Smarting from a summer of virulently anti-capitalist, anti-globalist, anti-well-just-about-everything sentiment, the Gods of the free market pantheon gathered at a recent half day seminar on the causes of the financial crisis to discuss and debate their preferred solutions amongst friendly (present) company (accepted).

Opening the proceedings was a well delivered and typically urbane speech by Lord Nigel Lawson, former Chancellor of the Exchequer, and notable climate change heretic, er sorry, I mean skeptic. After a spirited if somewhat shrill defence of the wonders of globalisation, free markets and international finance capitalism, he moved on to admit that some fundamental errors of judgement were indeed made in our way to the current calamity. In particular, he mentioned the repeal of the 1933 Glass-Steagal Act as a major factor in the spread of the crisis from the speculative activities of financial institutions, into the mainstream commercial and high street banking sectors. This, he said, more than any other factor, led to the impossible logic of “too big to fail” and “bailout or die”, which has characterised the government’s response to the crisis up until the present time. With that much said, he then went on to argue in response to a question from the audience that the government could not arbitrarily set the parameters of what constitutes an institution that has become “too big to fail” as that would be an illegitimate political intervention into the private market by state actors!

But putting that small contradiction to one side for moment, one interesting fact he did reveal was that following the decision to de-regulate the London Stock Exchange in 1986, the “law of unintended consequences” quickly led to a situation where “characteristically more conservative” City of London Banking institutions were forced to break down similar chinese walls in their capital markets operations in order to compete with (my choise of words) greedy Wall St banks who were taking advantage of the newly opened door to swoop in and buy up huge swathes of British equity. Obviously, nobody really thought about that, or, perhaps they did. I will leave it to you to decide.

The rest of the itinerary focused on various different attempts to defend globalisation, open markets and economic liberalism as the “greatest engine of human progress and happiness ever invented”. Without doubt, while free enterprise, innovation and long term physical and financial economic growth are all very good things, ultra laissez-faire economic globalisation and free trade have certainly produced one thing: the greatest financial and economic collapse in world history. A collapse that is about to burst into our lives with the force of a nuclear weapon. Make no mistake, we are now in the death throes of the present financial system and in a matter of days or weeks from now, panic and chaos will break out as what is left of the system disintegrates in hyperinflationary explosion. This is already evident in the rate of collapse of the US dollar against almost all major world currencies, and the sudden and dramatic rise it the price of gold.

This is a truly terrifying prospect, but there is a glimmer of light in the fact that some even among the elite on the ultra-liberal, anti-nationalist ”right wing” is openly talking about a reversion to a Glass-Steagal standard in international banking regulatory affairs. This is extremely significant in that it would appear to indicate that a powerful faction of the Anglo-American establishment is sounding the retreat, circling the wagons and picking specific tactical battle fields on which to fight a long war, as opposed to moving in directly for the kill via the total collapse of the global financial and monetary system, and a breakdown of civilization into a new dark age.

On the surface at least, Legatum appears dedicated to some pretty laudable political, economic and social objectives, but then, for a private equity “foundation” based offshore in Dubai and publicly dedictaed to demonstrably insane economic theories, do we really believe the hype? We should watch what they do and say very closely over the coming months of intensified international crisis.

This post is tagged Finance, Glass Steagal, Legatum