regions in Britain which statistically has the highest concentration of homeless people - around 0.6% of the population of people in London are homeless. These figures go up to 2008 and obviously do not take account of the recent recession.

I have no idea how much is the bare minimum in terms of cash required to get food and a place to sleep in London if you are homeless.

As I travelled home last night, I realised that this young man, without meeting my eye or talking to me personally had said something to me. I looked back over the various themes to my blog and realised that much of my own issues are with the injustice of greedy bankers getting a 'get out of jail free card' and then moaning about how few £millions they are allowed to earn this year or at 50% taxation and that Britain is pricing itself out of the financial market. That or trough-snouting politicians on the make, justifying themselves as if they needed it. Or lying politicians sending kids to die or get blown to pieces. I am angry about something.

I am not sure of my figures but I would suggest that 0.6% of people in London may be far more than the number of bankers who earn over £1m a year in bonuses. Perhaps it would be pertinent for the two populations to swap for a night or two just so that we can all get a sense of perspective.

Modern Britain is full of such peculiarities - in a population of 64m in Britain, over 1m are still classified as homeless. I would suggest just than a few thousand people in Britain are rich bankers earning over £1m for trading on the back of their company's big name. They are the people who leaned out of their windows at the time of the G8 talks waving £10 notes at protesters after losing £billions.

It would be good for such apparently educated and intelligent people to get some real education and humility.

Again, I am not sure of my point here but I guess I felt more humble about some homeless guy asking me for £2 than some rich kid robbing me of thousands so that he or she can continue to earn £millions and for them to act as if I owe them.

I shall remember that the next time I see bankers trying to justify themselves on TV or a politician feeling stressed by questions of their honesty or greed. What I shall forever feel guilty about is that I hesitated giving the man just £2, thinking it too much while I had no choice in giving thousands to some ungrateful little swines who had lost £billions and did not even have the humility to ask us to bail them out or thanks us.

They just expected it and we paid. And we keep paying. Perhaps we all need some education.

Well Worth The Wait?

A few hundred £billion later on bail outs and £200bn of Quantitative Easing (QE), a fiscal stimulus package worth a few bob, and all the 'right decisions' have 'apparently' been made?!

What do we get for all that money? 0.1% growth in the final quarter of 2009, according to the Office of National Statistics (ONS). Granted, they may 'sex up' that figure later but the reality is that the much-anticipated recovery that Alistair Darling and Gordon Brown got us all salivating over is hardly worth a thing. Given that we spent all that QE money, we had the effect of Christmas buying and pre-VAT surges, the fact of the matter is that we hardly showed a jot of growth.

The majority of the fiscal stimulus has been spent, now we are on the artificial lifeline of delayed spending cuts in order to tackle our ever increasing borrowing - we are in the red zone on the economic barometer. We are in dodgy credit territory and the Government's strategy of 'Hope' in terms of growth has been like a like a firework's touchpaper fizzling out with no bang.

One economic commentator from the FT previously described the economy as like being lit by firelighters and causing a momentary flash of burning but once the firelighter burnt out discovering that the economy is merely glowing not burning.

I said it before - I believed the Government used the strategy of throwing enough manure at a wall in the vain hope that some would stick in terms of the amount of money they spent. There was no focus, no target, no knowledge of the return on the money - just spend as much as possible and hope things would right themselves, all because a bunch of failed Investment Bankers advised them to do so.

It leaves the Government's fiscal policies both before the financial crisis and after in tatters - they were as bad dealing with the problem as the hubris shown in pre-empting it. No lessons have been learnt, banks have not been reformed or restrained, bonuses are being paid as high as ever in the City and bankers still being revered despite the pathetic windfall tax which makes little or no effect.

0.1% represents an economy in crisis still and we have little left to throw at it and a massive budget deficit to deal with. If this is 'prudent' economics as Gordon always told us he was expert in, then we are surely on a slippery slope to ruin.

If I were the Chancellor, I would be almost embarrassed to mention this figure. This is not good news for businesses continuing to hold in a survival pattern, hoping for an upturn.

The Public Sector Bonanza

If we needed more evidence that costs are spiralling out of control in the Public Sector and that it has not, in any way, shared in the need to cut costs to reduce the budget deficit, the article in yesterday's Daily Telegraph said it all.

A small, but prominent paragraph on the front page indicated there is now a record gap between Public and Private Sector pay which is over £2,000 on the average salaries in each sector.

I have beaten on about this but the Private Sector has borne the brunt of cost cutting and job losses in the last year while the Public Sector has remained fat and happy, negotiating unrealistic pay deals and sitting on overly generous pension schemes. The Government has postponed any cost reviews until after the election and our borrowing as nation rises daily - it's as if people who control these things either don't get it or, worse, don't care .

The Public Sector cost is a massive ticking bomb and the longer we leave tackling it, the worse it will get. Meanwhile, as National Debt goes onto the open market, credit agencies around the world will be questioning the British ability and appetite to deal with its growing public costs and repayments.

As we, the taxpayer, contemplate the price of all this, it is encouraging to know that right in front of our faces, our 80%+ publicly owned bank, RBS, is a principal lender to Kraft to acquire Cadbury - which no one seemed to know until after the deal was struck, while Mandelson now wants to see the detail as he wafts it through to conclusion. Further, those banks, who we bailed out are enjoying a wonderful resurgence as the wider economy still struggles - prompting new, higher pay deals and wonderful profits.

You couldn't make this up - the taxpayer gets the entire bill for economic failure to see banks whooping it up thanks to our generosity, while the Public Sector gets fatter because costs are not cut which could save the taxpayer some money.

Having just got my Corporation tax demand within minutes of posting my accounts and still waiting for my personal rebate since October, it seems that taxpayers have become the new 'Bank of England'.

Social Economics

I am absolutely sure I am using the term 'Social Economics' wrongly. Then again, I am not an economist or a real socialist for that matter. However, I probably know as much about economics as those who profess to by the state in which we find ourselves.

