Cassandra, in ancient Greek myth, was the daughter of King Priam of Troy. After Helen, she was considered the most beautiful woman on earth. Curly red hair, blue eyes, fair skin. (I know: she sounds more Irish than Turkish, but work with me.) Because of her beauty, the god Apollo fell in love with her and gave her the gift of prophecy. When she did not return his love – always a dangerous game when dating a god – he cursed her, ensuring no one would ever believe her prophecies.

But Cassandra saw it all coming: the Trojan war, the Trojan horse, the fall of the city and the slaughter of its citizens. She explained clearly and repeatedly what was happening. And no one believed her. Even after her early forecasts had proved to be bang on the money, still no one believed her. Even as the Trojan horse, bursting at the joins with Greek soldiers, trundled up to the gates of Troy, no one believed her.

Greece: We can’t see the 10-year depression just yet – but that doesn’t mean it’s not coming

So Cassandra feels like a good term to apply to people like me. (I’ve never been wooed by a goddess and cruel observers might suggest I’m very slightly past my physical peak, but I’m trying to focus on the prophesy side of things here. Work with me, folks.)

I’ve said for ages that the euro will fail, that the countries of the Mediterranean are bankrupt, that Germany doesn’t have the resources to fill the void, and that the Western world is entering not a recession, but a depression: a huge, 10-year, economic slump.

And here we are. If you look outside the city gates right now, I think you’ll find a giant wooden horse with a trapdoor in its belly. Because I’m a Cassandra, you won’t believe me of course, but I’ll give it a try anyway. That’s what I’m fated to do.

So number one, the interest rates on Spanish government debt are now heading up towards 8%. If you want to borrow money from the bank, you can likely do it cheaper than that. You personally may have a better credit rating than the Spanish government right now. In any case, a government can’t pay those punitive rates when its debt is gaping, its deficit out of control, and its economy in recession.

There’s muttering about a €300 billion bailout, which would keep Spain away from the financial markets for three years, but so what? For reasons I’m about to come to, I don’t think such a bailout could possibly happen, but even if it did, so what? Spain’s problem is too much debt piled onto a creaky economy. That €300 billion ‘bailout’ wouldn’t be a gift, it would be a loan. The solution to too much debt is not more debt. (And, for that matter, Mr King, the solution to weak money is not to print an endless supply of the stuff.) Naturally a giant bailout would kick the problem down the road, but bankruptcy is bankruptcy no matter when you meet it.

That’s point one. Point two is that Germany (and creditworthy northern Europe in general) is coming to the end of its borrowing capacity. There’s no reason at all why the German government should fail to meet its obligations, but it can’t be the Atlas that shoulders all the burdens of its southern neighbours too.

The ratings agencies have noticed this. Germany is now on credit watch for possible downgrade. If Germany commits to a monster bailout of Spain (not directly, of course, but via some Euro acronym), that downgrade would happen faster than Helmut Kohl could guzzle a schnitzel. Because Germany knows this, and because its citizens know it, those German purse strings are going to be drawn ever tighter as eurozone discussions progress. And quite right too. Germans have worked hard to restrain wage costs, export goods, innovate new products, and boost productivity. There’s no reason on earth why the fruit of those efforts should be handed out to economies which have steered a very different course.

Germany is now on credit watch for a possible downgrade. No wonder Angela Merkel is showing the strain

Point three: the terrible data, released today, about the British recession. I said we were in recession back in autumn last year. (No one believed me but, hey, I’m used to it.) And now we find that we’ve actually had three successive quarters of recession, with the last quarter the worse of the lot. Even if things turn up – and, pardon me for asking, but do you see any grounds for optimism right now? – we’ve still experienced the worst recession in British economic history. Not a bit worse than the Great Depression but, by now, very significantly worse.

Like I say, I’ve been saying all this for a while. Me and Cassandra both. The Greeks are coming. There’s going to be war. It’ll last for ten years. That wooden horse looks mighty iffy to me.

And no one listens. Maybe it’s nothing to do with being cursed by a God. Maybe it’s just the way with people who tell the truths that people don’t want to hear. But we Cassandras just go on prophesying anyway. There’s a big storm coming and it’s about to strike.

