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The stark warning will cause serious concerns, since it was this combination of falling prices and soaring debt burdens that plagued the US in the 1930s.

The Bank is using its Quarterly Bulletin to highlight the threat posed to the economy by deflation – where prices fall each year rather than rise.

Although inflation is currently in positive territory, it is expected to become negative in the coming months.

The Bank is worried that this may combine with high levels of indebtedness to squeeze families further.

It says that families with high debts could fall prey to the debt deflation trap. This means that the cost of their debts, which are fixed, would rise compared to average prices throughout the economy. While inflation erodes debts, deflation makes them relatively higher.

The Bank’s paper suggests that Britain is particularly at risk because there is a high proportion of families with significant levels of debt, and many of them are on fixed mortgage rate, which means they will not benefit from rate cuts.

Britons’ total personal debt – the amount owed on mortgages, loans and credit cards – is, at £1.46 trillion, more than the value of what the country produces in a year.

Total personal debt has risen by 165 per cent since 1997 and each household now owes an average of about £60,000.

The Conservatives claim this is the highest personal debt level in the world.

The Bank’s paper also says that consumers were suffering as banks keep the cost of borrowing high, despite Government attempts to get them lending again.

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The bank slashed interest rates to just above zero and pledged to create £150 billion worth of cash with which to buy up government and corporate debt.

This so-called quantitative easing is regarded as a radical measure to help prevent a repeat of the conditions associated with the Great Depression.

Industry surveys show double-digit growth in the number of home gardeners this year and mail-order companies report such a tremendous demand that some have run out of seeds for basic vegetables such as onions, tomatoes and peppers.

“People’s home grocery budget got absolutely shredded and now we’ve seen just this dramatic increase in the demand for our vegetable seeds. We’re selling out,” said George Ball, CEO of Burpee Seeds, the largest mail-order seed company in the U.S. “I’ve never seen anything like it.”

Gardening advocates, who have long struggled to get America grubby, have dubbed the newly planted tracts “recession gardens” and hope to shape the interest into a movement similar to the victory gardens of World War II.

Those gardens, modeled after a White House patch planted by Eleanor Roosevelt in 1943, were intended to inspire self-sufficiency, and at their peak supplied 40 percent of the nation’s fresh produce, said Roger Doiron, founding director of Kitchen Gardeners International.

Doiron and several colleagues are petitioning President Obama to plant a similar garden at the White House as part of his call for a responsible, eco-friendly economic turnaround. Proponents have collected 75,000 signatures on an online petition.

“It’s really part of our history and it’s part of the White House’s history,” Doiron said. “When I found out why it had been done over the course of history and I looked at where we are now, it makes sense again.”

But for many Americans, the appeal of backyard gardening isn’t in its history — it’s in the savings.

The National Gardening Association estimates that a well-maintained vegetable garden yields a $500 average return per year. A study by Burpee Seeds claims that $50 spent on gardening supplies can multiply into $1,250 worth of produce annually.

Doiron spent nine months weighing and recording each vegetable he pulled from his 1,600-square-foot garden outside Portland, Maine. After counting the final winter leaves of Belgian endive, he found he had saved about $2,150 by growing produce for his family of five instead of buying it.

Adriana Martinez, an accountant who reduced her grocery bill to $40 a week by gardening, said there’s peace of mind in knowing where her food comes from. And she said the effort has fostered a sense of community through a neighborhood veggie co-op.

“We’re helping to feed each other and what better time than now?” Martinez said.

A new report by the National Gardening Association predicts a 19 percent increase in home gardening in 2009, based on spring seed sales data and a telephone survey. One-fifth of respondents said they planned to start a food garden this year and more than half said they already were gardening to save on groceries.

Community gardens nationwide are also seeing a surge of interest. The waiting list at the 312-plot Long Beach Community Garden has nearly quadrupled — and no one is leaving, said Lonnie Brundage, who runs the garden’s membership list.

“They’re growing for themselves, but you figure if they can use our community garden year-round they can save $2,000 or $3,000 or $4,000 a year,” she said. “It doesn’t take a lot for it to add up.”

Seed companies say this renaissance has rescued their vegetable business after years of drooping sales. Orders for vegetable seeds have skyrocketed, while orders for ornamental flowers are flat or down, said Richard Chamberlin, president of Harris Seeds in Rochester, N.Y.

Business there has increased 40 percent in the last year, with the most growth among vegetables such as peppers, tomatoes and kitchen herbs that can thrive in small urban plots or patio containers, he said. Harris Seeds recently had to reorder pepper and tomato seeds.

“I think if things were fine, you wouldn’t see people doing this. They’re just too busy,” Chamberlin said. “Gardening for most Americans was a dirty word because it meant work and nobody wanted more work — but that’s changed.”

Harris Seed’s Web site now gets 40,000 hits a day.

Among larger companies, Burpee saw a 20 percent spike in sales in the last year and started marketing a kit for first-time gardeners called “The Money Garden.” It has sold 15,000 in about two months, said Ball.

A Web-based retailer called MasterGardening.com is selling similar packages, and Park Seed of Greenwood, S.C., is marketing a “Garden for Victory Seed Collection.” Slogan: “Win the war in your own backyard against high supermarket prices and nonlocal produce!”

