Amid chaos maybe some old-fashioned lessons need to be learned

This week the western economic system is in a state of shock after the failure of the US Congress to sell the $700 billion rescue package for the US banks. What happens now is anybodies guess but the melt-down in America has been quite frightening.

The finger of blame can be pointed at the American banks which seem to have had precious little regulation to stop them behaving like a bunch of demented, very badly managed, casinos. The ridiculous gambles which have been taken in the 'sub prime' market make you blink with disbelief. But now the chickens have come home to roost and, after this, surely the world's financial institutions will be in for a giant shake up and lots more global regulation.



We have been encouraged, over the years, to live above our means - the 'live now, pay later' society - which surely has to be at the grass root of this current problem, fed by the avaricious greed of bankers who see the way to a fast buck in high interest repayments, but which sadly for them and for the worlds financial stability, have never come to fruition.

The British, though the minor partners in all this, have as part of the international banking community been part and parcel of all this mess. Packages of debt bought from American banks have turned into a poisoned chalice and banks here have either been bought up by others or nationalised..and there is no guarantee that the bottom has yet been reached.

It's a sobering thought that, less than twenty years ago, we had Building Societies in this country who had operated with great fiscal responsibility for over 100 years. Then, under the Conservatives, they were given the opportunity to 'de-mutualise', go private as banks and be quoted on the stock exchange. Amid popping champagne corks and smoked salmon lunches, most of the building societies took the thirty pieces of silver, cock-a-hoop that now they could do wonderful things with our money and get rich in the process. Well I've no doubt that a number of top executives did exactly that. But what happened to the former Building Societies. There are none of them left now. All failed, went under, were bought up by bigger banks. It was a disaster.

But there are Building Societies, like the Nationwide and the West Bromwich who decided not to take the attractive bait and are still in business, paying investors a reasonable, though not spectacular return, and selling houses to those who prove they have the ability to pay the loans back. Sensible, modest financial dealing.

The safest place in Europe to have a bank account at the moment is France. The French government has a strong tradition of bank regulation and their banks are not allowed to speculate more than a fraction of the banks assets on high risk ventures. Consequently, although they have been bitten like the rest of us, France has withstood the credit crunch much better than the US or UK and is reasonably sound. If you obtain a credit card from a French bank, it is simply an easy way of avoiding carrying cash. If you go overdrawn on it, your card is stopped. You don't spend what you haven't got in the bank. No air miles or gifts encouraging you to go thousands overdrawn on that dream holiday...just pure, down to earth, spend it only if you've got it.

It's a rule my old grandmother lived by for years and it makes a lot of sense. It's a dose of reality which seriously needs to be infused into our collective psyche and into the operation of the world's financial community...let's hope it's not too late!