The International Monetary Fund expects the U.S. economy to contract 1.6 percent this year.

According to the global bank, British GDP will contract 2.8 percent this year, worse than the U.S., the eurozone and Japan, which will shrink 2.6 percent and the eurozone decline 2 percent. Overall, the IMF expects the global economy to expand 0.5 percent, its weakest showing since the Second World War.

Economists at the IMF also estimated that bank losses may reach $2.2 trillion, almost twice the $1.4 trillion the organization predicted in October.

It warned that, “unless stronger financial strains and uncertainties are forcefully addressed, the pernicious feedback loop between real activity and financial markets will intensify, leading to even more toxic effects on global growth.”

In Britain, the bank bail-out is already projected to take national debt to 8 percent of GDP, and today the Institute Fiscal Studies warned that national debt levels are unlikely to return to the pre-crisis levels for more than 20 years.

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.