Back to the nineteenth century?

As a young, eager and arrogant banking correspondent in the mid 1980s, I was underwhelmed by the calibre of those running our biggest banks.

They seemed too easily seduced into lending to crooks such as Robert Maxwell, or to spivs running over-extended property companies, or to Latin American economies too dependent on overseas credit.

And their capacity to damage the wealth of their shareholders, by generating meagre returns on their invested capital punctuated by periodic losses, was wholly uninspiring.

As I chomped on their over-cooked beef, in their cavernous dining rooms, waited on by liveried servants, I was convinced they were responsible for much of what was stifling the economic potential of the UK.

If only our bankers had the flair and imagination to direct their depositors' money to genuine creators of wealth, I would muse.

I now, of course, recognise that I couldn't have been more wrong.

Bankers with imagination are what has brought this country - and the global economy - to its knees.

Oh for the days when the chairmen of what were then called the clearing banks would have vetoed any suggestion that their executives should invest in something whose very names - "collateralised debt obligations" or "credit default swaps" - are an offence against the English language.

The banks of the 1980s were bumbling and mediocre, with collusive tendencies.

However under the stern gaze of a Bank of England - which was a bit-player in steering the economy but was a feared supervisor of banks - they fiercely protected their depositors' precious cash.

So it's something of a treat to hear from them once more - in a collection of essays called "Grumpy Old Bankers", published by the Centre for the Study of Financial Innovation.

This is a compendium of the thoughts of the (mostly) better-than-average bankers of yore, not the nits.

And arguably the most arresting contribution is from Sir Jeremy Morse. He was the cerebral former chairman of Lloyds Bank, who - with Sir Brian Pitman - steered Lloyds from being a virtually bust creditor of what were called the less developed countries into a retail bank which had an unusual and healthy respect for the interests of shareholders.

Morse fears that our banks' and our economy's increasing dependence on wholesale funding - credit from unreliable institutional sources - has taken us to a cross-roads. And the choice is between two fairly treacherous roads.

One way would be to shrink our banks so that they could be funded wholly by domestic deposits and savings - but that would lead to such a severe contraction in the availability of credit as to impoverish us for some years.

But "if the system is reconstructed largely as it was (in the past few years) but with the worst excesses removed " - and that seems to be where we are heading - then Morse fears that "the subsequent cyclical pattern would be likely to resemble that of the nineteenth century".

He means that there would be harsher downturns and periodic financial crashes (but, curiously, less inflation than in the last century).

There is a logic to this analysis, especially since neither the UK or the US has yet come up with any remotely credible plan either to reduce the record indebtedness of our public and private sectors or to reduce the dependence of our economies on borrowing.

In fact, all current policy measures are pumping up our debts, on the theory - which many regard as dangerous - that although too much debt got us into this mess, we're simply too weak right now to cast off our addiction to credit.