Recently, I blogged on National Debt being the new sub-prime but in the heart of that piece was the idea that external markets are watching our economy closely with a keen view to see how we can tackle our budget deficit and therefore be able to pay our debts. Given much of our National Debt is being subsidised by Quantitative Easing (QE) money to the tune of £200bn, soon it will go back on the open market and we will see what the real world, with real money, thinks of our ability to service our debt. There are many who now believe that as we leave a cogent strategy to tackle our debt until after the election and have built our strategy to date on using new money which we don't have to support ourselves, that Britain is in a precarious state.

It was described by an editor for the FT the other night as a period where a boy scout is trying to light a fire - the QE money is the firelighter which is burning brightly but there is little evidence that it has lit the fire that will be our economic recovery. But I would argue there is far more at stake here.

In my idea of 'Social Economics' which has nothing to do with its real definition, our future relies on two aspects which are not classical economics. 1) Politics - we are in a period of hiatus, marked by our lack of enthusiasm to actually do anything about the budget deficit, not even a spending review in preparation which is due to the imminent General Election. This may be understandable as cost cutting is not popular and it seems that inaction is as voters have actually polled in favour of the Government in recent months. Perhaps it is 'Denial', my age old theme - put your head in the sand and the problem will somehow right itself. Gordon Brown may be foolish to start believing in free market economics at the wrong time, especially as he believes it's what got us into this mess. The issue here is that the longer we delay and not tackle the problem, the worse the problem gets and the cure will need to be more drastic - in both spending cuts and tax rises.

2) Hand in hand with this comes the mood of the people. We have just had a dramatic illustration of how voters can change Government policy as Iceland has refused to back its Government in paying our Government compensation for those who lost savings in Icelandic banks. I have a great deal of sympathy with the Icelandic people - while they had many good years, by the end of this year they will have lost almost a third of their take home pay due to the banking disasters, and they are not a rich people. Besides, it was our Government's decision to repay the losses to individuals, not theirs. What it means is that there is a breaking point and people will have a finite limit as to how much they believe they can pay in taxes which is fair, while the same may not apply for spending cuts as they can be far more localised or general. The clear learning point is that if there had been a referendum on the bank bailout beforehand, it is suggested we would have all voted against it.

The outside world will watch closely as to what our breaking point will be. Astutely, Lord Mandelson has understood that there is a limit that people will pay in taxes but I don't think he was referring to us but to bankers who are royally miffed about the windfall tax, on top of the announced 'super tax' on those who earn £150,000 or more plus the new curbs on City bonuses. In a microcosm what bankers do about it will illustrate a wider reaction. Let's face it, if bankers get cheesed off their employers will relocate them and they will rise again elsewhere to earn their money. For real people like you and I, we will have to pick up their share of the tax burden and the rest.

So the question arises, how much will we all tolerate in Britain? How much are we prepared to sacrifice in order to keep bankers here and London as one of the biggest and most influential of financial centres? Are we prepared, as Iceland is, to say, 'Up yours, take your Casino banking elsewhere and the fools that play it' or are we realistic enough to know that we cannot have a Britain without the support of the City, its earnings and influence?

I am sure there is a line that we all cannot cross. I am also certain that the later we leave that 'stress test' the worse it will be. I do believe that part of the attempted and almost farcical leadership coup at Labour was fuelled by the PM's inaction on the whole matter. While it is nice to talk about halving the budget deficit and talk generally about the numbers, the reality is that every voter in the country would like to know what it means before they vote. Yes, it's true we are stupid lot - we think we are still relatively prosperous and that if house prices rise again, boomtime will be back - Christmas and new year sales spending shows we are that daft. It seems we have no idea what really may happen after the election or we are just in denial that it will not deteriorate.

The reality is that after the election, when the economic mire hits the fan, there will be pressure on two sides - 1) to impress the markets that Britain is doing more than enough to reduce its budget deficit and pay its debts and 2) the people will not like the bitter medicine we will have to follow to cure us of the years of excess.

It's at that point that my 'Social Economics' will kick in. Hubris and hiatus are two funny words but we have both to contend with right now and both are all about manipulating our minds and votes. Personally, I would rather know how much all this £1.3 trillion of bailout will cost me in real terms before, not after the election, and how parties are going to give us cast iron guarantees it will not happen again.

I see nothing of it from any party right now - which means we will cast our vote once again, as at the last election over Iraq, without any of the real facts at our fingertips. Some things never change.

Icy Reception

Iceland has agreed to pay a sum equivalent to 40% of its GDP as compensation for the money lost by Dutch and British savers in the collapse of online bank Icesave.

Icelandic voters are up in arms, seeing this as taxpayers coughing up for the mistakes of businessmen, to the tune of almost €12,000 per person in a country of only 320,000 people. In terms of lost opportunity, the interest on the payments alone would run the cost of their entire health system for six months.

Icesave attracted savers and Local Authorities alike through its marginally higher interest rates but when it collapsed it was not covered by the FSA compensation schemes - something that savers had ignored in order to get at the extra savings interest. One could argue convincingly that the apparent lack of care by the FSA and the savers allowed this to happen while taxpayers in Iceland can rightly say that they should not be liable for compensation for the mistakes of a small group of greedy businessmen who happily risked the deposits on crazy products as a result.

In Britain, even before the banking collapse, saver deposits were protected to a certain extent and the Government moved in quickly to support all deposits, following Ireland's lead. The FSA has always had such a scheme - but why should it support the deposits of foreign savers? And should Iceland have a similar scheme?

Perhaps more importantly was the question of why several local authorities, including my own, were depositing funds in such saving schemes when they knew they were not protected by the FSA? It seems that not a single person in Local Authorities lost their jobs for not checking this and many such staff in charge of the management of funds do not even have formal accountancy qualification. Yet, such mistakes have to be funded by private citizens who pay tax in Iceland.

