How sustainable is the alleged economic recovery? A brighter outlook certainly appears to be in evidence in parts of the City. Construction work on glitzy office buildings has resumed. A stroll through the Royal Exchange takes you past packed wine bars, expensive restaurants and boutiques displaying the most opulent array of branded merchandise – jewellery, watches, perfumes, clothes – and they’re buzzing with customers. Visit the furniture department in any major West End store on a Saturday and you will see young people happily paying hundreds of pounds for a chair and thousands for a modest living room suite. Recession? What recession?

In the investment banking, hedge fund and private equity fraternity the global financial crisis has already been relegated to the status of a blip. In anticipation of this season’s bumper bonus round all the major banks have signed up to voluntary rules that promote transparency and purport to limit cash bonuses. But there is still no absolute cap on basic pay, which for many has doubled (just in case bonuses are reduced). The Chancellor professes a determination to curb obscenely disproportionate pay cheques, but who believes anything will change?

Judicial intervention in USA

In the USA there is far more direct judicial intervention concerning the inequities of the bonus culture. Last month a New York court overturned the settlement between the SEC and Bank of America over the non-disclosure to shareholders of billions paid in bonuses to Merrill Lynch executives immediately before they were rescued by the bank The judge wrote that the SEC’s puny $33 million fine “does not comport with the most elementary notions of justice and morality”. He also criticized the fact that the fine would be borne by the bank’s shareholders, who were the ones injured by the non-disclosure!

He reasoned that the shareholders had lost enough

The judgment is a gem. “It is quite something else for the very management that is accused of having lied to its shareholders to determine how much of those victims’ money should be used to make the case against the management go away.”  In 2003 the same judge, Jed Rakoff, refused to sanction the settlement between the SEC and WorldCom following its collapse in an $11 billion accounting fraud. He reasoned that the shareholders had lost enough, so when he forced the SEC to increase the fine against WorldCom from $500 million to $750 million he also demanded that it be paid to the shareholders rather than the SEC. Compare that with the hollow threats and ineffectual posturing, mired in legalistic recrimination, that passes for remedy in this country.

In Washington, senior Treasury officials hold absolute veto power over executive pay packages in companies that have received government loans. Yet here, where taxpayers own half of the largest retail banks, we have “voluntary” compliance with a code so soft that the biggest rogues have rushed up to sign. And when did you hear of a UK court hand down a sentence to match the 24 years in jail given to Jeff Skilling, the Enron mastermind?

 A sector-oriented veneer

Returning to the original question, what kind of economic recovery does all this folderol represent? My own sense is that the simulated normalcy of a rising bull market, increased reported earnings in the financial sector and a 25% rise in Kensington and Chelsea house prices since February, signals little more than a sector-oriented veneer.

The underlying reality presents harsher truths. As unemployment rises and fresh credit dries up, many will be unable to meet repayments on the enormous credit card debts they have been running up. Among Europeans, the British hold more cards per head than any other nation with total credit card debt now standing at £54 billion. The 2008 crunch was triggered by banks’ reckless determination to lend to people with no prospect of repaying their loans, and the impending credit card crunch may prove to be its most menacing manifestation.

Despite reassuring Bank of England reports on availability of funds, small businesses still find it nigh impossible to access credit on fair terms at reasonable rates, and now many face business rate increases of up to 25%. It is as if two parallel, but disconnected, economies exist. Which one is real?