Bob Diamond was almost certainly ignorant of the market manipulation Barclays have admitted to. You don’t take notes on a criminal conspiracy and you don’t run a major bank without knowing how to not know what you shouldn’t in a defensible manner. Sorry for the Rumsfeldian epistemology.

But this isn’t limited to individual banks, or a lapse in the regulatory regime. Other banks were directly involved in the LIBOR manipulation and in the credit swaps fraud that will be announced shortly. Not to mention all the other incidental frauds that haven’t been discovered yet. There’s a systematic problem that all the major commercial banks are or were actively and gleefully participating in.

The ever astute Gaby Hinsliff pointed out the fundamental issue with a thorough Leveson-esque inquiry into this. It seems justified but would make the current IT issues at RBS seem like a good day as the UK portion of the international financial system collapsed under the weight of its own shit.

I don’t really know what to do from here. The banks have caused a massive world recession which has caused huge government deficits and the failure to deal with the recession in a sensible manner by governments, not least the austerity programs in Greece, Spain and the UK have made matters worse. Yes, there are issues about the way that the Northern European countries benefited from a relatively low Euro exchange rate at the expense of countries like Greece and Italy, that the better off benefited from the policy of price stability pursued by the BoE and the ECB at the expense of the worst off but there’s a deeper issue about the way that corrupt financial institutions have literally collapsed the Western economy around us all through fraud and corruption.

There’s essentially three questions which may well have conflicting answers:
1. How do we get out of this?
2. How do we stop this happening again?
3. How do we punish the incredible malfeasance which got us here?

Picture by Jessica Lucia

No matter how cynical you get, it is impossible to keep up – Lilly Tomlin

Late stage finance capitalism, along with being inherently unstable due to requiring periodic crises to act as selection events, is endemically corrupt with constant fraud, back scratching and what I believe is referred to in the parlance of our time as “troughing”.

In the US the defence in a fraud trial is trying to convince a jury that because state governments couldn’t tell they were being systematically defrauded by financial institutions that was ok (HT James for that link). Seriously.

Over here Barclays systematic, long term manipulation of LIBOR during the worst financial crisis in the history of the world resulted in a fairly minimal fine which will be used to reduce the cost to other banks of running the FSA, which failed to stop it. There’s a bigger fine being paid to the US, but in total the fine probably represents about 10% of the profit generated from the two scams. If I got to keep 90% of my ill gotten gains I might take up bank robbery too.

The lenient fine isn’t particularly surprising, but the lack of prosecutions is. Turns out this is because Barclays realised there was first mover advantage in rolling over, cooperated with the authorities and did a deal with the authorities who are investigating a number of other banks for the same or similar offences: i.e. conducting massive fraud.

These are just the latest in a long, depressing line of companies such as JP Morgan , Goldman Sachs blah blah, blah blah, blah blah, blah blah.

Basically, they’re all at it and they don’t care. And they’re probably doing it with your money. So move it.

My first reaction to The Herald’s exclusive that the Greens have “walked out on the Yes campaign” was exactly the same as Labour MSP Patricia Ferguson’s soundbite – it’s either Salmond’s way or the high way.

It would take the most blinkered Cybernat to dress this up as media bias or an exaggeration of a minor split. Patrick Harvie sat cheek by jowl with Alex Salmond in the Cineworld cinema two weeks ago as part of the ‘broad church’ Yes Scotland campaign kick-off. Now Patrick can’t confirm that the Scottish Greens will even be participating. We will have to wait until the SGP conference in October to learn if that’ll happen.

This isn’t the first time that the Greens are concerned they are being taken from granted by the SNP. Who can be forget the pulsating drama as the Greens voted against Swinney’s budget in 2009 over an insulation plan that did not go far enough? And on her blog, Joan McAlpine has regularly mildly scolded the Greens for not pushing independence harder:

“As a party, they claim to support Scottish independence, but I see little evidence of this in their campaigning.”

Two parties wanting the same thing but undermining each other by not overcoming their relatively minor differences makes me think of the squabbling Socialists and their unfortunate lack of representation at Holyrood. The second parliamentary term contained six Socialist MSPs, so the appetite for their policies is out there, but political infighting is the easiest way to scare away voters and that’s what could happen with Yes Scotland here if this disagreement isn’t fixed.

