The Royal Bank of Scotland - which was forced to accept a £20billion government bail-out last month - said £400million was at risk in the hedge funds invested with 70-year-old Madoff. Spanish bank Santander, which owns Abbey and the savings business of Bradford & Bingley, said its potential exposure was more than £2billion, while HSBC could reportedly lose up to £668million.

And the Man Group, Britain's largest hedge fund manager, admitted that it had £231million invested in two funds that 'are directly or indirectly advised by Madoff Securities'. City 'superwoman' Nicola Horlick earlier attacked U.S. financial regulators after she became a victim of the investment scam which may yet turn out to be the world's biggest fraud. She said: 'It is astonishing that this apparent fraud seems to have been continuing for so long, while investors have continued to invest more money into the Madoff funds in good faith. IT SEEMS THAT CRIMINAL ACTIVITY HAS CONTINUED UNFETTERED AND UNDETECTED FOR YEARS.'

Madoff was arrested on December 11 and charged at federal court in Manhattan with a single count of securities fraud. He was released that day on a $10million bond guaranteed by his wife and secured by his Manhattan apartment. A day later, a federal court froze the firm's assets.

"Banks aren't lending so people are coming here for short-term loans against collateral like diamonds, watches and other jewelry," said Jordan Tabach-Bank, CEO of Beverly Loan Co, self-described "pawnbroker to the stars. I do see my share of actors, writers, producers and directors," he said, but also cited more visits from white-collar professionals and especially business owners struggling to meet payroll obligations.

In the 70 years of the family business, Beverly Loan, which usually charges 4 percent monthly interest on loans, has never loaned so much as it has in the past few months, he said. "We're a lot easier to deal with than a bank," he said from his office on the third floor of a Bank of America building near Rodeo Drive. An armed security guard watches over the reception, where case after case is filled with precious gems.

There are as many as 15,000 pawnbrokers across the United States. As the U.S. recession deepens, pawnbrokers - long seen as a lender of last resort - are noting a rise in business. No national body keeps statistics for the sector, but proprietors across the spectrum say they are thriving as home foreclosures spiral and bank credit remains scarce.

As we can see from the very public arguments between Britain and Germany, central banks do not always see recession in the same light. There is disagreement not just between the British and German governments, but between Germany and France and between the Government and Opposition in Britain. Mr Brown has pursued what has been called a Keynesian policy of making large bailout payments to the banks, combined with a short-term cut of VAT from 17.5 per cent to 15 per cent. The British borrowing requirement had already been rising because of increased expenditure matched by falling revenues. The deficit will now rise to a forecast £118 billion into 2009, which will take at least five years to claw back, probably much longer.

Germany has been pursuing a much more cautious policy. Angela Merkel, the German Chancellor, made a key policy speech this month in Stuttgart; she sounds extraordinarily Thatcherite. She talked of the Verantwortung, which is the German for "responsibility". "As we are in Stuttgart, you should ask a Swabian housewife," Ms Merkel suggested. "She would give us some short and correct advice, which would be this: 'YOU CANNOT LIVE BEYOND YOUR MEANS IN THE LONG RUN.' WE ARE NOT GOING TO PARTICIPATE IN THIS SENSELESS RACE FOR BILLIONS."

I have found Vilfredo Pareto (1848-1923) one of the most helpful of the leading economists who have written about economic crises. He emphasises the importance of psychology. He wrote: "ALL CONSCIENTIOUS OBSERVERS OF CRISES HAVE NOTED THE ROLE PLAYED BY THE IMAGINATION. IT IS ONE OF THE PRINCIPAL CAUSES OF CRISIS." And, of course, of THE ENDING OF CRISIS, WHEN THE DEPRESSED IMAGINATION TURNS TO HOPE.

If one considers the choice of policies between Mr Brown and the mythical Swabian housewife, one should ask which policy has more appeal for the human imagination. Is it a 1.5 per cent stimulus followed by massive debt, or is it a return to stable finance, paying one's way, lower debt and lower taxes? As Pareto observed: "IT IS OBVIOUS THAT PEOPLE CANNOT GO ON CONSUMING MORE THAN THEY PRODUCE INDEFINITELY."

The18 sets out its goals on its website. Among the goals are challenging the two-state solution, being relentless and joining the fight worldwide. "The18 will not be polite," the group warns. The group was founded after the election of Barack Obama to be President of the United States. Obama believes in "linkage," the group says, and believes that if Arab grievances are addressed, terrorism will cease. He will see the creation of a PA state as a top goal.

