Analysis: One begins to run out of words powerful enough to convey what is happening to the disintegrating global banking system. It takes your breath away.

One begins to run out of words powerful enough to convey what is happening to the disintegrating global banking system. It takes your breath away. We've had the ninepins falling, five in one day a couple of weeks ago. Now we are about to see the part-nationalisation of most of the UK's leading high street banks, including Scotland's big two.

It will probably be called a recapitalisation by an injection of public equity. But it's a state rescue of banks in this country, whatever they call it. And there can be little doubt, given the intense pressure bank shares have been under in recent days, that without that rescue insolvency loomed for some of them.

Consider Royal Bank of Scotland. Yesterday, after a credit rating downgrade and further confusion about what leading banks, including Royal Bank, had been talking to the chancellor and the Bank of England governor about on Monday evening, its shares closed at just 90p, down 39% on the day. That gives Royal a market capitalisation of just under £15bn. But it raised £12bn from shareholders in April by way of a rights issue. So, is the Royal's global empire, having added bits of ABN-Amro to its fiefdom, really only worth £3bn? That's what the markets, with no interference from spivs and speculators, are now saying.

And if, as has been rumoured, the package to be unveiled this morning means as much as £15bn of taxpayers money going in to Royal's balance sheet by way of preference shares, does that really mean we all get to own half of Royal Bank and a substantial chunk of several of its rivals, too?

The fall in the HBOS share price was even steeper yesterday and left the Halifax/Bank of Scotland grouping valued at just half the current Lloyds TSB offer. If these two are also in line for some of the multi-billion equity pot the government is putting together, as everyone expects, how are their shares being allocated? According to what the market says they are worth now? Or how they would stand if Lloyds goes through with its current offer?

That distinction matters. After all, the government tore up the competition code to clear the way for that rescue deal. In more normal times it represents a substantial competitive edge. Is that reality reflected in what the taxpayer is now being asked to pay to further underwrite the planned merger? Or is the priority to spend whatever it takes to avoid another UK banking failure, and worry about the impact on ordinary taxpayers after the deed is done?

I suppose we can all take some comfort from the knowledge that we are not Iceland, watching its banking superstructure simply melt away, leaving some 300,000 UK savers wondering if and when they'll get some or all of their money back.

The Russians have stepped in with an emergency loan. But one begins to wonder whether an independent island state of 300,000 can survive this trauma. Even its sovereign debt has been downgraded. Might a constitutional merger be in the offing with, say, Denmark?

Putin would be too much of an elephant, surely, even if the Kremlin does have hydrocarbon-fuelled roubles aplenty.

This financial calamity is losing its capacity to shock and awe. We've been shocked and awed on an almost daily basis for weeks. But even the package Chancellor Alistair Darling is set to announce does not solve the fundamental problem. Banks may continue to protest that they don't really need government help to shore up their balance sheets, as the likely recipients all did yesterday.

But they all seem paralysed by fear and mutual mistrust when it comes to lending to each other in the wholesale money markets. That's where the global financial plumbing has become completely clogged up. And no-one seems to have invented the banking equivalent of Dynarod to get credit moving again.

The US Federal Reserve resorted to buying up unsecured and asset-backed commercial paper yesterday in its latest attempt to provide a liquidity backstop.

But all the hundreds of billions in liquidity from central banks around the world and the promised roll-out of the US Treasury's "bad bank" package, now approved by Congress, have so far failed to restore interbank confidence.

One begins to wonder what size of bazooka - to borrow a favoured Hank Paulson word - will be needed to shock the financial nervous system back into life.

Taking chunky government stakes in leading banks that not so long ago were carving each other up in their mission for global dominance is certainly bazooka-scale intervention. But before this week is out, we may see another. The Bank of England is being urged to go nuclear on monetary policy this Thursday and take a whacking great chunk out of UK interest rates.

Half-a-point is about the minimum every lobbyist and analyst in the land is demanding. Might Mervyn King, having sanctioned the partial nationalisation of most of Britain's standing banks, urge his MPC colleagues to match Australia and go for a one per cent cut or more? After what's already happened, I wouldn't be shocked or awed if he did.