President Bush said Saturday he will host an international summit in response to the global financial crisis, but said that any reform of financial systems must not chip away at the foundations of democratic capitalism and free enterprise. Bush, meeting at the Camp David presidential retreat with French President Nicolas Sarkozy and European Commission President Jose Manuel Barroso, did not set a date or place for the meeting. Sarkozy, however, suggested it be held before the end of November in New York. Bush said the summit attendees must be open to ideas from around the world, but he said nations should avoid protectionism. "As we make the regulatory institutional changes necessary to avoid a repeat of this crisis, it is essential that we preserve the foundations of democratic capitalism – commitment to free markets, free enterprise and free trade," Bush said, standing with the two European leaders at a helipad on a crisp fall afternoon. "Together we will work to strengthen and modernize our nations' financial systems so we can help ensure that this crisis doesn't happen again," he said. – AP

Dominant Social Theme: Drastic times demand drastic measures.

Free-Market Analysis: It is hard to see through the vagueness to exactly what is being called for, but no doubt whatever takes place will do nothing to address the root cause of the current economic crisis. Those who are most forceful in calling for "reform" – whatever that is – include the "rightist" French President Nicolas Sarkozy and European Commission President Jose Manuel Barroso. Here's another take on the evolving process from Canada's Globe and Mail:

"This may be a great opportunity, if we do not fall back into the hateful practices of the past – practices that have led us exactly where we are right now," Mr. Sarkozy said at the Camp David presidential retreat outside Washington, D.C., flanked by Mr. Bush and Mr. Barroso. "…We cannot continue along the same lines because the same problems will trigger the same disasters." In a statement issued after the meeting, the three men said the U.S. summit, likely to be held in late November, would be the first of several gatherings to "review progress" in dealing with the crisis and find common ground "on principles of reform." British Prime Minister Gordon Brown also wants to recreate the Bretton Woods conference, when world leaders gathered at a New Hampshire lodge to rebuild the global monetary system in the chaotic aftermath of the Second World War and the Great Depression. The Europeans haven't said so explicitly, but the implication is that they want a new global banking regulator with teeth and harmonized regulation. The Bush administration, on the other hand, is pushing the idea of greater inclusion, by expanding participation beyond the Group of Eight leading industrialized countries to emerging economic powers, such as China, India and Brazil. Robert Zoellick, a Bush administration appointee who heads the World Bank, has called for scrapping the G-8 in favour of a more inclusive economic steering group. "We need a Facebook for multilateral economic diplomacy," Mr. Zoellick said in a recent speech.

It is actions like this that make at least some observers (including us) ever more suspicious of fundamental elements of the economy both nationally and internationally. For a while, leaders were making some common sense statements, but that is probably over now. The conversation has been set, the message frozen. Nations will "bail out" certain enterprises while talking about how the system has failed. But those in charge of the bail out remain the very individuals who have caused the problem.

What exactly is to be the solution? More of the same. More regulation for failed entities around the world. More power for failed wise men. In fact, it is fascinating, if disturbing, to see how quickly those in power leap to the conclusion that the reason for market failures were because this bureaucratic entity or that one did not have the proper Draconian powers.

Former U.S. Securities and Exchange Commission chairman Arthur Levitt said the agency was complicit in the financial meltdown. Mr. Levitt, who led the agency from 1993 to 2001, told the Senate banking committee that a resource-strapped SEC allowed confusion and reckless risk-taking to dominate financial markets. "As the markets grew larger and more complex – in scope and in products offered – the commission failed to keep pace. As the markets needed more transparency, the SEC allowed opacity to reign. As an overheated market needed a strong referee to rein in dangerously risky behaviour, the commission too often remained on the sidelines," he said. (AP – Remorseful Paulson regrets 'mistakes')

The idea that a worldwide bank liquidity crisis could have been prevented by more SEC power to stop "reckless risk taking" is irresponsible in the extreme. The crisis is a monetary one, not a regulatory one. It has to do with the extreme and reckless behavior of central banks including the US Federal Reserve. Yet search the Internet and you will find little if anything pointing the finger of blame at central banking policy – at least not in the mainstream press.

There is undoubtedly a monetary elite, amorphous or not, specific or not, global or not. As this latest crisis of capitalism plays out one can grow ever more suspicious of its motives and rationale, not because of the earnestness with which they are being proposed so much as because the solutions are so pat and the analysis so wrongheaded. Central banks print too much money, causing investment manias. It happens time after time and decade after decade. The idea that more centralization, more regulation, more "management" of the financial system – absent removal of the central banking mechanism itself – will do anything to ameliorate the problem is fantastical.

There has been talk of a "new Bretton Woods" to go along with palaver about a worldwide harmonization of regulation, a worldwide banking regulator, etc. We shall see what the upcoming international meetings harbinger. It is possible, just possible, that those in charge shall call for some sort of quasi-gold standard to be loaded in with everything else. If so, it will merely be an admission that there is more inflation coming – as indeed there probably is, given the ferocity of central banking liquidity in response to the crisis. Given the way these meetings are being configured, a peg to the dollar or some other currency would not be an admission of failure so much as an anticipatory devaluation. If it happens at all.