Downstairs from my office in New York around the corner from Wall Street and the New York Stock Exchange is the gigantic 3� tonne bronze statue of the bull that  symbolises Wall Street. On a recent cool October morning, I found myself watching the morning sun bounce off the shoulders of the bull and wondering where to start the search for the meaning of the financial meltdown that has destroyed names like Lehman Brothers and Bear Stearns and forced proud and independent institutions like Morgan Stanley, Goldman Sachs, Royal Bank of Scotland and countless others to seek solace in the arms of their governments.

Is it just the greed of Wall Street chieftains that brought this catastrophe about? Or is it just a part of a natural business cycle where a boom that is set off by low interest rates winds down only to rise again and for good times to return?

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Then it struck me. Perhaps the answer lies in Atlas Shrugged, Ayn Rand's 1950's novel.

Atlas Shrugged follows the fortunes of a woman, Daggny Taggart, as she fights to keep her family's railway business alive in a futurist America where "looters" and "moochers" run rife. "Looters" are government tax collectors who promptly confiscate other people's earnings and "moochers" are people who demand other people's earnings because they are unable to earn money themselves. Looters and moochers hate the talented that have the ability to earn money that they themselves cannot earn.

In protest, all the talented people in this society decide to go on strike by withdrawing from it. No longer will they contribute their ideas, their inventions, their scientific research or their business leadership to the rest of the world. In other words, they are like the Greek hero Atlas who has finally decided to shrug off the burden of the world that he has had to carry for so long.

Atlas Shrugged epitomised Ayn Rand's faith in an unbridled free enterprise system; the belief that the clear separation of the economy and state was as central to human progress as the separation of the church and the state had been in an earlier era. And the belief that any form of state intervention in society is fatally flawed and would lead to stagnation.

Alan Greenspan, who, first as chairman of the Council of Economic Affairs and later as chairman of the Federal Reserve Bank of the US, was at the center of economic decision making for two decades right up to 2006 was a great admirer of Ayn Rand and a true believer in the philosophy she espoused in Atlas Shrugged.

"I became a regular at the weekly gatherings in her apartment," he says in his autobiography, The Age of Turbulence, and was captivated by her philosophy that "...individuals have innate nobility and that the highest duty of every individual is to flourish by realising his potential..." When Greenspan took his oath of office at the White House for his first public policy job as the chairman of the Council of Economic Advisers, he had Ayn Rand standing beside him.

As chairman of the Federal Reserve Bank, when confronted with a seemingly unending series of financial calamities - the bursting of the technology stock bubble, the 9/11 attacks, the invasion of Iraq and Afghanistan - Greenspan was steadfast in his belief in this laissez-faire philosophy, cut interest rates to rock bottom levels and kept it low for a long period.

His belief was that this low interest rate would ignite entrepreneurial activity in US housing construction which in turn would stimulate other entrepreneurial economic activity and stop the US from sliding into a recession. This happened exactly as Greenspan predicted: housing construction and prices zoomed upwards, thousands of new jobs were created and the US economic growth leapt forward.

A few observers did express concern that a housing bubble was under way and would cause a mess when it burst, but Greenspan waved them away. Speculative selling or buying of houses, he said, is not as easy as speculating in securities. Sellers have to incur substantial transaction costs like brokerage fees and taxes and these costs act as dampeners to speculation.

In any event, there is no national market for housing, he said and thus, even if housing bubbles do form and then burst they are likely to be localised to some towns or at worst some regions. Such phenomena cannot affect any other part of the United States, let alone any other part of the world.

But in holding steadfastly to this laissez-faire philosophy, Greenspan was overlooking another development: a financial innovation called "mortgage-backed securities" an example of the new world of "derivatives". These securities would, when the housing bubble burst, carry "the mess they created" not only to other parts of the United States but also to other parts of the world.

Such destructive power would derivatives wield that Warren Buffett, the man whose financial acumen Americans respect the most, would describe them later as "weapons of mass destruction", "contracts devised by madmen" and the derivatives business itself as " like hell�easy to enter and almost impossible to exit."

But others have described derivatives as a modern invention that ranks up there with the microprocessor and antibiotics in its potential to benefit mankind. In the next part of this three-part series, we'll try and understand what these derivatives are, how they came to be objects of such veneration and hate.