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In Edinburgh, on a bitter cold day, reflecting on a tumultuous year for the city's financial institutions.

The news that the Royal Bank of Scotland has lost as much as £400m in what appears to have been a spectacular fraud by the Madoff hedge fund in New York had one colleague observing things are so bad for RBS that he's beginning to feel sorry for it.

When people criticise the bank, it might worry, but when they feel sorry for it, things really have come to a pretty pass.

Looking down the Royal Mile, it looks less tumultuous for Holyrood politics. Economic events have meant that the Scottish Parliament has ceased to be the focus of events, and the pivotal point of debate, for perhaps the first time since its current incarnation began nearly 10 years ago.

The obvious explanation is that it lacks the economic and taxation powers to do much in the face of the global tumult. But it is notable how muted is the SNP Government's argument these days that it would want them. Would John Swinney really want to be in the same position as the Irish finance minister in announcing a £9 billion recapitalisation of his nation's banks?

But while Westminster seems to have the power to make decisions on Britain's economic future, that may be something of an illusion. "Being in control" is a relative concept, and the Bank of England and the Treasury are closest to it. Parliament can ask questions but looks weakened by the scale and speed of events.

Indeed, neither centre of political power looks in control of events, and looking to the new year, both could look puny when compared with the scale of the economic storm raging around them.

This next year looks like shifting the political-economic nexus from treasuries and bailouts to the political and social fallout from recession. Politicians will have to deal with the pain being inflicted on their constituents, and will have to get used to the cry: "Well, if they can do it for the banks, why not for us?"

There are few convincing answers. "Not enough money," doesn't seem much of an answer when UK borrowing will be up three-fold - at least, from a worryingly high starting point and, no doubt, with more bail-outs yet to come - and the combined governments' response to the crisis is somewhere in the region of 1.5 trillion US dollars.

The challenge is to get the balance right between seeing recession as something that inflicts pain and dislocation of some sort on almost every home in the country, and seeking to respond to it that way, and on the other hand recognising that the big longer term pressures may be gathering elsewhere, sometimes a long way off, but building up a storm that will hit us all in different ways.

A geo-political rebalancing is already taking place. Of all the extraordinary events that have taken place in recent months, one that stands out as having the biggest implications for the world's future was the G20 gathering in Washington last month - not because of anything it achieved, but because it pointed towards the need of the US and Europe to recognise the emerging powers as not just economic but political partners and, perhaps sooner than we realise, as equals.

So, while the future of Edinburgh banks and Merseyside Vauxhall car plants will concern many, there is a link to millions of Chinese people returning to their villages from the industrial belt, taking the potential for social unrest with their frustrations.

Russia was strutting its energy power in mid-summer, but is now having to explain to its people why its public spending has gone haywire. The international implications of its insecurities are rarely comfortable.

Tensions are already becoming clear within Europe, particularly around Germany, over the need and scale of reflation.

The strong euro could be bad for British travellers to the continent next year, but it is a whole lot worse for the Irish, many of whom sell into the British market.

And with massive flows of migration a feature of the global economy in the good times, new patterns - some of them troubling - will arise in the bad.

The brightest prospect in the year ahead is surely the inauguration of Barack Obama, elected on an electoral wave for change. But the change is happening all around him and it is not the variety of his choosing.

January 20 on the Capitol steps in Washington looks like being the eye of an economic hurricane.