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.

Bank of England Deputy Governor, Charles Bean, indicated today that the Bank is moving relentlessly towards the most controversial form of “printing money”, buying gilts, or Treasury bonds.

He spoke in the context of a further adjustment on the downside for GDP this year. The previous forecast was -4 percent. That now has a 75 percent chance of going lower still.

Although the Bank has been tinkering with “quantitative easing”, as it’s known, it was not clear whether it would wheel out the big gun of covering government debt.

Charles Bean also indicated that further cuts in interest rates are likely, falling from the current level of 1 percent to, presumably, the American level of a tiny squeak above zero.

He was said to be relaxed about the fall in sterling and an additional tweaking of rates lower, indicating that the falling pound is not high on the alarm agenda right now.

The BoE believes a further rate cut is necessary before it can begin full-scale quantitative easing.

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.

One of Britain’s leading economists Peter Spencer, Chief Economic Advisor to the Ernst & Young ITEM Club, has warned that “printing money” to buy assets such as corporate bonds and consumer loans, was needed now or the country faces a repeat of the Great Depression.

“My concern is that people don’t fully understand the dangers lurking out there. The Bank of England needs to move towards quantitative easing immediately – you don’t have to wait until you get to zero percent interest rates. If someone is choking to death you don’t think twice about giving them an emergency tracheotomy. There may be dangers, yes, but the alternative is that they die,” he said.

“We are now in danger of seeing the economy choke: and once you get into a situation where people are hoarding as much cash as you can throw at them and interest rates are stuck at zero, you’re in real, real trouble.”

He continued, ominously, “Our forecasts are relatively optimistic. The recession is already baked in. The question is whether we go from here into a decade of deflation – if they make more mistakes that is pretty much on the cards – or some pretty horrific numbers this year and some positives later on. They have days – not weeks – to play with.”