POP goes the bubble.

For some odd reason I’m reading a damning report on the state of the US Economy on the Times Online site in the UK and not on a US news source.

Morgan Stanley has issued a full recession alert for the US economy, warning of a sharp slowdown in business investment and a “perfect storm” for consumers as the housing slump spreads.

In a report “Recession Coming” released today, the bank’s US team said the credit crunch had started to inflict serious damage on US companies.

The report uses heavy language and absolute terms to discuss the current situation and the inevitable recession that will be in full bloom.

Mr Berner said US demand is likely to contract by 1pc each quarter for the first nine months of 2008, but the picture could be far worse if the Federal Reserve fails to slash rates fast enough. It is betting on a quarter point cut this week, with three more cuts by the middle of next year. “We expect the Fed to insure against the worst outcome,” he said.

Morgan Stanley is the first major Wall Street bank to warn that it is may now be too late to stop a recession, though most have shifted to an ultra-cautious stance in recent weeks.

One of the Big Five banks in Canada has a different view. This being the same Big Five bank that has 9.3 Billion is exposure to the sub-prime mortgage debacle.

So, what are you doing during the holidays?