The worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Not a commentary on the panic that gripped global stock markets yesterday but a brief excerpt from JK Galbraith's book on the Great Crash of 1929. Galbraith was writing about events that took place nearly 80 years ago but his analysis could equally be applied to the turbulent events of the past couple of weeks. The difference, so far, between then and now is that the Wall Street Crash was the catalyst for the Great Depression, which produced dire political as well economic consequences on a global scale.

The worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Not a commentary on the panic that gripped global stock markets yesterday but a brief excerpt from JK Galbraith's book on the Great Crash of 1929. Galbraith was writing about events that took place nearly 80 years ago but his analysis could equally be applied to the turbulent events of the past couple of weeks. The difference, so far, between then and now is that the Wall Street Crash was the catalyst for the Great Depression, which produced dire political as well economic consequences on a global scale.

It is evident, however, that the growing fear among investors of a global recession, despite interest rate cuts and massive injections of cash by central banks to boost economies and financial institutions, has induced blind panic on the markets. Wall Street was heading for one of the biggest weekly falls since the Dow index was created more than 100 years ago. The FTSE 100 index fell 21% this week, its second biggest drop. Markets across Europe and Asia took a pummelling yesterday. Are we in the grip of capitulation frenzy, the notion that speculators and investors withdraw from the market at any price and pile back in again to make a killing, precipitating recovery, when they believe the bottom has been reached?

Making an accurate prediction is almost impossible because there is no logic to what is happening. It is as illogical as the febrile activity that saw the markets hit dizzying heights on foundations no-one really understood or cared about and were as flimsy as a house of cards.

Toughing it out is not an option. Events are slipping beyond the ability of governments to control. Yet control they must. Much is riding on the gathering of G7 finance ministers in Washington, which will be followed this weekend by International Monetary Fund and World Bank meetings, also in the US capital.

The G7 gathering is shaping up to be perhaps the most important meeting of the world's richest developed nations since the end of the Second World War, with the focus being on whether they can add substance to the signal from George W Bush that everyone is in this together and will come through this together.

The challenge is to unlock the key to the kingdom wherein the banks continue to refuse to lend to each other. The clout of the G7 (in the stability and prosperity of whose nations the banks have a major vested interest, lest they forget) should be exercised not only to oil the wheels of interbank lending, but also to get them moving again. That must be the priority. Looking to the longer term, there should surely be a better way of ordering global financial markets and their activities.