JEWISH NATIONALISTS MUST MAKE FIGHTING THE CREATION OF A PA STATE THEIR TOP GOAL, the group says. "All other issues are a diversion... we must steel ourselves to the reality that all else must be secondary to fighting two-state," member Michael Fenenbock explains in the group's manifesto. "IF WE LOSE THE TWO-STATE BATTLE... WE LOSE THE WHOLE GAME."

The18 is inspired by the Warsaw Ghetto uprising during the Holocaust, members say. On its site, the group mentions the uprising as a time when "a young Jew named Mordechai Anielewicz showed that a fearless handful of committed men and women can make a rebellion and he forever laid to rest the myth of the passive Jew."

"Oh noble Gaza, raise your head high," he screamed into the microphone, panting heavily. "You have made the Muslims raise their heads high. And you, people of Hebron - you are now waging a war against the Jews. You are well-versed in this. We saw how, on a day in 1929, you slaughtered the Jews in Hebron. Today, slaughter them on the land of Hebron. Kill them in Palestine. Arise, oh people of Palestine, all the people of Palestine - arise in defence of your Al-Aqsa Mosque, arise in defence of Nablus and Hebron. Arise and face the [PA] Preventive Security forces. Fear them not, for they are rabbits. They are wolves, so fear them not, oh lions," he exhorted.

"Oh young men, what will you say to the Jordanian government?" he continued. "Expel the Jewish ambassador from Amman. Amman is pure, and the Jewish ambassador must not defile its soil. Recall the Jordanian ambassador from Palestine. Only mujahideen should be in Palestine - not ambassadors, not ministers, or any representative of this nation. Do not recognize the ambassador of this nation in Palestine. PALESTINE IS THE LAND OF JIHAD, OF SACRIFICE, AND OF PREPARATION."

Yvette Cooper, Chief Secretary to the Treasury, said that attempts by previous administrations to target exchange rates had been unsuccessful. The Government will continue to plot a course aimed at keeping inflation under control and supporting the economy, she said. Officials say that with inflation falling sharply the kind of interest hikes that might bolster sterling would be completely inappropriate at a time when the Government is intervening to support the economy.

Ms Cooper went further than most ministers normally do in talking about sterling. She acknowledged that British tourists were suffering as a result of sterling's weakness, but said that the low pound was also good for UK exporters.

The plunge in the base interest rate to just 2% over the past few months, coupled with an increase in Government borrowing, has prompted a collapse in the value of sterling, which is today trading at just 1.12 euros or 1.49 US dollars. As recently as last December, £1 would buy 1.40 euros or 2.06 dollars. SOME HOLIDAY-MAKERS ARE RECEIVING LESS THAN A EURO FOR EACH POUND THEY CHANGE because of commission charges at bureaux de change in High Streets and airports.

THE SOLES OF SHOES ARE CONSIDERED THE ULTIMATE INSULT IN ARAB CULTURE. During the trip, Mr Bush and Iraqi PM Nouri Maliki signed the new security agreement between their countries. The pact calls for US troops to leave Iraq in 2011 - eight years after the 2003 invasion that has in part defined the Bush presidency.

Speaking just over five weeks before he hands over power to Barack Obama, Mr Bush also said the war in Iraq was not over and more work remained to be done. His previously unannounced visit came a day after US Defence Secretary Robert Gates told US troops the Iraq mission was in its "endgame". In the middle of the news conference with Mr Maliki, a reporter stood up and shouted "this is a goodbye kiss from the Iraqi people, dog," before hurtling his shoes at Mr Bush, narrowly missing him. "All I can report is a size 10," Mr Bush said according to the Associated Press news agency.

President Bush leaves the White House in less than six weeks. He said in a recent interview with ABC News that THE BIGGEST REGRET OF HIS PRESIDENCY WAS THE FALSE INTELLIGENCE THAT IRAQ HAD WEAPONS OF MASS DESTRUCTION. Finding these was one of the key justifications for the invasion. NONE WERE EVER FOUND.

Number 10's Permanent Secretary Jeremy Heywood later acknowledged that "insufficient attention" was paid to their concerns. His admission came in a letter to the chairman of the UK Statistics Authority Sir Michael Scholar, after the watchdog spoke out publicly against the Government's "premature, irregular and selective" use of the figures. Sir Michael said ministers had breached the code of conduct which they had themselves approved to fend off accusations of spin.

