In the end it played the fool with us all, and didn’t frighten the horses. That is all that can be said of Alistair Darling’s second and, let us pray, final Budget.

If the horses remain calm, we should not. Yesterday’s exercise was designed to do one thing: to conceal a massive timebomb set to detonate when the Tories have been in power for a year or two.

In a way it was a game two halves. The first was Prime Minister’s Questions in which Gordon Brown asserted again that the ongoing slump is not a conventional one, preceded by inflation, but a much more serious occurrence caused by a catastrophic drop in financial blood pressure.

However, Alistair Darling’s Budget calculations premised a normal recession in which the economy powers back to higher than trend growth within a year or two as companies rebuild their inventories and buy new machine tools. GDP will, the Chancellor asserted, grow by a sprightly 3.5pc in 2011 before gently easing back to trend. Cue gasps and catcalls from many MPs.

Slumps caused by financial collapse always take much longer to throw off, as did the Great Depression of the 1930s. This one will have a similar trajectory.

The faultline demonstrated here is not built on human error, but on Brownian calculation of advantage. Brown should have bitten his tongue at PMQs and the disparity of logic would not have been so glaringly obvious. His vanity got the better of him.

The IMF were quick to rubbish the Budget predictions of growth. Evan Davis on this morning’s Today programme practically accused the Chancellor of using a false growth figure to conceal a massive fiscal tightening from 2011 onwards. By then, the Conservatives will be in power and Labour will be screaming “Tory cuts!” from the Opposition benches.

There’s not much love lost in politics, but some personnel would be jailed for that under less liberal regimes. One incident caught my eye. As Darling read out the numbers for public borrowing for this year and next, £175 billion, and £173bn — the highest in history and more than all years added together since 1694 — Gordon Brown was laughing.

Was it because he had made history at last? Or maybe because he believes he has scuppered the next Conservative period in office, setting depth charges to explode year after year.

Whatever the reason, it revealed Mr Hyde in full swing and convinces many of us that Dr Jekyll was a figment of our imagination.

As if aware of the skullduggery that had just been played out, David Cameron put up a spirited and angry response to the Budget speech. It was the performance of the day and contrasted markedly with Darling’s leaden oratory — if it can be called that.

Many of us waited for the scorn to be poured all over the new 50p tax rate for high-end earners, the very people who create our wealth and divert their surplus funds into investments. It didn’t come.

One can imagine the delight of low-tax regimes (so-called havens) at the lip-smacking prospect of all those City types heading their way after this Budget-for-Bennites.

This was another Brownian trap for the Tories. How he must be chortling with glee, like Billy Bunter on receipt of his long-awaited postal order and the prospect of a big bag of cream buns.

Thankfully, David Cameron and George Osborne live in the real world.

John Evans
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Gordon Brown’s new back-to-the-future idea is to introduce “old fashioned banking” again to the High Street. After all, banks lend out other people’s money, so should be careful where they put it.

He will “ban” 100 percent mortgages, make borrowers save up their deposits, and force them to meet “old fashioned” bank managers, who will get to know them like GPs did in the days of Doctor Finlay’s Casebook. Ahh, the past is so reassuring, isn’t it?

But Chancellors of the Exchequer also spend and allocate other people’s money. Shouldn’t they be tightening up their rules of tax and spend in the vast public sector? And shouldn’t State benefits be handed out sparingly to those who truly need them? Isn’t it also imperative that no-one should be given a public job unless they are urgently needed on the front line and well qualified for the task?

Brown didn’t begin to address that problem. Bankers will be sent for re-education by Captain Mainwaring characters, but the good old “public realm” will just carry on as before, squandering other people’s money.

Isn’t this just another sneaky way of blaming the banks rather than himself?

Labour MP, Chris Mullin, in a new book* writes: “The trail leads back to Gordon — but if it all goes wrong he’ll be nowhere to be seen.”

* A View From The Foothills

Do you ever have “There is a God!” moments? I had one last week.

