The End Game Approaches, Probably In Next Few Weeks.

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"This has been one of the most interesting days in finance ever," said Andrew Roberts, head of credit at RBS. "We are right at the tipping point. Yields are about to collapse even further, equities are about to turn over. The end game approaches, probably in next few weeks."

In the US, the 27pc collapse in existing homes sales in July leaves no doubt that America's property market cannot stand on its own feet without the prop of homebuyer tax credits. "Home sales are in free-fall. These are truly dismal numbers," said Teunis Brosens from ING.

The overhang of unsold homes has jumped from 8.9 months' supply to 12.5, higher than at any point during the Great Recession. Over 20pc of mortgage holders are already in negative equity and home default notices hit 325,000 in July.

The Richmond Fed's manufacturing index showed a plunge in August expectations on Tuesday, with shipments dropping to 7 from 40 two months earlier, and the backlog of orders dropping to -1 from 22. This follows the Philly Fed's crash last week to -7.

Stephen Lewis from Monument Securities said bond yields have dropped further than they did in the "flight to safety" extreme of late 2008, a sign that markets fear that underlying conditions are even worse today than they thought then. "Now they fear the global economy will remain in the mire for decades," he said.

For the Japanese this has become a nightmare. Their V-shaped rebound has been cut off short of its 2008 peak. Growth stalled to just 0.1pc in the second quarter. Unemployment has been rising for four months.

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