This was published in todays Daily Mail.

Barclays will not be alone in its wrong-doing, and other banks may even have exceeded Barclays’ brazen contempt for truth and right-dealing.

So what happens? So far, we’ve seen all the standard responses.

Exit: Bob Diamond has quit Barclays after days of pressure but what will happen next?

Barclays’ Chairman, Marcus Agius, tried to fall on his sword, but the political commotion was such that the bank’s CEO, Bob Diamond, was forced to fall on his instead. It is said that there will be significant pressure on the board to avoid paying a monster ‘golden farewell’ to its departing boss, but don’t place too much faith in that pressure.

For one thing, if a deal has not already been penned (a big IF), Diamond will have lawyers pushing for maximum compensation and the Barclays board will want to avoid a protracted legal fight and even more negative publicity. But in anycase, Diamond has already earned £100 million in pay and and perks from hisstint at the firm. The guy’s hardly going to be destitute.

Neither destitute nor (what a surprise!) repentant. Diamond’s arrogant and self-serving spin said, ‘I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth. I know that each and every one of the people at Barclays works hard every day to serve our customers and clients.’

What? ‘The impression created’? Every one of the people at Barlclays ‘works hard’ to serve customers? Bob, you haven’t got it at all. Your bank was involved in fraud on a massive, multi-trilliondollar scale.

I don’t necessarily mean fraud in the way that the law defines it – I’m not a lawyer – but I do mean fraud in its ethical, moral and human sense: the manipulation of interest rates to fit the bank’s position. Emails prove Barclays bank employees are guilty of conspiring to manuplate interest rates on a massive scale. Bob, your bank was rotten as hell and your bankers were part of that rot.

Probe: The Conservative party have ordered an inquiry into the scandal

Meantime, the Tories have ordered an enquiry into the scandal. Andrew Tyrie, the putative head of that enquiry, describes his remit as dealing with these questions: ‘What does the Libor scandal, what does this scandal in the market, where people have made money by rigging the market, say about the standards and the corporate culture of banks?’

Those are dumb questions. The LIBOR “Fixing” scandal provides one small illustration of what my book, Planet Ponzi, details in 394 pages: banks no longer have any functional ethical standards and that the corporate culture of the City of London has been degraded beyond all recognition. We know that already. (And remember I’ve been talking about this LIBOR “Fixing” scandal long before it hit the main stream news.)

But it’s not just LIBOR. It’s the PPI scandal. It’s the bonuses paid out by taxpayers to the employees of failed, nationalised banks based on lax if not fraudulent accounting practices. It’s the gross misselling of mortgages which led to those bank failures. It’s any number of derivatives scandals. I’ve accused regulators oftentimes in the past of being useless and toothless. And so they mostly are. But a near £300 million fine is a good start. We need to encourage those regulators to stay in action mode, to find their teeth.

Meantime, Labour is reluctant to endorse Tyrie’s enquiry because it wants any probe to be run by a judge under quasi-courtroom conditions.

Reluctant: Labour is reluctant to endorse Tyrie’s enquiry because it wants any probe to be run by a judge under quasi-courtroom condition

And Labour is half-right. If you’re going to do this job, do it properly. Get a judge. Give that judge a budget, as much time as he needs, and the power to sub-poena documents and compel witnesses. The Tory enquiry will only have eleven weeks to complete its mission. That’s pathetically insufficient. You might as well try to fix the England football team in that time, or restore Nick Clegg’s image.

But Labour’s no more than half-right. We don’t need an enquiry, we need prosecutions.

The Feierstein rule of criminal justice says that for every million pounds of financial misselling or manipulation, one banker should spend one year in jail. That’s a reasonable, modest, and proportionate rule. If you started to nick stuff from your local Tesco’s, you’d find a much fiercer rule applied to you.

And where are the prosecutions? Where are the bankers in handcuffs, in custody, applying for bail, their passports confiscated and (ideally) a block on any movement or transfers ofassets? A fine of a few hundred million quid means something to a bank – though not much – but it means little or nothing to the guilty individuals.

