“The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up,” the economist told the Telegraph newspaper before the World Economic Forum in Davos.

White is one of a few bankers who warned about the rising crisis in the Western financial system before the financial crash eight years ago.

Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief,” said White.

“It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something,” he added.

According to White, European lenders will have to face large haircuts. In particular, European banks have already recognized $1 trillion in non-performing loans.

He added that the emerging markets are an important part of the problem, even though after the bankruptcy of Lehman Brothers that resulted in the 2008 global financial crisis, they were part of the solution.

The economist also said that the yuan devaluation could “metastasize” in the future.