Interest rates on US, German and UK government bonds have fallen to all-time lows. Yields on 10-year US Treasuries are below 2 per cent, the lowest recorded since the Federal Reserve began publishing market data in 1953. Yields on the inflation-protected 10-year Treasuries are zero. These are almost incomprehensible levels, whose implications are profoundly negative. Only the anticipation of negligible demand for capital and negligible inflation – could drive rates this low. Tuesday’s International Monetary Fund report is quite correct: America and Europe are on the verge of recession.

For the American and western European economies to decline again, when unemployment levels are already so high, would be disastrous. Fearful consumers, businesses and markets will retrench further, causing economic decline to accelerate. Weak labour markets would get worsen, as would already swollen deficits and debt.

Overall we are in serious danger of repeating the experiences of 1937, when America fell back into recession after three years of recovery from the Great Depression. Sadly, there is no other credible explanation for the relentless fall in interest rates. Yes, monetary policy is on maximum ease and that controls short-term rates. Safe haven psychology also is at work. However, these cannot explain the current low. Bond markets usually signal recession through an inverted yield curve, when long-term rates are lower than short-term ones. Technically, this is now impossible now given short-term rates are zero. But the recent moves in long-term rates amount to the same thing.