These are extraordinary times. I was tempted to open this post with just those words. But what a cliche that would be. A statement of the blindingly obvious as the credit crunch became financial meltdown for some of the west’s most venerable, apparently rock solid names.

Yet all of us have been shocked as the United States, home of red-blooded capitalism, has been forced to undertake the greatest nationalisation programme the world has ever seen. The world’s biggest insurer, AIG is now effectively owned by the US government. The US central bank has intervened to sweep up the toxic bad debts of the country’s banks. Closer to home, the British government has ripped up competition rules to allow Lloyds TSB to rescue our biggest home loans lender, HBOS. And the UK Financial Services Authority has banned the ‘short-selling’ of shares – the act of betting that a company’s shares will fall in value.

I hope that these extraordinary measures will restore calm to the global economy. Friday’s dramatic revival in share prices suggest a degree of success. But the best outcome would be the end of the perverse and unjustified view that the private sector knows best. Many of us have been appalled by the explosion in executive pay over recent years, especially in financial services. And the rebirth of insane practices such as lending homeowners more than their home is worth (100% mortgages), which burnt lenders and borrowers alike 20 years ago., has reeked havok.

If I were in charge, I’d make the following changes:

Ban 100% mortgages. After the late 1980s housing crash, 100% mortgages disappeared for years. Yet the lessons of those painful years have been forgotten in recent years as lenders like Northern Rock and HBOS arm Birmingham Midshires lent 125% of the value of a borrower’s home. This was madness. It fuelled house price inflation and ensured misery for all if house prices slumped. As they now have.

Ban the ability to trade or short-sell shares you don’t own. Many of us have been baffled that share-owners have been prepared to rent shares to traders who then bet on the value of those shares falling. Just ban this toxic practice. And ignore the howls of protests from the free market fetishists. The free market has failed. There’s no need to indulge its fanatics.

Enforce strict controls on executive bonuses. At the very least, ensure that executive bonuses are locked in for a number of years so they can only be realised when their companies can demonstrate real rather than illusory success. 

Give mutually owned organisations advantages over proprietary companies, through tax and other measures, but in return make it harder for them to convert to banks, and make them more accountable to their members. Britain doesn’t need any more struggling former building societies like Alliance & Leicester (about to be bought by Santander) and Bradford & Bingley.

Ban the use of exotic financial products until it has been demonstrated their benefits outweigh their risks. If this slows economic growth – fine. Sustainability should be more than an environmental concept.

Change monetary policy to ensure the crisis does not become a 1930s style slump. In Britain, the objectives of the independent central bank’s monetary policy committee are focused on controlling inflation. Yet inflation in Britain is currently almost entirely caused by the rise in fuel and food prices. Consumers are running scared, and do not need to be reined in by interest rates. The MPC’s remit should be changed to reflect the new world. A dramatic cut in interest rates might just avert a slump. The lesson from the 1930s and Japan in the 1990s is that very low or negative interest rates will not revive the economy after a slump has hit.

The clear message of the last year is that politicians and regulators have been equally entranced by the glamour of the markets they were supposed to be regulating. We actually need powerful independent regulators, who have the expertise and confidence to call time on a rowdy party rather than becoming caught up in the excitement.

Finally, I can’t help but reflect on the irony that Britain’s third national party, the Liberal Democrats, have chose this moment to swing towards free market liberalism and the smaller state. Their new leader, Nick Clegg, has made an extraordinary political blunder. Old style socialism has been dead in Britain for years. But this is the exact moment for our third party to make the case for intelligent state intervention as a matter of policy, let alone argue for the free markets. How odd that the part of Lloyd George is now to the right of George W Bush…