Without spirited Sarah, we haven't got a ghost of a chance

THEY say there's a ghost of a lady, tear-stained and dressed in black mourning, who haunts the Bank of England, or to be more precise, Prince's Street, the road running up the side.

Her name is Sarah Whitehead, and she was the sister of a bank clerk sentenced to death for forging a bill. The tragedy sent her mad and for 25 years, between 1812 and 1837, she came daily to the Bank, asking for her brother under a delusion he was still employed there.

All this is historical record. However, some say at dusk, when the workers have departed, you can hear a woman crying and see a figure dressed in black gliding down the road to the entrance used by staff, where she knocks on the ancient door.

This week she will not cry alone, if the Bank of England fails to cut interest rates, as many observers are desperately hoping for.

Over the past year, this column has pretty much exhausted every available adjective to warn of the economic disaster we thought looming on the horizon, while Government, regulators and even august bodies such as the Confederation of British Industry, said the gloom was overdone.

It brings little pleasure to be proved consistently ahead of the curve, nor to have certain knowledge that we have reached a more serious and precarious place than any in living memory. You would need to be older than 100 to have witnessed the Wall Street Crash as an adult.

In the UK we have lost four banks and three building societies. One can only guess at the position of the Irish and Greek system that governments felt compelled to guarantee everything.

US banking has effectively been nationalised, and the Dutch Government has nationalised Fortis, the Netherlands bank. Bush fires are threatening to break out all over Europe. The Icelandic economy is in meltdown with its banks holding deposits worth eight times the size of national wealth as measured by GDP.

At home, layoffs are escalating, with short-time working throughout the car industry. Yet while most are glued to financial coverage, I can't take my eyes off the international pages. Two far-right parties swept the polls in last week's Austrian elections, with growing unrest between the Flemish and Walloons in Belgium.

This is not the end of capitalism nor life as we have come to know it in the developed Western economies. But it could be. Everything now hangs on the decisions made by Government and regulators over the next few weeks and months.

It wasn't the Wall Street Crash that caused the depression, but bungled policies pursued in its wake, not least by governments selfishly protecting national interest and to hell with the consequences, just like the Irish last week.

A good start would be a substantial cut in interest rates on Thursday and for that I am going to call on poor Sarah Whitehead for help. As the rate-setting committee sits, please, Sarah, go tapping at their door, and wail as loud as you like.

Send shivers down their spines, because I honestly don't know what else we can do to put the fear of God in them.

Irish in a stew
But while we will happily see members of the Monetary Policy Committee trembling at their knees, consumers need to get a grip. This panic has got to stop.

There is no need whatsoever for people to keep switching their money from bank to bank and building society.

On page nine we talk to reader Alex Orr who says he is very worried about his savings. But then he had to admit he didn't have enough to worry about. That goes for most of us.

From Tuesday, deposits up to £50,000 are guaranteed. If your nest egg is bigger, spread it around. The old rules still apply. You are protected per person per banking licence, which means a couple can rest easy with £100,000 with one bank.

To remove any doubt for readers we have taken the unusual step of publishing the entire list of savings brands and which banking licence covers them. Make sure you do not hold more than £50,000 with separate accounts covered by one licence.

If you need to make a big deposit, perhaps because you are moving home, and are worried, put it in an NS&I easy access account.

But hell's-bells, don't go charging off to Ireland. Its Government has guaranteed deposits three times bigger than its national wealth as measured by GDP. That's not a guarantee I would ever want to have to claim against.

Which raises the interesting question of what would happen to Scottish financial institutions in the event of independence, when deposits here might dwarf the country's GDP? A conundrum for another day perhaps?