And now for the bad news

"Whatever it takes" has been the mantra that Prime Minister Gordon Brown, Chancellor Alistair Darling and other government officials around the world have kept repeating over the last few weeks. So what did it take? No less than the nationalisation of the world's major commercial banks and the socialisation of all the disastrous debts and investment decisions that the so called "masters of the universe" had racked up over the last few years as they built up their vast personal fortunes. Well, let's face it, Caribbean islands do not come cheap do they?

The scale of the bail out is quite astonishing. Literally billions and billions of pounds, dollars, Euros etc have been pledged by our governments to make sure that confidence returns to the simple business of borrowing and lending. In this column I have resisted on many occasions the temptation to say that there is light at the end of the tunnel.

I did not believe this when Bears Stearns was bailed out by the Federal Reserve, aided and abetted by JPMorgan; when Freddie and Fannie were basically nationalised; when AIG was bailed out; or when Paulson announced his grandiose but ill-fated original plan to hand over $700bn of US taxpayer's money to his chums in the US banking industry.

However, with the announcements of the last few days, which have come from far and wide, from the shores of this sceptred isle, from the snowy wastelands of Russia, from South America and from the Middle and Far East, governments and monetary authorities have come together with commitments ranging from promises of capital injections to guarantees for interbank lending and for retail deposits. Given all this, I am now cautiously confident that while this is not the end of the crisis, or the beginning of the end it is at least the end of the beginning, with my apologies to Winston Churchill.

Although inter-bank spreads have not yet returned to pre-crisis levels they have fallen and I believe that they will continue to shrink in the coming weeks. And the uncertainty surrounding the safety of their retail deposits should also subside for the man on the street, as long as the implication of the bank nationalisation programme is explained properly to them. As such, I also believe that the panic that we saw on Friday 10 October will mark the low point for equities in this bear market. This does not mean that we can expect the markets to rally to pre-crisis levels any time soon, nor that we will not revisit these lows again, just that this seems to be the worst that we should expect for equity valuations in the short-term.

Perhaps the main reason why I believe that equity markets could revisit these lows again is that we can now look forward to the unfolding global recession. This will not be pleasant. Unemployment will rise over the next 12 to 18 months or so in most developed economies as companies come to terms with the lower growth environment and with much tighter lending restrictions.

For UK citizens perhaps the best statistic to use, to explain how different the world will be in a post credit crunch world, can be obtained from the financial derivatives traded on the Halifax's house price index. These prices represent the market’s best guess of where the index will be over the next 20 years. The predicted path for UK house prices based upon these derivatives is shown in Chart 1. The prices are rebased to August 2007.