This is the derivatives situation on the day the Twin Towers were blown up five years ago…courtesy of Adam Hamilton’s 7th September 2001 analysis of figures reported to the US Office of the Comptroller of Currency. You can update the numbers from the OCC website but may assume that any changes over the past five years have made matters worse. See that red line on the right? This tracks the rise of OCC reported derivatives. See that pie chart on the left? Add Goldman Sachs and Deutsche Bank to the list and you have a pretty good picture of the Rogue Traders.

Financial illiteracy is normal. But to be mistaught is worse than to be untaught. All financial and monetary experts are mistaught. The number of exceptions can be counted on the fingers of two hands. It was always thus. A little knowledge is a dangerous thing. And theirs may severely damage your financial health. Electoral reality is the note Bill Clinton pinned up on his White House office wall…it’s the economy stupid!

English politicians are learning to interpret this admonition by way of three easy-to-remember rules of thumb. If you manage the economy badly voters hate you. If you claim to be a tax-cutting party and then raise taxes they mistrust you. If you send mortgages through the roof they will swear never to vote for you again. The Cameron-Osborne mantra from the New Tories on economic stability is code for low mortgage rates. Gordon Brown is widely mistrusted now people have become aware of his Stealth Tax approach to increasing the tax burden.

Economically England has become two nations divided by Homes that are no longer the Englishman’s Castle. Homeowners and Tenants are two distinct economic tribes. Tenants pay their rent with money received from the private purse…wages and pensions…or from the public purse…benefits and pensions. The Rent Trail follows its own food chain…to very rich people at the top. Housing Benefit puts a roof over poor people’s heads…a Good Thing as it gets them off the streets…but channels rents into the bank accounts of the rich…a Bad Thing because banks hand out most of the money in circulation; and access and cost of credit depend upon the size of a bank balance. The rich get richer and the poor have no money.

In a cleft stick between the wealth-accumulating rich and the money-less poor are the Middle Classes. For political calculation Home Ownership is a good proxy for the Middle Class. The upper class and the very rich may own their homes but are numerically swamped by the Middle Class. Moreover as election turn-out declines towards United States 50% levels from the high 80% of the post-war generation so the propensity to vote becomes an increasingly important part of the political calculation and getting out the right voters wins elections…if they vote for you.

Home Ownership wreaks havoc with Middle Class Attitudes. Never a Borrower or a Lender Be only works by discriminating between debts…a Bad Thing…and mortgages…a Good Thing. Equity Release runs a coach and horses through this distinction. A Good Day’s Pay for A Good Day’s Work works with a Just Price regime where an Honest Living can be distinguished from Unearned…or unfairly earned…Income. The Entitlement Culture of a Benefit Regime…and some Pension Policies…make a mockery of this idea. Less talked about in the tabloids is the ethical clash between an entitlement philosophy and rocketing house prices. Homeowner mortgage debt declines and unearned income is doled out via the banking system while no equivalent benefit is available to the English Tenancy.

Only dimly sensed by most Middle Class Families is the fact that they are the biggest gamblers since the Peasant Farmer. Their whole life is one never-ending bet on Property Prices and Interest Rates. The happiness of their family is mortgaged to forces over which they have no control. Only inheritance…and inflation…improve the odds. To the Home Owner Tribe, mortgage rates matter as much as income tax. But these change quickly and unexpectedly and are paid from disposable income…unlike income tax and national insurance…which makes them more painful.

England may seem a special case with high levels of home ownership. But liens and mortgages play havoc with Real Legal Title. The English Homes Fiasco is indicative of a poverty of political imagination. The Gladstone-Disraeli Generation would have gone for radical root and branch reform. Five Acres and a Cow; A Home for Seven Hundred Days Work. These are the slogans they would bring to the Public Political Domain to unite the two English Nations.

As only a hundred million people in the world speak Persian it is perhaps a little surprising to find that Persian is the Number Four blogging language in the world. In China four hundred million are actively using or learning the Number One blogging language English...though not for blogging. English is compulsory for the 150 million children in China’s primary schools. So my instincts are right in wanting to take the Magpie Sagas to China.

The Beijing International Book Fair should be my first port of call…with a stop-off in Seoul on the way as the magpie is the national bird of South Korea. Any Business Plan will need to reflect Chinese Business reality where half the books sold in China are Pirate Editions…with seventy rogue editions for every official one. I should be so lucky.