Cultivators with years of experience worry that home gardeners lured by promises of big savings will burn out when they see the amount of labor required to get dollars from their dirt. The average gardener spends nearly five hours a week grubbing in the dirt and often contends with failure early on, said Bruce Butterfield, a spokesman for The National Gardening Association.

“The one thing you don’t factor into it is the cost of your time and your labor,” he said.

This week, as unemployment is expected to burst through the 2 million barrier, The Observer can reveal that the spectre of mass unemployment is forcing the government to reinforce job centres, with civil servants diverted from child maintenance and disability claims.

Already 600 staff working for the Child Support Agency, which has been renamed the Child Maintenance and Enforcement Commission, and 300 Pensions, Disability and Carers Service staff have been asked to work with the growing number of unemployed, to the anger of charities.

The full extent of the jobs misery is shown in a nationwide analysis by the TUC. In some parts of the country, the task facing jobseekers is critical. The Isle of Wight has more unemployed workers per new job than any other area. In total, there are 3,152 people chasing 52 advertised vacancies, as its main industries of tourism and manufacturing suffer from the credit crunch.

“These shocking figures blow out of the water the government’s claim that there are plenty of jobs available for people who are prepared to look,” said Brendan Barber, the TUC general secretary.

“We are talking about millions of patients worldwide, where postoperative pain management has been affected by the research findings of Dr. Reuben,” says Steven Shafer, editor in chief of the journal Anesthesia & Analgesia, which published 10 of Reuben’s fraudulent papers.

Put plainly, the UK and its currency are now perceived as a riskier bet. Sterling’s decline may be telling us that overseas investors see a significant risk of inflation ahead. It’s not hard to see why. It took the Bank of England far too long to appreciate the potential damage the build-up of household debt and the associated bubble in house prices might cause. The ensuing crisis has forced the banking system into the government’s arms, pushing up net government debt, which Brown pledged to keep always below 40% of GDP, to well over 100%. History teaches us that governments deep in debt are more likely to tolerate higher inflation. And this week the Bank of England began creating money in order to buy some of this outstanding debt – in effect monetising the deficit.

G20 central bankers, meeting with finance ministers ahead of the London summit on April 2, signed up to a statement to keep interest rates low for as long as it took to get the economy back on its feet and engage in quantitative easing if needed.

The Bank of Canada has already said it will soon outline a framework for quantitative and credit easing, giving it the means to conduct similar actions to the Bank of England and Swiss National Bank.

“It’s important to do that in a comprehensive, holistic fashion so that people can see the range of tools that the bank continues to have,” Carney told reporters after the meeting of old and emerging economic powers in southern England.

“In putting out a framework, it does not necessarily follow that we would immediately implement that action. Those are discussions we take as a governing council at the appropriate time, given the economic outlook.” But Carney said many of the downside risks to the economy the central bank had already identified were materialising, hinting that a downgrade to the Bank of Canada’s growth forecasts could be just around the corner. The BoC updates its forecasts next month, with the estimates it made in January — especially for 3.8 percent growth in 2010 — looking increasingly optimistic.

“I would draw your attention to the commitment of central banks to maintain expansionary policies,” he said. “Rates will remain low for longer. In Canada … our overnight or target rate can be expected to remain at its current level of 50 basis points or lower until there are clear signs that the output gap is beginning to close.”

Officials at the meeting underlined the significance of the joint central bank pledge, signalling that even traditionally conservative central banks had indicated they were prepared to take the leap into quantitative easing as they run out of room to cut interest rates. “Many countries have already reduced policy to the bone,” Brazilian Finance Minister Guido Mantega.

Alistair Darling and senior figures in the US Treasury have been encouraging the Fund to issue hundreds of billions of dollars worth of so-called Special Drawing Rights in the coming months as part of its campaign to prevent the recession from turning into a global depression.

Should the move, which is up for discussion by the summit of G20 finance ministers this weekend, be adopted, it will represent a global equivalent of the Bank of England’s plan to pump extra cash into the UK economy.

However, economists warned that the scheme could cause a major swell of inflation around the world as the newly-created money filters through the system. The idea has been suggested by a number of key figures, including billionaire investor George Soros and US Treasury adviser Ted Truman.

Simon Johnson, former chief economist at the IMF, said: “The principle behind it is that everyone would get bonus dollars and instead of the Federal Reserve having to print them, everyone gets them.

“This is the worst I have ever seen,” said managing partner Joseph Chait. He would know: His late father took over the business in 1965; his wife’s grandfather started working there in 1952. Chait has been there since 1971.

“We are seeing more people who, if they are not at the end of their rope, they are close to it. They are just trying to stave it off.”

Customers come through the door in a sad, daily procession. They are close to default on their mortgage, car payments or their kid’s tuition. They have made the wrenching decision to quite literally sell the family jewels.

Shemano said they tell stories about a piece of jewelry or silver, how it has been in the family for generations. With every telling, the imagined value tends to grow.

“You’ve got to pop bubbles sometimes,” Chait said. “They tell you, ‘I remember this silver tea set from when I was little.’ And you have to say, ‘Well, it’s worth $40.’ ”

At times there are tears – “about once a week or twice a month on average,” Chait said.