One of the UK’s most successful hedge-fund managers has issued a stark warning that the global economy faces a downturn that will be “remembered in a hundred years” and leave stock markets facing devastation.

Crispin Odey, best known for anticipating that banks would go bust in 2008, made his gloomy predictions in a missive to clients of his Odey Asset Management business in which he warns that the European Central Bank’s €1.1tn (£730bn) bond-buying programme announced last week will not stave off a slump.

He is not only pessimistic about the firepower of the central bank to inject life in to moribund eurozone markets but also about China, where recent data showed growth had slowed to 7.4%.

Acknowledging he is gloomier than rivals, Odey said: “This down cycle is likely to be remembered in a hundred years … Sadly this down cycle will cause a great deal of damage, precisely because it will happen despite the efforts of central banks to thwart it.”

He concluded: “We are in the first stage of this downturn. It is too early to see what will happen – a change of this magnitude means the darkness and mist is very great”.

Odey – who reportedly was paid £47.8m in 2013 – earned a reputation for being a canny if controversial investor in the runup to the banking crisis when he was placing bets that bank shares would fall, notably those of Bradford & Bingley which was later rescued by taxpayers in September 2008. He has not always called markets correctly and early in his career suffered losses when the US Federal Reserve raised interest rates in 1994.

Central banks are currently adopting measures to cut interest rates to counter the impact of the 2008 banking crisis and injecting cash into markets by buying back bonds. Odey, though, warns central banks are running out of options and that investors are being overly reliant on them to bolster growth.

“We used all our monetary firepower to avoid the first downturn in 2007-09, so we are really at a dangerous point to try to counter the effects of a slowing China, falling commodities and emerging markets and the ultimate first-world effects. This is the heart of the message. If economic activity far from picks up, but... falters, then there will be a painful round of debt default,” he said.

The markets are already digesting the implications of the price of oil, which has more than halved in six months, to below $50 a barrel, while foreign exchange dealers have been rattled by the sudden move by the Swiss central bank two weeks ago to stop trying to hold the value of the Swiss franc against the euro at 120.

“For me the bearish opportunity looks as great as it was in 07/09, if only because people are still looking at what is happening and believe that each event is an individual, isolated event. Whether it’s seen as the oil price fall or the Swiss franc move, they’re seen as exceptions,” he said.

Odey also predicted that markets will take more note of politics this year. “This time around, the problem we have as well is that politics will start to rear its head and we are left to deal with politicians who are increasingly critical of the capitalist system’s ability to allocate capital,” he said.

He is concerned that a faltering Chinese economy will have a knock-on effect to those economies linked to China, naming Australia, South Africa and Brazil. He is also analysing the fall in commodity prices and cites the impact of the oil price on the economies of countries in the Middle East, Venezuela, Argentina and Norway.

He is one of the best connected fund mangers in the City, married to Nichola Pease, who has run a rival fund management firm and is a descendant of the founders of Barclays Bank. His previous wife was Rupert Murdoch’s eldest daughter Prudence.

The €306m (£228m) Odey Pan European fund, for which the letter was written, has achieved a rate of return of 15% in the year to 23 January.