I was walking down a narrow pavement alongside a completely empty road, when the tinkling of a bicycle bell assailed my ears from behind. One of those aggressive two-wheel types was attempting to force me to stand aside on a pedestrian walkway.

I won’t go into how irritating these people are, fury is not a pleasant subject to write about. However, whatever allows these oiks to ride along pavements should be repealed by the next Conservative Government.

Naturally, I ignored him — it’s always a he. He rang the bell again. I sauntered on. Again he tried, before snorting and turning onto the road. As he passed he gave me a backward glance of total exasperation.

My returned stare must have unsettled him. He wobbled, desperately corrected his trajectory, hit the curb, and fell off.

I walked past with a beatific smile of satisfaction.

There is a God!

Like everyone else I’ve been trying to make sense of the causes of this world depression. I’ve pieced together bits that have appeared here over the past few months in the hope they make a coherent and plausible case for what went wrong.

In the beginning
1. In 1977, President Carter pushed through an Act forcing banks to give mortgages to sub-prime borrowers.
2. In 1999, President Clinton signed off the repeal of the Glass-Steagall Act, which separated commercial banks from investment banking.
3. Clinton also encouraged the securitization of morgage debts into Collateralized Debt Obligations by Bears Stearns. Astonishingly, they were given Triple A investment status by the involvement of government-backed Freddie Mac. Thus, potentially toxic assets were bundled up and sold off to the world’s banking system.

Note: these are both Presidents of the left.

Reinforcing causes
Fed Chairman, Alan Greenspan kept interest rates too low for too long because he believed “downturns will happen and can be cleaned up afterwards”. Meanwhile, just enjoy the white-knuckle ride.

In the benign conditions created by Greenspan and his student Gordon “No more boom and bust” Brown, high leverage (debt) was seen as a one-way bet for financiers and private-equity outfits, some of dubious provenance.

A system of shadow banking was set up outside the regulatory framework which passed debt around between different institutions, hedge funds and capital markets, creating more money than the original debt. The normal effect of a burgeoning money supply is inflation, which eventually squeezes out any asset bubbles that form along the way.

However China simultaneously introduced a massive deflationary element into the mix. Trillions of dollars of very cheap goods poured out of the country to soak up the growing money mountains of the developed world.

The deflationary effect masked the inflation embedded in the Western economic boom, allowing it to last much longer than normal and storing up more problems as time passed.

On the ground, it seemed as if the good times would go on forever. A classic psychological contagion set in among politicians, financial markets and the ordinary public. No-one could lose was the signal, everyone was a winner, even the poorest with no income, no job and no assets.

The Endgame
When sub-prime borrowers in America started defaulting on their loans, as they were bound to at some point, bankers found it impossible to trace the indebtedness through the system because of the sliced and diced nature of the securities that now concealed them.

These assets were effectively worthless as they could not be valued. The whole planet was suddenly stripped of value. There were no hooks left to store capital and savings, except gold and flighty commodity markets. Meltdown time had arrived.

The growing realization that banks all over the world held these poisonous assets, effectively closed down the inter-bank lending markets. Banks no longer trusted any other not to fail and default on their loans. The Credit Crunch was born.

The rule of Up-To-A-Pointism suggests: “If something works, it only works up to a point. Thereafter it yields diminishing returns, followed by negative consequences. Government intervention is like that, as are free markets. Both have a limited bandwidth within which they operate well.”

Let us hope that the new financial system that emerges takes note of this simple rule.

Prediction
The world will now skate helter-skelter in the opposite direction. The pendulum of opinion will overshoot the mark and overregulate financial markets, thus breaching the Up-To-A-Pointism rule.

Something akin to a 1970s situation will be created as legislators try to close off all exits. The result will be a stifling, sealed commercial environment with few incentives for innovation and hard work.

It will take another “liberalization” package of measures a few decades down the line to set off another period of prosperity, leading to another bust.

Plus ca change …

I’ve just watched the seventh of eight episodes of Channel 4’s patchy series, Christianity. It was presented by Professor Colin Blakemore of Oxford University, a colleague of Richard Dawkins — author of The God Delusion — and a fellow believer in the new religion of Scientism.

