How bad can it get? Our misery has just started

That’s a large swathe of history, even for Threadneedle Street. The reason for the breathtaking statement is easy to grasp, however, whatever your station in life.

“There is not enough money,” says the man who has just begun to print £75 billion for the sake of “the economy”. Mr King will worry about inflation another day.

Meanwhile, with their usual sense of timing, and with their usual disregard for life in the real world, the ratings agency Moody’s decides to lighten the mood by cutting the credit standings of 12 British financial institutions. There is nothing wrong with these banks and building societies, we are assured, but Moody’s no longer believes the Government would stand behind them all if real trouble – unthinkable, obviously – were to befall. Again.

It is a symptom of present madness. The Moody’s downgrade ensures that life will become instantly more difficult, in terms of their borrowings, for a dozen institutions it otherwise assesses as sound.

It also piles pressure on a Coalition Government desperate to steer clear of eurozone banking contagion. I only ask: why would an agency with fees to earn, one so often accused of conflicts of interest, do such a thing?

Perhaps because this may indeed be capitalism’s most serious financial crisis “ever”. Historians will sort out exactly what the word might mean. The rest of us want answers to two questions. What is being done? When will it end?

Mr King, like every other central banker, has the air of a man who has already given it his best shot.

The four-month, £75 billion round of “quantitative easing” (QE) is a trick that has already been tried. It is being tried again for the not-too-convincing reason that it didn’t work last time. The total bill now approaches £200 billion in virtual money with real long-term costs.

But what else can the Bank of England do? There are no more cuts in interest rates to be had, and previous cuts did no good. George Osborne, the Chancellor, has piled austerity upon austerity, to Mr King’s evident approval, yet succeeded only in making matters worse. QE or cuts: it’s all beginning to look a bit Japanese. On the other side of the world, after all, they spent a decade floundering, much as Mr Osborne and Mr King are floundering, even before the first banking crisis.

The second of those is probably upon us. “It’s debt,” cries the Chancellor. He’s right, too, but not in the way he would have you believe. Mr Osborne would have you believe that the debt is Labour’s, or Europe’s, and born of profligacy. The truth is that much of it is born, certainly in Britain, of the last banking crisis. Countries put themselves in deep holes in an effort to protect their financial institutions.

The question for 2011 is simple, then: could such countries do it again? Where Britain is concerned, Moody’s patently does not think so.

Mr Osborne, another who has run out of ideas, refuses even to confront the question. The deficit-cutting Chancellor is busy – he doesn’t like to talk about this, either – increasing Britain’s debt because his medicine has put the economy in a coma. There is no growth, therefore no hope of rescue. Across the northern hemisphere, everyone is in the same leaking boat.

Grim enough? Perhaps you don’t know the meaning of the word.

Even if this autumn’s perfect storm is averted, the aftermath could make Japan’s lost decade seem like a restful interlude.

In these days it is no longer merely glib to invoke the 1930s and the Great Depression. Now, as then, the policy-makers have exhausted their repertoires. Now, as then, those famous words of J.K. Galbraith (The Great Crash, 1929) spring to mind: “the burden of reputable economic advice was invariably on the side of measures that would make things worse”.

Given everything we have witnessed in these past three years, that’s difficult to dispute. Galbraith wrote, variously, of failed banking regulation, a speculative frenzy, grotesque income inequalities, trade imbalances, and what he called “corporate larceny” as causes of the collapse and the misery of the 1930s. Anything sound familiar?

You can find plenty of people, right wing or busy making money, who will tell you that Galbraith got it all wrong. What they cannot do is claim that their spiritual forebears got much right in the decade when life for ordinary people seemed to come almost to an end.

The parallels between one era and another are far from exact, of course – prices rising rather than falling, no gold standard to bewitch Mr Osborne – but broad causes in the 1930s had the same broad outcomes as now. Capitalism ate itself; misery followed. “Recovery”, when it came, was for most a technicality: the millions of unemployed were left untouched. An end to a “periodic failure” of markets (and economic theory) brought no quick success where real people lived. For them, year after year, the struggle continued.

Parallels, to repeat, are far from exact. In the 1930s, house prices, like graduate unemployment or the cost of an overdraft, were of concern to very few. But let’s say that a year from now Mr Osborne is able to declare (again) that Britain is “out of the woods”. Where will house prices be then? How many years will it take for such prices to return to their 2008-2009 levels?

Where will unemployment stand when Mr King feels it safe to say the danger has passed and interest rates can rise, the better to quell inflation? Mr Osborne’s public sector cuts – with all their private sector consequences – have barely begun to bite. One answer to the question “How bad can it get?” is plain. For millions, bad as things are, “it” has barely begun. Misery was central to the Chancellor’s plans even before the eurozone began to tremble and the soundness of banks again became an issue.

Any choice of dates would be arbitrary. Most of us will be lucky to get away with a lost decade, but a generation has already been blighted. Parasites infested banking; banking turned out to be rotting from within; governments obsessed with market dogma saw nothing for it but to transfer public wealth to private interests. And we are, as politicians like to say, where we are.

Some young people are marching from Jarrow to London even as I write, and not for fun. They are already hardest hit by unemployment. Theirs is not some “symbolic” gesture: they want jobs.

This is happening in a country in which food charities are reporting a huge upsurge in demand: people can’t afford to feed their families.

Among the better-off, petrol consumption just fell by 15%. As for debt, consult your millionaire Prime Minister for his wise thoughts on credit cards.

History does not repeat itself. Capitalism, on the other hand, is stuck in a tape loop: the same mistakes, the same venality, the same excuses over and over.

When Mr Osborne says the great financial war is ended, will he pause to count the casualties?