The Icelanders are not taking it lying down. A large petition has been put together and around 56,000 or 23% of Iceland's voters have signed it to try and prevent the payouts. If only the British voters could have been bothered to do the same perhaps we would have saved paying out such massive blank cheques to save the careers and fuel the wealth of a tiny percentage of this nation's citizens or at least made sure there were enough caveats to make them all culpable should it ever happen again.

But that's the stoic Brits for you. £1.3 trillion bail out to save rich bankers? Why not.

Profit and Loss

It's nice to know, as major shareholders and owners of 5 banks in the UK, that we are being royally screwed at both ends.

I am sure endless puns and innuendos can be made of that statement but whichever way you cut it, banks are pretty nasty to us. On the one hand, they make extortionate profits out of thin air and spread the proceeds amongst themselves. Then when the whole scam is revealed, we have to bail them out to the tune of £trillions - effectively footing the bill for every bit of profit they have lost and more. Then, since the very existence of banks, they have crippled the customers with expensive, incomprehensible and downright unjustifiable overdraft charges.

Last month a court upheld the right of banks to charge basically whatever they want and not have to justify it to customers, which was amazing enough. Now the regulator, Office of Fair Trading (OFT), has dropped its attempts to rein banks in. Once again, regulators and authorities seem to be powerless when it comes to even the simple things at banks, so imagine what it must be like when it comes to the more important things like losing £billions or paying themselves hearty bonuses for doing nothing since the Crash.

It is clear that banks operate in a twilight world where people who ask questions or try to intervene are systematically told to get lost, be bamboozled by technicalities, are blackmailed in terms of consequences of interference or simply reminded of who their friends are (as in the case of Government ministers). The result is that the taxpayer, despite paying for both ends of the spectrum, has no say or form of recourse in what happens to them. If banks fail, we are told that we are liable yet if banks want to continue to shaft us for excessive fees, they can.

It really comes back to this whole point of banking reform. As shareholders and stakeholders we should have far more say in what goes on. Why should we pay such unjustifiable fees when we are bailing them out and supporting liquidity in the financial markets, from which a small percentage of people are benefiting to the tune of £millions in bonuses? We sit here like lemons letting it all happen - thinking a couple of quid of windfall tax will sort out the problems.

Perhaps, if we got ministers, regulators and non-executive directors in who cared about all this we might get some progress, but while we populate the FSA with former bank executives and have Government with ministers who want to be non-execs of banks, we will not get anywhere.

Just try not paying the fees, and the law will pound you for money and jail you if you refuse. Perhaps the bank executives ought to get some of the same treatment for their losses?

Taxing Problems

While it may help soothe internal feeling about bankers by taxing them heavily for a short period, the reality is that the problem of banks running extreme risks in their business is not solved and we run the risks of other problems.

John Varley, CEO of Barclays, who did not use taxpayers' money to prop up their company in the Crunch, has said that using tax as a stick short and long term is not a solution. His argument is that it drives 'talent' away from Britain. Personally, I really don't care if unaccountable people who thrive on big bucks set up their own island somewhere in the Pacific to go race their fast cars and talk about the size of their wallets or purses. But I do care that if we do not fix the fundamental problems in the financial system, it makes not a jot of difference to the banks where they locate their staff just as long as they can earn big money - and so driving people away from the UK doesn't actually help us.

If the Taliban all dropped their weapons tomorrow, turned themselves in and embraced Christianity without a further shot being fired we might think this a victory but it isn't going to happen on the current tactics employed. Likewise, banking will find a way to continue what it does unless we tackle the underlying problems - it will also find a way to continue doing what they do to earn billions in scam profits and reward a thin wedge of staff beyond all sense of reality in some way or another. They can afford to as there are huge profits at stake and, frankly, we have shown that we cannot do without the banks. A compromise will be found or loopholes used - either way, banking will get what it wants in some place or another.

The UK Government's headline-grabbing move to tax bankers and high earners generally will not have the desired effect. Firstly, only £550m is expected to be raised on the windfall tax and secondly, high earners will find loopholes in the 50% tax on £150k or above - accountants and lawyers are hard at it as we speak, communicating openly on how to 'mitigate tax' on websites as legitimate as the IOD's.

Tax is a useless and archaic system in driving behaviour. As with speed cameras, it is a way to make money out of transgressions but it does not stop dangerous driving which can be done even at low speeds. So too, heavy tax on bankers merely makes a few bob to assuage public opinion but it does not stop the banks trading products that will cause the next bank meltdowns and even harder economic times while staff cream off ridiculous profits. In fact, unless we fundamentally reform what banks do, before we have paid off the bills for this time around, the next bill will be on us. You see, taxing them this way ultimately will get transferred to us anyway by the fact that they will continue to do what they do to cause financial meltdowns.

If the tax burden gets too high, ultimately it will drive people out of the country. The most able to pay will leave, transferring the burden back onto the people who did not cause the problem. The non-domicile rules will ring fence high earners at one end of the spectrum and banking havens will arise nearby fairly soon.

Fundamental reform of banks is what is needed. I applaud the splitting of investment and retail banking as a start - too often staff in retail banking pay with their jobs for the idiots in the investment banking side and the cash is used to hide the activities of the investment arms. But trading debt should be rigidly reformed so that complex, structured products cannot be used to hide poor asset valuations and debt management, creating a convoluted web that no one, even in the banks, understands. Wholesale money markets should not be used to prop up banks' activities, it is not a question of ratios it is far more fundamental than that.

Until we get some people with real sense and courage into the banking industry, regulators and Government who aren't so rich that their views are biased then we will always have this stupid attitude of tax being the tool to solve any problem.

