<strong>Are markets becoming part of the problem?</strong>

‘Should we blame it all on City spivs?’ I asked a managing director of a famous investment bank at a pre-Christmas party.

He had just told me – with the smile of a man who can look forward to yet another seven-figure bonus in a few weeks’ time – that his firm was still doing very nicely thank you. It was doing so, he continued in the same breath despite the fact that the economy was going to hell – and his forecast for the state of the nation’s, rather than his own, wealth in 2008 was as startlingly downbeat and bluntly phrased as any I have yet heard in this winter of doomsaying. Adapting the famous words of the senior civil servant Sir Richard Mottram at the time of the debacle over ‘burying bad news’ at the Department of Transport on the day of 9/11, my banker friend said: ‘I’m f***ed. You’re f***ed. We’re all completely f***ed.’

I blinked, and decided to press home my killer question. Were we all in this unfortunate state, I asked, because of the stupidity of politicians and the feeblemindedness of central bankers, or the folly of over-borrowed homebuyers and consumers on both sides of the Atlantic, or the unalterable tide of long-term economic cycles, or the whims of 21st century weather and harvests. Or was it down to the action of what I undiplomatically (but deliberately, to get a rise) called ‘City spivs’?

Any complete answer to that question would of course seek to attribute blame judiciously between all the factors: in short, house prices always fall after a long rise, people always borrow more than is good for them if offered attractive credit, bankers always lend more than is wise when the going looks good, politicians allow all that to happen because it creates the feel-good factor that gets them re-elected, and Alan Greenspan of the Federal Reserve should take a slice of the blame for making money so cheap in the first place.