We have been told for years that a virulent ‘flu pandemic is only a matter of time. Last year, the World Bank forecast it would depress the world economy by 5pc.

Well, it’s here. The outbreak of “swine” ‘flu in Mexico, where 150 people have died as I write, has been classified as a pandemic by the World Health Organization (WHO). There have been a number of cases in the US and a couple in the UK, although no deaths as yet.

With the entire world in the grip of a gathering recession/depression, this is what we don’t need. Britain is already facing a fall in GDP of around 4pc this year, and the effects of the ‘flu outbreak could push that up to depression levels (10pc fall in output from peak to trough) with massive implications for unemployment.

The City of London does have emergency plans for just such an occurrence and they are now being activated. The nation as a whole has enough antiviral drugs, such as Tamiflu, to cover half the population, but has rejected stockpiling face masks because they have to be replaced frequently and could be easily contaminated.

Already, markets are feeling the pinch, many headed south, while banks may need even more capital before this episode is over.

On Tuesday, the Bank of England began the arcane process of printing money by buying back the government’s debt.

The decision has had mixed reviews from the press.

The potential inflationary effects are the main are of concern. Others take the line that the Bank could do little else to boost the money supply, while a few politicians have pointed out that broad money (M4) is already rising by 20+ percent.

A good primer on the pros and cons is given by the BBC’s Business Editor, Robert Peston on his blog:

Will QE work?

Not to be outdone the BBC’s Economics Editor, Stephanie Flanders, also weighs in with an informative piece on how the Americans are doing it — mainly by buying corporate bonds, not Treasuries:

Ahead of the curve

My favourite is by the Daily Mail’s City Editor, Alex Brummer, who today gives an emphatic thumbs down to the whole operation.

Bank’s great experiment may prove gamble too far

Syntagma also greeted the “new dawn” of lumpen monetarism with incredulity:

Watch out for the mashed potato machine

Food for thought.

Gordon Brown, former British Chancellor, now Prime Minister, has come in for weighty criticism in recent days for his failure to spot and stop the runaway disaster that is the British economy.

Lord Turner, new head of the Financial Services Authority (FSA), blames Brown when Chancellor for the failure of regulation which led to catastrophic losses at Northern Rock, HBOS and RBS.

“They existed within a political philosophy where all the pressure on the FSA was not to say ‘why aren’t you looking at these business models?’, but ‘why are you being so heavy and intrusive, can’t you make your regulation a bit more light touch?’,” he said.

“We were supervising people like HBOS within a particular philosophy of the way you do regulation, which I think in retrospect was wrong. I think (the FSA’s actions were) a competent execution of a style of regulation and a philosophy in regulation which was, in retrospect, mistaken.”

Similarly, Bank of England Governor Mervyn King claims he has been shouting warnings for years about risky lending without any response from Brown.

It is on the record that Brown delivered a speech in the City urging them to take even greater risks.

The Prime Minister is now trying to cover the mess up by throwing the kitchen sink at sacked RBS boss Fred Goodwin’s enormous pension. Significantly this was done as the Treasury unveiled its third bank bailout in the form of a £325 billion insurance scheme for desperate RBS.

Meanwhile the head of the Audit Commission, Steve Bundred, warned that public debt is at “Armageddon levels” and will exceed two-thirds of the entire annual economic output of the country.

As Brown heads for Washington to try to convince the new adminstration to set up a “global regulatory system” the rest of us should ask why we should believe him now when he failed so spectacularly for 12 years.

The International Monetary Fund, as predicted, is now forecasting that British gross domestic product will contract 2.8pc this year, worse than the U.S., the eurozone and Japan.

Last year we reported here on the first use of the “T” word (trillion) for losses across the banking sector. Now we’re into the “2T” word, a graphic indication of how much conditions are deteriorating around the globe.

The IMF expects the US economy to contract 1.6 percent; Japan to shrink 2.6 percent and the eurozone to decline 2 percent. Overall, the IMF expects the global economy to expand 0.5 percent, its weakest showing since the Second World War.

Economists at the IMF also estimated that bank losses may reach $2.2 trillion, almost twice the $1.4 trillion the organization predicted in October.

It warned that, “unless stronger financial strains and uncertainties are forcefully addressed, the pernicious feedback loop between real activity and financial markets will intensify, leading to even more toxic effects on global growth.”

In Britain, the bank bail-out is already projected to take national debt to 8 percent of GDP, and today the Institute Fiscal Studies warned that national debt levels are unlikely to return to the pre-crisis levels for more than 20 years.