The problem is that taxpayers have to pay for the mistakes. If we, the taxpayers, held people accountable for the money they use from our personal wealth pots, then people like Andy Hornby, Fred Goodwin, Alistair Darling, Gordon Brown and Hector Sants would be flipping burgers at McDonalds learning the basics of business by now - paying tax like the rest of us and ranting at the their former colleagues in the banks.

Grim Reading

If you want to really make yourself angry ready for a showdown with the boss or to get in the mood for a hard game of rugby, please read the attached description of the Asset Protection Scheme as pertaining to our wonderful investment, RBS.

On the face of it, there is nothing new in there. We have known for some time that as taxpayers we would be underwriting about £280bn of toxic assets accumulated by the bank. In many respects we were led to believe that the grimmest story was contained within ABN AMRO bank, the ill fated and disastrous acquisition made by RBS just prior to its demise. How glad we must be to find that in fact half of the stupid lending at RBS was plain old loans to the UK public, small businesses and property companies - what may be described as banking basics. There are quite a few derivatives in there too but not half as many as you might think.

Now, cast your mind back to when our glorious leader said boldly that it was sub-prime mortgages in the US that precipitated the Credit Crunch. How wrong he indeed was. His good friend, the man he knighted, Fred Goodwin was hard at getting the very basics of banking wrong. Fred 'The Shred' was well known for acquiring companies and then shredding costs and getting supposed 'value' for the assets, but he wasn't actually much good at banking per se, it appears. The risk assessments and controls at RBS must have been pitiful because most of the assets we are now underwriting, frankly, should not be there.

Where, oh where, was the FSA when all this was going on? Where, oh where, was the Government? The problems stemmed from the basic, basic rules of banking, and knowing that RBS was leveraging money on the wholesale money markets to finance his business big time, could we not see that this was a company doomed to fail? Yet even up to the wire, the Government and regulator reckoned RBS was a company with enough capital to survive.

It is a story of incompetence and hubris that runs through the entire credit crunch story. We only needed sub-prime to expose the rottenness underneath - it was merely the bit that was showing at the time. RBS was doing its own 'sub-prime' right here under our noses - the US had very little to do with it as it may as well have started right here.

I read the grim details of what I am insuring this morning and while I got very angry with RBS, I was more angry with the fact that people in senior positions did not know what was going on - like at the FSA and Government. It really reflects how little our most senior and supposedly intelligent people know about how the Credit Crunch actually came about and therefore casts more than my major doubt on the measures they have taken to get us out of it.

To be precise about that - Alistair Darling is now bickering about introducing a windfall tax on bonuses and excess profits at banks. However, the problems that were created were right at the very heart of the banks - the basics. That is where the real flaws exist and the whole ability to trade poorly assessed debt is where the money is made. Any debt was good as it could be traded many, many times for vast profits and no one ever cared about the original debt itself or the assets it financed or the ability of the person or company to service it. It did not matter - the money was in the trading of the debt, not the debt itself. The money to buy more debt was cheap and plentiful and no need to get deposits to pay for it - the world was perfect and still is. This is a basic but subtle difference in semantics but it's where the whole problem originated.

The crisis was about what banks do, not about the money they and their employees make. Taxing them may help purge the soul and win votes, however impractical it will be to implement if at all, but it will not stop it all happening again.

Stoic Britain in 2009?

I think we all need a pat on the back. 2009 has to be one of the worst years in terms of crises for many a long time, yet the average person in the street, young or old, took it all with a traditional British stiff upper lip.

We have endured 6 successive quarters of GDP contraction. We have endured 4 years (and more) of serious decline in household income, with 2009 being by far the worst. We have added well over 1m to the dole queue and there are still more to come on that. We have seen major companies try to impose draconian cuts on staff at banks, the Royal Mail and BA as good examples; we have seen the loss of major household names like Woolworths, MFI, Threshers, Borders. We have seen the near collapse of the financial system, with 5 household named high street institutions falling largely or wholly into public hands. We have seen the exposure of long term, systematic abuse of the taxpayer by MPs on their expense claims with some stepping way beyond the point of common decency and into the world of crime. We have seen more deaths in Afghanistan in one year than all the previous years of that engagement added together - and totalling now as many as those lost in the Falklands conflict. Even as we watch with horror as that seemingly pointless engagement continues, that still our troops are not being given the right support, numbers and equipment to do the job they are asked to do. As the official inquiry into Iraq starts, it is already clear that the public were grossly misled into supporting a war that had no legal grounding - making Britain no better than a rogue state intent on imposing its will on others because it wants their assets.

Why have we put up with it all? Even in the Glasgow East by-election, the status quo was endorsed. During the year there was much talk of discontent amongst workers and potential riots in the streets as Britain suffered from the depths of the recession. We have seen that wile private firms have suffered badly from the effects of the recession and the credit crunch, the public sector has enjoyed an unscathed path with hardly any job losses, no major cuts, good salaries and fantastic pension rights as more private firms close their final salary schemes.

For many we have seen our assets corrode at an acidic rate - the stock market has regained ground but most of us look at our pension and savings statements with fear and depression. Our homes have lost some 25% in value and although they are back on the rise, many people are now in the mire of negative equity or under the cloud of delayed payments. Many firms have deferred their tax under the government schemes and face a big cash call soon that may yet send more companies under. The VAT reduction to 15% will be reversed as of the end of this month and prices will rise sharply.

And perhaps most depressingly, we have been shielded from the true cost of the massive bank bail outs we have been party too. The National Audit office have now fixed the current running total as £850 bn and rising - a spend totally unanticipated by anyone and we are still worried about further liabilities as now the next wave may not be sub-prime mortgages but sub-prime national debt as whole states or countries like Greece and Dubai start to falter on debt repayments. The result is that we are likely to be paying for the huge borrowing on all this until 2032 although Government calculations seem to be wrong each month as the borrowing requirement keeps exceeding estimates.

