The answer is a big 'no'. The United States economy has just experienced the classic economic downturn with falling house prices, which have hurt the banks badly.

Economically speaking, this is just the beginning of the downturn. The next to come is the growing default of car loans (General Motors Corp's finance chief mentioned that the third quarter default was up slightly from 2.4 per cent to 2.6 per cent, but did not mention anything about the fourth quarter default rate).

Credit card default will be the next to fall invariably as it is used to 'support' other outstanding loans until it cannot do so any more. Current outstanding credit card loans is estimated to be close to US$1 trillion.

The US-based credit card company Capital One is already reporting higher delinquency rate. With a 24 per cent to 30 per cent charge rate, it can accelerate quickly. Even the prime housing loans default will not be spared. Subsequently though, it will be at a lesser degree but from very sizeable base figures.

Finally, the corporate loans default which now is almost at an all-time low, is likely to rise to the 'normal rate of 1.25 per cent (or equivalent to about US$500 billion) as reported by Financial Times on Jan 12 and may likely overshoot it, (it is beginning to hurt some Credit Default Swaps issuers).

I repeat, we are now just after the first stage, the sub-prime loans. Who is going to save the US economy from recession?

It cannot be easily overcome by dropping the US Federal Reserve rate even to zero per cent, as the financial futures market has already priced in a 0.5 per cent cut to 0.75 per cent by end of this month (to 3.75 per cent or 3.5 per cent). And yet, last night, the Dow Jones Index was down by close to 300 points.

The Producer Price Index came in tame last night. But with rising commodity prices, the Consumer Price Index will have a problem of staying low for too long.

Like an auction party during the US presidential election campaigns, the candidates are all shouting higher rescue fiscal packages to the tune of US$75 billion and more tax cuts. Will the world fund the US party (or merry-making) this time round where the country has already accumulated trillions of fiscal deficits (currently about 20 over per cent of its gross domestic product)?

Have world economies decoupled? Just look at the stock markets around the world where a drop in the US stock market last night triggered a drop in almost all other markets. This is very telling that it is not as decoupled as many have hoped.

A last word of advice is taken from fund managers: 'Never try to catch a falling knife'.

Lim Kay Soon