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GEITHNER COULD DO WORSE THAN EMULATE JAPAN

All bankers are liars. They have to be, because the banking system is built on the fiction that our hard-earned money will always be available. But if depositors all demanded their cash at once, the banking system would fail and the economy seize up overnight.

In a banking crisis the lie ceases to be credible. The only solution is for the government to convince the public that it stands behind the banking system.

There is a clean way to get this point across, and a messy way. The clean way, patented by Sweden in the early 1990s, involves rigorous accounting of financial health, nationalisation of insolvent banks and separation into “good banks” and “bad banks”. The messy way, associated with Japan, involves large slugs of taxpayers' money being injected into banks, and backroom deals that have all the transparency of freshly stirred miso soup.

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