Why would floating voters vote Yes to independence if even the proponents of a separate Scotland can’t get on? Indeed, why would would-be-Yes-voters vote Yes?

The silver lining is that we are still well over two years away from the independence referendum and a more consensual approach from the SNP coupled with a notably hungrier attitude to winning a Yes result from the Greens is a compromise well within reach.

Those in the SNP may reasonably point out that the SNP have all the campaign money and its election machine won a parliamentary majority at the 2011 election while the Greens didn’t improve upon their lowly two representatives, so who is best placed to lead, perhaps even dominate, the Yes Scotland campaign? That may be so, but it would be arrogant to assume that any party would want to sit under the SNP only to lend their arguments a greener hue and more weight. As James has said before, the Scottish Green Party is not the environmentalist wing of nationalism. It certainly shouldn’t be treated as such.

So what happens from here? Well, it may sound dry and boring, but hopefully an organisational design can be drawn up that satisfies all relevant Yes Scotland stakeholders and decision makers, and then the coalition can get on with doing what really matters – taking their arguments to the nation and convincing the voters.

Alex Salmond doesn’t suffer fools gladly but if he continues to see Patrick Harvie (and Colin Fox) as passengers and not partners, and by extension ‘fools’, then he’s going to win a very small battle but lose a very big war.

There needs to be a third way over and above Salmond’s way and the high way for something as important as this.

Spain seems to have agreed to accept €100bn of bailout for its banks. The only meaningful difference between why this happened and why Ireland had to be bailed it is because Ireland nationalised its banks and their losses, something Spain thankfully seems to be reluctant to do.

At least, that’s what’s being briefed. Given they’re still denying even asking for this, the details seem likely to change before the markets open on Monday, but the narrative so far requires this to be a done deal by then or everything’s going to go on fire. Which is good for Spain, and probably why they’re not being forced to impose even greater austerity than they were signed up.

What’s potentially more problematic is that Spain isn’t following the Icelandic route and hanging their arguably endemically corrupt banking institutions out to dry. In attempting to keep them going, and there are good arguments as to why that’s necessary (the Caja system is largely funded from small depositors, despite a surge in regional government bond holdings recently), the Spanish system is becoming increasingly reliant on the relatively powerless central government to manage the economy.

As it does so it inevitably becomes increasingly dysfunctional: the asymmetric federalism of the Spanish system has been unable to either reduce their deficit, because the regions refused, or coordinate an effective fiscal stimulus to keep things going.

One of the bellweathers of the global economy is the Baltic Dry Index, which represents the cost of moving raw materials by sea. This is important because it’s an efficient indicator of expectations about the future that isn’t open to revision or speculation. It’s fallen a quarter in the last month, and a half since January 6 months.

I don’t have a good solution to propose. Eurobonds are politically problematic for the countries that would underwrite them, even though they benefited from the artificially low exchange rates during the boom. Equally, mutually agreed splits into a “hard” and “soft” Euro would cripple the hard-zone exports and the soft-zone debts and domestic demand. Even an orderly exit by Greece would be catastrophic and wouldn’t solve the problem.

To be honest, the closest analogy I can think of is the credit crunch of 2007, right before Northern Rock went under. It seemed bad at the time without anybody really realising the next few years of economic Armageddon that would follow, and that was with a globally coordinated policy response.

That’s not where we are now. The risks are greater: we’re talking about large nations becoming insolvent, not just large banks and small nations. The relative size of possible response are smaller: a countries GDP is, almost by definition, larger than it’s banking sector.

Most worryingly, there’s an absolute vacuum of leadership. Few of the current set of world leaders really understand what’s going on, fewer still have the domestic political capital to use and none of them have the international standing required. Obama is hobbled by a frankly insane legislature, Cameron is set on playing the ingenue, Merkel is constrained internationally if not domestically and Hollande hasn’t either the strength of personality, intellect or international credibility required.

ETA: To sum up, this classic movie clip