Writing in The Times, the BBC's Business Editor Robert Peston looks at some of the causes of the economic crisis we are now in and posits the idea that a new kind of capitalism will emerge:

Capitalism is changing in fundamental ways. What's happening will affect the relationship between business and government, between taxpayers and the private sector, between employers and employees, between investors and companies for many years to come. Arguably the crisis will turn out to be more significant for us and other developed economies than the collapse of communism.

A New Capitalism is likely to emerge from the rubble, one which may well seem fairer and less alienating than the model of the past 30 years. The system's salvation may require it to be kinder, gentler, less divisive, less of a casino in which the winner takes all.

Could it really be a more significant change than the fall of communism?  Peston argues that things have been going fundamentally wrong in the West, as compared with Asian economies, for a very long time.  Where China has been building up surpluses, our spendthrift ways now mean that there is a big price to pay.  It is this massive accumulation of debt, Peston tells us, that will force the change:

Here are some of the numbers that tell us what's gone wrong. If you combine consumer, corporate and public sector debt, the ratio of our borrowings to our annual economic output is a bit over 300 per cent, or more than £4,000 billion. Over the past decade, we borrowed and we borrowed and we borrowed: we assumed that the day when we had to pay it back would never arrive.

One of the best ways of understanding how all our debts were accumulated is to look at the gross foreign current liabilities of our banks. These rose from £1,100 billion in 1997 to £4,400 billion this year - again, about three times the size of our annual economic output.

When put in such stark terms, it is obvious that something has to give.  The oil-rich Arab states and the Chinese are sitting on massive surpluses.  The strategic terms of trade have shifted fundamentally and the West is no longer calling the shots.

Peston ends by saying that we have to come to terms with new international political and regulatory institutions able to cope with the impact of globalization.   In the past the West has been able to shape such institutions.  Will we be able to do so once more?

One of the ironies of Alex Salmond's position at present is that the Union he works so hard to dismantle is currently ensuring that Scotland's public finances have a degree of stability that would otherwise be impossible in the current financial crisis.  Amidst the turbulence, the block grant from Westminster provides the budgetary certainty that many would envy.  Despite criticisms of the Barnett Formula by a panel of experts reporting for the Calman Commission on devolution, its chair, Professor Anton Muscatelli, conceded that the advantage of the Barnett Formula was stability and predictability.

This is just as well, since an analysis last week by Glasgow University's Centre for Public Policy for Regions suggested that Scotland's public finances are in a parlous state.

But if Barnett provides some stability for Scotland under the shelter of the UK's public finances, what are the prospects for the UK as a whole?  Not good, argues Philip Delves Broughton in an article for First Post.  In fact, he looks at a scenario in which Britain could become bankrupt.

The first part of his argument looks at the increasing budget deficit.  It is not hard to imagine, he says, that the current public debt of £640 billion could balloon to over a trillion pounds.  At that point it is approaching the annual national income.  He goes on:

" Now, if you were a lender looking at the United Kingdom's credit application, how would you feel? Here is a client who spends around 10 per cent more than he earns every year. His income is now set to fall, while his expenses will rise as he has to support ailing family members and pay a mortgage about to reset to a higher interest rate.

He acquired his main asset, his house, with a 95 per cent mortgage and the house has just fallen 15 per cent in value. The client advises that he is going to solve this blip in his personal finances by running up every available line of credit he can and spending. He is already awash in consumer debt and has the lowest savings rate among his neighbours. "

He then notes that foreign investors are pulling out of the UK's gilt market, thus Britain has to offer higher interest rates to attract potential lenders.  But the problem is not solved there:

" Meanwhile, the cost of crucial imports such as food and manufacturing goods soars owing to the crippled pound. Inflation takes hold. A financially cautious world wants nothing to do with Britain's key export, financial services. Foreign currency inflows stall.

The hedge funds and private equity firms which propped up London's economy either close up shop due to the lack of any credit or move to Geneva, where the crime level is lower and the tax regime more generous. Britain is suddenly unable to pay its bills or roll over its debts. It is bankrupt. The IMF, the EU, the Americans and the Saudis will have to come to the rescue. "

It is not a scenario that is certain but it is perhaps possible.  Alex Salmond should give thanks for the relatively small problems he faces at present - but keep one eye fixed firmly on the bigger picture.  If the UK faces a financial meltdown, the Barnett Formula will become simply irrelevant.

Yesterday's pre-budget report by the Chancellor confirms the economic mess in which we are now mired.  But it confirms something else too: that politics is dominated by opportunism.  The supposed handouts will be short-lived and only serve to build up yet more debt, something that will have to be paid for in higher taxes.  The budget deficit is set to rise to some 8 per cent of GDP, making the limit under EU rules of a 3 per cent deficit look somewhat fanciful.

The announcement of an increase in the top rate of income tax is yet another sign of a return to class warfare.  When we take into account previous National Insurance changes and changes to the higher rate threshold, it represents a massive penalty on success. That is not the way forward if we wish to build a prosperous society.  Indeed, some studies suggest that such tax hikes even fail in their stated aim of generating more tax revenue as economic activity is stifled and successful wealth creators move out.  A decrease in VAT is welcome but it is taxes on earnings that do the most damage.

