Sean O'Grady: Celebrating the boom? Me neither

The brutal truth is that we won’t get back to normal levels of output until about 2012, maybe later. Your living standards will take equally long to get back to normal

Does it feel to you that the economy is growing at breakneck speed? Do you feel as ballsily confident as you did, say, in the balmy days of 2007, a time now as remote as the Edwardian era, a never-never land where house prices could only ever go up and "boom and bust" had been abolished? Can we really be back to the go-go days of earlier in this decade when jobs were plentiful, rising living standards were a human right and no one, not even John Redwood or Vince Cable, talked about austerity as the only possible future? Does it feel that good to you?

No, me neither. Yet the latest figures on the economy suggest that it is expanding at its fastest rate since 2003, an annualised growth figure of 4.4 per cent, well up there with the best boom times since the Second World War. Suggests, that is, not proves. For the problem with these sorts of figures is that they can be misleading – unless you take a reality check. The real "big picture" view of the economy is that it is bouncing back from the deepest recession in three quarters of a century; 2009 was the worst single year for the economy since 1921.

Look at it this way. If the Honda factory in Swindon normally makes, say, 1,000 Civics a week and in 2009 it dropped to, say, one a week (I'm exaggerating only slightly), then if they are making two cars per week now, then – wey-hey – we've got a 100 per cent "jump" in output in a year.

Yet the situation is far less joyful than that. The brutal truth is that we won't get back to normal, ie pre-crisis, levels of output until about 2012, maybe later. The corollary of that is that your wages and living standards will take equally long to get back to normal. And that's before we have the savage cuts in public spending promised – or threatened – by the coalition. By the way, I'm not at all sure that 40 per cent cuts in any departmental budget are realistic politically, but they're welcome to have a go. Anyway, it won't be fun watching them sack entire social services departments.

So, no, you can put the bunting back in its box and take the champers off ice. The Great Q2 GDP Party is cancelled, due to a misunderstanding of basic stats. The Queen's Diamond Jubilee in 2012 might just see us back to where we were in 2008 in terms of whole-economy output. So you'll have a double cause for celebration. Why, you might even get a pay increase too, plus an extra bank holiday. Something to look forward to, then.

You see, the problem is that this recession is different. There must be a sizeable chunk of the British population that has no adult sentient memory of any kind of recession. As Gordon Brown never ever tired of reminding us at the despatch box, the economy grew every single quarter from 1992 to 2008, and it was the longest period of uninterrupted growth since the Tudors. Something like that, and in fact he was right. Things did get better. But for those of us a little older, those who can remember the recession before the last one, plus a couple more before that, we are little better off in our breadth of experience. That's because all the post-war slumps were followed by a fairly rapid recovery.

What is different this time, and more like the 1930s, which only a tiny proportion of the nation can recall, is the banking crisis which just hasn't gone away. The Economist this week says that Britain's banks are "on methadone" and I cannot better that description. Having been deprived of the pure heroin of cheap and plentiful money in the money markets in the credit crunch, the banks had to be put on a heroin substitute. They've been handed some great big bottles of methadone-esque official support. It's not as good as the real thing, obviously, but it will do: up to £1trn in guarantees, soft loans, equity stakes and generally supportive funding for the Government and the Bank of England (which amounts to the same thing, in fact – you and me, the taxpayer).

That money is going to be stripped away over the next couple of years, and the banks are finding it hard to replace it. Cold turkey awaits, which, in the case of finance, means that they will be even less willing to offer you a mortgage or give that small promising biotech firm a loan or a struggling student an extended overdraft. This is a case of the addict giving the doctor cold turkey.

So let's not OD on the GDP figures. Over in the United States they had a similar experience – an unbelievably strong comeback from a near Depression. But as soon as the official subsidies and support were peeled away – the scrappage scheme, a subsidy for housebuyers, tax cuts – the recovery began to stumble. So now they're talking about renewing their stimulus packages. We are not so very different.

The collapse in credit in bank lending that was going to happen in 2008 and 2009 has been merely postponed. Had the world allowed that to happen – and here Gordon Brown did earn his place in history as the man who led the G20 into a concerted global stimulus – then we would indeed have seen a 1930s slump and the horrors of that era revisited upon us.

Although it is going to be more orderly and contained, a contraction in credit throughout the advanced world is about to follow, and it will hurt. It will not, for example, be good for house prices or the value of your pension pot. In its way, it will be just as bad for the economy as the public spending cuts, and very possibly more so. "Credit Crunch 2" is a sequel that we have all been trying to avoid, more gruesome even than Sex and the City 2, but it is coming to a town all too near you all the same.