The speed with which financial markets are being gripped by the fear of global recession is underlined by the decision of the Bank of England yesterday to cut the UK base interest rate by one and a half per cent.

The scale of the reduction shocked the City, which had expected no more than half a per cent, and was greeted with gasps by MPs in the House of Commons.

It is not yet two months since the Chancellor, Alistair Darling, was ridiculed when he warned that economic conditions were the worst for more than 60 years.

Most experts were quick to point out that Mr Darling’s timescale took in the 1930s. Was he really saying that things could be as bad now as they were then?

Subsequent events suggest that is exactly the point the Chancellor was attempting to make.

Markets across the world are racing southwards, ominously unemployment is beginning to grow, firms are going out of business almost on a daily basis and the cost of borrowing in the UK is now at the lowest level for 53 years.

But conditions today cannot be compared with the 1950s, when Britain was at the start of a post-war spending boom culminating in Harold Macmillan’s ‘you’ve never had it so good’ riposte.

Whether low interest rates 2008-style, and the near certainty of even lower to come, will save the economy from slumping into depression depends on several factors. Will banks reduce their rates to borrowers in line with the base rates?

Will inter-bank liquidity improve to enable a significant number of loans to be made?

Crucially, will consumers have enough confidence to borrow money if yesterday’s cut is passed on by lenders?

The latest car sales figures, a standard indicator of prosperity, reveal a 23 per cent year-on-year drop in sales of new vehicles with Land Rover down by an alarming 58 per cent.

Meanwhile, the continuing fall in house prices contributes to what might be termed a feel-bad factor descending around the heads of most property-owners.

There is a palpable sense now of events spiralling out of control, amplified by a Bank of England which only a few months ago was lecturing us sternly about inflationary pressures and refusing all demands for large cuts in interest rates.

The about-turn yesterday was proof enough that the Bank failed to recognise the seriousness of the economic crisis as it unfolded and will be seen by its latest actions as having pressed the panic button.