We do not object to measures designed to underpin the stability of the banks at this critical time, although we do deplore the crazy build-up of public and private debt that has helped to bring about this situation.  It is not necessary, however, to squander public money indiscriminately in the way that the Chancellor appears to be doing.  The old-style Keynesian notion of pumping money into the economy to generate economic activity just does not work.  It is far better to ensure that the fundamentals are right - a sound financial system, proper reward for effort through lower taxes and regulation that supports rather than stifles businesses.

So the recent political infatuation with tax cuts has been shown to be little more than headline-grabbing spin.  What we are seeing is more spending and - after the inconvenience of an election is out of the way - higher taxes.  Middle income families will suffer.  And the higher earners?  They will move out if they have the chance.

The Glenrothes by-election yesterday saw Labour hanging on and the SNP failing to come anywhere near taking the seat after looking to be unstoppable just a couple of months ago.  Extravagant claims meant that many commentators had written this off as an SNP gain already.  Instead, the swing from Labour to the SNP was a mere 4%.  Has Alex Salmond's bubble burst?

The SNP increased its share of the vote by 13.1% but at the expense - it would seem - of the Liberal Democrats and Conservatives.  In this widely-trailed two-horse race it is hardly surprising that protest votes would go to the party most likely to unseat Labour, but what is surprising is that Labour's share of the vote actually increased.  There are a couple of important explanations for this.

The first is that the SNP is largely the 'incumbent' party as far as Scottish politics is concerned.  As voters begin to learn more about its performance in government and its plans for the future, the enthusiasm with which they rally behind the SNP to bash Labour will diminish.

The second reason is that the Labour party at Westminster is seen to be tackling the financial crisis, however controversially, with the SNP as bemused bystanders.  The fate of two Scottish-led banks - RBS and HBOS - is in the hands of Gordon Brown, not Alex Salmond.  The real pain from the financial crisis is still to unfold but as of this moment the electorate can only look to political leaders in London to provide some sort of lifeline.

This is not yet evidence of any great comeback by Labour and the coming job losses and house repossessions will almost certainly hit Labour hard.  It is more of a political stalemate as the old established parties fight it out with little real enthusiasm behind them.

As Hamish Mcdonell notes in The Scotsman :

Momentum is everything in politics. Going into the Glenrothes by-election, it was with the SNP. Now, as the ballot boxes are packed away and the posters are taken down around the Fife constituency, that momentum has been stopped.

It is far too early, and there is much more to be done, before that momentum is transferred completely to the Labour Party. Indeed, that may never happen. For Labour, Glenrothes may prove to be a temporary blip, a short respite in an overall downward spiral.

What of the also-rans?  The Liberal Democrats and Conservatives saw their votes collapse.  While part of this may be the effect of a by-election with the SNP being seen as the main challenger, it is also the case that confident and strong parties should not collapse so easily.  The Conservatives are largely an irrelevance now in Scottish politics. The four minor parties achieved less than 2% of the vote between them.  There is no obvious challenge to the status quo, but neither is there any great enthusiasm for the status quo.  Something has to give.

We sense a vacuum of ideas in Scottish politics.  The SNP's forward march has been halted but nobody among the established parties is mapping out an alternative future for this country.  The Scottish Progressives seek to work with others to provide that alternative and build a coalition of ideas to challenge the politics of failure that has been Scotland's lot these past number of years.

The UK government's bail-out and part-nationalisation of the banks has hit a snag with the £17 billion merger between Lloyds TSB and HBOS.  The merger must go ahead and both institutions are in favour, says the prime minister.

Gordon Brown told the BBC's Politics Show both institutions now want the proposed merger, which has been brought about by the crisis in banking.

Under the plan, £17bn would be put into HBOS and Lloyds TSB, meaning taxpayers would own about 40% of the merged institutions.

The SNP and Liberal Democrats have questioned if the deal should go ahead.

They have called for clarification over the bail-out, arguing that it may still be possible to preserve HBOS, while the Conservatives have branded the deal "necessary but expensive".

But Mr Brown said: "We have one offer, which is the Lloyds TSB, it protects the maintenance of the Halifax Bank of Scotland, in merger with Lloyds TSB and if people have another offer then obviously we'll look at it.

"But that's the only offer on the table."

One thing for sure is that the banking crisis calls into question the SNP's confidence in Scotland's financial industry.  The two leading banks - RSB and HBOS - will come out of this mess being largely owned by the government in London.  While non-Scottish ownership is not in itself a problem, ownership by the UK government is.  It's a thorny issue for Mr Salmond and one that is not going to go away easily.

Eight candidates will take part in the Glenrothes by-election on 6 November.  The main interest will be in whether Labour can defend the seat against the SNP, but it will also be interesting to see whether the minor parties can make any impact.  The parties contesting theseat are: Labour, Conservatives, Liberal Democrats, Scottish Socialists, Solidarity, UK Independence Party and the Senior Citizens Unity Party.

Full details of the candidates can be found here .