Some of the problems are externally generated; but many are self-inflicted. The difficulties of 3i, its shares at a 75 per cent discount to book and below their issue price, is a demonstration of the underlying crisis.

Many limited partner (LP) investors are finding it difficult to meet their capital calls, thanks to a lack of liquidity. Permira has already announced that it will not draw down 40 per cent of its last fund. Institutions over-committed to the asset class, assuming that cash returns would continue as normal. But exits have stopped, so LPs are getting no money back. Meanwhile their other allocations to assets including property and equities have plunged in value. SVG, the quoted fund of funds, has launched a rescue rights issue to prevent it defaulting.

Most major buy-out houses have carried out over-priced, over-leveraged deals that are underwater. Examples abound: EMI, Boots, Countrywide, Harrahs, Hilton, McCarthy & Stone, GMAC, Chrysler, Freescale, Gala Coral, Pilgrim's Pride and so on. In some, the bond prices indicate the equity is worthless; for others, the LPs have revealed huge writedowns. No doubt at year-end many auditors will insist on painful impairment provisions. The total paper losses will be at least $50bn – and quite possibly more.