The Bank of England's latest half-yearly finan- cial stability report, published overnight,probably needs a new title. For, after the most profound financial crisis in living memory, if not in all time, the prevailing expectation is of more instability to come. Until order and calm are restored, and no-one knows when that might be, it should perhaps be renamed the (in)stability report.

We don't need the Bank's 52 pages of graphs, panels and dense text to convince us of that. We see it in the wild daily gyrations of prices in equity markets and foreign exchanges. We see it in continuing unease in the banking sector. There is talk of more billions of write-downs at Royal Bank of Scotland before this week is out. Yesterday, some troubled Swedish banks were raising billions more in new capital and central bank loans.

We see it in the once untouch-able hedge fund industry, forced to dump stocks and other assets at fire sale prices, as investors rush for the exits. The Bank of England puts the net capital outflow there at $50bn in the past three months alone. And we see it in mainly emerging market economies going cap-in-hand to the IMF for massive loans or, in the case of hapless Iceland, looking for even more billions in support from other sources.

No wonder then that Sir John Gieve, the Bank's deputy governor in charge of financial stability, noted, with a touch of understatement: "With a global economic downturn under way, the financial system remains under strain." Strain! It looks like a system-wide profound nervous breakdown. Caused by losses that just go on mounting.

The Bank's (in)stability report reckons mark-to-market losses in the US, the euro area and the UK combined have more than doubled since it last reported, in April, to $2.8 trillion. The UK accounts for £122.6bn of that. One tiny consolation, however. With sterling plunging against the dollar in the foreign exchanges, our dollar contribution to those mounting trillions of losses is shrinking by the day.

Politicians continue to try and steady the rudder. The prime mini-ster is off to France again today to see Nicolas Sarkozy. Talks in London with German Chancellor Angela Merkel are also planned. Alistair Darling will sig- nal in a lecture tomorrow that the UK's fiscal rules, first introduced by Gordon Brown in 1997, are no longer fit for purpose andwill be replaced by a new, more flexible framework, allowing higher levels of government borrowing during the looming recession.

The prime minister insisted yesterday that is the "responsible course" to take during a downturn, if economic activity is to be revived. We have yet to find out how much of that responsible borrowing will simply be used to fill the hole left by falling tax receipts to pay the rising numbers of unemployed. And how much will go in good old- fashioned Keynesian pump- priming investment.

A clutch of sceptical economists wrote to The Sunday Tele-graph at the weekend arguing that a public works programme would be misguided and might stunt the private sector's capacity to recover. If a more active fiscal policy was needed, they argued, it would be better if taxes were cut, allowing markets to decide which parts of the market should shrink and which should grow.

I thought it rather rich that among their number was the chief economist at Lloyds TSB Capital Markets. Given that his own bank is already among the recipients of taxpayers' cash (£5.5bn in its case in new equity and preference stock) and is having conventional competition rules waived to allow it to take over HBOS, might he not have decided discreet silence was in order?

We don't actually know what stimulus Brown and Darling have in mind. The prime minister has hinted at more spending on education, training and energy efficiency. But he has also talked about tax cuts for hard-pressed families. And his chancellor, while explicitly keen on accelerating some spending within the current three-year envelope, has been rather more opaque about how much acceleration and how quickly.

Darling is not likely to tell all until he delivers his pre-Budget report. But in launching the Bank's latest (in)stability report, Gieve did offer a clear signal about what's likely to happen, further ahead, to ensure banks don't get us all into anything resembling the current crisis ever again. there will be "stronger restraints" on the build up of risks - code for much tougher regulation.

The increased capital and liquidity requirements that were the central features of the recent government rescue package will, in future, be "related to the cyclical growth of risk in the system." It looks like capital requirements will be set higher in the good times, so that banks have reserves adequate to cope with tougher times - the kind of counter-cyclical policy response David Cameron's Tory Party has been promoting.

It's a version of the old "fixing the roof while the sun is shining". But, as Paul Krugman has pointed out, emerging economies like Russia, Korea and Brazil did just that in the last global financial crisis in the late 1990s.

Their governments built up huge war chests of dollars and euros as an insurance against emergencies. But their banks and corporations continued to borrow overseas, big time, attracted by lower dollar interest rates. And that has sucked them into this crisis. Even new roofs haven't saved them.