The figures reflected earlier falls in Europe and the US, which on Monday had its worst day's trading since 9/11. The fourth-largest US investment bank, Lehman filed for bankruptcy protection on Monday, becoming the latest victim of the global credit crunch.

Japan's benchmark Nikkei-225 index dropped 5.3% in morning trading, Shanghai's index fell around 4%, and shares in South Korea and Hong Kong shares shed about 6% in value. Markets in Taipei and Singapore were also sharply down, and the pattern was repeated in Australia and New Zealand, although the falls were smaller.

The collapse of Lehman, which had incurred billions of dollars of losses from the failing US mortgage market, THREATENED TO DEAL A FURTHER BLOW TO OTHER FINANCIAL INSTITUTIONS, as they unwind deals with the former investment giant. Earlier in the day President George W Bush said: "In the long term I am confident that our financial markets are flexible and resilient and can deal with these adjustments."

Until now the U.S. has done all in its power to organise bail-outs for problem banks. This led to the widespread assumption that the big investment houses were regarded by the authorities as 'too big to fail'.

As a Wall Street investment broker it stands at the centre of global markets and will have TENS OF BILLIONS OF OPEN POSITIONS – UNCOMPLETED DEALS – WITH OTHER BANKS AND FINANCIAL ORGANISATIONS AROUND THE WORLD. So when the markets re-open there is likely to be a massive scramble to close those deals at the minimum of loss. But the likelihood is that investment groups around the world could find themselves facing LOSSES IN TELEPHONE NUMBERS.

The decline of Lehman Brothers from the fourth largest bank on Wall Street worth tens of billions of dollars was dramatic. AT THE END IT WAS WORTH LESS THAN £2BILLION, less than Northern Rock at the time of our Government's rescue a year ago. The best hope is that key assets can be sold off in a fire sale, enabling the company to pay back some of the creditors.

But the likelihood is of HUGE SHORTFALLS AND A CRISIS THAT WILL CASCADE THROUGH THE FINANCIAL SYSTEM, affecting insurance policies and pensions across the globe. The authorities have decided to teach Lehman executives and investors a lesson. There will be no more rescues for badly-run financial institutions. But in so doing they risk turning a severe downturn in the global financial system into a deep recession – from which it may take years to recover.

The implosion of Lehman, wracked by worries about losses in its portfolio of tens of billions of dollars of mortgages and real estate, comes six months after rival Bear Stearns collapsed and a week after the government took over mortgage companies Fannie Mae and Freddie Mac.

Lehman's travails have already heightened concerns about American International Group Inc, Merrill Lynch & Co and Washington Mutual Inc, whose shares all lost more than one-third of their value last week. Merrill is in merger talks with Bank of America, the Wall Street Journal said on Sunday, citing people familiar with the matter.

Nouriel Roubini, a New York University economics professor who predicted the U.S. housing crisis, said the government lacks the wherewithal to step in every time a big financial firm fails. "I DON'T SEE ANY SIMPLE SOLUTION TO THIS MESS," HE SAID.

Vegans and vegetarians are the most likely to be deficient because THE BEST SOURCES OF THE VITAMIN ARE MEAT, PARTICULARLY LIVER, MILK AND FISH. Vitamin B12 deficiency can also cause anaemia and inflammation of the nervous system.

The link was discovered by Oxford University scientists who used memory tests, physical checks and brain scans to examine 107 people between the ages of 61 and 87. When the volunteers were retested five years later the medics found those with the lowest levels of vitamin B12 were also the most likely to have brain shrinkage. It confirms earlier research showing a link between brain atrophy and low levels of B12.

- U.S. bank Lehman Brothers files for bankruptcy
- Merrill Lynch in $50bn takeover deal
- FTSE 100 Index falls more than five per cent
- Bank of England injects £5bn into money markets
- Lehman forced to sack all 5,000 British workers

The Bank of England pumped an extra £5bn into money markets today after two of the biggest investment banks in the world fell victim to the credit crunch. The collapse of Wall Street giant Lehman Brothers and $50bn takeover of its even larger neighbour Merrill Lynch sent shares tumbling, forcing the Bank to intervene.

Its funds were immediately five times oversubscribed with banks bidding £24.1bn, in a sign of the fresh pressure on the financial system. The European Central Bank also made 30bn euros (£23.8bn) available to banks to stem growing panic as the London Stock Exchange fell more than 280 points.

Lehman, which employs 5,000 workers in Britain, filed for bankruptcy at just before 6am. Its bankers were later told at an emergency meeting everyone was out of a job. Its even more illustrious neighbour, Merrill Lynch, then announced it had agreed a takeover deal with the Bank of America to save it from becoming the next to fall.

Thousands more jobs in the financial sector could go following the effective demise of two more illustrious Wall Street institutions. U.S. experts were ominously calling the events its worst financial crisis since the 1929 crash which ushered in the Great Depression. The dramatic events sent shock waves through the world's markets, with the FTSE falling 5.3 per cent to 5132,4 by midday.

