Addressing a World Economic Forum update on the economy, the self-confessed "Davos bear" said indicators suggested continued growth, but that in the US, "either I've got the math wrong or something just doesn't add up".

One problem, Roach said, was "the self-indulgent American consumer".

They were not awash in jobs and growth, he said, but were becoming "asset-dependent consumers" who used the value of their homes to back credit.

A real-estate bubble was growing in the US, however, and threatened to bring on a credit crunch, he said.

"The American consumer is an accident waiting to happen," the blunt-speaking economist said. "We are in the early stages of a residential property price bubble in the US.

"Consumers know this, and that is why they are turning their homes into a massive ATM machine ," he explained.

US interest rates had to rise, Roach said, something that would be left to the successor of Alan Greenspan, who is preparing to step down as chairman of the US Federal Reserve.

"Real interest rates, normal real interest rates which we have not had in the US for a long time, will deal with the excess consumption and the critically important import piece of the US current account dilemma."

US consumers "suck money" out of their homes to fuel imports from Asia while governments there buy dollars, keeping interest rates low and allowing consumers to borrow more, Roach said. "This is an utterly insane way to run the world economy. You know that, we know that, but the Federal Reserve is in denial about that," he charged.

At a separate press conference, John Thain, CE ive of the New York Stock Exchange gave a US view of the deficit issue, saying: "The current account deficit is at least in part due to the fact that the US economy is growing substantially faster than many of its other trading counterparts."

Insurer Jacob Frenkel of the American International Group told the economic forum that the record US current account deficit was a global problem but noted that lack of growth in Europe was another cause of concern in 2005.

Laura Tyson, dean of the London Business School, noted however a move towards greater labour flexibility in Germany and France, and said that the euro exchange rate and competition from eastern Europe had forced companies in Europe to become more competitive.

Frenkel, a former chief of the Israeli central bank, struck an optimistic tone with regard to Asia, saying a new paradigm had been created with China's continued economic growth. Sapa-AFP