In amongst all this bad news - terrible news - the population seems to be unfazed and carries on regardless. Even terrible disasters like the Cockermouth floods seem to move us little anymore as we become numb to the pain around us. Perhaps we are in denial - all this bad news is being locked out so that we can focus on existing in our way. After all, there are no food shortages, we still have credit and we still have means of getting what we need. Indeed, the travel industry, with the exception of BA, reports that holidays have not fallen off at all - for most of us, life goes on.

One theory why we have not been up in arms and rioting in the streets is that we have a focus for our fury. The one benefit of the bizarre banking drama has been that we can collectively and unreservedly hate the people who caused the mess we are in - the bankers. The issue just won't go away. Even as the money still pours in from the taxpayer creating an artificial market condition where every bank in the world can make vast profits quickly with little investment and cost, they are demanding bonuses for effectively just pocketing our cash. They are not even demanding it - they are blackmailing us for it.

At one point in the year, I advocated that we do not pay our tax as enough was enough - why should we give our money and see the direct result as being MPs cheating us for cash and bankers queuing to buy shiny new sports cars? Why can't we see more care homes for the wounded returning from Afghanistan or better equipment and transport for them so that they can be protected against the unseen enemy? If money was so easy to be handed out, why did we have to pay so much tax before, if debt was so good for us?

I can only put it all down to the old spirit of survival and stoicism by the British people. At the direst moments we had the surreal moment of an open racist on prime time TV telling us that Hitler had a point in so many words. And still we carried on.

I think as the year closes, we should all pat ourselves on the back for our courage, fortitude and downright ignorance of what is going on around us. By putting our heads in the sand, young kids in Afghanistan will continue to die and rich people in the City will continue to earn a fortune off the back of our mindless handouts and behave as if they earned and deserved it. Why, when history is rewritten, we will find that the likes of Goldman Sachs, RBS and the other banks saved us, not we them.

And we will believe every word of it, just as we did of the rewritten history in the TV program, 'The Blair Years'. The one thing that Mandelson and Brown got right in the last year is that the public was stupid - the rest they got totally wrong.

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.

A Sense of Perspective

So the Board of RBS will resign if the Chancellor uses a veto to stop payments of up to £1.5bn in bonuses in their investment banking arm this year.

As a taxpayer and an interested party in the matter as I participate in the 70%+ shareholding we have in that bank, I say the door is there and mind it doesn't smack your backside on the way out.

Why are we arguing about this? A year ago this company was broke and dead, thanks to the board of directors who are largely the same as before with a few notable exceptions. Had we allowed them to fail then they would have collapsed owing hundreds of billions - that's how bad it was. Even though we rescued them they made thousands of redundancies of everyday banking staff who were not party to the mindless decisions to squander money on such stupid activities as playing poker to buy ABN AMRO or for that matter loan Dubai World around $2bn.

So they have turned £6bn in profit - thanks, we will take that as we generously allowed them to write off a further £8bn in loans only a few weeks ago.

For the public at large, it is incredible that a few strutting peacocks in the city dare hold us to ransom when we came to their aid and preserved their way of life not 12 months ago. They tell us the 'talent' that is capable of winning and losing so capably will go and join other banks if we don't pay and then we'll be sorry - and that by paying them they are doing good by their shareholders.

Hi guys - welcome to the real world. The public is your major shareholder and the 'talent' can leave whenever it likes - don't let us stop them. I'm a shareholder, that's my vote.

Honouring Debts

The one thing that is becoming apparent about the Dubai World debt crisis is that Governments are getting tired of just accumulating more debts.

The governments of Dubai and Abu Dhabi are taking a pragmatic view on the debts at Dubai World - they basically say they will pick and choose where to bailout but creditors need to front up to their responsibility as well as Dubai World doing so. While there have been some short term liquidity measures taken by the UAE banks, effectively Dubai World is a pretty unsafe bet and no one is going to step in and pick up a full tab.

At last, some sanity. It finally shows, if a company or entity recklessly gambles on growth via continually rising asset values and creditors lend them money because they think they cannot lose as they can trade and trade the debts, perhaps the Dubai hiccup has taught us the lesson that a debt is just a debt. The even better news is that just because Dubai World is big and important, Governments are in no way going to just save it when it makes stupid decisions.

The fall out of this crisis, being downplayed in most quarters as a side show and trivial in the great scheme of lending, has yet to be really felt. I suspect that credit agencies and creditors will be taking a great deal more interest in what the British Government is doing in order to secure its ability to repay its growing debt. Hope isn't a strategy, as I have blogged before, and it is high time we saw some action on curbing and cutting costs as well as strategic spending to stimulate the economy rather than just shoring up the balance sheets of banks who risk the free cash to make more profits while no real effect is felt in the actual economy.

I still believe that Dubai is a salutary lesson once again that not enough is known about our financial system, locally or globally, and there are few safeguards against high risk products being traded.

Dubai Wobbles - What Does It Mean?

Two authoritative bloggers, Robert Peston and Stephanie Flanders on the BBC site have given the conventional view that the Dubai debt repayment blip is merely that.

They also argue that if push comes to shove then the European banks which are estimated to be exposed to around 50% of the total $80bn that Dubai owes, then they can absorb those losses well within their stride. In reality, they say a big Sugar Daddy in Abu Dhabi is on hand to pick up the tab anyway and they are just toying with Dubai.

It sort of shows just how punch drunk we have become to big numbers. This is a sovereign state - and a rich one at that - delaying loans because of excessive debt.

Hello!

Substitute any rich nation having trouble repaying their loans - and there may be a fair few soon - and you have the real picture. Countries all across the globe, with few exceptions, have vastly increased their borrowing to support the bank meltdown. In doing so, they have burdened their taxpayers with extraordinary new debts and, for the most part, they have underwritten the future debts of the entire global banking system. And we are in the final throws of a recession so there is no growth to offset these debts.

