It may be a crisis, but it can still yield dividends

So-called gilt-edged government bonds provide the illusion of safety. They are safe only in the sense that you'll definitely get your money back on specific dates in the future, but they don't buy safety against the dwindling buying power of that money, currently shrinking at 4% a year.

To buy that safety is much more expensive. If you think Treasury 4% 2016, yielding 4.5% before tax, looks poor value, then look at its index-linked equivalent, which returns just 1.3% on top of the rise in the Retail Prices Index over the next eight years.

These prices result from the stampede to safety, and the Government will take advantage; its finances are in a mess, and the Northern Rock fiasco (see below) promises to pour at least another £50 billion of stock into the giltedged pool in addition to the £40 billion or so already needed to close the gap between the state's income and expenditure-In short, these bonds look very poor value unless you believe we're headed for a depression where prices of goods and services actually fall.

The chart above shows the yields on gilts and shares since the dot-com boom, after basic rate tax for shares and before income tax for government stocks.

In early 2003, there was a war in Iraq, oil prices had risen, consumer confidence was falling, growth was slowing and a recession loomed. Pension funds and life offices were running from risky shares into safe bonds, and in March the two lines touched. This rang the bell for the end of the bear market; share prices doubled while bonds went nowhere.

Ah, but it's different this time. It always is. This time we're not merely facing a slowdown, but a deep depression. Expect articles on How to Survive the Coming Slump, recycled from five years ago. The outlook appears to be worse now than than it was then, but we know how that one turned out, and watching your team on Match of the Day when you already know the result is much less nerve-racking than seeing the game live.

We do have a full-blown banking crisis. All round the world, write-offs are cutting into reserves just at the moment when bank balance sheets are being bloated by the obligation to take the assets from special purpose vehicles on board.

Banks will have less to lend and will be determined to make as much as they can on what they do lend. Money will remain expensive even if the Bank of England throws caution to the wind and cuts interest rates next month. America is probably in recession already, and we may well follow.

Yet look again at the chart. The two lines have converged in recent months. Current share prices are implying that dividends on the 100 largest companies are hardly going to grow at all over the next decade. It's just possible this might be true in total, if the banks decide to rebuild their balance sheets by cutting their payouts. Citigroup has already cut, and if one big British bank does so, the temptation for the rest to follow may become irresistible.

However, there are plenty of shares yielding a lot more than gilts whose dividends are going to rise, at least at the rate of inflation.

We may shop less, but we're not going to stop. Commercial property values may fall again, but a further quarter off is already factored into the sector's shares. The need for new houses remains.

Nobody can pick the turn of a market except by luck, but there is plenty of nice, clean value out there among those stocks that have already finished their spin cycle.