Einstein asked "what does a fish know of the water in which it swims?". Hernando de Soto, a Peruvian economist, argues that Westerners are like fish, swimming in financial and legal waters that they do not understand.

He compares shiny suited city bankers with the poor as depicted in Slumdog Millionaire - both living in a shadow world where property ownership is not formally declared or centrally registered. Neither can be really sure about who owns what - it is the strong and ruthless who rise to the top. You are either quick or dead.

As described in my recent Blog, the world of financial derivatives is murky and opaque, ownership and value are hidden. Like the shadowy figures behind the small-time gangsters portrayed in Slumdog the real players behind the major banks stay away from the light.

For example, it has been reported for years that AIG (the too-big-to-fail American insurer) has laundered money that the CIA makes from it's drug smuggling activities. AIG is now playing a central role in the present transfer of wealth from public to private hands.

The current stock market rally was triggered when some major banks (Citigroup, JP Morgan) declared that they have traded profitably this year. Given that they were bankrupt, supported by the tax-payer and operating in the worst economic environment since the Great Depression, this was a Lazarus-like recovery.

But wait! Look in the shadows, just out of sight where it is hard to see. It is reported here that during this period AIG unwound a huge number of trades with these banks. These deals were detrimental to AIG but provided enormous profits to the banks (possibly around $1bn each). Thus: banks profit, the markets rally, small investors are tempted back and AIG goes to the Treasury for another $30bn. (By the way, the number one recipient of AIG political donations in 2008 was the current POTUS).

It doesn't end there. The banks use the extra cash to raise loans from the government to buy each others toxic assets (at face value). The bank puts up 7%, the tax-payer puts up the rest - a good deal for the bank considering that even fire-sales of these assets have fetched 10 cents in the dollar. The toxic assets get moved around between the banks who take all the profits and any losses are covered by the government - thus the bad assets are now publicly owned!

Our governments have not taken over the banks, the banks have taken over government. And the sharks remain in the shadows.