"If we’re lucky, it won’t be any worse than Thatcherism."

There's a new benchmark in journalism about the economic crisis and the failure of the banks: John Lancaster's long but incredibly rewarding, incredibly clear and incredibly angry piece in the current London Review of Books. He brings a novelist's clarity to the necessary unpicking of otherwise arcane banking euphemisms. Go educate yourself.

I'll restrict myself to two delicious quotes. First, here he is summing up after a long, penetrating description of the nature and origin of toxic assets and Anglo American governmental attempts to deal with the crisis:

"Many of the banks will turn out to be insolvent. In that case the bank is nationalised, or at the very least goes into administration and receivership. Then, a number of options become available, one of the principal ones being to break the bank up into the viable part of the business, which will eventually be refloated back onto the market, and a ‘bad bank’ of dodgy assets which must be sold off (or arguably held until the values recover) in whatever way makes the most possible money for the taxpayer.Nobody in power wants to do that. Nobody with power in the banking system, and nobody with power in government. Both the British and the American plans to help the banks are very, very, very expensive variations on the theme of sticking their fingers in their ears and loudly singing ‘La la la, I’m not listening.’ This is what’s happened so far."

Second, here he is on the meaning of the disaster:

"....the cost of the financial crisis is going to be paid not over a few years but over a generation, we have a perfect formula for a deep and growing anger. Expectations have risen a lot, over the last three decades; that’s going to have a big impact on how furious people feel about the hard years ahead. The level of future public spending cuts implied in Darling’s recent budget – which included the laughably optimistic idea that the economy will grow by 1.25 per cent next year – is greater than the level of cuts implemented by Thatcher. Remember, that’s the optimistic version. If we’re lucky, it won’t be any worse than Thatcherism."

It's worth remembering this when you hear different economists or politicians comment on this or that latest tactical development. Take that business of the threatened S& P downgrading of Britain's creditworthiness for instance. Basically the siren voices of the Right claimed this was a sign we were heading for a Sovereign default and having to go cap in hand to the IMF. On the other hand people from Left and Centre tended to say, no, this is about a recognition of what we already know and, in any event, there is absolutely no chance of Britain going bust because it will, in time, balance its books through cuts and raised taxes after the election. But that last quote is Lancaster saying what the future is going to look like if the second set of voices are correct - in other words, that's the optimistic scenario.