Why the panic? One fact lies beneath the convulsions on the world’s stock markets that have been seen this year. It has driven Northern Rock to the brink of bankruptcy. It has forced George W. Bush to rush out a plan for $145 billion in tax rebates for Americans. And it explains why Ben Bernanke, the Chairman of the Federal Reserve, slashed US interest rates yesterday.

We are witnessing the end of easy money. For 15 years the world has enjoyed unprecedented access to plentiful supplies of cash. Homeowners in the American suburbs found it easy to get a mortgage and, then, remortgage the house to buy a boat. Northern Rock could offer cheap loans for homebuyers in the UK, because it could borrow at low interest rates in the City and on Wall Street. Those financial institutions repackaged the loans and farmed them out to investors and banks around the world.

Four trends emerged, and then merged, to create conditions where, until last summer, credit was easy. First, inflation was tamed to the point that some economists believed that it had died. Thanks in no small part to China’s ability to export low-cost goods, improvements to productivity in the West and globalisation’s encouragement of competition, price rises were subdued for most of the 1990s and well into the new millennium. Low inflation encouraged people to borrow, and lend, because it meant they could be more certain about the true cost of their investments. Low inflation also meant that central bankers could afford to set interest rates at minimal levels. Easy money came, secondly, because commercial bankers were incentivised to make the most of “leverage” – ie, borrowing.

There was a time when bankers were innately cautious. Some remained that way. Plenty of others decided they could afford to borrow heavily to increase the size of their investments and, therefore, their potential for profit. The bonus system in the banking sector is designed to reward such big bets. When the bank wins big, so do the bankers. When it loses, they do not have to give their bonuses back. Thirdly, advances in financial technology meant new investment structure were built that could load more and more debt on, relatively speaking, smaller assets. When the foundation stone of those structures – in the US case, the mortgage market – was wiped out, billions of dollars of debt collapsed in value too. And fourthly, globalisation brought more money from more places on stream.

Since last summer, however, bankers have begun to worry that the money invested in US homes or Newcastle banks or, even, the financial capitals of the world is not safe. This has coincided with a reassessment of the conditions for borrowing money. This act of revision happened last summer en masse. In other words, the markets panicked. They feared they would not be able to get their money back on investments and demanded it immediately. The result was a liquidity crisis. The banks thus caused a run on the banks.

The fallout has been coming ever since. This week, the gyrations in world stock prices reflect fears that the problems that started in the US housing market and moved to the US financial sector and now appear to be tipping the US economy into recession will depress businesses and consumers around the world. In recent months, the emergence of sovereign funds lending much needed cash to some of America’s biggest banks has been less dramatic, but arguably more important. The financial institutions of the West have had to go cap in hand to China, Singapore and the Gulf, where money is still easy, in order to shore up their balance sheets. This constitutes more than financial engineering, it represents a rebalancing of power in the world economy.

Mr Bernanke’s intervention yesterday was a measure of the anxiety among bankers and business leaders everywhere. If anything, the scale of the rate cut only added to the alarm. Cuts in interest rates of the size ordered yesterday by Mr Bernanke are rare – as rare as England wins in Ashes cricket series against Australia, but much less welcome. The last time that the US authorities took the hatchet to interest rates by the same amount as it authorised yesterday was in 1982.

The Bank of England is now under pressure to follow Mr Bernanke’s aggressive lead. In keeping with its behaviour throughout this crisis, the Bank yesterday signalled that it would not be hurried. Unfortunately, the Bank’s stately manner has not served it well in recent months. It has been too eager to preserve a semblance of calm and, as a result, appeared out of touch with the troubles in the financial markets. It needs to act. This may give some relief to hard-pressed mortgage payers. But it is also the sort of good news that many would do without if it comes as a result of bad news.

The precondition of politics this year will be economic uncertainty. In the US, it looks likely to be worse – a recession. For business leaders too, the climate will dictate caution. Chief executives arriving at the annual gathering of the world’s plutocrats in Davos last year devoted their discussion to risk. While their businesses were booming then, they worried out loud about what they feared, but could not see, was around the corner. In 2008, the cost of the last decade’s financial excesses is much clearer. The challenge in Davos this year is for business to plot the path to recovering growth. The best single means to do so requires harnessing the power of politicians and pushing through the next round of trade liberalisation.

The seismic shifts that have called time on the era of cheap money have created vast waves of uncertainty. In time, stability will be restored and it will become easier to obtain finance. How much time is the unknown factor. Adjusting to the changed realities was always likely to be painful. It may yet get more painful.