A strange incident in the smoke and mirrors world of Iraq Operations took place a few months ago when two British undercover soldiers wearing Arab dress were cornered in a car laden with explosives. The British Army went in with all guns blazing and got them out. What were they up to? One theory is that they were blowing up the Hajjis to set Sunnis against Shias.

Supposedly this would create the chaos the Neoconservatives needed to go ahead with their plan to divide Iraq into ethnographic bantustans. Based on this sort of black ops and false flags reasoning this means that the escalating bloodshed in Iraq is a measure of the success…not the failure…of US policy.

This gained some credence this week when the Bush Family’s Chief Operating Officer James Baker III followed up the media offensive of the British General Sir Richard Dannatt and his Government Minders with his own report on Iraq Coalition Forces’ Exit Strategy Options. The Coalition could Stay The Course meaning more of the same. This was rejected…as was the Cut & Run strategy which would lead to loss of face and involve heavy casualties.

James Baker’s other options were Redeploy & Contain…doublespeak for minimising US casualties and withdrawing Coalition Troops to bases outside Iraq; Stability First…giving up on democracy, stabilising Baghdad, finding a political solution to The Insurgency by enlisting the help of Syria and Iran; and…well, well, well…Partition defined as splitting the country into a Shia South, a Sunni Centre and a Kurdish North. Oh dear. Ever heard of Kurdistan?

The Kurdistan Workers’ Party (PKK) was founded by Abdullah Ocalan in 1974 and in 1984 began fighting for a separate Kurdish homeland in areas straddling Turkey’s borders with Iran, Iraq and Syria. After Ocalan’s capture in 1999 the PKK continued their struggle politically. From 1999 to 2004 a ceasefire was in place. Partitioning Iraq is first and foremost a Persian and a Turkish problem and only secondly an EU Enlargement and Global Oil problem. Syria’s and Israel’s legitimate security concerns, NATO’s borders and US commercial interests are way down the list.

The best argument for Big Empires…like the European Union or the pre-1918 Austro-Hungarian Empire…is their potential ability to dissolve border disputes. The counter-argument is that they exchange little frontier disputes for big ones. Diplomatic Theorists like Leopold Kohr…and Montesquieu in the 18th Century…squared the circle by paying meticulous attention to the small print. In their tool bag were two principles: Cantonisation and Relative Power.

Cantonisation means dividing above and below any potentially unstable aggregations…defined by the Relative Power Principle. The potential flashpoint for the Swiss Confederation is the top-heavy German linguistic presence. This is dissolved by the Relative Autonomy of the Cantons. Your Nation is your Canton…not your Germanity.

It is often believed that Leopold Kohr was an advocate of smallness for its own sake because he wrote much about scale and pace in human affairs. But in The Breakdown of Nations Kohr’s crucial measure is Relative Size as a surrogate for Relative Power. He is an old-style English Balance of Power man…a Montesquieu man.

Ivan Illich drew attention to Kohr’s love of the German word ‘gewiss’ that translates into English as ‘right’ or ‘certain’…as in ‘a certain size’ or ‘the right pace’. Kohr knew his Classics. He thought in terms of Good, Beauty and Truth. Man as the measure of all things…to use Aristotle’s phrasing. Ivan Illich labelled Kohr’s intellectual domain Social Morphology. Other things being equal, structure determines behaviour. By the end of the 21st Century our diplomats will once again be schooled in the ancient arts of Structural Sociology. Herein lies Peace & Permanence.

One of my very few disappointments about the cancellation of last month’s Radical Consultation is not getting to meet up with Tracy Worcester again. Tracy was happy to be on Zac Goldsmith’s Any Real Questions Panel with Dele Oguntimoju and Angela Bates but felt somewhat overwhelmed when John Papworth…at my prompting…persuaded her to deliver the Keynote at the Opening Plenary.

Privately I was expecting her to pull out which would have been a shame as she would have done so for the worst feminine reasons…doubting her own power as an advocate. I saw enough in 2001 to realise she has that rare gift of passionate engagement that can change hearts.

