"Ahem, I'm Still Here." Signed, The Economy

Iain Martin for the Telegraph in the UK drops a bomb on his countrymen today.

The Government's bail-out of the banks in October with £37 billion of taxpayers' money was supposed to have "saved the world", according to the PM, but now it is clear that it has not even saved the banks. Our money kept the show on the road for only three months.

As the Liberal Democrats' Treasury spokesman Vince Cable asks: where has the £37 billion gone? The answer, as Cable knows, is that it has disappeared down the plug hole.

It is finally dawning on the Government that the liabilities of the British banks grew to be so vast in the boom years that they now eclipse the entire economy. Unfortunately, the Treasury is pledged to honour those liabilities because it has guaranteed not to let a British bank go down. RBS has liabilities of £1.8 trillion, three times annual UK government spending, against assets of £1.9 trillion. But after the events of the past year, I wager most taxpayers will believe the true picture is worse.

Meanwhile, the assets are falling in value. This matters, because post-nationalisation these liabilities are now yours and mine. And they come piled on top of the rocketing national debt, charitably put at £630 billion, or 43 per cent of GDP. The true figure is much higher because the Government has used off-balance sheet accounting to hide commitments such as PFI projects.

Any of this starting to sound familiar? The general conundrum reads quite similarly to my look at Tracking the Bailout last week, where Britons' tax monies are stashed into the principle values of the banks' overvalued assets. Consider the peril that Britain is in, where Martin informs his readers and us that essentially Britain's economic hopes are pinned on our shoulders.

In this gloom, the Prime Minister has but one slender hope: that somehow, by force of personality, the new President Obama engineers a rapid American recovery restoring global confidence, energising the markets and making us all forget this bad dream.

Obama is talented but he is not a magician. Instead, Gordon Brown's nightmare, in which we are all trapped, is going to get much worse.

NASDAQ's Government Relief Index, a collection of 14 of our most bailed out banks which you'll find pegged over to the right of this post, shows us that the assets our government holds in those banks, stock in turn collateralized by overvalued assets, have lost nearly 20% of their value since closing last Friday, and nearly 42% of their value overall since the index was established on January 5th! Recently bailed out by emergency Bank of America has lost over 27% today alone, Morgan Stanley over 14%, and State Street Corp has lost 60% of its stock value today.

The people of America are energized in general by the inauguration of Barack Obama today. But as Iain Martin points out, he is not a magician. A does not cease to be A simply by his taking office. Bank stocks continue to tumble relentlessly, and do not seem likely to stop.

I hope Gordon Brown isn't holding his breath.