Financial legislators will meet in triumph this weekend. The stellar clueless who’ve been trying to sort the fiscal, financial (and consequent economic) mess out are to engage in some more freebie back-slapping in the blissful location of Basle. There they will gather on Sunday with other bigwigs and halfwits to ratify tougher capital requirements for banks, and thus perhaps pour cold water on the so-called ‘risk culture’ which allegedly bankrupted the planet.

Well, taking lunatic risks may have emptied the world of notional money, but since then there’s been minus 100% risk as the bankers have tried desperately to plug holes in balance sheets – and find easy ways to make money….up to but not including loans to entrepreneurial business. So to be honest, I don’t think these much-heralded ‘reforms’ will make a blind bit of difference.

That the EU will shoot itself in the foot by ratifying them is pretty obvious: rumours don’t come from nowhere – especially persistent ones that keep reappearing week after week. Last week’s late counter-attack by the legislators (to up the levels again to near Basel III’s original proposal) sent several banks scurrying around looking for petty cash. I’m cynical (and informed) enough to know that the instant rights-issue announced by Deutsche Bank yesterday wasn’t a coincidence.

But even without this, a number of eurobanks are going to go bang anyway. When Trichet and Bernanke exchange false smiles this weekend and say “So far so good”, they will almost certainly know that they’re halfway down a cliff, and the tide went out hours ago.

There is a sense of sleepwalking rather than urgency about the whole tableau at the moment. Reformers say the new rules should rein in the worst excesses, cutting banks’ profitability and providing a natural brake on pay levels that should be more effective than politically inspired taxes on bonuses – but based on previous bitter experience, that isn’t credible. And crucially, these changes will be phased in over the next decade. Not only will that give Goldman Sachs and J P Morgan ages to work out ways round them, the UXB will go off long before then.

Is this just more doom-mongering? Hardly. The ‘system’ adopted by Trichet as head of the ECB (against the simmering protests of several fellow board-members) is one of buying any old EU bond rubbish that comes up, and giving eurobanks attractive deposit rates. The policy is insane for many reasons, the chief ones being that banks are rushing to put everything they have into the central bank – not trusting any other banks – and it leaves the ECB as the proud owner of unprofitable deposit accounts on a declining currency, plus a slag-heap of toxic debt.

The tell-tale writing is in 500-pt type on every wall in every member country. The rush to buy Swiss francs is unabated. The eurobank stress test is now revealed for what it was – a fraudulent scam. Virtually no banking business of any use to the eurozone economy is being conducted. Brussels eurocrats are frantically trying to get open-ended emergency taxes through, and being firmly rebuffed by everyone except Germany – which now has by far the most to lose. And many Franco-German banks are flatly refusing to reveal quite normally released details about their capital levels and debt exposures. In Spain, they’re raiding the national pension pot to artificially keep the bonds market there buoyant.

This isn’t the smoke from a fire being hidden by the chiefs, it’s a thousand smoke signals from the panic-stricken indians.

In the US, the battle between Obama and the banks is already lost. The Blankfeins are laughing at the President, certain now that he’s a one-termer. Nobody else is laughing: jobs have gone for good, and the repo housing sales list is so enormous, the supply will exceed demand many times over in the next few months. Obama announces a stimulus here and a grant there, but there’s neither lead in his pencil nor bullets in his Colt 45. He is caught between the GOP and the Chinese (who will cut up rough about any massive QE or welfare increases) and the trade gap which gets bigger every month. Like the bankers in Basle, he has left it too late – and now has too little with which to get out of the hole.

In this dire context – and I could run through another thousand or so signposts, but we’d be here until Monday – those given the hospital pass are doing everything they can to sidestep the juggernaut. The Obama fiscal team has considered using Fed Reserve funds to blast some secret QE into the economy without the necessary Congressional approval. It has cast China in the role of villain in a bid to get the Yuan down to a sensible price. (China may well deserve the role, but a cheap Yuan isn’t the problem). But it has got bogged down in a political slanging match during the run-in to November’s legislative elections: it dare not lose them, but it will most definitely lose them.

The US Government is quite happy to tangentially insult the average American’s intelligence. With the EU, the situation is different: the openly-expressed view in all the spin-stunts they pull is that every European is as thick as a donkey’s undercarriage. Trichet in particular tries on the most spectacular falsehoods virtually every day, and Barroso is not much better. Waiting – skulking – in the background is Herman Van Rompuy, said by many to be the author of those never-ending squadrons of tax which keep trying to fly under the parliamentary radar and bomb the people being foreclosed on the ground.

The Slog is currently on the trail of the latest scam – a grubby back-door sting of such enormity that, when it is revealed, may yet finally nail Jean-Claude Trichet and his financial fibbers. If ever there was a man who put the rat in Bureacrat, it’s M. Trichet. Stay tuned for more revelations.

Related pieces: The China strategy, Europe in a basket, EU aid fund – broken or broke?