Depression 2.0?

I doubt there's a person in London who isn't acutely aware of the turmoil sweeping the world’s financial markets. What began as an investment bank failure two weeks ago has rapidly escalated. The speed at which the mood in London has changed has been extraordinary. I've seen at least a dozen headlines in the last week titled, "Depression 2.0".

Today’s headlines focused on the UK's FTSE which suffered its largest one day fall in history on Monday. The index fell 7.85% as news of five European bank bail-outs dominated the headlines. Iceland’s Prime Minister also went on television warning that his country faced national bankruptcy.

Similar indices fell around the world yesterday. Germany’s DAX fell 7%. France’s CAC 9%. In Asia, Hong Kong’s Hang Seng dropped 5.0% and Tokyo's Nikkei Index closed down 4.3%. Wall Street’s Dow Jones fell below 10,000 points for the first time since 2004. It’s clear that the continuing volatility in every market is impacting investor confidence and progressively undermining consumer confidence.

I knew something odd was happening yesterday when the value of the Australian dollar began plunging. In the space of six hours £1.00 bought 15 more Australian cents. The currency rate started the day at £1.00 = A$1.31 and finished at £1.00 = A$2.46. In the space of a few weeks the dollar is back trading at the same level it was when we first arrived in 2005.

Today the news in the UK grew worse as some of the nation’s largest banks saw 40% or more wiped from the value of their shares. Bank share prices have been in free fall for weeks now. Shares in the bank I use fell below a pound for the first time. Six months ago they were trading at £12 each. The graphs being published are staggering, and just a little frightening.

In response the Government called an emergency bankers meeting at Downing Street this evening. The Government is expected to announce that it's taking a £50billion stake in the nation’s major banks overnight. The continuing crisis seems to be throwing up new twists by the hour.