If you weren't sure why the banks got themselves, and everyone else, into such a pickle with the Credit Crisis, the 2012 Budget Document is the source of some nice nuggets of information. Civil servants, competent and on the whole moderately paid, have little incentive to avoid the truth and will often slip it in if they can.

The financial sector, having burned down the economy, tried to plant the box of used matches in the hands of the public. Ordinary Britons were fingered as a major cause of the crisis due to accepting a rush of cheap credit they couldn't afford. 


They glossed over the fact that the banks and building societies were the pushers of the cheap credit. And they also omitted to point out that actually it was overwhelmingly the banks - not the consumers nor the non-financial businesses - that went on a borrowing frenzy.
 
Why did the banks borrow so much? "Casino banking" is intended to be derogatory, but bankers probably don't realise they are supposed to feel insulted - as it couldn't be closer to the truth. Idiot sons for hundreds of years have been gambling away their family fortunes - relying on indulgent parents to bail them out. Cunning bankers have been gambling the nations money in the same way - knowing that indulgent politicians would bail them out using the taxpayer's money.
 
 
Here is how borrowing boosted bankers bonuses in the good times, and crushed the economy when their bets went wrong:
 
Idiot Son: I have £50. 
  • I bet it on a "six line" (odds 5:1) spin of a roulette wheel.
  • If I win. I pocket £300 (my original £50 plus 5 x £50). 
  • A 500% return on my original money! 
  • If I lose.
  • There goes my £50. Back to daddy for some more cash.
 
Cunning Banker: I have £50 million. I borrow another £250 million.
  • I bet it all on bonds, equities, derivatives (odds 5:1) not unlike the spin of a roulette wheel. 
  • If I win. I get £1,800 million (my original £50+£250 million,  plus 5 x £50 million plus 5 x £250 million)
  • I pay back the £250 million. I pocket £1,550 million.
  • A 3,100% return on my money!
  • If I lose. 
  • The taxpayer bails me out. The taxpayer loses his job, has his benefits cut, has his pension reduced and deferred, the nation is protected by an aircraft carrier with no aircraft.
* MORE DATA FROM McKINSEY report "Debt and deleveraging: The global credit bubble and its economic consequences" added to this post in December 2012*
"The United Kingdom and Spain stand out for having the biggest increases in financial sector debt relative to GDP. These figures reflect the rapid growth of the financial sectors in those countries as well as a gradual shift by their banks away from relying on deposits to fund lending towards raising money by borrowing in the wholesale markets."
Not our crisis - Austerity isnt working.
#JailTheBankers