So far, only three of the programmes have stood out: Howard Jacobson’s, Michael Portillo’s, and Rageh Omaar’s thoughtfully fair view of the relationship between the West’s religion and Islam.

As an Idealist in philosophical terms, I’ve not got a lot in common with Blakemore’s viewpoint, however, he put his case engagingly and intelligently.

One highlight for me was the comparison of a cathedral with the Large Hadron Collider at CERN on the Swiss/French border. This chilling aggregation of metal, electric wiring and brutalist architecture seemed straight out of the Nazi manual of “How To Subdue Human Values By Gigantism and Intimidation”.

Next up: Cherie Blair. What are we to make of that?

Quote of the Week

This is rather a good description of New Labour philosophy:

“The idiot who praises, with enthusiastic tone,
All centuries but this, and every country but his own.
W. S. Gilbert, The Mikado

John Evans

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As a person without any debts, and four bank accounts coloured black, I awoke yesterday morning to find the country’s National Debt at £2 trillion ($3tr) and more. That represents more than £60,000 ($86,000) and rising per household. It dwarfs Britain’s annual national income of £1.4 trillion, and doesn’t include other off-balance-sheet liabilities.

Since I am a genuine citizen of the United Kingdom, I am liable for that sum, and probably more from people who can’t or won’t pay, and from more recent arrivistes who decide to desert the heavily listing vessel.

I won’t get an invoice in the post: “For gross mismangement of the economy by Gordon Brown”. That would be too candid and straightforward.

Instead, I’ll find almost every public and private bill will rise, while any receipts will fall and services diminish. Prices in the shops will also start to balloon in a year or two and will remain high for decades to come.

Thus, this debt-free individual, who earns his own living, with savings in the bank and other less liquid assets, will suffer the consequences of others’ malpractice through substantial impoverishment.

Almost everyone in the country will be on a similar path, except those with institutional parachutes to comfort, like politicians, top bankers, and the upper reaches of the Civil Service who caused the problem at source. In modern Britain the buck only stops when it nestles in the pockets of the guilty.

The principal culprit, as almost everyone now realizes despite his increasingly-pathetic attempts at shovelling it off onto others, is Gordon Brown, the man who ran the Treasury with an iron fist from 1997 to 2008 and has been British Prime Minister since then.

In France, within almost living memory, he would have faced the guillotine. In Britain, more likely disgraced and forced into a humbling exile. Even now, he can be impeached by a much-abused nation. Why is this not being discussed?

The other big number this week is 219. Not so significant, you might imagine until you add “billion” on the end. £219 billion ($311bn) is Brown’s yearly overspending in real terms, i.e. above inflation. (From Bankrupt Britain by City fund manager, Malcolm Offord.)

It’s not good economics, but multiply that figure by 10 and you get a rough approximation of the new National Debt.

The pity of it is, the money was wasted. Almost no improvements are discernible in public services over the period while most have gone downhill, the result of politburo-style management and misuse of public funds at every level, much of it from incompetence, the rest from jobs-for-the-tribe. Snouts in the trough doesn’t begin to cover it.

Once again a Labour Government will leave office having wrecked the country.

* In 1929 we had the British version of the Great Depression to look forward to.
* In the late 1940s it was by restricting markets from operating at all while Germany and Japan freed up their workforces and built the foundations for their current strength.
* In the 1970s, Britain was placed at the mercy of the IMF, followed by the Winter of Discontent.
* This time, the nation has been hollowed out, its vital wealth-creating engine crushed. A decade of its earnings simply squandered on a whimsical mountain of public services that struggle to operate on any level.

It didn’t help that this time Labour was given three Parliaments to wreak its usual havoc. How did that happen? By guile, neglecting the truth, cooking the books, making false claims about almost everything … and getting away with it thanks to friends in the media who complacently turned blind eyes to the accumulating shambles.

Will Brown be impeached, do you suppose?

Do elephants ski?

John Evans

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Watching Prime Minister’s Questions on Wednesday reminded me of what Swiss philosopher and psychologist, Carl Gustav Jung thought: “Only 200 people really understand what the world is, and how it works.”

