The analysts who had sounded warnings about economic imbalances for at least the past two years argue that their forecasts are now coming true, and that things could get worse, despite reassurances from mainstream economists.

"Even though there were extraordinary excesses and imbalances in the US economy and financial system coming into the spring of 2007, mainstream forecasters believed things would still work out OK because they had done so previously," said Michael Panzer, a former securities trader and author of a 2007 book aptly called "Financial Armageddon."

Panzer argues that he predicted the current "systemic crisis" but that this is just "the second of four stages" in the crisis.

"My belief was that this development would be the catalyst that transforms economic malaise into a depression -- like we had 80 years ago," he said.

"I believe we are on the precipice of a lingering and painful deflationary downturn, which will last at least a few years."

Nouriel Roubini, a New York University economist dubbed "Dr. Doom," said he foresaw a crisis as early as 2006, when he predicted "a tsunami that will soon trigger an ugly recession" and "the biggest housing bust in the last 75 years."

Roubini contends "the current financial crisis is becoming more severe in spite of the Treasury rescue plan, or maybe because of it" and sees a "risk of a total systemic financial meltdown."

Peter Schiff, president of Euro Pacific Capital and author of a 2007 book "Crash Proof: How to Profit From the Coming Economic Collapse," said he had issued similar warnings.

"Once I saw what the government was doing to prevent the recession in 2001, I saw the housing bubble they were blowing up, and I started writing about the ultimate collapse," said Schiff, who also has earned the "Dr. Doom" moniker.

Schiff argues that the economy has moved from one bubble to the next and that government cannot prevent a painful correction but only delay it.

"The disaster is not that the economy is collapsing, it's that we built it on a phony foundation in the first place," he said.

"The whole economy is built around Americans borrowing money and spending it. We need to stop spending money and start making things."

Other forecasters have been expressing similar concerns. Morgan Stanley economist Stephen Roach, known for his longstanding bearish views, said in a research note last month that his pessimism now appears justified.

"At the root of the problem was America's audacious shift from income- to asset-based saving," Roach said.

"American consumers no longer felt they had to save the old-fashioned way -- they drew down income-based saving rates to zero for the first time since the Great Depression. And why not? After all, they had uncovered the alchemy of a new asset-based saving strategy -- first out of equities in the latter half of the 1990s and then out of housing in the first half of the current decade."

David Rosenberg, economist at Merrill Lynch, another of the so-called "perma-bears," argues that the worst may not be over.

"I wrote a report late last year titled 'The Four Horsemen.' It was a regretful choice of words, because I kept on fielding questions as to whether or not I was, in fact, calling for the end of the world," Rosenberg said in a a research note.

"I got to a point where my answer was 'Just wait; it's going to get worse than that.'"

Robert Brusca at FAO Economics said many "prophets of doom" had the correct forecast but the wrong cause. Instead of a collapse due to hedge funds, he said it was excessive risk taking by regulated banks that created the crisis.

"The problems have come from allegedly regulated entities and their affiliated funds, not from independent hedge funds," Brusca said.

"My favorite villain is Alan Greenspan, who was hailed as one of the best central bankers but who I think will be one of the worst. He was the regulator who didn't believe in regulating."

Brusca said the current situation has no precedent, making forecasts difficult.

"We are too far into this (downturn) to call it short and shallow," he said. "It's hard to know where we are going."

Despite the doom and gloom, a large number of economists say the crisis will pass after some pain.

Cary Leahey, senior economist at Decision Economics, acknowledged that the current situation is "the biggest event in global capital markets since 1929" but does not see a new Great Depression.

Leahey said the US jobless rate could rise as high as seven to eight percent, a far cry from the 25 percent level of the 1930s.

"The reason we had a Great Depression after 1929 was that policymakers were slow and then did the wrong thing," Leahey said.

Today, he added, "They've been doing the right thing, lowering interest rates, increasing liquidity and cutting taxes."

As for the doomsday forecasters, Leahey said that "some of them have been saying for 25 years the US is on the precipice," and that at some point they will appear correct when a downturn occurs.

But he said that those who followed the advice of the naysayers would have missed "the biggest bull market in history."

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