Albert Edwards at Societe Generale has grave doubts about the American economy.

The S&P 500 index of US shares, he thinks, is about to crash through its half-century support line to 500.

“Technicals say it is time to bail out. Cut equity expose and prepare for rout. US depression looking likely. While China’s 2009 implosion could get ugly.”

Albert Edwards has called this crisis right from way back. He goes on:

“The Chinese economy is imploding and this raises the possibility of regime change. To prevent this, the authorities would likely devalue the yuan. A subsequent trade war could see a re-run of the Great Depression. … Do you really trust politicians to do the right thing?

“Could the economic situation in China become so bad that it threatens the regime itself? Of course it could. But before being swept away in a tidal wave of worker unrest it has one key tool in its economic armoury it has used before. MEGA-DEVALUATION. China has a track record of such things. At the end of 1993 the authorities devalued the yuan by 33pc.”

Is the way to a Smoot-Hawley II — the Act that caused a catastrophic loss of world trade and the Great Depression? I doubt that a U.S. with Ben Bernanke at the Fed would make the same mistake twice.

However, Edwards continues:

“Amid confidence that the ongoing, massive, monetary and fiscal stimulus will prevent a repeat of the Great Depression, will it instead be competitive devaluation and implosion of world trade that we should watch out for.”

Gerard Baker, writing in the Times (London) today says, “US economic activity is collapsing so fast that it is hard to keep up with just how bad things are. The various monthly data releases are ancient history by the time they are published, even the most up-to-date ones.”

The loss of half a million jobs in November was particularly calamitous. Nothing like it has been seen for 30 years or more.

The upcoming President, Barack Obama, promised last weekend to create 2.5 million jobs by a massive fiscal stimulus. This has to be set against the Bush stimulus last year which broadly had little effect. People simply tucked the money away, or paid off debt.

Obama wants to spend on roads and transport. He also wants money to go to green and information technology-based infrastructure.

Meanwhile the Fed has been using so-called “quantitative easing” in the wake of its dramatic cuts in interest rates. That means printing money and buying assets of all kinds. So far, nothing seems to be working.

Finally, when there are no more cliffs to fall off, we may see some “green shoots” of recovery.

Hold your breath if you dare.

Just about everyone in the financial services sector has been blamed for the credit famine that has almost brought the entire world to its knees. But who really is to blame?

Over at Syntagma, John Evans lays the “seed culpability” on President Carter and President Clinton for forcing banks to lend to people who could never afford the houses they bought.

After much digging around, we can report that, contrary to many attempts to blame investment bankers, as well as retail banks and their customers for the financial fiasco, real seed culpability lies with politicians of the left interfering in the workings of what are sometimes laughingly called “free markets”.

Here’s the timeline:

1977. President Carter passed the Community Reinvestment Act …

Read the whole article here.

If you were an investment banker, the chances are you’ve already lost your job. If you were something less than a Master of the Universe, yours may have disappeared without a splash on CNN.

Is there any consolation for losing a job or a career, even in an economy on the brink of a slump? Paul Graham makes a great case for it.

“Our bodies weren’t designed to eat the foods that people in rich countries eat, or to get so little exercise. There may be a similar problem with the way we work: a normal job may be as bad for us intellectually as white flour or sugar is for us physically.”

But don’t jobs and food actually go together?

“The root of the problem is that humans weren’t meant to work in such large groups. … Though they’re statistically abnormal, startup founders seem to be working in a way that’s more natural for humans.”

Paul Graham — who is a venture capitalist — is right. You can buck the system and you owe it to yourself to make the attempt.

Incidentally, a recession is a great time to go it alone. Venture capitalists have money burning a hole in their vaults, there’s a surfeit of experts going cheap, and opportunities for anyone with a great idea or a new approach.

Innovation is at a premium during a downturn. Many of the biggest names in corporate America began in a garage during a recession when there was little else to do.

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