Generation after generation has to make the choice between free markets and Government regulation.

The solution seems to turn on the nature of the business cycle and the strengh of current booms and downturns.

In the present world recession the context is so severe that it’s become a crisis in both the financial markets and the real economy. Many governments are having to nationalize part or all of their banking systems. Financial services never seemed so brittle.

Is that really the case though? In a well-argued article, The world needs Up-To-A-Pointism, John Evans suggests that by staying within the boundaries where governments and free markets work best, the world would be a much more stable place to live and do business.

Although mostly mutually-exclusive, the interface between regulation and free markets could be made to operate more efficiently, to the benefit of both.

Clara Furse, London Stock Exchange chief executive, claims it is “not if but when” the UK Government will scrap stamp duty on share transactions.

Furse said: “The question is not if, but when. There has been a significant shift in the Government’s thinking about stamp duty following a recent report by think tank Oxera, which found that the removal of the tax would be revenue-neutral. Trading remains strong with positive momentum carrying forward into the current financial year. The proven international success and increasing efficiency of our market, underline the secular change to equity trading, as TradElect goes live this summer.”

At present, investors are paying 0.5 percent of the value of their transaction when they buy shares. The tax raises around £3 billion ($6 bn) a year for the Treasury.

It appears that the LSE is in discussions with Economic Secretary Ed Balls on how to take the proposal forward.

The Exchange’s headline profits jumped 55% to £186m in the year ended March, on revenues up 20% at £350m.

The Conservatives have already said they would consider scrapping Stamp Duty on shares if they came into power.

Nasdaq has made a new offer valued at £2.7 billion ($5.13bn) for the London Stock Exchange.

The LSE board has rejected the bid, claiming it undervalues the buoyant stock market, which has posted record trades and earnings in recent reports.

Nasdaq already owns more than 25pc of LSE shares, giving it a powerful advantage in the current round of consolidation deals. With the New York Stock Exchange well on its way to takeover Euronext, Nasdaq sees a liaison with the LSE as strategically crucial in its battle for business with its close NYC neighbour.

Shares in the LSE have traded briskly since the offer was made. The BBC calculates that if Nasdaq bought them all, they would have a 50pc holding in the company. That’s unlikely to be the case though.

With a proposed softening of America’s draconian Sarbanes-Oxley rules and a new bill protecting the LSE from foreign regulation from the Treasury, the major obstacles to a merger seem to be melting away.

Clara Furse and her board may have other tricks up their sleeves, not least a tieup with an exchange in the Far East — Tokyo was mentioned recently.

It’s still all to play for.

In a speech to the British Bankers’ Association, Treasury minister Ed Balls announced that he will introduce legislation before Christmas to “safeguard the light touch and proportionate regulatory regime that has made London a magnet for international business”. He said the new law is “not intended to make overseas ownership of UK exchanges any easier or more difficult than it is at the moment”.

He had previously planned to add these clauses onto the slower-moving Companies Bill legislation. Balls also said he is determined to maintain “sensible and light touch” regulation of the financial sector at global and EU level.

The new regime will mean that any bidder for the LSE will face a lengthy regulatory process before a takeover can go ahead.

It has been suggested that Nasdaq has held a series of high-level, confidential meetings with the Treasury, and feels assured it would eventually secure the go-ahead.