Poor Mervyn King, I've just been back in the UK coinciding with his public TV question time by a load of naive MPs pretending to be real experts on the world and finance and questioning him about why he took the stance he did with Northern Rock.

Personally, I think he was spot on not to get involved with Northern Rock or any other bank having problems, they should be allowed to stand or fall as independent businesses. Do we bail out every corner shop with a "cashflow" problem? Should we?

A lot of the questioning was very naive, and seemed to be based on what the MPs thought up after reading the morning papers and now we hear that the British Government is to increase the banking deposit guarantee limit to £100,000. Aargh! How easy it is to be generous with the taxpayers money, and worse still, the vague statement that this would be funded by a levy on banks means that actually the decent, well-run banks subsidise the risk-taking dangerous ones. Any large guaranteed deposits scheme only encourages banks to take yet more risks. This is a bit like adding a load of extra Vodka to the punchbowl.

At this moment in time, I would not be surprised to see a repeat of 1925-29, with a huge run-up in stock prices as more money gets pumped into the economy by the Ponzi scheme that is fractional reserve banking, followed by an almighty bang, on a scale of the 1974 90% stock market drop.

Don't sell yet, but enjoy the ride and keep your finger poised on the sell button! (oh, and hold some gold!)

Going back to my earlier article though, I still insist Northern Rock has some assets and would watch to see who makes a move.

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Banking Crisis?

Banking crises are more common throughout history than people might think. A lot more common.

The only problem is that history shows that they only tend to happen to one generation once, and they become so cautious about banks afterwards that it never happens again in their lifetime. Then the next generation forgets about it all over again and the cycle repeats.

So I guess in that score, we shouldn't be surprised at what is happening with the Northern Rock right now. We were probably due one.

Historically, somewhere behind it all normally lies a tangled web of profligate lending by the problem banks. None so truer than now.

I am sure that the British Treasury and Bank of England will hold true with their promises to back depositors with the Northern Rock. But then when you're playing with other people's money (I guess such a payout will be made simply by running a few extra pounds off the printing press), you can afford to appear generous.

Not sure what this will do to the British Pound exchange rate longer term though.

And looks like another reason to hold gold and silver as per the ISA recommendations of the superb new book Do-it-Yourself ISAs.