We must overcome our addiction to debt

The Ernst & Young profits warning report makes grim reading. Corporate earnings have been keeping the market bears at bay for a long time, but it looks like they are now coming under pressure as consumer credit dries up and businesses look to borrow less.

Some smart hedge funds are already diverting assets from the UK to the US. Despite the problems across the Atlantic with sub-prime mortgages, the weakness of the dollar makes assets like property and infrastructure companies increasingly attractive. Once the mortgage problems are shaken out of the system, confidence in the US market will grow strongly - or that's the theory.

But in the UK, any bursting of the credit bubble will hurt the economy a great deal. Brits are hooked on debt in the form of mortgages and credit cards - and we are unlikely to rein in our spending in time to avoid an economic downturn. Of 250,000 county court judgments against consumers in the first quarter of this year, 70 per cent were for credit-related matters. Only capital gains on property and shares have driven the belief on the part of the consumer that increased levels of debt simply don't matter. That opinion has to change fast.

RBS won't surrender

Bankers, lawyers and PR executives working on the two bids to acquire Dutch banking giant ABN Amro should cancel their holiday plans for August now. A Dutch court ruled last week that ABN could sell LaSalle, its US subsidiary, to Bank of America without shareholder approval.

The decision means that ABN can continue to flog itself to Bar- clays. Meanwhile a consortium led by Royal Bank of Scotland, which was offering a higher price for ABN on condition that La-Salle was not sold, now has to come back with a revised bid for the remainder of ABN or walk away with its tail tucked between its legs.

Sir Fred Goodwin, the combative RBS chief executive, is hardly likely to take the latter option, despite the misgivings of some of his investors. As usual, there is some ferocious spinning from both sides over whether RBS will be massively overpaying for ABN's remaining assets if it continues to stalk the Dutch bank. But I would not bet against RBS trumping Barclays with a higher bid for ABN before the bid deadline of 23 July.

Having started its takeover attempt of ABN by making it clear it really wanted LaSalle, sources close to RBS are now claiming that actually they wanted ABN's other assets - notably its wholesale bank - just as much. I know the Edinburgh Fringe is about to kick off but come off it, Sir Fred.

Ironically, now that LaSalle is no longer part of the equation, the battle between Barclays and the RBS consortium looks much more of a simple straight fight. If it comes down to who can offer the most for the rump of ABN, RBS looks strong favourite to win. Nevertheless, one alternative for RBS might be Harris Bank, the US Mid-Western institution owned by Bank of Montreal. It has many of the same attractive properties as LaSalle and would satisfy the ravenous appetite of Sir Fred for another big deal.

Games companies play

On paper, the [euro]1bn ([pound]678m) valuation placed on Game Domain International (GDI) looks absolutely barking. This is a company that today has no commercial product, no revenues and no customers. But that valuation, while being very ambitious, might just be achievable.

Most entertainment forms these days arrive in digital format and, so far, the problem with downloading games has been that it takes hours. GDI claims it has technology that cuts download times to minutes rather than hours. For the $30bn interactive entertainment industry, that is a potentially huge development that would slash distribution costs and prices for consumers.

However, the internet is already creaking with the weight of data criss-crossing the planet as teenagers increasingly share huge video and audio files. Add computer games to the mix and the need to increase the capacity of the world's data-carrying cables suddenly becomes more urgent.

For GDI the big question is whether its technology will hold up once tens of thousands of subscribers start using it to download games. Any early foul-ups and the whole project could go flat very quickly.

Time to deliver

There doesn't appear to be any end in sight to the pay dispute between Royal Mail and the Communication Workers Union (CWU). The two sides seem miles apart with no meaningful negotiations taking place, so we can all expect further 24-hour strikes throughout the summer and probably into the autumn.

It is a sorry saga and the only lasting result, if all concerned are not careful, is an erosion in the relationship between the public and the postie. Allan Leighton, the chairman of Royal Mail, and Billy Hayes, the CWU general secretary, are both convinced that the very future of Britain's postal service is at stake. Mr Leighton is adamant Royal Mail must cut costs to survive. Meanwhile, those with sacks on their backs just want to ensure they can still earn a decent living.