To my mind, Dubai is a stark reminder of how precarious the global economy has become and how interdependent we all are on one another. The butterfly wings beating in Dubai could have a dramatic effect on the world economy and particularly if we remain unimpressed by the magnitude of the numbers involved.

A sovereign state has found repaying its debt hard. It's a wake up call for us all - you don't need many more countries announcing the same for the world to become a pretty shaky place.

It's a real reminder to our Government - plan to repay those debts and take action now. Delay, and we could be in the same boat with no Sugar Daddy oil state locally to bail us out. It should make us think hard.

Very Sharp Reminder

Just when we were believing we were free of recession and the financial crisis was all but over, Dubai has shocked the world.

We were busy worrying how to curb bankers' bonuses and when the economy would show growth again - then we had a day of turmoil as stock markets reacted badly to the news that Dubai World, the state owned investment company, delayed payment on its quarterly debt repayments. Almost unnoticed, book store group Borders slipped into administration following the Thresher off licence chain, making a further 1,000+ people unemployed in the UK.

Dubai has enjoyed a six year period of unprecedented growth as it has invested enormously in property, both commercial and private and the market for it has been buoyant. As an Emirate state it is not blessed with a rich supply of oil but its strategic location makes it compete with Hong Kong as one of the great ports in the world for international freight transport. Dubai has been Western-friendly and inward investment has been enormous but Dubai World itself has clocked up astronomic debts of $59bn.

It's another tragic example of a total belief that asset values can only go up and that all debts can be repaid. The mind boggles to try and work out how many times that vast debt has been chopped up, repackaged and sold multiple times around the globe as part of derivative trades and credit default swaps upon which banks and their trading employees have pocketed enormous profits and bonuses.

This is a stark and sharp reminder of the folly of the global banking system. The total belief that any debt is good and that asset values will always rise has been the bedrock of the financial system that has turned into the sands of the Arabian desert. The creation of structured products to trade around these debts is like a terrible cancer ravaging the financial system and this shows how very easily the whole system can get a critical blow. This kind of catastrophic failure in debt servicing threatens to have a domino effect and I am sure there are many bank executives who are nervously watching and hoping that the oil rich Government of Abu Dhabi steps in to bailout Dubai World - Dubai has total debts of over $80bn.

There is a good reason why everyone is nervous. Dubai World is not the only entity in Dubai which owes incredible amounts of money. If the Dubai economy fails, the fallout could be felt all over the world and snag us all just when we believe we are recovering. As an eminent economist, Nouriel Roubini, has asserted, there is more bad news about debts to come and banks have not yet revealed the full picture on this yet.

Dubai is reminder of how bad things can get very quickly.

Banking Governance

Kudos to Sir David Walker who has at least understood some of the big issues in the banking sector and has proposed some major changes which he believes the UK should lead on.

However, I still do not think anyone has nailed the crux of the problem. It's all very well proposing that banks should disclose how many people earn of £1m or more and that Non Execs (NXDs)and shareholders should take more responsibility in the governance of banks but I really do believe it is naive to believe this will actually solve anything, even if it is a step in the right direction.

Firstly, disclosing millionaire earners is neither here nor there - meaningless in the great scheme of things and it reveals nothing of how a banks works, the basis of reward schemes or whether it is acting properly or not. It is a mere barometer and if anything, it advertises to peer companies which bank is prepared to pay more of its employees more money. As for NXDs and shareholders having more say, I believe there are several issues here.

Firstly, we have seen how NXDs have acted in the lead up and during the crisis. As the proverbial hit the fan and one of its biggest perpetrators was being thrown to the dogs, they still acted as if nothing was wrong in conjuring up a massive pension pay off for Fred Goodwin or re-engaging Andy Hornby on a £60k per month consultancy contract at HBOS. Because the rewards of the NXDs are inextricably linked to the profits, they are hardly likely to kill the golden goose - they are by definition already wealthy people who are there to make a great deal more money. Then there are the shareholders. Of course, their rewards are dependent on the banks' fortunes as well but there is a bigger issue at play.

The vast majority of bank shares are owned by the public but indirectly - either via the Government and its vehicle, UKFI, or via pension funds and the like. The general public owns very few shares individually. Therefore any involvement by shareholders comes as 'block votes' from these 'aggregators'. Again, both fund managers and directors of UKFI are charged with obtaining maximum value from the shareholdings so they are hardly likely to vote against making profits. Again, they are all wealthy individuals and are motivated by making a great deal which their own bonus schemes generously allow.

Finally, as the whole of the banking industry now has a safety net of unlimited lack of liability to their losses should there be wide scale failure, there is zero incentive for any of the 'aggregators' to act in any way different to the banks themselves. Indeed, even the staff at the FSA all received bonuses for last year despite presiding over catastrophic losses.

There are far more fundamental issues to be resolved here and it isn't rocket science. At the heart of the banking system lies a serious flaw and a massive liability. Upon this flaw, the global financial system has built an estimated $550 trillion of open derivative positions and a further $400 trillion of associated insurance positions - all of which are so convoluted as to be virtually unauditable. As long as banks are allowed to continue trading in such products and financial instruments, then the rewards will be massive and yet largely unreal.

Until we get to grips with these 'Financial Weapons of Mass Destruction' as Warren Buffett called them, we will always have a basic issue of governance in banks for which the taxpayer will be liable - yet we are the biggest shareholders.

More Good News For Banks

Bank executives are probably having a few drinks tonight - not just because they are earning fat profits and bonuses again, but because they have found they can continue to profiteer at the expense of those who go overdrawn.

The Supreme Court has ruled in favour of the banks in the feud with customers over being able to charge excessive fees when customers go overdrawn without pre-agreed authorisation. We have all been victim of this at some point when a cheque is late or something, we get some arbitrary sum charged with no real reference to the cost incurred or to our banking history. There seems to be no real standard charging system and then suddenly, in the same month or more, all letters and administration charges can be lumped on you too.