But Conservative leader David Cameron insisted an apology was needed from Mr Brown, saying: "We are not going to get anywhere with a government giving us dodgy statistics and deliberately disobeying what its own Statistics Authority is saying. The Home Office figures were fed to the media on the morning when Mr Brown launched the No To Knives campaign with actress Brooke Kinsella - whose brother Ben was murdered in a knife attack earlier this year - and Richard Taylor, the father of Damilola Taylor.

They suggested that a crackdown on knife crime in ten hotspot areas, including London, Manchester and Birmingham, had prompted a 27 per cent fall in teenagers being taken to hospital with stabbing injuries.

Mash'al Al-Sudairi's column, translated by The Middle East Media Research Institute (MEMRI), stated that although the "Jewish 'occupation of a part of Palestine constitutes great oppression,' the Arabs have a history of self-inflicted blows" resulting from opposition to the re-establishment of the Jewish State of Israel. "When, in the early 1930s, we were offered 80 percent of Palestine, while the Jews were offered 20 percent, we rejected the offer. In the late 1940s, we were offered 49 percent of Palestine, and the Jews 51 percent, and we rejected that [offer]," al-Sudairi wrote.

He criticized the Arab world for exhausting all of its resources over the issue of "Palestine" and wasting money and time. I am positive, [and am willing] to bet and even to swear by Allah, that if only 10 percent of the money that the Arab countries invested in arming their forces during the futile fighting [with Israel] had been invested in what was left of Palestine and its people, the West Bank and Gaza would now be enjoying a living standard higher than that of Singapore," he added.

Sudairi also commented on Iran's occupation of three Persian Gulf islands. "With all the turmoil over the Palestinian issue, we have completely forgotten that other Arab countries have been robbed of parts of their territories, in broad daylight, and we never uttered a word of protest," the Saudi columnist noted.

Ambassador Georg Boomgaarden said his government did not need to match the massive sums spent by Gordon Brown to beat the recession because GERMANY IS IN FAR BETTER ECONOMIC SHAPE. Writing in today's Mail on Sunday, Mr Boomgaarden gives six reasons why German Chancellor Angela Merkel is justified in taking a different approach from Mr Brown.

He says that, in Germany, unemployment is falling, inflation is much lower and there is no housing market 'bubble'. He adds that Germans are keen savers and do not have big credit-card debts. Most wounding of all, Mr Boomgaarden says HIS COUNTRY STILL MAKES A HEALTHY PROFIT AS A TRADING NATION – IN CONTRAST TO THE UK, WHICH IS IN THE RED.

The intervention risks reigniting the war of words between the two governments over how to beat the credit crunch. It started when German Finance Minister Peer Steinbruck called Mr Brown's £20billion boost in public spending 'crass Keynesianism'. Mr Boomgaarden now explains why Germany is right to adopt its own approach to the economic crisis instead of following Mr Brown's lead. He is careful to avoid any personal criticism of Mr Brown but says: 'Key aspects of the current state of the German economy are notably different from the UK.'

In a caper worthy of an Ealing comedy, they motored from Glasgow to London (in those days no mean feat), broke into the Abbey, AND STOLE THE SYMBOL OF SCOTTISH PRIDE, THE STONE OF SCONE. The Stone of Scone, you might ask – what exactly is it? More than a mere 336 lb slab of ancient sandstone, for a start.

Alleged to once have been Jacob's pillow, where the Biblical figure laid his head while he dreamt of a ladder to Heaven, it became the symbol of Scottish pride and independence, upon which the nation's kings were crowned. Then, in 1299, King Edward I, known as Longshanks, infuriated by the rebellious Scots, stormed Scone Abbey and stole it. Its new home was Westminster Abbey, where it was placed beneath the Coronation chair as a scornful symbol of Scotland's subservience to England. Ever since then, its theft has been a thorn in the side of Scottish nationalists, symbolising England's arrogance and Scotland's shame at the loss of a sacred relic.

As they sped off, the nightwatchman was phoning 999. When they reached the border, they marked the Stone's homecoming after 600 years by dousing it in whisky. The hue and cry was enormous, but though the foursome were questioned by police, once the Stone was found, they did not press charges, fearing an even bigger incident. Hamilton gave up the Stone a year later, after a very public and fruitless police search, by leaving it at Arbroath Abbey, where the Scots had signed a declaration to fight for freedom in 1320.

