The former chairman of the US central bank Alan Greenspan has warned that US economic growth has stalled and a quick recovery is not likely.
Mr Greenspan has been critical about the handling of current policy
"As of right now US economic growth is at zero," he said, adding the longer it stayed this way the greater the risk of a deep recession.
Wall Street giants Goldman Sachs and Merrill Lynch have both forecast that the US economy will contract in 2008.
The US Federal Reserve has said 2008 growth will be between 1.3% and 2%.
The forecast, made last week, was half a percent lower than the Fed's previous estimation.
The gloomy outlook was blamed on falling house prices, reduced bank lending, turmoil in the financial markets and higher oil prices.
Mr Greenspan also predicted that booming oil prices, which reached a record of more than $101 last week would keep rising and that the US housing market would see more misery before the tide turned.
On Monday, figures from the National Association of Realtors showed US house prices fell 4.6% to $201,100 (£106,691), while inventories rose.
This adds to the drumbeat of bad news for consumers, including higher unemployment, more expensive fuel costs and higher credit card repayment costs and raises worries about their ability to spend and prop up the world's largest economy.
Increased globalisation of trade could offset a sharp downturn in consumer spending and "facilitate the absorption of shocks in the US," Mr Greenspan said.
In a separate speech at an investment conference in the Gulf state of Abu Dhabi, he said US resistance to Gulf or Asian government-backed investors would be "counter-productive" and will result in all parties being "losers".
Lehman Brothers has predicted that these funds have assets of about $3 trillion at the moment, including large stakes in many banks, which have turned to them for capital after sustaining heavy losses on investments centred on soured US sub-prime debt.
Often secretive, they have come under fire for their investment motives, which some interpret to be political rather than commercial.
"The negative response is protectionism and that is counter-productive," Mr Greenspan said.
"The US has gained much in post-World War II globalisation and for us to be pulling back makes me sad and is not in the best interest of the US," he added.
Mr Greenspan left the Federal Reserve in 2006 after 20 years at the helm.