It came after last-ditch talks failed to save Lehman and the U.S. Treasury refused to step in. THE FIRM HAS POSTED LOSSES OF $613BN IN WHAT IS THOUGHT TO BE THE BIGGEST BANKRUPTCY IN HISTORY.

THE UNTAUGHT ONE: THE "HOME SCHOOLED." Contrary to popular belief, you don't have to send your kids to school in Britain. We have no idea how many children are kept at home. Nobody is counting. But the current estimate is 50,000. Of course, SOME OF THESE KIDS ARE WELL-TAUGHT – but there is disturbing evidence they are a minority.

THE UNTAUGHT TWO: THE "PERMANENTLY EXCLUDED". Over 10,000 children in Britain have been chucked out of school for bad behaviour, and can't make their way back.

SO MOST OF THESE KIDS WILL SOON JOIN THE UNTAUGHT THREE: the imprisoned children. We are jailing kids faster than ever before: the number aged 15 or under has increased by 800 per cent since 1992. When the gates slam behind them, some 40 per cent are functionally illiterate. So do we do the one thing guaranteed to make them less likely to mug another granny – intensively teach them to read, and how to get a job?

THE UNTAUGHT FOUR: ASYLUM SEEKING CHILDREN. Every year, 2,000 kids who have committed no crime are jailed in Britain's "immigration centres". They are not allowed out to play in a park or to kick a ball. They are given virtually no schooling. Their "offence"? To come to Britain fleeing persecution.

Lars Herbst, regional director for the U.S. Minerals Management Service, said Sunday that flyovers revealed that at least 10 PRODUCTION PLATFORMS WERE DESTROYED BY THE STORM. Herbst stressed the assessments were preliminary, but the damage appeared far worse than that caused by Hurricane Gustav two weeks ago. Specifics about the size and production capacity of the destroyed platforms were not immediately available.

There are about 3,800 production platforms in the Gulf, including 717 with full-time staffs aboard. The MMS says Hurricane Katrina destroyed 44 platforms three years ago, and soon after Hurricane Rita destroyed 64.

City police declared a night time curfew through next weekend, warning of downed power lines, broken traffic signals and water-filled roads. Power crews worked to restore electricity to the region, a task that could take a month, said utility CenterPoint Energy Inc. "We need to be patient; it can't be done in a day," Houston Mayor Bill White said in a televised press conference. He asked residents to boil tap water, as flooding may have tainted it with bacteria.

About 2.2 million Texas homes - mostly in the Galveston-Houston area - were without power, said the U.S. Federal Emergency Management Agency. Many pumping stations were also down, leaving residents with no running water.

Houston's 75-story JPMorgan Chase Tower had windows on its west side smashed out, according to the local CBS affiliate, KHOU-TV. The Enron Building and Crown Plaza Hotel were also damaged, the station reported. The city's George Bush Intercontinental and William P. Hobby airports remained closed.

The cash handouts, of up to $4 per person, are a tradition during the Islamic fasting month of Ramadan. Television footage showed women screaming as they were pushed into a fence by the crowd. Under a system known as Zakat, wealthy Muslims are required to give away a portion of their money to the poor every year.

A worker at the local Morgue, known as Budi, said that most of the dead were women. The mayor of Pasuruan, Aminurrahman, said it was unclear what had sparked the stampede. "It's an annual activity from that family," he told local radio, "but there were a lot more people lining up today than in previous years."

The pope urged the faithful to adhere to the teachings of Mary that "tell us that there is a love in this world that is stronger than death, stronger than our weaknesses and sins. The power of love is stronger than the evil which threatens us," he said.

Benedict was to deliver an address to French bishops later Sunday to chart a course for Catholicism in a country facing a freefall in the number of churchgoers despite its deep Christian heritage. Only 10 percent of Catholics say they attend mass regularly, according to a recent poll.

The pope arrived in Paris on Friday, meeting with President Nicolas Sarkozy, who has called for easing France's strict secularism defined in a 1905 law on the separation of church and state. Sarkozy, a twice-divorced lapsed Catholic, broke a French taboo during a trip to the Vatican last year by calling for a "POSITIVE SECULARISM" that would allow space for religion in public life.

THE POPE SOUGHT TO BUILD ON SARKOZY'S POSITION, SAYING EUROPE FACED "DISASTER" IF IT TURNED AWAY FROM RELIGION.

THE US GOVERNMENT, which bailed out Fannie Mae and Freddie Mac a week ago and orchestrated the sale of Bear Stearns Cos To JP Morgan Chase & Co in March, played much tougher with Lehman. It REFUSED TO PROVIDE A FINANCIAL BACKSTOP TO POTENTIAL BUYERS.

Without such support, Barclays PLC and Bank of America, the two most interested buyers, walked away. On Sunday night, Bank of America struck a deal to buy Merrill Lynch for $29 a share, or about $44 billion. Lehman was working on a possible bankruptcy filing that would allow most of its subsidiaries to continue operating as the firm is wound down.

