There are striking similarities between the horsemeat affair and the international banking scandal that broke in August 2007.

The financial crash was caused by the sale of toxic financial products called Collateral Debt Obligations that were composed of mortgage bonds that had been "sliced and diced" into new products that were then marketed as cheap and safe. They were the financial equivalent of mince meat, which of course was itself invented as a means of disguising poor quality meat.

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In theory, CDOs spread the risk and diminished the likelihood of a price crash, because the dodgy mortgages were bolstered by the sound ones. So, for every "liar loan" handed to an unemployed single parent in Detroit, there was supposed to be a solid and dependable loan on a substantial sandstone property in Edinburgh.

Unfortunately, it didn't quite work out that way – the duff mortgages ended up contaminating the good ones and the whole system perished. These financial products had been sliced and diced so often and had been swapped back and forth between the offshore subsidiaries of international banks that no-one knew any more what was in them.

The issue was one of trust – the most essential commodity in any financial system, or indeed, in any food chain. When you examine the extraordinary circuitous route by which processed meat is marketed, it is hardly surprising that it becomes contaminated.

Findus ready meals were found to have horsemeat that came from Romanian slaughterhouses, via a Dutch food trader, who sold the stuff to a Cypriot dealer who sold it on to a French firm, Comigel, that sold some of it to the Netherlands, and some to UK supermarkets, which ended up being tested in Ireland.

Once a product has been passed through half a dozen intermediaries, it is impossible to know where it is headed or what the hell is in it. We know that horsemeat ended up in cottage pies sold to children in England. The Scottish Government insists that no horse has been flogged – if you'll excuse the pun – to Scottish schools, but who really knows?

This slicing and dicing of food is almost guaranteed to lead to a deterioration in standards because, as with the financial products, the purpose of the process is to disguise the true nature of the product that is being sold. It is an invitation to fraud. The Government response was also a disturbing echo of the 2008 crash. Ministers and the Food Standards Agency didn't know whether their job was to allay public alarm or try to expose the scale of the contamination. So we had the bizarre spectacle of Government ministers munching burgers and insisting there was nothing wrong with a bit of horse – quite tasty really – while at the same time warning of a massive criminal conspiracy. The public had grounds for confusion.

It is true that horsemeat is not in itself toxic and only a little of it had been treated with bute – phenyl-butazone, a toxic painkiller given to racehorses – and you'd have to eat 1000 burgers to get a life-threatening dose. But this isn't the point. The real issue, as with the financial crisis, is confidence – the collapse of trust. Everything we do in a market economy depends on confidence. Once it is shown that some food labelled beef is actually horse, public confidence in all food health and safety collapses.

Those of us who remember the crisis of BSE – mad cow disease or bovine spongiform encephalopathy – in the 1980s can hardly believe this latest scandal could have happened at all.

BSE entered the food chain through the brain and spinal cords of diseased cattle. The outbreak saw 4.4 million animals slaughtered in Britain alone, but only after some 400,000 tonnes of contaminated meat had entered the food chain in the 1980s, with a potentially catastrophic risk of humans contracting vCreutzfeldt Jakob Disease.

In total, 198 humans are known to have died of vCJD. But the infection has never fully been eradicated, and new strains of the deadly "prion" that transmitted vCJD to humans have been discovered in the past 10 years. The BSE crisis led to the European Union banning exports of British beef, and the restrictions were only finally lifted in 2006.

There are many disturbing parallels with the current scandal. BSE arose because cattle were eating industrial feeds that contained material from diseased cattle and sheep. Cows are herbivores, and feeding them processed offal and brain cells from other cows, including sick ones, should never have been legal. But of course, no-one knew what was going on. The diseased cattle carcasses had been sliced and diced and sent back and forward between traders and processing plants, acquiring infectious agents along the way. Then they were dried and added to bone meal and other material as a "high protein" feed.

After BSE a whole new apparatus of food regulation and inspection was introduced. Yet we find that the labelling and monitoring of human feed is almost as opaque and unreliable as it was with cattle feed in the 1980s.

Put simply, none of us knows what is in the minced beef we have been buying. Some is up to 100% horse meat, but no-one knows where this has come from. There are dark rumours about 70,000 missing horses in Ireland – animals that were acquired as pets and show animals during the property boom and were sold on by owners who could no longer afford to keep them. Given the unscrupulous nature of the food processing industry, it is quite possible that these animals may now be inside us – or those of us who have eaten mince meat products.

The problem, as with the financial crisis, is a collapse of ethical standards in the food industry. It is the pursuit of short-term profits, the indolence of the regulatory agencies, the complacency of politicians, the failure of international regulation and the connivance of some large food companies with organised crime. What infuriates me most, however, are those Government apologists – especially the LibDems – who seem to lay the blame at consumers for buying cheap food.

Food is not cheap. Food price inflation is running at 2.5% higher than non-food inflation, and takes up some 30%-40% of the budgets of low income families. Parents struggling to keep their families together should not be made to feel guilty for shopping at supermarkets like Tesco, which last year made profits of £3 billion. If customers buy a product in one of its stores, it should be safe, it should be properly labelled and it should be nutritious. There's no excuse.

In August 2007, the banks simply stopped buying CDOs, and they became valueless. Since the banks had been using these instruments as capital, this threatened the entire financial system. Confidence was only restored after the taxpayers – you and me – were forced to buy up all these toxic products and put them in a special zone, held apart from the rest of the financial system. Let's hope history doesn't repeat itself.