If you thought we are over the worst of the economic slowdown, think again.

In its latest report, the Bank for International Settlements warns that we could be at a "tipping point" and things could get a lot worse.

The report condemns the way banks have kept interest rates low, or even cut them , as this has exacerbated the problem. "One plausible explanation for this extended period of easy monetary and credit conditions is that central banks have not yet fully adjusted their domestic policies to reflect increasingly important global influences ... It is not fanciful, surely, to suggest that these low levels of interest rates might inadvertently have encouraged imprudent borrowing, as well as the eventual resurgence of inflation. Similarly, there are dangers in saying that food and energy prices can be ignored in setting domestic policy because they are externally driven."

The report also condemns the high level of financial innovation, through various debt instruments, like derivatives which it says have had "calamitous side-effects". Earlier this year, I examined this problem in my column here.

It also warns about the high debt burden on households, tighter credit conditions and rising global inflation. Failing to tackle these issues will in the end be more expensive and dangerous, the report warns. But it will require some hard decisions.