So,” asked a young relative, conveniently, “all this money that Bernie Madoff stole, what happened to it?” Deep into GCSE maths, she could see that the alleged fraudster was unlikely to have spent the whole $50 billion on himself. He owned the $7 million apartment in New York (which was middle of the range for Manhattan) and had absent-mindedly posted $1 million of jewellery to relatives, but these were just the necessary flim-flam of his business, and hardly amounted to anything serious. “It's gone,” I said, wisely. “But who spent it?” the poppet persisted.

We worked out that the answer was, to a large extent, that the people whose money he stole were also the ones who received it. On a 12-14 per cent return per annum, it wouldn't have taken you much more than eight years with Bernie to get your money back. It's just that you didn't know it was someone else's money.

The young person and I felt this to be a deeply satisfying thought, unless your pension fund or your charity was somehow bound up with Madoff. And it mitigates any sense of outrage one might have felt on behalf of those investment funds now casting around for other people to sue, or blame, in order to get a fraction of the money back that they may themselves already have disbursed. The thought arises that they may well be discovered in one guise - that of losers in the fraud - suing themselves in another guise, that of beneficiaries. We must wish them good luck, especially 91-year-old Zsa Zsa Gabor.

The involvement of Nicola Horlick, whose career and manner lends itself more easily to envy even than Gabor's, makes the naughty satisfaction greater. The Madoff case pointed to “a systemic failure of the regulatory and securities markets regime in the US”, Horlick complained in December. Back in May, however, she had told an interviewer that the improbably successful investor was “very, very good at calling the US equity market”, adding: “This guy has managed to return 1 per cent to 1.2 per cent per month, year after year after year.”

In our present state one successful narrative is that we're doomed and that it's all the fault of the bankers; or the variant is that we're doomed and it's all the fault of the politicians and the bankers. “We name the guilty men and women” has a definite appeal, recasting the arrogant bonuseers as hollow people. It is hard, on hearing of the suicide of a master of the Universe, not to enjoy the inner smile of recognition.

It isn't enough, though. So we have disinterred that old religious precept that we're doomed and it's our own fault. Illustrating this theme (I think unconsciously) one newspaper has taken to gathering its Approaching Depression material under the generic heading of The Road to Ruin. “Enter ye in at the narrow gate,” said Matthew, “for wide is the gate, and broad is the way that leadeth to destruction, and many there are who go in thereat.” The Victorian painter W.P.Frith will have had the apostle in mind when, in 1878, he created his five-picture series entitled The Road to Ruin depicting one chap's descent into the abyss of gambling-induced debt.

Frith, naturally, had a more interesting and extravagant reproductive life than his moral fables suggested, fathering 12 children by his wife and another seven by a mistress. But this could suggest self-knowledge as much as hypocrisy. So we might also believe that we too have danced, holidayed and texted on our iPhones along the capacious path to Hell.

It is a corollary of such a belief that regained virtue is to be found in self-denial - and specifically the kind of self-denial represented by otherwise pointless saving. We can somehow make amends for our “orgy of greed” or our “mountain of personal debt” by donning the hair-shirt. Then we will be good.

One problem with this is that, excepting icons of overpayment such as Sir Fred Goodwin and Jonathan Ross, we haven't actually been orgiastically greedy, or particularly personally profligate. At least, I haven't. My money's gone on a mortgage on a house I love, on theatre tickets and on books, not on wenching or roistering. As Anatole Kaletsky has often told us, the large rise in debt in the last two decades has been overwhelmingly due to the operations of the financial sector, and not down to ordinary people or businesses. Most of us have just tried to live a little better, helped by many of things that we like, such as computers and mobile phones, being far cheaper than ten years ago.

But we won't have it. Things may be bad, but we won't be satisfied until they're worse. If we formerly regarded the world with Horlickian optimism, we are now determined to understand it with biblical pessimism. Even where we don't need to. Take, for example, the recent run on bank shares, which hit some troubled stocks but which also undermined perfectly good ones. The operating assumption seemed to be that everything was now rubbish. I can attest to the mordant humour of our leader writers, but even so I was surprised by the recent sentiment in an editorial on the £4.4 billion of assets owned by British banks that “not all those assets are worthless”. Somehow the author regarded this as needing to be said!

So, over the two weeks up to yesterday, Barclay's shares fell by more than two thirds. At the weekend the chairman and CEO put out a letter effectively telling the market that it was wrong. “Although we have been heavily impacted by the credit crunch,” they pleaded, “our income generation was at a record level in 2008 and has enabled us to withstand this impact and still produce strong profits.”

Robert Peston on the BBC opined that perhaps they had “protested too much”. Any optimism is impermissible: Baroness Vadera leapt from anonymity to notoriety simply because she agreed with an interviewer that, just maybe, she could descry the first green shoots of renewed interbank lending.

This was psychologically unbearable. It reminded me of watching my team, Spurs, play at Manchester on Saturday. I had sat down gloomily contemplating defeat. Then disaster happened - we scored. I couldn't take it. Not until United had replied with two quick goals could I regain my equilibrium. The chance of success was far worse than the certainty of failure. In the same way we seem to be easier with the idea that, however bad things are, they must in fact be worse.

Yesterday Barclays shares rose sharply. Perhaps there are some realists out there after all.

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