A financial system in which the face value flow of funds was vastly greater than the face value flow of goods traded is a bubble. The “bailout”, or payment of vast sums of ordinary people’s money to bankers to keep this crazed system going, could never make it sane.

Allowing bad banks to go to the wall was not just possible, it was essential. Instead the poor are in deep hock simply to maintain the lifestyles of awesome consumption led by the political and financial elites. That is the immediate cause of the services cuts and tax increases sweeping the Western world. The fact this is no solution at all to funny money explains why trillions were wiped off world stock markets last week. The explanation is simple; those trillions never existed in the first place.

There is some quite good analysis of the current situation by Will Hutton . But while his analysis of the problems is basically correct, he demands a radical solution and then proposes a sticking plaster. Reducing the stock of debt by deliberate inflation is not going to solve the problem for a decade, and is predicated on making part of the situation still worse by creating yet more, even more worthless, fictitious money.

Britain is not immune to this at all. UK debt is about 410% of GDP – worse than Italy. Crazed right wing ideologues believe that, as in the UK there is a much higher ratio of private sector to public sector debt, this does not matter. That is nonsense. It might have some validity if that private debt related to the purchase of capital machinery for manufacture, but actually the vast majority of it is related to consumption, and of course most of all to sustaining a housing market inflated to ludicrous prices. Much of the rest relates to credit card funded holidays in Ibiza.

A total collapse of the UK housing market is one of the necessary and highly desirable outcomes of the current crisis. The really radical action that is needed is a repudiation of debt by governments and by ordinary people.

Government could have paid individuals and companies their full bank deposits, and let the bad banks collapse, for less than a quarter of the cost of the bailout. That approach is needed now, with government repudiating debt while guaranteeing individual deposits as the banks fall. We should then make new banking institutions based on the financing of actual trade and investment projects, not on speculation in derivatives. There will be awful dislocation effects, but less extreme than the suffering over the next thirty years of everybody working for the bankers.

Governments, of course, will not be that radical. But people with time will see that they have been duped; a (in one sense) fortuitous series of events has done more in this last five years to improve the vision of the blinkered masses as to the true nature of their masters, than anything in the preceding six decades. I would dearly like to see a repudiation of private debt, with neighbourhood solidarity in physical resistance to throwing people on the streets, to bailiffs and to essential service cut-offs.

I think there is a serious possibility that this will not sound as improbable in a few years time as it does today.