THE STONE REMAINED IN WESTMINSTER ABBEY UNTIL 1996, WHEN IT WAS RETURNED TO SCOTLAND ON THE CONDITION THAT IT BE USED FOR CROWNING THE BRITISH MONARCHY.

The long awaited document from the Vatican's doctrinal body marked a big step by the Vatican into the brave new world of biotechnology, an area in which governments around the world are struggling to formulate legislation. The document also condemned new drugs that block pregnancy from taking hold, such as the so-called "morning-after pill" and the drug RU-486, which blocks the action of hormones needed to keep a fertilized egg implanted in the uterus.

"Dignitas Personae (dignity of a person), an Instruction of Certain Bioethical Questions," is an attempt to bring the Church up to date with recent advances in science and medicine. The document, the most authoritative of its kind from the Vatican in 20 years, said human life deserved respect "from the very first stages of its existence (and) can never be reduced merely to a group of cells."

"The human embryo has, therefore, from the very beginning, the dignity proper to a person," said the Congregation of the Doctrine of the Faith's document, approved by Pope Benedict who headed the same office before his election in 2005.

The sun-drenched Asian city-state, with the highest density of millionaires in the world, is seeing wealth management prosper as the U.S. and Europe grapple with the worst slump in a generation. Singapore's strict bank secrecy rules seem likely to be spared an assault similar to the one that Berne is defending now, following the charging of UBS's wealth management chief for helping Americans hide money.

With close ties to powerful Asia, Singapore is in a stronger position to resist pressure from the U.S. than rival Switzerland or Alpine retreat Liechtenstein, which recently partially surrendered bank secrecy. "It's a wealth center," said Martyn Schilte, a manager in charge of selling million dollar supercars in Singapore. "If you look at the type of client we sell to, it's people with a net worth of $50 million-plus."

Like tax hideout Monaco, Singapore has a hard line on bank secrecy. It has not agreed to the Organization for Economic Cooperation and Development's (OECD) standards of transparency and exchange of information. Singapore, which is trying to grow financial services to wean dependence on manufacturing, is on the International Monetary Fund's list of tax havens and targeted by a proposed new U.S. anti-tax-abuse law.

That puts them askance with a growing number of high profile equity fund managers, including James O'Shaughnessy and BlackRock's Bob Doll, who say stocks hit their worst levels in late November, but in line with the grim tale fixed-income markets have been telling. O'Shaughnessy said that while IT'S A FOOL'S ERRAND TO CALL A MARKET BOTTOM, he thinks it is a good time to buy.

However, Taylor, an outspoken, veteran investor who runs the largest currency hedge fund in the world, with $14 billion in assets, believes THE BEAR MARKET WILL HOLD FOR SOME TIME. Taylor said HE DOESN'T EXPECT THE U.S. ECONOMY TO STABILIZE UNTIL THE END OF 2009, adding that the consumer-driven economy was in the early stages of a structural shift that could take two years or more.

"I don't see fast growth in the United States for several years," he said. "People need to get their finances in order." That said, Taylor said that after a brief year-end sell-off, HE EXPECTS EQUITY MARKETS TO RALLY UNTIL SHORTLY AFTER THE INAUGURATION OF PRESIDENT-ELECT BARACK OBAMA, AND THEN PLUNGE AGAIN. "We're going into one of these periods where everybody is in la-la land. They think Obama's going to help them out," Taylor said. Once the euphoria of a new administration and a likely stimulus package wears off in the spring, he said, AMERICANS WILL WAKE UP TO A HARSH ECONOMIC REALITY.

One town newspaper was contacted ahead of time and provided a reporter, but chose not to notify the church of the demonstration. "Jesus was gay," they shouted among other profanities and blasphemies as they rushed the stage. Some forced their way through rows of women and kids to try to hang a profane banner from the balcony while others began tossing fliers into the air. Two women made their way to the pulpit and began to kiss.

Members of the gay activist group marched down aisles shouting profanities. They pushed and shoved church members in an attempt to get them to "push back." The demonstration quickly broke up when the sheriff arrived. A statement on Bash Back's website read, after the event, "Let it be known: So long as bigots kill us in the streets, this pack of wolves will continue to BASH BACK!"