There was a DVD from Tracy in yesterday’s post. I put it on when I got back to the boat at 9.30 pm after my Ryesingers rehearsal for G & S’s Princess Ida. Three were three samples of Her Work as a Film Director with the BBC. Pig Poland was a Michael Moore style exposé of pig farming in Poland…with Erin Brockovich overtones. The Politics of Happiness was about the pressure on Bhutan to join the WTO and Is Small Still Beautiful chronicled the struggles of forest people in India to secure land rights. All three are hopeless causes. Polish Farming will be taken over by agribusiness; the WTO will destroy Bhutan and the rip-off of India’s rural poor will gather pace. What to do?

In my blog on 16th July I remarked that my translation of Lena Rainer’s book For Sweden Carl XVI Gustav - In Keeping With The Times published for the 50th birthday of the King of Sweden on 30th April 1996 was enough to put me in the Monarchists Camp if another English Civil War breaks out.

Sydsvenskan the publishers included the Bernodotte Family Tree on the inside covers. They had an A3 landscape space to play with…so had room for lots of royal relatives. The problem was that it was in Swedish and I had to translate it into English. Somewhat foolishly with hindsight I assumed I could just pick up the phone and get the Palace to fax me the Swedish-English Court Glossary.

Getting through to the Royal Palace was no problem…Sweden being Sweden. In fact they would have put me through to Carl Gustav himself. The trouble was that until I created it, no glossary existed. I think I got them right…at least there were no recriminations and my invoice was paid promptly. By the end I knew my Marquis from my Duke. So I know that Tracy as Marchioness of Worcester is towards the top of the English Aristocratic Heap.

In my youthful ignorance I was an instinctive Republican. But the best thing for England…and for the Left…would be a New Constitutional Settlement which places power in a pre-Norman Conquest English Council…and empowers the Privy Council and County Governance. The Lord Lieutenants of the Counties should revert from their ceremonial roles and become Chief Operating Officers with direct control of regiments, budgets, courts and taxes. A replay of the English Civil War is probably the least harmful way to reverse Social Inversion and return to a Cathedral Culture.

Charles III needs to carry on where Charles I left off if he is to hand over a Real Kingdom to William V…or Harold III if our Crown Prince gets killed in Afghanistan or Iraq. A bloodless coup would be best. But if this is to come about in my lifetime…by the Twenty Thirties…the political work needs to start now to prevent any excesses by the Right and to educate the Left on the Democracy of Monarchy. I propose to write the Monarchist scripts.

The King of Buen Consejo begins with Shaw’s Apple Cart and ends with the return of Real Monarchy. The early sketches for the sequel 2034…set 50 years on from George Orwell’s 1984…are set in the Baltic in 2034…après le deluge.

John Seymour’s Retrieved From The Future…set in Suffolk a decade after the oil tankers fail to arrive and London’s population dies of cold…has a similar feel. Like John I am going for the Detective Novel Genre. But where John has his heros piecing together recovered written fragments of the history of the collapse, 2034 has echoes of Ayn Rand’s question in Atlas Shrugged: Who Is John Galt?

A young brother and sister get drawn into the sort of adventures Enid Blyton created for her parent-free Famous Five and Secret Seven when they explore the mystery of the strange disappearance of William Shepherd…who will eventually turn out to be their Great Great Grandfather.

Two of the novel’s heroes are to be based on my daughter (born 1973) and son (born 1975) as I choose to remember them from 1981…but projected into a new world 50-60 years hence. As they are drawn deeper and deeper into their quest so the True Story of The Rebellion and the Real History of Societal Inversion…R.H. Tawney’s story in The Acquisitive Society over a millennium and its dramatic reversal within two generations…will be revealed.

Interestingly the first thing I did when starting to sketch out the plot ten years ago was to redraw the Baltic Lake Coastline by raising the water level fifty metres. I wanted to have some sunken civilisations for my young hero to discover. Nicholas John is a Steve Wozniak calibre inventor of genius who has harnessed Fish Mobility Technology for his small mini-sub…in much the same way as my 1950s generation designed go-carts and built crystal radio sets.

But I was aware that Kennedy’s Scientific Adviser Jerome Wiesner believed that Global Warming would be worse than Nuclear Weapons. The jury is still out on both counts so I will probably invent something completely different. I rather like the way Douglas Adams wiped out the human race with dirty telephones after sacking the cleaners.