HBOS, Scotland and finance

The 'spivs and speculators' who engage in short-selling are no more.

Those who Alex Salmond accused of bringing down the Bank of Scotland have been replaced by 'the unregulated derivatives market' as the primary cause of the troubles in HBOS and the RBS.

Unfortunately, one lot of economic illiteracy has been replaced by another in the desperate search for a scapegoat to blame for the unfolding catastrophe.

The bank are in the shit because they engaged in 'trendy' financial techniques and bought assets that they couldn't value for an excessive sum, whilst ignoring their day-to-day customers. It is called bad business. And companies go bust for this reason every day.

No-one (including the bankers) really understood what they were doing. Witness Alex Salmond praising both HBOS and RBS recently, when in fact they were sitting on piles of toxic debt.

The cause of Scottish Independence has been put back by the misreading and mishandling of this crisis, and because of two simple policy omissions by the SNP:

• The absence of any Scottish 'Central Bank' post-independence would lead to reliance on either the Bank of England or the EU to perform that function; removing effective economic control in difficult circumstances from Scotland

• The absence of any Scottish currency post-independence exacerbates this problem. Removing the issue of changing money at the border, was an easy political sop, but leads to tying the economic future to a third party. Iceland tried tying the Kroner to the Dollar last week. For a few hours. And then gave in to the inevitable, and then saw the currency rates to wild.

The 'arc of prosperity' – including Scotland with Ireland and the Nordic countries - has been renamed the 'arc of insolvency', a slight which will last as long as the 'Tartan Toes' gibe, and probably do as much damage.

Alex Salmond had a solution to the woes besetting HBOS: raise a Government bond to bail them out, just like the Norwegians had done.

Sorry, but I for one do not want to be paying for the bankers follies for many long years.

Norway can afford to raise such a bond largely because it has personal tax rates starting at 37%, and the debt can be repaid out of that yield. Alex Salmond is clearly not suggesting the same for Scotland, but just how would the debt be repaid????

HBOS and RBS (and Lloyds TSB which is also registered in Scotland) are now all part nationalised and are controlled by Westminster. Scotland had a financial sector comparable to that of Iceland (in terms of total size compared to national GDP), a matter that emphasises the sheer problem of becoming over-reliant on any on part of the economy to the detriment of the others.

Banking is not good because it is big; it should be good because it provides a secure, reliable access to funds for everyone. The banks forgot that, and we must use this opportunity to rebuild the economy in a more balanced fashion and to ensure that the principles of banking return to their roots.

Not spend the time finding someone – anyone – to blame. Blame will need to be apportioned – whether that be to friends of Alex or friends of Gordon – but the key issue is ensuring that the illusory economic 'miracle' never bursts again,