Plainly, none of them has made it into the House of Commons.

Reading about the cash-for-legislation gravy train in the House of Lords last week — mainly among appointed Labour members — it seems that the luminaries are sparsely represented on the red benches too.

Next up were the “show trials” of our top bankers before the Treasury Select Committee in Portcullis House. I failed to spot a single member of the illustrious order among the grovelling and shamefaced money men.

A day later, during Prime Minister Gordon Brown’s grilling by Heads of Select Committees, it was apparent that our PM is far from understanding how banks work, let alone the planet. As a “saviour of the world” he cuts a droopy figure.

Are we in Britain unusual in having no-one from the great 200 among our leaders and shakers, or is this state of affairs evenly spread across the global political and financial elites?

Alas, I have to report, I truly think it is. Nobody who knows what the world is, and how it works would feel comfortable in the spheres of politics and banking. And yet these trades are vital to our civilization and way of life. Are we doing something wrong?

I’ve come to the conclusion that the overwhelming majority of people are programmed to operate within a rather narrow band of experience — even the high-flyers among us. Once activity breaches the limits of that band, whether above or below, they are like fish without water, humans without oxygen. They rapidly lose all sense of reality.

No-one can really be trusted to behave well in the wider interest when events are excessively good or painfully bad. Unfortunately, we are moving rapidly from the former to the latter condition, where we will be no better served than we were in the wild, expansionary phase.

Whereas in the growth period we could at least fend for ourselves, we are now dependent on other people to lift us out of the communal mess. Many of our fellows will be in thrall to people they never intended to imbue with such power over them.

Already the bogey of fascism is being held up to make us feel more at ease in the Marxist version of human life, which has never failed to destroy the human spirit and snuff out any light on the horizon.

So where are Jung’s 200 outstanding ones?

Perhaps they are Nobel Prize winners. Joseph Stiglitz, a Nobel laureate in economics, thinks Britain should default on all its bank liabilities, as Iceland has done.

Since British bank debt far and away exceeds our annual income as a nation, that would not only make us a pariah State never to be trusted again, it would also plunge international finance into an unstoppable economic ice age.

Paul Krugman, a recent economics Nobel laureate, who once praised Gordon Brown in the New York Times as “the man who saved the world”, now writes, “this looks an awful lot like the beginning of the second Great Depression”.

That has been apparent for quite some time. Even depression guru Ben Bernanke at the Fed is struggling to hold the line, while keeping the printing of money in reserve. His British counterpart, Mervyn King, is treading water too. The ECB chief, Jean-Claude Trichet, is behind the curve on rates as well as on “quantitative easing”, which the Germans are determined to oppose.

All are waiting for the “tipping point” when it will probably be too late to act effectively.

It’s almost as if this were meant to happen, with the key players frozen at their desks. The world may have to go through this calamity to purge the vast excesses of the past.

In Jung’s late memoirs, Memories, Dreams, Reflections, he presents a view of the world at variance with both scientific and popular opinion. As a psychologist, he knew the power of mentality, and how a belief system can become embedded in the collective unconscious, for good or bad. “Psychological contagion” was one of his more powerful phrases.

Those few who really understand what the world is and how it works, may be standing aside and bowing to the inevitable.

In the end, there’s no difference between down and up. They just taste different.

John Evans

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The word “protectionism” is on almost everyone’s lips these days. It’s viewed as a bogey word, depicting the worst that could happen.

The fact is, it’s as inevitable as cold weather in winter. In some senses it’s also necessary.

When danger advances, creatures retract to safety. Think of crabs, snails, hedgehogs, wood lice … humans. The flight to safety, as financiers call it, is as natural as autumn rain. It will happen. It is already.

Globalization is fine in the good times. No-one turns away a good deal when there’s no risk, even if it arrives from a far-off country. When we perceive high risk to be involved, we withdraw to what, and whom, we know, in our own communities.

We can’t buck human psychology. We shouldn’t try. Only socialists do that. It wastes precious energy and resources.

