The British Chancellor of the Exchequer has responded to the severe, complex and accelerating global financial crisis by using the word 'stability' 6 times in the first twelve sentences of his inaugural budget. This, after a week when the US Federal reserve had made an extra $300bn dollars available to banks that nobody else would lend to.

Alistair Darling, the Chancellor, has all the stability of a rabbit frozen in the headlights of an on-coming train, and probably the same prospects of survival. Just think about how money works. Fractional Reserve Accounting explains a lot. Money is created when a borrower signs for a loan (like a mortgage or hire purchase agreement). Just like that, money out of thin air! Fractional Reserve Accounting means that the lending bank can use that credit agreement to lend up to ten times it's value – creating more money! Then that new money can be used to create more credit and thus more money. Typically one newly created pound can create another hundred pounds of credit.

Bingo! $100bn enables $10 trillion of credit to be created – or, at least, retained. That is what has been going on for years – but the problem is that it is unsustainable. The whole smoke and mirrors trick depends upon creating more and more debt. But when the debt starts to collapse the Fractional Reserve Accounting rules work in reverse, taking $10bn off the bottom line removes $1 trillion of credit. You have an accelerating collapse of credit as the illusion is exposed.

You might wonder who benefits? Surely the powers that be would not let this happen!! You may not realise that the people who are supplying all the money are themselves out to make a profit. The Federal Reserve Bank in America is a private company with undisclosed shareholders and nothing to do with the US government. It has a monopoly on the production of dollars and profits from their production. That $300 billion is 'lent' to the US government which has to pay interest on it (extracted from US, British and other taxpayers). And don't forget that, as Northern Rock collapsed and two and a half million mortgage foreclosures took place in the US, the top five US investment houses paid out over $60 bn in Christmas bonuses to their star traders!

External debt for the US was $12 trillion in 2007 and $8 trillion for the UK in 2006. Darling has admitted that Government borrowing will continue to rise (despite removing billions from the balance sheet by the use of PFIs – shades of Enron). The dollar is plunging, stock markets falling, oil is over $110 a barrel (and climbing) and gold approaching $1000 an ounce. It looks like the monetary house of cards is collapsing. Hyper-inflation and a serious depression (not merely recession) are looming. (A scenario usually addressed by war - have you heard of Admiral Fallon?)

Given this picture you have to wonder whether stability is the most appropriate word. Without dwelling too much on the criminal responsibility of a finance director (Chancellor) who willfully misleads his shareholders (the public), perhaps the kindest phrase might be 'paralysed by fear'. Bicycle clips and a change of trousers are probably in order for the poor man.