it isn't just the united states that is staring into the abyss. banks all over europe have failed and/or been nationalized.

"The interbank market has collapsed," said Hans Redeker, currency chief at BNP Paribas.

"We're now seeing a domino effect as the credit multiplier goes into reverse and forces banks to cut back lending to clients," he said.

Mr Redeker said the latest alarming twist is a move by banks to deposit E28 billion in funds at the European Central Bank in a panic flight to safety. This has jammed the mechanism used by the authorities to shore up the financial system in a crisis.

"The ECB is no longer able to inject liquidity because the money is just coming back to them again. This is extremely serious. If monetary policy is no longer working, there is a risk that the whole system will blow up in days," he said.

http://www.telegraph.co.uk/finance/f...