ONE readers used to reading the unvarnished truth on this site will hardly welcome my first comment this week – namely, that the worst of this financial crisis is yet to come, probably in the autumn of this year or early next year at the latest. However, I’ll also argue today that there are signs of hope – not of a return to what we called “normality” over the last twenty years, but of a return to sanity and morality.

The bad news first – independent economists all over the world are predicting a second wave to this financial crisis. They argue that this will happen because most banks are still grossly underestimating the scale of their losses from irresponsible loans made during the property boom. And note the caveat – independent economists. This is significant, because independent economists don’t have their wages paid by banks, investors or political parties or think-tanks. They get no percentage from telling the truth, or otherwise.

What will happen next is as follows: having been kept solvent by their governments, US and UK banks will able to trade profitably within weeks – and some (Barclays, Goldman Sachs) are already doing so. However, this profitable trading ignores the “unwinding of positions” (ie debts) that they have not disclosed to either the government or shareholders as yet.

Some economists estimate the extent of these undisclosed losses to be ten times greater than the funds the banks have so far received from governments to be able to continue trading. The banks are able to continue trading because these as yet undeclared losses do not have to be brought out into the open until certain trading bets made in 2007 fall due later in 2009 and 2010.

Between now and then, these banks are in a race to make as much money as possible to shore up their positions. That’s why the “spread” between the rate at which banks offer mortgages (6%) and their savings rates (2%) is larger than it has been for around 20 years. Simply put, the banks are making more money from consumers in an effort to save themselves from their indebted positions.

It’s worth noting that, notwithstanding this favourable “spread”, even those banks which have declared a profit have made much less money (officially) than in previous years – the rest of the money they make is going to support their huge undeclared losses.

What it amounts to is the taxpayer paying twice for other people’s mistakes. We are paying once through government intervention and increases in national debt that can only be repaid through higher taxes and lower spending, then again when we take out a mortgage, or try to save our wages at lower interest rates.

So much for the unvarnished truth of where we are now. As for the good news, it looks like the virtues of self-reliance and do-it-yourself are coming rocketing back all over the developed world. From sales of vegetable seeds to holidaying at home, or “staycations”, the current economic crisis is killing off keeping up with the Joneses in favour of a newly-rediscovered moral equity.

Most interesting of all, to me, is the sudden rediscovery of a mind-training system, Pelmanism, which fell out of fashion in the 1960s. From 1890 to the end of the Second World War, Pelmanism was the equivalent of today’s “Mind Gym” companies, practised by men and women the world over. It was so popular that more than 100,000 soliders in World War I, and many more in the Second World War, subscribed to the course – there’s even a site on the internet that shows a copy of the course retrieved from a prisoner’s clothes in Colditz.

With the advent of the permissive society and an era of effortless plenty for all, Pelmanism’s popularity waned. Now it appears that people are taking an interest again – not one, or two, or three, but no fewer than eight web sites world-wide are offering the course materials – go to to check out the materials for free. Some of the other sites, and a book published late last year, are trying to charge for materials that long since fell out of copyright.

But hurry – once this course catches on again, I’ve no doubt that someone in a smart suit will effect a releveraged reverse buyout, or whatever, to try and make some money out of the common sense that this course offers.