The common misconception about at the CD market at the moment is that liabilities are cumulative. In theory the entire derivative market should net off to zero – if only Politicians could grasp this!

Richard in norway – it was just an analogy however it was politicians who removed legislation put in place during the great depression to limit the lending powers of the banks (which I have always been greatly opposed to).

Princesschipchops – private sector borrowing has ballooned because government tinkered with capital requirements and interest rates, thus inflating a classic bubble. The private sector generates income with which it can repay this whereas the government makes no money at all, it can only take it from you and me!

The problem is not so much that tax has been too low but government has become too large and too wasteful with too much of a hunger for interfering with the productive economy, in spite of having little understanding of economics. You seem to confuse banal incompetence with systematic failure. As you say, too much of the tax take is wasted on non-essential (administrative) services and private sector bodies who are merely parasitical.

I have been hoping you would join us. Welcome. I look forward to your comments.

I am livid today after reading in the local paper that our childrens hospital – that provides vital care for critically ill children for miles around – Yorks, Lincs, Notts etc – may be hit by massive cuts to its budget by the Con Dems. So I feel your rage!

Wolfie – first of all private sector debt dwarfs public sector debt. I think something like six or seven times in the UK. This was a private debt crisis and it precipitated the crash. It's the elephant in the room that no one wants to discuss.

Re government debt – well the neo-liberal mantra of low taxation has probably not helped too much either. If you remember I think even under Maggie for a fair few years the top rate of tax was about 65% and CGT was at 40%.

But we need to spend taxes on PUBLIC services – 22p of every tax pound goes on public sector wages – 38p on the private sector! We are wasting the taxation of the UK's people on propping up a failing private sector – some of which is not even UK based.

In fact in my view this is the starkest indicator that capitalism is in terminal decline. And once we hit peak oil prices (we probably already have) then it really will hit the fan.

borrowing from a loan shark is stupid but not illegal

being a loanshark is quite clever but very illegal

The government debt is large, but surely not as large as the liabilities of the banks. Clearly, we'll need to re-learn to live within our means, but just how large are the liabilities of the banks? Nobody really knows.

I believe the CDS market is worth about 30 trillion dollars, but how much of this is truly of AAA status.

Your background is in investment banking, so I suspect you have a better idea than most.

Nevertheless, nobody forced the governments to take on so much debt – many fiscal conservatives warned against borrowing so much and they were routinely derided by neo-liberals as heartless.

I note that government liabilities dwarf the banking bailouts. So who really is the bad guy? If your friend goes to a loan shark to borrow money to gamble you have a go at him, not the loan shark – he's just doing "what he does".

The general tax-take and borrowing has been increasing year by year as the government swelled, making endless promises they could not meet. All since the end of WW1. Why?

I was exploring ideas outside of neoliberal economics and found something you may also be interested in; the Sustainable Development Commission's 'Prosperity Without Growth' paper which can be downloaded from this page: http://www.sd-commission.org.uk/pages/redefining-prosperity.html

Also Lord Adair Turner did some lectures at the LSE this year about similar issues where he called into question the continuing relevancy of growth in our economy, you can download the podcasts somewhere on here: http://www.lse.ac.uk/resources/podcasts/publicLecturesAndEvents.htm

Hope you find them useful.