After yesterday's 31 per cent plunge in Lloyds, this morning it is the turn of Barclays.
Shares in the group plunged 25 per cent at one point this morning, "rallying" to a 22 per cent fall as I write. Lloyds has plunged another 17 per cent as the bloodbath in the banking sector shows no sign of ending.
lass=434285909-21012009>The banks are falling to nothing. These share collapses presage full scale nationalisation and a state of emergency for Britain 's financial sector.
And they coincide with a further surge in unemployment, underlining the horrendous damage now being inflicted on the broader economy.
UK unemployment rose by 131,000 to 1.92 million in the final quarter of last year, the highest total since September 1997.
That does not include the tens of thousands of jobs cut since November.
The number of people claiming jobseeker's allowance increased by 77,900 to 1.16 million, according to the Office for National Statistics.The unemployment rate was 6.1% for the three months to the end of November, compared with 5.2% in the same period of 2007. It is the highest jobless rate since the three months to the end of April 1999.
The latest collapse in bank shares follows a four per cent slump on Wall Street yesterday - the biggest ever Inauguration Day decline.
It can't go on like this. Of particular concern is the further fall in sterling - down one per cent against the Euro at 1.06770 and down (again) against the dollar $1.37985.
The government now needs to step in with a bold statement - and fast - to halt a systemic loss of confidence in Britain's banks. These events put us firmly in the Last Chance Saloon.
The collapse is now spreading to the insurance sector as traders speculated on the sector’s capital requirements. Shares in Aviva were down 5% or 15.75p at 283p and Prudential dropped 11.25p to 282.25p. Standard Life was off 10.3p at 171.7p.
Last night Bank of England governor Mervyn King, in an important speech signalled a resort to ‘unconventional’ measures to stimulate the collapsing economy. With base rate approaching zero, the prospect of Keynesian deflation is looming large and falling prices that push up real interest rates, choking potential for recovery.
These ‘unconventional’ measures would involve the Bank of England purchasing assets from the banks and government and corporate sector – in effect printing money to stimulate demand and inflation in the economy. This has already begun in a limited sense in Monday’s £50 billion package; it is unlikely to be the last.
But the problem is the deepening erosion of confidence. And for that to be addressed needs a greater and bolder statement of determination to tackle the crisis than has so far come from the government, the Treasury or the Bank of England.
