Federal Reserve Chairman Ben Bernanke (Chip Somodevilla/Getty Images)

In my student days, our thermodynamics lecturer gave us a little talk regarding examinations.   He started with the usual advice about reading the question carefully, not to panic if we could not initially answer the question, and to move on to another… etc.   Finally, he said, do not do what one student did who wrote to the examiner: “I am sorry I cannot answer this question but I can answer the following one”.  He then proceeded to write his own question, and to answer it perfectly.

The above story sums up the actions of politicians thus far as they respond to the economic crisis engulfing this corrupted form of capitalism. The politicians are unwilling or unable—or both—to tackle the causes of the problem – banks too big to fail where the profits are privatized while losses and liabilities are passed on to taxpayers, combined with a lack of regulation and supervision. This crony capitalism has fuelled a bubble where financial engineering has replaced real engineering, and usury and debt have been driven to unsustainable heights.  The inevitable collapse of such a system is now blighting the lives of tens of millions.

The banks were rescued by taxpayers’ money, with hundreds of billions more pumped into their coffers through a system known as QE.  It stands for Quantitative Easing; a better description would be Questionable Economics. This is the process by which money is created electronically and pumped into banks’ coffers. The more I read about it, the more convinced I become that this is a racket that enriches the banks and endangers the real economy.

It is bizarre that governments keep pumping money into the institutions that were the cause of the problem, in the hope that they will lead nations out of depression and into prosperity, and simultaneously punish the rest of the population through austerity and cuts.

The British Chancellor George Osborne has just announced that £80 billion is to be made available to the banks in the form of cheap loans, to deal with the “exceptional market stress”.  This is in addition to the £325 billion pumped into the banks through Quantitative Easing.

What happened to that money? Here is the view of Sir Terry Leahy, the former boss of supermarket Tesco, quoted in the Independent talking about the first tranche of £200bn: “QE created an awful lot of liquidity intended for the real economy, but found a home in markets and speculators looking for quick returns.”

This view is supported by a number of economists. Dhaval Joshi of BCA research in a report, the findings of which were presented in the Guardian, argues that:  “QE1 [ £200bn]—combined with Bernanke’s much larger US asset purchases—just handed banks lots of extra money which they used to speculate on commodities such as oil, boosting their price, pushing up inflation and making life even harder for cash-strapped consumers.”

Albert Einstein defined insanity as: “doing the same thing over and over again and expecting different results.”

Perhaps someone could explain to us ordinary citizens why it is that if the government intended that money to help the real economy, it was not put directly into the real economy?

Pumping those billions into the economic equivalent of cosmic black holes, the banks, is like putting the fox in charge of the henhouse.  Moreover, it does not address the problem, and with all these billions for the banks to gamble with, how long will it be before we experience the collapse of the next bubble?