"A very nasty period is soon to be upon us - be prepared"

With those chilling words, Royal Bank of Scotland (RBS) put the wind up most of the UK and Irish markets last week when the bank's chief credit strategist Bob Janjuah decided he wanted to up the ante in everyone's favourite parlour game – offering ghoulish and blood curdling warnings about the future of western economies.

As investors watch their portfolios soaking in red ink, RBS, which owns Ulster Bank, rejected the view that the credit crunch is now fully priced into most leading shares. "I do not think I can be much blunter. If you have to be in credit, focus on quality, short durations, non-cyclical defensive names," said Janjuah, who clearly forgot to throw in the more general advice to stock up on perishables too.

Who really knows whether Janjuah is right? But investors will have an ironic chuckle at the idea of RBS dispensing such gloomy advise about a major stockmarket crash.

It comes just days after the bank completed an astonishing $24bn rights issue. Investors might have liked to have known about the cataclysmic events about to hit them before they exercised their rights to the additional shares.

Irish banks of course don't need to be told about poor sentiment. Just ask Brian Goggin's Bank of Ireland which last week raised €1.25bn in unsecured debt, but only by agreeing to repay the money at 100 basis points above three-month Euribor, the main European money market rate.

Irish banks will now have to pay well above the odds for debt finance, even compared to other shell-shocked banks in Europe. This is because international lenders believe the Irish economic decline has nowhere near bottomed out yet.

Of course this premium will eventually have to be passed onto customers, thereby damaging the demand for credit further. I think the technical term for this is a 'spiral'. Now that is truly scary.