Many bank customers had rightly complained and taken the action to court - I can only hope they had not gone overdrawn to pay for the legal fees as it has taken years to get to this point. But the Supreme Court was swift and damning in its judgement, allowing the banks to effectively charge what they liked so that they could offset the cost of those who do not incur charges.

Banking is one of the few services that you have little or no control over the charging structure and the costs can be as arbitrary as they like. It is now case law that you cannot complain and get compensation - they are allowed to do it.

Given the fact that banks are extracting front and back office staff at an alarming rate, the £2.3bn they earn annually on such fees are pretty essential to their well being. It seems a little churlish that banks would behave this way after all our incredible generosity in bailing them out - some of the bailout we did not even know about as £61bn was secretly stumped up to 'save' Lloyds and RBS last year and the public were not informed until this week. What else we don't know about may well have been swept under a very lumpy carpet.

It seems taxpaying bank customers are being shafted at both ends. We pay excessive fees for going overdrawn and if the banks go 'overdrawn' we totally underwrite their losses. I am sure that in isolation, the Supreme Court had no real choice but to exclude the fact that taxpayers rescued the banking system but in the cold hard business world once again it just goes to show what a dreadfully poor deal taxpayers got for its largess in saving the banking system.

Politicians may think it is petty to negotiate on such trivia but this is really at the heart of the matter - it is everyday people who simply cannot afford to prop up banks when they fail who have been preyed upon by banks with excessive charges. If the individual or collective taxpayer had had the authority to negotiate the bailout deals rather than ministers, civil servants and investment bank advisers, then the shape of the deals, if any would have been agreed at all, would have been very different. If we were to put that much 'skin in the game' we would have expected something in return. Instead we see high risk plans, excessive wages, written down debt being traded again and a new bonus extravaganza.

Lord Myners and the rest of the crew who negotiated all this rubbish were probably far too wealthy to be worried by such details but that was the essence of the whole lackadaisical approach that led to Fred Goodwin walking away with millions when his strategy had actually wrecked a great company.

At a time when the whole country seems to have gone mad enough to want more of this Government, this ruling was a timely reminder of how badly the whole bank bailout affair was handled.

Irrational Decision Making

Emotional and social factors are rarely taken into account when developing ideas on economics. I just read a great article by Professor James B. Duke on why they should be taken into account.

Which camp do you fall into after the economic crisis? Will the crisis change your buying habits or will you change? Here's the conundrum - some will say that because of the crisis they will no longer have a big mortgage or have such huge credit card debt. Then there will be some who think that they have saved for years and now see their savings depressed in the crash and they might think that they have missed out as their purchasing power has declined over time - perhaps they might spend more rather than save for the future because in reality, they haven't saved anything.

In some respects, this is the dilemma our economy faces. We are creatures of habit and so as the economy recovers we will probably revert to type and spend more - but until we see it recover we will more likely hang onto our cash believing that we may be at risk due the economy. It's the sort of circular argument that economists have tried to break by advocating Government spending and Quantitative Easing (QE) to give the economy a 'virtual' boost as it is money we don't have. Economists believe that the market will pick up but they lack the ability to factor in the human emotional and social dynamics which will actually play an important role in any recovery.

Here's an experiment which sort indicates this. Two players are given £10 each. Then player 1 is given a choice - give player 2 their £10 and player 2 will give player 1 half of their money back - or player 1 can keep the £10 and go home. Player 2 has the choice of keeping the £10 they have and the £10 they are given so they can leave with £20 or indeed give half the money back to player 1.

Then a nuance is added, as player 1 gives £10 to player 2, the £10 is quadrupled so that player 2 actually receives £40 and then has £50 in total. Player 2 has the choice of giving half back (i.e. they both finish with £25) or walking away with £50.

Now the rational perspective is that player 2 will never give any of the money back so the prediction is that player 1 keeps the £10 and goes home because they do not expect any of the money back. However, human nature appears to be more trusting as in the experiment it was found that there was a good chance that player 1 gave the money to player 2 and that player 2 would reciprocate and give half their money back. But the more interesting aspect was that if player 2 walked away with the £50, then player 1 is invited, having lost their £10, to give £1 to the experimenter and for every £1 given, the experimenter takes £2 off player 2 - so give them £2 and they take £6 off player 2 and so on. Rationally, why would player 1, who had just lost money, pay more money just to see player 2 punished? The reality is that people often do exactly that - spending money to effectively express revenge even when revenge is irrational.

This is a trust game and it mimics exactly what we have been through as investors in the last two years. We have ploughed money into investments and pensions in the past and we expect fair play from the providers. Now that these investment companies and banks have blown all the money and expected us all to bail them out, our trust has been broken as they have effectively walked away with the 'experimental £50'. Consequently we feel betrayed.

Professor Duke asserts that this trust needs to be rebuilt and it means that we have to get some understanding of what is going on in order to invest again. He believes there should be new regulations, more transparency and removals of conflicts of interest in order to rebuild our trust. But perhaps the most basic of human nature is at work too, and I know I really empathise with this, we also want to see the perpetrators to feel pain too.

I have to say that I am in that camp that says I really resent that I have been asked to bail banks out without seeing hardly any of the executives and traders who caused the crash suffer - in fact, we are griping and arguing on how to limit their pay rather than stopping them trading. The reality is that even if we attempt regulate their bonuses with laws that in practice cannot be applied they have not suffered for what they have done.

Perhaps this is one of the reasons why the recovery is a great deal slower than anticipated and it is why our Government consistently miscall that borrowing they need. One thing is for sure, the trust of every day people has yet to be repaired over the banking collapse and I, for one, am still not comfortable about paying for other people's mistakes and greed - now or ever.

James B. Duke is a Professor of Behavioural Economics at Duke University, North Carolina and is the author of 'Predictably Irrational'

Banks Sorted - Move Along, Nothing More To See

A simple podcast and bit of TV interviewing and finally Gordon Brown and Alistair Darling have brought the banking crisis to its conclusion.