The time has come to rebuild our home infrastructure and rethink the way we are governed. Anyone who believes that is not necessary should consider the mechanics of how we operate a variety of our affairs now: The State of the Union.

Latterday protectionism is happening over trade — think U.S. car subsidies — and also in financial markets. Foreign banks have all but pulled out of Britain, leaving massive holes in our ability to borrow commercially and domestically. That is a major part of the problem we face.

Did anyone in the UK with a Post Office savings account know their money was held by the Bank of Ireland? They do now!

We may be lucky that the situation is “only” as rotten as in 1931, especially as 1933 was when the really bad things began — like Major (later General) Patton leading a sabre charge of the U.S. Cavalry against 25,000 starving war veterans in Washington DC. That sort of thing couldn’t occur now, could it? Don’t count on it.

The fact is we’re set on a trajectory that will bring us close to a 1933 scenario. Let’s do ourselves a favour and accept that. We can then set about putting our individual houses in order by retracting to what matters here and now. When the time arrives, we will be prepared for the economic winter to come.

Bleating on about “global solutions” that are never solutions, even in the good times, but merely sticking plaster pretences to save face, is about as counter-productive as it gets.

This is not pessimism, it’s an acceptance of human psychology and having the guts to face up to it. If the worst catches us by surprise, we have only ourselves to blame.

Britain as a nation has always faced the tempests bravely, with fortitude, stoicism and humour. Our leaders need to start preparing the country for a prolonged period of acute discomfort. When we know the worst, the best in us will emerge.

The good news is that when we hit rock bottom, the only option is to rebound.

But will we have rebuilt our public domain by then, so that we can be first onto those bright sunlit uplands?

John Evans

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What a day to have a birthday. With the world and its future darkening visibly around us, and crunch turning to munch, we’re all seemingly heading for lunch on a plate, not seated at the table.

However, amidst all that financial chaos there is some good news: Syntagma is three years old.

Three is a significant number in horse, dog and internet years. Horses get to run in the Derby, dogs are the equivalent of 21, and anything on the internet is a virtual centenarian.

When we started out 36 long months ago, this site was a pure technology and media play. It was also the cheerleader for the launch of new sites on a large sprinkling of topics. Now I write here only about politics, finance and technology, in that order of magnitude. You won’t need to ask why, discerning Reader.

Many of the old staff have moved on — those who remain have aged visibly, some even look like centenarians.

Enough of the past, it is another country as someone once said — The Shire, perhaps. If the future looks more like the Land of Mordor, I fancy we’ll glean something of value and interest from it, and certainly something to write about — whatever horrors it throws at us.

So what’s the prognosis for Syntagma’s fourth year of operations, bearing in mind it is a business as well as an online publication?

In the wider world, freight shipping is slowing at the same rate it did at the end of 1931. There are so many similarities popping up between now and the 1930s, it’s beginning to take on a distinct Tolkien shade of dark mist and distant pointy mountains.

Even Russia, with it’s massive half-trillion of cash reserves, is sliding into a downward spiral towards another bankruptcy and authoritarianism.

We ourselves on this sceptred Isle will not be spared a decade of pitiful growth, or none, as we purge the vast vaults of debt accumulated under the deceptively-stern gaze of Prudence in recent years.

As Ambrose Evans-Pritchard puts it in today’s Telegraph, “The world stole prosperity from the future for year after year, with the full collusion of governments, regulators, and central banks. Now the future has arrived.”

Well, we are still here. And we will prevail until we come out the other side like foot soldiers returning from the trenches. In internet age, I calculate we’ll be around 300.

Something to celebrate, surely?

P.S. As a contrast with today, here’s Syntagma’s first birthday piece. Read here.

John Evans

Yesterday, a senior Conservative was said to have exclaimed, “Good grief, this is Brown’s Falkland’s moment.”

He was referring to the Falkland Island’s war in the early 1980s, when Margaret Thatcher was way behind in the polls and presiding over a country ravaged by recession — some of the pain inflicted by her own monetarist policies. She went on to win the next election with ease.

