It looks like we are in for another day of sharp losses. Last week’s warnings from the IMF finally took their toll in the US on Friday, with the Dow falling 256 points – although it is still well up on the levels it sunk to last month.

At the time of writing, markets across East Asia had suffered sharp falls, with the Nikkei in Japan and the Hang Seng in Hong both down by over three per cent.

On top of all the woe from the IMF, reported here last week, the US consumer confidence index published by the University of Michigan fell to a 26-year low, while the forward expectation index fell even lower.  

And the more the G7 and the likes of Gordon Brown talk about how we need to take action – and now is the time to stop talking about doing something and actually do it, and how we can keep talking and talking, but what we need is action, markets just fret that nothing seems to be working. 

The trouble is, central banks, and governments in particular, celebrated when economic growth was being promoted by an unsustainable debt bubble.  They did nothing to stop the development of this bubble.  Now, the bubble is deflating they are looking for ways to stop it.  In short, when bubbles are being created they say, “Don’t lean against the wind.”  When they are deflating, they lean against the wind, as much as they can.