THOUGH IT STEERED CLEAR OF A BAILOUT, THE FEDERAL RESERVE IS EXPECTED TO TAKE NEW STEPS TO STABILIZE THE BROADER FINANCIAL SYSTEM. These steps, expected to be temporary, would make it easier for banks and securities firms to borrow from the central bank by using a wider range of collateral. Bankers say these financial institutions might need short-term funds as they unwind their many trading positions with Lehman.

"MONDAY WILL BE A DAY OF RECKONING FOR THE FINANCIAL MARKETS," said Carlos Mendez, senior managing director of ICP Capital, a boutique investment firm in New York. On Sunday, he said, "it was like a fire alarm went off and people ran in all directions."

Lehman, a 158-year-old firm that started as an Alabama cotton brokerage, and Merrill, with its trademark bull logo, have been pillars of Wall Street for much of the past century. WITH THE DEMISE OF BEAR STEARNS, THREE OF THE STREET'S FIVE MAJOR INDEPENDENT BROKERS COULD END UP DISAPPEARING, LEAVING ONLY GOLDMAN SACHS GROUP INC AND MORGAN STANLEY.

THE HUMBLING MOVES, WHICH RESHAPE THE LANDSCAPE OF AMERICAN FINANCE, mark the latest chapter in a tumultuous year in which ONCE-PROUD FINANCIAL INSTITUTIONS HAVE BEEN BROUGHT TO THEIR KNEES as a result of tens of billions of dollars in losses because of bad mortgage finance and real estate investments.

They culminated a weekend of frantic around-the-clock negotiations, as Wall Street bankers huddled in meetings at the behest of Bush administration officials to try to avoid a downward spiral in the markets stemming from a crisis of confidence.

It remains to be seen whether the sale of Merrill, which was worth more than $100 billion during the last year, and the controlled demise of Lehman will be enough to finally turn the tide in the yearlong financial crisis that has crippled Wall Street. Questions remain about how the market will react Monday, particularly to Lehman's plan to wind down its trading operations, and whether other companies may still falter, like the AMERICAN INTERNATIONAL GROUP, the large insurer, and WASHINGTON MUTUAL, the nation's largest savings and loan. Both companies' stocks fell precipitously last week.

Though the government took control of the troubled mortgage finance companies Fannie Mae and Freddie Mac only a week ago, investors have become increasingly nervous about the difficulties of major financial institutions to recover from their losses. What will happen to Merrill's 60,000 employees or Lehman's 25,000 employees remains unclear.

Their report will be published jointly on Tuesday by two think-tanks: the Centre for Social Justice which is chaired by Mr Duncan Smith; and the left-leaning Smith Institute, set up in memory of the late Labour leader John Smith. It will call for agreement from all parties on THE IMPORTANCE OF PROJECTS DESIGNED TO BOLSTER THE LIFE CHANCES OF CHILDREN WHO ARE LIVING IN DEPRIVATION, from the moment they are born.

YOUNG CHILDREN ARRIVE AT NURSERY SCHOOL UNABLE HARDLY TO SPEAK OR RELATE TO OTHER CHILDREN WITHOUT RESORTING TO VIOLENCE. Unless concerted action is taken, they warn that Britain will be "saddled with a new generation of disturbed and aggressive young people doomed to repeat and amplify the social breakdown disfiguring their lives and others around them".

Mr Duncan Smith writes that the "creeping expansion of the underclass" is sucking "decent" families into the "code of the street". He cites research suggesting that on more and more council estates, anti-social behaviour is regarded as the norm, and is spreading. Mr Duncan Smith also warns that council estates are increasingly becoming a ghetto for the poor, dominated by low-income, single-parent families living on benefits. "YOUNG CHILDREN SUFFER LIFE-LONG DAMAGE IN A WORLD WHERE THEY SIT IN FRONT OF THE TELEVISION ALL DAY, ENCOUNTER CONSTANT ANGER AND SHOUTING, AND WITNESS THEIR MOTHERS BEING ABUSED BY A BOYFRIEND".

Lehman had incurred losses of billions of dollars in the US mortgage market. The move threatens to deal a further blow to the global financial system, as banks unwind their deals with Lehman. Merrill Lynch, also stung by the credit crunch, has agreed to be taken over by Bank of America in a dramatic weekend of events for Wall Street.

The chance that Lehman Brothers could collapse increased sharply after the strongest potential buyers pulled out at the weekend. Greg Wood, the BBC's North America business correspondent, said that police had cordoned off the bank's headquarters in New York and staff were leaving with cardboard boxes as onlookers gathered to watch the bank's demise.

Of course, there are terrorists, and there are also fantasists, fanatics, low-lifes and camp followers who plot and attempt horrible things. Some of them even call themselves 'Al Qaeda' these days because they have learned that this is a good way to scare us. BUT, WHILE THEY ARE A MENACE, THEY ARE NOT AS BIG OR AS ORGANISED A MENACE AS THE GOVERNMENT LIKES TO MAKE OUT.

The State and the vainglorious bureaucrats of the 'security' services need to pretend that the terrorists are a tightly organised and terrifying threat, to make themselves look big as well – AND TO HELP THEM GET HOLD OF NEW POWERS TO SNOOP ON US AND PUSH US AROUND.