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.

US SubPrime Worries Hit the StockMarket

Okay, so the market is having some serious jitters right now about these US SubPrime Loans and who is really holding the debt. Banks are being sold (look at Northern Rock - if I had some spare cash I suspect that one could turn out to be a bargain).

To counterbalance it all, the US Fed and the European Central Bank is pumping billions in to shore it all up.

I don't like the sound of this at all, but consider this...it sounds very similar to the 1925 crisis in which banks, mainly the US Fed, pumped billions into the system. The net turnout of that was that for the next 4 years, the stock market powered ahead, culminating in the infamous "permanently high plateau" of 1929.

On this basis, I wouldn't be surprised to see the same thing happen again, so while I'd still recommend diversification into Cash ISAs and Commodity ETFs, don't sell at the prices currently on offer and keep plenty in stocks, just in case.

Of course, it would probably be better to let it all fall apart now, but governments don't tend to let that happen.

Bonds and property funds on the other hand, I would still ignore.