Terry Murden: Why we need another Lehman crisis or two

WHO said lightning never strikes twice? With a morbid sense of timing western economies have conspired to give us a second crisis in the financial markets on the fourth anniversary of the beginning of the credit crunch.

It was the worst week since the collapse of US investment bank Lehman Brothers, except this time it was not maverick and greedy bankers bringing the world to its knees and requiring billions in government bail-outs. Now the rescuers themselves are looking for a lifeboat. And there isn't one in sight.

G7 finance ministers are expected to be recalled this week for another round of talks on what to do next. The downgrading of United States' debt by ratings agency Standard & Poor's on Friday night just added another shockwave to the coming tsunami.

Friday evoked memories of 2008, with share prices yo-yoing all day and investors unclear whether to buy or sell as nothing and no-one seemed to be providing any sense of direction.

Britain is yet to feel the full force of the storm blowing in from both sides of the Atlantic. Despite the FTSE's end-of-week collapse and the general gloom descending on us, there are reasons to feel we could yet survive the worst if we can just cling on. Growth is weak but exports are holding up, our credit rating is secure and, therefore, the interest on our debt is relatively low. Unemployment has not been as severe as some feared.

UK ministers will be desperate to minimise the impact on British taxpayers of any further bail-outs for the misbehaving nations, but we cannot expect to emerge totally unscathed.

What the current state of affairs is telling the West is that it has yet to tackle the borrowing issue that lies at the heart of the system's failure. Until there is de-leveraging on a massive scale, we will continue to stoke the fires of the crisis instead of extinguishing it.

Our standard of living, falsely inflated in the years of plenty, will have to be restrained and we need to accept that the state must be substantially smaller, thereby easing the burden on the taxpayer.

The immediate worry is that the G7 meeting will focus only on throwing yet more money at the problem when everyone knows that it's time to withdraw the credit card and call in some of those debts. A few failures may be needed to create a new playing field. Yes, we need another Lehman or two.

Maximum confusion from people's bank

IT COULDN'T have been a worse week for the part-nationalised banks to announce half-year results. With their shares already showing signs of flagging, and heavy losses likely to push them lower, a wave of panic selling in the wake of the global debt crisis blew the prospect of reaching break-even completely off course.

There is now a 30 billion deficit on the taxpayers' 65bn stakes in Lloyds and Royal Bank of Scotland. Such was the volatility of the markets that bank shares were suspended several times.As for the figures themselves, RBS once again managed maximum confusion with an impenetrable list of numbers that meant various sources reported its figures differently. It also initially played down and finally admitted that 2,000 investment bankers jobs would be lost. So much for the new era of transparency.