The final solution is the FSA will be given the authority to tear up bankers' contracts if they feel they are excessive or reward high risk activities. Makes you wonder why the FSA would do that after sitting by and watching the last crisis unfold last time and doing not a sausage about it - in fact, receiving bonuses themselves for their good work at the time. Indeed, to a person, the same staff exist at the FSA so we can expect this new, draconian behaviour to really work. Sure.

Along with a few gems on higher capital to be kept by banks, Gordon Brown confidently announced in his podcast that "We will ensure that the banking crisis we have experienced over the last two years should never again come at a cost to the taxpayer".

The finality was awesome - the banking crisis as we experienced it will never happen like that again but if it does we will never have to pay for it the way we did before. Of course, if you believe that then you will believe anything and vote for a landslide Labour win at the next election.

Much more to the point, long before we look at why Brown's comments are not true, we should be asking why did the last crisis cost so much. Brown tries to tell us that as recessions go we have not fared badly on unemployment and repossessions. I think sometimes he must be reading different reports than the rest of us as unemployment is now higher than at any point in the last 12 years and if you add those who have been on long term benefits for whatever reason, then Britain is at its worst in terms of Welfare strain for a long, long time. As for repossessions, when those who have opted for the deferred payment schemes and when the interest rates start to pick with those in negative equity, it is arguable that we have yet to see the full effects of the housing crash.

As before, Brown seems to think the financial situation in Britain is far better than it really is.

The stark facts are there to see. We have spent £1.4 trillion on saving the financial system and to this day we have no idea whether that is too little, too great or enough. The bankers remain unscathed by our generosity and the best we can do is to threaten their bonuses in the future while at right now headhunting, sign on fees and massive profiteering on written down debts are bolstering earnings greatly. Under our noses, the very machinations that brought about our ruin are going on and the best our ministers can do is to write a few rules that banks and their lawyers are adept are getting around.

The actions by Darling and Brown are superficial and treat only the symptoms of a flawed banking system that is working in exactly the same way as it did before. We have printed £200bn of new money and given it to the banks to shore up their finances and play the markets - none of it has got into the real economy whereas the exact same QE in the US was put into the asset backed securities markets and guess what? They emerged from recession and we didn't.

At every turn and juncture this Government has got the financial calls wrong. We have spent far too much money rescuing a system that did us no good to act the same way again. None of what these two goons have done or said will make an iota of difference and at every point they called the situation wrong and estimated its extent wrongly too. It has been a process of escalation all along of reacting to the crisis, trying numbers and then spending much more as the guesses made were never right. How much we could have avoided paying, we will never know.

If you believe this cod's wallop they have spouted this week, you may as well believe pigs can fly.

How Will You Vote?

Glasgow North East has delivered its message - Gordon Brown and Labour are doing a fine job and there is no need to change a single policy.

You have to wonder where the folk of Glasgow North East have been these last few months. The by election was triggered by the resignation of their sitting MP, former Speaker Michael Martin, who was at the centre of the controversy over MPs' expenses. It appeared that Mr. Marin had lost his sense of reality and fairness as well as possibly his senses in actually not agreeing with the general view in the country that MPs were ripping us off at a time when ordinary families were struggling to make ends meet. Further, as we wallowed in bad news after bad news on bank bailouts, bonuses, Fred Goodwin's pension and our treatment of our fighting soldiers, it appeared life in Glasgow was not just unaffected but thriving. The majority returned was all but what Martin won at the last election except for a few votes that were picked up by a Conservative candidate who decided to contest the seat for the first time in ages.

I am sure Michael Martin was a popular local man and had represented his constituency well - no doubt. However, it seems that the staunchest of Labour supporters cannot seem to link the country's woes with the sitting Labour PM and his Government. Perhaps the whole affair over the SNP's decision to allow the Lockerbie bomber to go free on compassionate grounds to be received by a hero's welcome by Libyans on his return was a step too far for the sitting party. Perhaps the feeling is that while Labour may be a bunch of incompetent dolts who now agree that rich people should get richer while shafting the working class, the contemplation of Tories ruling is too unpalatable. At least the BNP came nowhere - a small victory for democracy and common sense.

But it does make you wonder what will Labour have to do worse than they have so far in order to lose their core vote? Even their own MPs are fed up with Brown's leadership while who would have thought Peter Mandelson would rise to the very top like the villain of a Harry Potter book and rule the country as 'Minister for Information'. It's like the chilling plot of a novel worthy of George Orwell.

Maybe I'm seeing it all wrong. Perhaps my lingering distrust of Tony Blair's cynically sleazy regime and its decision to fight wars without good legal reasons really got to me. Perhaps I read too much into Governments that try to manipulate our minds by programming our thoughts. Perhaps I should not be surprised that the whole financial system has failed and I have born a cost for no good reason while the bankers continue to earn millions. Maybe I am the one who is illogical here, expecting too much for our troops fighting wars I think are unwinnable - certainly the way we are engaged in now. Maybe I am the one who is wrong in believing MPs should not be allowed to claim cleaning bills as that is a lifestyle decision not a burden for taxpayers or that they should benefit from the profits of houses whose mortgage interest we paid for. Maybe I am the one who is out of touch believing the credit crunch and how we dealt with it has left us worse off than all other rich nations - maybe I am too idealistic in believing as a result of this our fight to save the planet and the starving people of this world has been set back years as we have ploughed all our money into saving the wrong people because they have us by the short and curlies.

That is the Labour world I thought I would never see. From my viewpoint it has catastrophically failed us all - but Glasgow North East is just fine. I wonder if Willie Bain's first words after winning will have made the penny drop. If everyone adopted the same approach, Gordon Brown and Labour will be back in on a landslide come June.

Surely there is something wrong in that?