Watching Gordon Brown yesterday I sensed a smug belief that “this is my moment. At last I’m fighting on my terms and my territory.” Since many of the problems we have now can be traced to his door, that attitude is hugely condescending to most of us.

While Margaret Thatcher was correcting years of Labour incompetence and waste, her creative destruction is defensible. By contrast, Brown simply squandered the best economic inheritance given to any incoming administration in more than living memory.

As a corrective to his wild decade-long spending spree, Brown has put at risk £500 billion ($900bn) of our money. Note how a country one-fifth the size of the U.S. needs the same quantity of money to bail it out.

Although the package is an ingenious assemblage of prods and winks, Brown is not doing what the Fed announced yesterday, buying up commercial paper (corporate bonds) to keep the business sector flush with funds. This crisis may have started with banks, but it’s hitting Main Street hard right now with the worst of it to come in the UK.

This is not Brown’s “Falkland’s moment,” it’s his bed of shame.

P.S. How about this for an idea to break the fear of bankers to lend to other banks? It comes from Bob Cringely over at PBS in America and uses the methods of Jack Welch, former Tzar of General Electric:

“U.S. bank regulators should go to all the banks this afternoon and say, ‘You aren’t making loans, which is part of the definition of what it is to be a bank. If you aren’t acting like a bank by tomorrow we’ll take away your banking license and transfer your deposits to another bank that WILL make loans.’ Problem solved overnight.”

Sounds mighty feasible to me — if you could prevent them all saying “No” simultaneously.

John Evans

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Just a few weeks ago the world was wondering if we were about to be pitched into a deadly Black Hole created by CERN’s Large Hadron Collider in Europe.

Relax. The machine has broken down and will not be cranked up again until the spring.

Strange then that another Black Abyss stretches before us today in the shape of a virulent debt deflation of almost unimaginable ferocity.

Take these words by Ambrose Evans-Pritchard in today’s UK Telegraph:

We face extreme danger. Unless there is immediate intervention on every front by all the major powers acting in concert, we risk a disintegration of global finance within days. Nobody will be spared, unless they own gold bars.

In case you think that smacks of hysteria, this is a man who has called this crisis correctly ever since the late summer of 2007. He adds:

“During the past week, we have tipped over the edge, into the middle of the abyss. Systemic collapse is in full train. … Central bankers still paralysed by a misplaced fear of inflation – whether in Europe, Britain, or the US – have become a public menace and should be held to severe account by our democracies. The imminent and massive danger is now self-feeding debt deflation.”

What this crisis shows is that world prosperity was built on a giant illusion: that there was real value in other people’s promises to pay at some future date, and that you could pass the parcel at a vast profit.

Time has run out and a bubble the size of an asteroid has landed and exploded in the centre of our civilization — the banking system.

The Sage of Omaha, Warren Buffett agrees, “In my adult lifetime, I don’t think I’ve ever seen people as fearful.”

Evans-Pritchard is lacerating about the EU and its Central Bank. It offered no “cover” to the Fed when Ben Bernanke slashed rates to 2 percent. The ECB simply raised its rate to 4.25 percent into a steep downturn, making oil inflation even worse.

As a last resort, it seems, the American authorities will use Bernanke’s famous printing press “to expand the menu of assets that it buys.” In the worst case, that could lead to a massive run on the dollar by foreign creditors and no end of misery for us all. But it may be necessary nonetheless.

At home, I have absolutely no confidence in the British government under Gordon Brown and Alistair Darling. They have been woefully slow to act, their policy to hide their heads under a pillow hoping it will all go away.

If Brown had even a small slice of a leader’s courage he would put together a massive package to recapitalize the British banking system; disown the “mark-to-market” accounting agreement, which forces banks into insolvency by estimating their assets on depressed valuations; take immediate control of interest rates by reducing them to 2 percent; begin to prepare for withdrawal from the useless European Union; and work closely with the Americans, who are, at the very least, fully aware of the immense dangers we face.

The Kraken is awake and bearing down on us fast. Over coming months and years we may wish that the Hadron Collider had swallowed us all up when it had the chance.

