For at least a quarter of a century, the financial sector has pulled off a confidence trick that in 2008 almost destroyed the monetary system of the world and continues to imperil the world's money system. It is called financial deregulation.
Pro-market politicians, especially US president Ronald Reagan and the British prime minister Margaret Thatcher, business-funded think tanks and conformist university economics departments, established a chorus that mesmerised the world: financial markets are overly controlled by governments; there is a need to remove that control in order for money to roam free and create more efficiency.
Even after the most dangerous financial crises ever seen, the finance industry's lobbyists are still arguing that the sector should not be too heavily regulated on the grounds that it would be counterproductive.
This is nonsense. Money is rules. It is impossible to deregulate rules, as it is impossible to take the wetness out of water.
The rules of money are principally about value and obligation. When a bank lends money for a mortgage, the borrower is obliged to repay the value of the loan within a certain period. When investors buy shares, they purchase ownership of a certain value, which the company is obliged to give to them.
Money is not a commodity with a value in its own right; in the English speaking world, not since Henry VIII diluted the value of coinage in the 16th century. The wooden stocks (sticks) of medieval times that were used to record debts were just sticks, of little value in themselves.
These days, money mostly exists as blips on a computer screen. The amount of physical cash is very small. Such electronic transactions are based on agreement about how the rules operate.
Since finance cannot be 'deregulated', what actually occurred was a shift from government setting the rules, to traders setting the rules. Far from reducing the number of rules, the amount of rules has soared. According to Andrew Haldane, a senior official for the Bank of England, speaking at the economists' talkfest in Jackson Hole:
Since 1978, the Federal Reserve has required quarterly reporting by bank holding companies. In 1986, this covered 547 columns in Excel, by 1999, 1208 columns, by 2011 ... 2271 columns. Fortunately, over this period the column capacity of