It’s the stupid, stupid, economy, stupid…Bad timing for Iain Gray; wiped off the front pages by an imploding economy yet this was the week, of all weeks, that in accepting the mantle of leadership in Scotland he decides to quote Thomas Carlyle and take a swipe at Alex Salmond for studying that ‘dismal science’ of economics. As share prices collapse, banks merge, depression looms and government looks increasingly impotent at understanding why this is happening and what can be done about it, who would you rather put your trust in – a physics teacher or an economist? But then that’s all academic because even the First Minister with his mighty head for sums has found it difficult to articulate just what the problems are and how to solve them. Reeling from the news that a bank, a Scottish institution at that, has been felled by this terrifying episode and facing the terrible prospect of tens of thousands of job losses in Scotland, he, perhaps in his anger, did not choose his words wisely. But to blame ‘spivs and speculators’ for HBOS’s demise is a limited and disingenuous interpretation of the facts and will teach us nothing for the future. For to paint HBOS as some wide-eyed and blameless innocent in all of this would be to deny that it and its convoluted funding mechanisms are part of the same rotten system that has bred those hedge fund managers that seek out overly exposed companies and target their vulnerability by shorting their shares. The First Minister is right, HBOS may have been a sound and profitable business but it also operated with the same flawed business characteristics that Northern Rock rested on – borrowing short and lending long – like using an overdraft to fund a 25-year mortgage. Madness. And it was also caught up in believing that money could breed money and if you could do that easily by investing in complicated and ultimately toxic funds in the States including sub-prime which promised a fast buck, then all the better. Since Northern Rock went bust, HBOS management, the financial services regulators, the Bank of England, HBOS shareholders, and politicians have done little to avoid this eventuality that, in echoes of the Nick Leeson scandal, has meant too many questions were not asked as long as profits were rolling in. Why were the brakes not put on HBOS’s lending before now? The answer is the desire to make more and more money and that is the same thing that fuels hedge fund managers. They are not criminals; they are simply clever gamblers, exploiting a market that governments have allowed to operate with little or no regulation. Shorting is something that most people have probably never heard of until now but it is basically the process whereby fund managers will sell shares that they don’t actually own and bet on the fact that their price will go down. They then buy back the shares and pay a small fee to their original owner; usually a traditional fund perhaps even your pension fund. It is legal, although now temporarily suspended, and is worth a staggering $6 trillion. What is not legal in the mores of the buying and selling of shares is to spread untrue rumours that may affect a share price and then capitalise on that by shorting on the plummeting shares. HBOS apparently fell victim to that a year ago but no one was ever convicted. The economy should not be this complicated but since government puts all its faith in the ability of the market to regulate itself, it is now struggling to rein it in. Twenty-one years ago this month, Tom Wolfe’s seminal novel Bonfire of the Vanities exposed a city on the brink of collapse with the so-called Masters of the Universe (white, wealthy bankers) – partying as the rest of New York’s inhabitants drowned in a tidal wave of crime and unemployment. The book captured a zeitgeist that was neither pretty nor complimentary and that world comes of age today with the reality that there is no such thing as free money and an 
inevitable schadenfreude in the downfall of those Big Swinging Dicks that Tavish Scott dismissed as “rich kids in bright shirts”. But why are they being made the scapegoats for a system of capitalism that we have so embraced that we are no 
longer sure anymore when avarice 
becomes exploitation until it precipitates 
a once-in-a-lifetime crisis that causes a bank to collapse, politicians to get involved and for it to become very personal? Government needs to get on the front foot. Stop trying to blame the spivs and barrow boys that you have 
allowed to thrive by your inaction

Stop trying to blame the spivs and barrow boys that you have 
allowed to thrive by your inaction

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