Update: The British Government has announced a variety of measures to recapitalize the banks and get the inter-bank lending markets working again. It amounts to a $900 billion bailout, eerily identical to the Paulson Plan for a country five times the size of Britain.

John Evans

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In the days of sail, when ships were built of wood and were vulnerable to hostile warships and pirates, each ship had many bulkheads to isolate parts of it that were hit.

In the later days of giant ocean liners made of iron, wealthy passengers demanded large ballrooms and restaurants so the bulkheads disappeared from the upper decks. One of the first of these new vessels was the Titanic. It hit an iceberg and the rest needs no retelling.

We’re having our own Titanic moment now in the world’s financial system, where the bulkheads that protected us have mostly been removed. In the 1930s, America had the Great Depression, but Britain was comparatively unscathed. In 2008 we share the pain.

As David Brooks puts it in the New York Times, “We’re living in an age when a vast excess of capital sloshes around the world fueling cycles of bubble and bust. When the capital floods into a sector or economy, it washes away sober business practices, and habits of discipline and self-denial. Then the money managers panic and it sloshes out, punishing the just and unjust alike.”

Francis Fukuyama points out that globalization masks the flaws in economic policy. “Foreigners seemed endlessly willing to hold U.S. dollars, allowing the U.S. Government to run deficits and enjoy high growth. That’s why early on Dick Cheney reportedly told President Bush that the lesson of the 1980s was that ‘deficits don’t matter’.”

Globalization is not new. The 250-year British Empire was a globalized trading system, depending on the might of the British Royal Navy — which had 50 percent of the world’s warships and most of its merchant fleet. It had the muscle and authority to protect its own national interests. That has been lost in modern times.

Transnational private-equity capital, almost all of it borrowed, has swept in and bought up most of our major corporations — on both sides of the Atlantic. These highly-leveraged buyouts seem benign in times of rampant expansion. However, it only takes a small twitch in the markets for the dust-thin financial structures to become sickly.

That also applies to banks that have followed suit and lent much more than their capital should allow. When the assets on their books are impossible to value because of the extent of toxic debt, the game is over.

The biggest question we will have to answer once the financial system has been stabilized, and the toxins isolated like nuclear waste, is: how much should we retract from globalization? In the age of the internet, is that even possible or desirable?

Even in regional terms, there’s no doubt that Britain’s membership of the European Union has degraded the country’s ability to be itself — a quality that has always paid off in the past.

On the other hand, staying out of the euro currency has shielded us from lower interest rates than we needed during the boom times. It also leaves us free to set optimum rates instead of relying on blunt fiscal instruments as the Irish, Spanish and Italians are having to do. This is one bulkhead that has more than proved its worth.

The EU’s decision to adopt the accounting standard of “fair value” or “mark to market” is having a devastating effect on our banks, whose diminishing capital is daily undervalued by the system, especially in hard times. The standard is as toxic as American mortgage securities.

While the U.S. is planning to ditch it, the EU’s directives will take years to repeal, and would need 27 countries to agree to it. Britain, should, as a matter of urgency scrap Brussels’s hold over our financial markets.

On some estimates, 84 percent of British laws are now made in Brussels. Most of them are counter-productive in a British context, obsessively bureaucratic, prescriptively inefficient and despised by the population. This heedlessly dispensed-with bulkhead is deeply desired and its absence bitterly resented. We should restore it as a matter of urgency.

I suspect that globalization has passed its peak. Without descending into full-blown protectionism, most nations will consider rebuilding some of the bulkheads that gave them their national characteristics, while minimizing restrictions on free trade. With tariffs low across much of the world, there is no need for global institutions to gum up the works with legalistic complexity.

Much of globalization is unnecessary and faddish, urged on us by old international Marxists and student Trotskyists like Gordon Brown and New Labour. They should be rejected.

America too should beware of whom it is electing to office in November.

It’s time to return to simplicity, fleetness of foot, and self-reliance. We would be much better nations if we did. And happier too.

John Evans

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