Today's huge drop in the markets is surely a symptom of the underlying problem in global finances.

It is simply this: there is a chronic lack of confidence out there.

Look at the institutions that have been hardest hit this morning. Banks have been pummelled once again, with HBOS and RBS taking a particular hammering.

The fact that inter-institution lending is frozen has contributed to the banks' woes but today's plunge has a deeper cause: the uncertainty over what the UK government is about to do to shore up the banking sector.

And it is not just the UK government that the markets are watching.

German Chancellor Angela Merkel yesterday said yesterday that "savings are safe" but it is not exactly clear if she is going down the Irish or Greek road in terms of guarantees.

It appears as if she has made a political commitment, rather than a commitment to legislate - putting her closer to the UK po

But this is yet more uncertainty to pile upon uncertainty.

Last night, in the wake of what at first appeared to be Merkel's guarantee pledge, there were strong rumours in the business community that the UK government would follow suit this morning.

Senior business and political sources were keeping their own counsel, adding to the fevered atmosphere and fuelling further speculation.

Nothing happened this morning, but that does not mean the UK government will do nothing.

It now seems as if they are preparing to use taxpayers' money for a recapitalisation of the UK banks, an injection of capital to try - finally - to oil the wheels of the credit crunch-rusted financial system.

Significantly, if they do that they will have the support of the Tories at Westminster, with David Cameron signalling his backing for this kind of extreme action.

We may learn more this afternoon, when Chancellor Alastair Darling makes a statement to the House of Commons.

The markets will be hanging on his every word, seeing if he will expand upon his remarks on Sunday on the need to take "pretty big steps" that would not be taken in ordinary times.

To use the jargon, it seems that nothing is ruled in and nothing has been ruled out.

Asked whether the Government had contingency plans to partially or completely nationalise the banking sector, Treasury Chief Secretary Yvette Cooper said today that Mr Brown and Mr Darling had said they would do "whatever it takes" to ensure the banking sector remained safe.

"The Chancellor said yesterday that of course that does mean looking at a whole series of pretty big steps that you might not take in ordinary times," she told BBC Radio 4’s Today programme.

We shall see... and know very soon...