Please note that I’m not calling for the writing of new laws to bolt the stable doors behind this most recently escaped horse. I’m calling for the vigorous application of existing laws that have never been enforced.

It cannot be the case that kids who pilfer from ashop in Hackney are sent to jail, while the bankers who manipulate hundreds of millions on an industrial scale and over a period of years, are allowed to walk free.

Oh, and because the bankers will have the best lawyers that money can buy, the state should respond in kind. There should be no financial limits placed on prosecutors. If they need more money to secure convictions, they should get it. If they need to hire in top-dollar financial consultants, they should get them. Without limit. (Oh, and again, this isn’t a new theme of mine. It’s right there in my book Planet Ponzi: enforce the laws, send corrupt bankers to jail. It’s so simple, but what has happened? What ever happens?)

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Uncapped: There should be no financial limits placed on prosecutors

So, enforcement of existing laws would be my very first recommendation, but it doesn’t stop there.

The Tory Party needs to stop taking money from the finance industry. That industry is too vastly compromised and has done far too much harm to this country – yet some half of all Tory funding comes from that source.

Just as the Leveson enquiry will force a much greater distance between politicians and the media, so too should this Barclays scandal force a proper separation of finance and politics. There should be a crocodile filled moat between the two. And searchlights, machine guns and electric fencing.

These things matter for two reasons.

One, it’s a simple question of justice. We don’t have a fair or equitable society if the rich aren’t held to account the same way as the poor.

But two, it’s a question of saving our society from civil unrest. Last summer saw the London riots. There were multifarious causes of those riots of course, but the essential heart of them was the sense – the perfectly correct sense – among the rioters that ours has become an unjust society. Where the rich too often don’t deserve their riches, where their crimes go unpunished.

If we want to save this country from more civil unrest, more riots, we need justice. We need bankers in jail. Lots of them and for long, long sentences.

This was published in the UK Daily Mail

I don’t know. But I do know that behind the bland official announcements and yawn-inducing data about pension-deficits there is a giant scam going on and you are the one being ripped off. But first, let’s get to grips with the facts. According to the neutral voice of the BBC news website: ‘Royal Mail pension fund assets and liabilities are set to be transferred to the government next month, subject to EU approval, the BBC understands. The move means that Royal Mail pensioners will enjoy a state guarantee of their retirement benefits. It is a key part of the impending privatisation of the Royal Mail. The transfer – which was backed by the Communication Worker’s Union – will provide a windfall gain to the government’s budget of about £28bn.’

So that’s all good, right? It’s win-win-win. The Communications Worker’s Union gets what they want (government-guaranteed pensions). Royal Mail management gets what it wants (the path cleared for privatisation). And the government gets a windfall gain of £28 billion which, with government finances the way they are, is not to be sneezed at.

Only, and here’s the thing, you can’t create winners by accounting changes. And if it looks like everyone’s a winner, then you can pretty much bet that there will be a loser – and you, my friend, have been cast in that role. Congratulations.

Here’s the scam. By nationalising the Royal Mail pension fund, the government gets to snaffle its £28 billion of real, tangible financial assets. That’s all real money, which can be used to offset our borrowing needs, hence the reason why the government debt falls by that amount.

But the government is also nationalising the future obligations of the Royal Mail pension fund. And – how unsurprising is this? – those liabilities are almost £10 billion greater than those assets. So in fact the taxpayer has just lost out to the tune of £10 billion. The only reason why the government debt looks better not worse is that our current – insane – accounting standards don’t report pension obligations as part of total financial obligations.

If you want to know how much that little swindle will have cost your household, the answer is approximately £450. And please don’t think that that £450 is one of those mythical charges which will never actually be imposed. On the contrary: those Royal Mail pensioners will receive their pensions and you personally will be on the hook to make sure they do. Needless to say, if you are covered by a private sector scheme, no taxpayers will be there to rescue you should something go wrong.

Fortunately, of course, you have your elected representatives to defend your interests and stand up to this fiscally reckless behaviour. One lion-hearted MP, for example, said: ‘I fear the government is going to steal £22bn of pension assets, dump the liability as a mortgage on future generations and dress it up as the salvation of the Royal Mail. Their plan to steal the pension assets to help reduce their borrowing figures while taking out a massive mortgage to cover Post Office pension liabilities for 50 years is nothing more than a massive accounting scam … This dangerous plan must be resisted.’

