That old pendulum is swinging again and at a speed that threatens disaster for banks and economies alike.

During the Thatcher decade (1980s) the politburo socialism of the 1970s was jettisoned all over the world — apart from in isolated outposts like Castro’s Cuba. Both the Berlin Wall and the Soviet Union crashed to oblivion, and Mao’s China turned to its own version of capitalism.

That long swing to market dominance over centralized control has continued for nearly 30 years. Until now.

It’s about to go into reverse because of the vast mountains of debt built up in the system — an indebtedness that threatens to bring down the whole financial setup, investment and retail banks, and the “real economy” too.

Bank regulators are even now sharpening their swords ready to cut into the once-impenetrable jungle of bonus-led speculation and rampant hedonism that defines the financial markets, once the Rolls Royces of any respectable country.

Should we allow the pendulum — which more and more resembles the scythe of the Grim Reaper — to retrace its path back to the 1970s? Have we learned nothing?

Let’s just glance at the current situation in the markets. A spokeman for French bank Société Générale, itself a victim of the speculation culture, is deeply pessimistic, “We expect global equity prices to fall by up to 75pc from their peaks as a deep global economic downturn unfolds over the next few years.” A 50pc collapse in earnings is on the cards, made worse by an “Ice Age derating of equities”.

A 75pc fall in stocks matches Japan’s Lost Decade in the 1990s when they fell around 80pc.

The danger is that ultra-low rates will fuel another credit bubble which will put the real problem — huge debt levels — off for another turn of the screw, when it will surely be even worse.

Ambrose Evans-Pritchard of the UK’s Telegraph believes, “The capitalist system is now so deformed by debt that it requires ever lower interest rates to keep going. It survives on perma-bubbles. Monetary rigour at this late stage would endanger democracy. How did we ever let matters reach this pass?”

The UK regulator — the Financial Services Agency (FSA), which failed dismally with Northern Rock, has just published a report on the affair which highlights the problems regulators have. The FSA simply lacked the up-to-the-minute expertise on the newest financial instruments of the people it was regulating. To make matters worse, it was grossly understaffed for the job it was asked to do by government.

Rather than going back to the Dark Ages of government control and draconian restrictions, it would be better to do a deal with the banking system to co-opt top bankers for a year to the regulators. They could be paid identical salaries and averaged bonus equivalents as the banks pay out. They would then return to their institutions to keep up with new developments.

This would be expensive and would probably cause outrage in the public sector, but it would be far cheaper and less demoralizing than turning the clock back to the bad old days of politburo socialism.

The depredations of the Sarbanes-Oxley Act in America, following the Enron collapse, is a measure of how to overdo regulation. Let’s learn from the past in order to safeguard the future.

In the meantime the vast columns of red ink splashing across the economies of the world will unwind fitfully and very painfully for years. There is no alternative.

We need to hold our nerve and steady the pendulum.

It’s happening now in America and is due here in the UK and Europe by summer, if the usual time lags apply.

The recession / depression / crash is on its way like an unstoppable tsunami.

A tsunami is not a “tidal wave”. Waves break and retreat when they hit shallow waters or the shore. A tsunami trundles on for miles inshore powered by tremendous forces out in the deep ocean. No power on earth can stop it until its energy is spent.

Those who think we can stop a deep recession from happening by fiddling with interest rates or printing liquidity are looking at wave science not tsunamis. Now we can only watch and hope.

The signs of families cutting back their spending are everywhere here in Britain. Apart from the super-rich, ordinary folk are drawing in their horns as if they never existed. This mass retreat from the markets is beginning to have a cumulative effect which can only build to an inevitable crescendo.

The banks are barely functioning, except as deposit-takers. When they get our money they hoard it like the early Ebenezer Scrooge — the kind of man who creates depressions or shows us how to avoid them, depending on your point of view.

America is in deep trouble now, deserted even by the Sovereign Wealth Funds of the Orient, who just a few weeks ago seemed like saviours. Now they are pulling their cash out and retreating to the new economies of the East.

