Sir Mervyn King was speaking after the decision by the Bank’s Monetary Policy Committee to put £75billion of newly created money into the economy in a desperate effort to stave off a new credit crisis and a UK recession. Sir Mervyn said the Bank had been driven by growing signs of a global economic disaster.

“This is the most serious financial crisis we’ve seen, at least since the 1930s, if not ever. We’re having to deal with very unusual circumstances, but to act calmly to this and to do the right thing.”

If this language sounds extreme, it is nothing compared to the gruesome detail that bank analysts are now starting to put out: please consider a partial list of consequences of a forced Euro exit by Greece in Mechanics of a Euro Breakdown by Izabella Kaminska at FT Alphaville, reporting on a bank note by HSBC:

*Huge contagion to other peripheral countries given that a precedent has been set for a country to leave: bond spreads blow out as foreign investors flee, widespread runs on banks which will have also suffered a credit event

*The ECB has to respond to with vast liquidity provision and government bond purchases as the EFSF would not be able to issue debt quickly enough to make the necessary purchases

*ECB and all private sector and official creditors would have to completely write off their debt claims on the exiting country. The IMF would likely be the exception given its preferred creditor status and because its assistance may be sought again soon

*A full-blown credit crunch on a scale that would make 2008 seem mild and economy falls into a deep recession