Strong stuff, huh? The trouble is that the MP in question was speaking in 2008. His name was Alan Duncan, then the Conservative’s shadow business secretary. And Duncan is now in the cabinet … which is expected to approve these plans.

And, in any case, a scam of a mere £10 billion was never likely to satisfy our politicians. Why fool around with mere tens of billions when you could play fast and loose with thousands of billions?

So, for example, when the government released its most recent debt figures, it said: ‘net debt excluding the temporary effects of financial interventions was £988.7 billion, equivalent to 63.0% of GDP.’ Since things only get really hairy when debt is above 100% of GDP, you’d think that everything was under control. Everything’s fine.

Well, yes, exactly. That’s what you’d think the implication of that statement is … except you probably have a niggling worry about that phrase to do with ‘the temporary effects of financial interventions’. And if you have such a niggling worry, you’re quite right to be alarmed. Because the ‘temporary effects’ in question refer to the government’s ongoing bailout of RBS and others. We’ve basically taken on the debts of the bailed out banks and will need to discharge those debts. Sure, we’ve also taken on some assets at the same time … but if the assets had been all that wonderful, we wouldn’t have had to bail the banks out in the first place. We took on iron-hard debts and putty-soft assets. That’s not a great combination.

The amounts involved are enormous. Including the effects of the bank bailouts – as we have to, if these accounts are to make any sense at all – public sector net debt at the end of January 2012 was £2311.6 billion or a jaw-dropping 147.3%  of GDP. That’s within touching distance of Greek levels of debt.

The last government got us into this hole and we can’t reasonably blame this one for not having fixed the problem yet. But the Royal Mail pension scam sends a deeply concerning messsage about the direction of travel. Personally, I think that the water in the taps of Whitehall has done its stuff. Stockholm Syndrome has taken effect. The contagion is spreading.

The lions have turned into rats.

Take the bold European rescue of Greece. A broad-shouldered continent saving a country in peril. Yes, that country brought its difficulties on itself, but the wise heads of the Brussels Eurocracy have ensured that the country is obliged to work its own way out of trouble, as far as that can be managed.

So: the Greek government will find a new sense of adult responsibility. The EU will continue to supervise things. The ECB will lard the entire system with money. And all shall be well and all manner of things shall be well.

The trouble is there’s so much wrong with this picture, it’s hard to find anything right with it. I could probably, if I put my mind to it, find fifty horrible things lurking like undetonated mines in small print. But, from that fifty, here are my top five.

First, any semblance of fairness has been discarded. Anyone who lent money to Greece was a dumbass who ought to lose money. And in most bankruptcies, that’s precisely what happens. If you don’t happen to be a secured creditor – that is, if you don’t have collateral, like property or financial securities – you just have to take your share of the loss. That’s what bankruptcy is. It is the basis for capitalism.

But not in Greece. In Greece, official creditors haven’t taken any hit at all. They’re fine. The entire burden of adjustment is falling on private lenders. In effect, Greece has changed the rules retrospectively. Bond investors thought they were lending under one set of conditions, but – hey presto! – they weren’t. It turns out that official bodies made loans while the private sector picked up the losses. You can call that what you like. Me, I call it fraud.

Second, this whole rescue is bogus anyway. A report compiled for the troika of the EU, the IMF and the ECB argued that economic conditions in Greece are so dire, so little likely to improve, that the real level of debt is likely to be 160 per cent in 2020, not the 120 per cent officially projected.

Since 120 per cent would only take Greece to the desperate position Italy was in before Christmas, that would hardly have been a rescue anyway. Since 160 per cent is the beyond-desperate position that Greece was in when the whole sovereign debt problem unfolded, that wouldn’t be a rescue at all.

The only long-term effect of the rescue will be to burden the Greek economy with so much debt that recovery will be all but impossible. The Greek economy is contracting, not growing. And that’s no way to get out of debt.