The “carry trade” to smaller Western economies, like Turkey, Iceland, Latvia, Estonia and others is falling apart, as will these countries in the coming months. Iceland may well be the first to crack, like some monstrous symptom of global warming tearing apart the ice sheets.

Those that are in the eurozone are being held together only by the common currency, the euro. But the fault-lines are beginning to show and it seems only a matter of time before the whole system snaps in a great twanging of over-stretched elastic. Beethoven would not recognize the new European Symphony about to be played. An Ode to Joy it isn’t.

If we look at all this from a Scroogian perspective though, it’s a kind of deep-cleanse that the world’s febrile financial sectors need — and this is certainly a problem of their making. This tsunami began in the boardrooms of banks and retail lenders, not in the real economy where most of us work — although our greed doubtless helped.

As America contracts, like a crab sensing danger, we can only await the storms to come. And they are the least of it. The unstoppable tsunami is the real enemy.

The European Central Bank (ECB) remains obdurate about cutting its 4pc interest rate despite the Fed going to the brink of its powers in Washington.

U.S. rates are expected to be cut by a whopping 1pc to 2pc today giving America an effective zero interest rate when inflation is taken into account.

The flight from the dollar will only get worse, especially with the ECB giving a two-fingered salute to the American authorities. It’s said that the eurozone (which does not include Britain) is in no mood to help the Americans — a situation similar to 1987, when the Bundesbank let the dollar slip into freefall, spooking the markets into a catastrophic drop.

Let’s not beat about the bush, Europe is engaging in a financial war with the U.S. As long as the ECB refuses to join in the rescue package, the dollar will fall spreading even more gloom around the markets. Some very senior commentators in the UK are now discussing the potential for a collapse of the entire banking system in the West and elsewhere.

Jean-Michel Six, Chief Europe Economist at Standard and Poor’s says, “There is a monetary war going on. The ECB view is that the Fed is a victim of its own mistakes and should pay for its past crimes. Frankly, they don’t see why they should be cutting rates when inflation is accelerating.”

British inflation measured on the CPI index, which doesn’t include mortgage costs, has risen to 2.5pc this morning. However, core inflation is down to 1.2pc, indicating that, apart from headline price rises in food and energy, deflationary pressures may be the real enemy in the months ahead.

Bernard Connolly of AIG thinks the ECB is making the same mistakes that led to the Great Depression in the 1930s. “The ECB represents the 1930s element in world central banking right now. It is adding to the atmosphere of panic in the foreign exchange markets and ensuring the collapse of the credit bubble in southern Europe and Ireland will be even worse.”

How long before cries of “Cheese-eating surrender monkeys,” are heard once again?

Imagine Barack Obama becoming President of the U.S. and announcing he will use the Democrat-dominated Congress to pass a bill partially outlawing white men from getting jobs.

You can’t really, can you? It’s unthinkable. It would be political — and possibly physical — suicide.

Yet that is precisely what the British nasty party, Newish Labour, is considering doing. Its latest wheeze is to ban the indigenous population — minus women, of course — from getting jobs just when the icy winds of economic recession, and possibly worse, are blowing in from America.

Let’s just remind ourselves of what it’s like now out there in the real world :

The Bank of England is right now being deluged with demands by British banks to borrow £23.6 billion ($50bn) as lenders scramble to prop up their capital amid plunging global stock markets and asset values.

The Bank had offered just £5 billion ($10.4bn) to banks over a three-day period in an attempt to increase the flow of money between lenders.

Banks are running scared after the overnight news that the U.S. Federal Reserve has cut the discount rate by 0.25 percent and facilitated the fire sale of Bear Stearns to J.P. Morgan Chase at a fraction of its value.

Meanwhile, our government socially engineers while the City burns.

As subprime politicians in a subprime government, they should be sliced and diced and bundled into political instruments for sale to any institution that wants them.

Don’t hold your breath.

Postscript Our apologies for yet another political and economic article in this studiously non-political site. The news is getting so alarming now that it’s proving impossible to ignore the elephant in the broom cupboard — which is what the global financial situation now is.