Third, loads of private investors were worried about their Greek exposures, so they bought insurance on it. In the financial markets, that insurance goes by the forget-you-even-asked name of Credit Default Swaps, or CDSs. Those things are simple in essence. If you lend £1,000 on an insured loan, and the creditor only repays £300, then your insurer should pay out £700. Simple, huh?

Yes, but that’s too simple for the financial markets of today. As I write, a financial outfit called the International Swap Dealers Association, or ISDA, is considering whether a ‘credit event’ has happened in Greece. If no credit event has taken place, that CDS insurance won’t pay out. And ISDA may well decide that because the restructuring was ‘voluntary’, no credit event has happened.

Which would be crazy. Beyond crazy, actually. A child can see that if private creditors take a haircut of more than 50 per cent on their loans, a credit event has taken place. Sure, it was voluntary. Creditors enjoyed roughly the same kind of choice their predecessors had when Dick Turpin stuck his pistols into their faces and said, ‘Your money or your life?’

Fourth, there’s a stunning lack of transparency here. The whole bailout is so complex, so full of sweeteners and buried provisions, that the most important act of European financial rescue since the Marshall Plan is pretty much impossible for any outsider to analyse. In effect, a huge financial restructuring has taken place without democratic oversight. Voters can’t comment on the deal, because they don’t understand it. And they don’t understand it, because no-one ever wanted them to.

And fifth, the entire rescue has simply made everything worse. Do you want to know why Italian government bonds were yielding more than 8 per cent before Christmas and are yielding less than 5 per cent now? Is it because the clown Berlusconi is no longer in government? Because a new technocratic (but unelected) government is finally getting to grips with some economic basics?

Or is it because the ECB has just splurged another €1,000,000,000,000? It’s lent that money at low interest rates, against dodgy collateral, to weak banks, on the understanding that they’ll prop up insolvent governments. Great stuff.

If you’ve got too much debt, the European solution turns out to be to make more of it. To permit no vote on the issue. And to proclaim it all a rescue.

It’s not you. It’s them.

And Goldman’s the same. It’s a traditional sort. Once it’s got into a habit – excessive leverage, taking huge risks and disguising them, helping to bankrupt Western capitalism, paying its staff huge bonuses – it likes to keep it up. Think of it as a sort of tradition. Think halloween crossed with a multi-billion dollar balance sheet … and remember that on Wall Street it’s always halloween.

The latest news from Chateau Goldman is this. The former Goldman CEO, Jon Corzine, came to head up a firm called MF Global. That fine firm ‘last week reported a record loss, had two of its credit ratings cut to junk and drained bank lines’ and is now facing ‘a pivotal few days as the futures broker pitches itself to potential buyers to avert failure.’ (more info from Bloomberg here.)

The problem: massive leverage plus crazy risk-taking.

The consequences for creditors: hideous.

The consequences for Mr Corzine: well, let’s see. But here’s my bet: nothing will happen.

And just one more comment. Massive leverage, crazy risk-taking, unsound investment goals, inadequate supervision. What does that sound like to you? To me, it reminds me a little of a Ponzi Scheme.

Now Ponzi Schemes are totally illegal and – just to be clear – I’m not accusing Mr Corzine or MF Global of criminality. But I do say that either what they did was illegal or it should have been. And anyone who operates a Ponzi Scheme should go to jail. For a long, long, long time.

That sweet old Goldman magic: part 2

Hey, what do you know? Since writing the previous post, MF Global – Jon Corzine’s baby – has gone bankrupt. That’s funny for a guy with some very well-connected friends. Bet he gets one less card this holiday season.

But the story gets stranger still. Investment firms need to keep client funds strictly segregated from the firm’s own cash. You’d think that Goldman-alumnus Jon Corzine would know that rule. After all, it’s quite an important one.

But Bloomberg reports that as much as $700 million of client funds are not yet accounted for. Not accounted for as in ‘gone missing’, vanished, gone AWOL. As a financial expert, I’m in a position to tell you that $700 million is quite a lot of money. And at the moment, no one knows where it is.

Care to enlighten us, Jon? Or perhaps, Mr President, you could ask your buddy where that money is. We’d sure like to know.