Dr Paul Erdman is about as cool as economics gets. Not that the greying, bespectacled and rather avuncular analyst is about to roll onstage on a skateboard, pierce an eyebrow or drop the names of rock-star pals.

It's just that he's managed to create an unlikely career, which combines being an international economist with hosting radio shows; penning opinion pieces for the New York Times, Financial Times and Washington Post; and writing financial and political thrillers that tend to sit on bestseller lists and occasionally end up as films.

In other words, not exactly the expected trajectory for a man who began his working life as an economist with the European Coal and Steel Community in Luxembourg and Brussels - the embryonic form of the European Common Market - and then with Stanford Research Institute in California.

Along the way, he's been a banker and was chief executive of a Swiss bank that he set up. In the US, he's a well-known figure, both as a novelist and an economist.

A talk by him on The Economics of Internet Time was bound to be a major draw for the California technology crowd, who are feeling quite anxious these days about whether one can even form a sentence that positively places together the words "Internet" and "economy" in any related context.

But ultimately, Dr Erdman did just that before several thousand listeners last week in San Francisco. They crammed into his keynote talk for the RSA Conference on data security - one of the largest annual events on the tech circuit.

There's no doubt, he said, that the "best of times" the nation had experienced in the previous decade were "linked to the Internet". The rate of productivity doubled and tripled, and "thousands of multi-millionaires were created at one time", he said, adding that most of this activity and subsequent wealth arose out of California.

"We all thought the new millennium had not only dawned but was here to stay. We thought the good times would now roll on forever." But then came the March 2000 tumble and, suddenly, people were talking about "burn rates" - the speed at which a company tears through its available cash.

Chips began to pile up, mobile sales slowed, big fibre optic network projects were completed, and "it became increasingly clear that the first phase of the global Internet expansion was coming to a close," said Dr Erdman. "California giveth and California taketh away."

However, Dr Erdman places the blame for the declining economy on US Federal Reserve chairman Mr Alan Greenspan due to last year's sequence of interest rate increases.

The Fed, he said, historically tends to raise rates by too much because the markets respond slowly to increases (or decreases). Because rate changes seem to be having little effect, the Fed raises them further. Eventually, the increases begin to bite but, by then, they are too high, slam the brakes on the economy too severely and "dump the economy into recession". Mr Greenspan's rate reductions probably won't have an effect until autumn or later, Dr Erdman predicted. (Mr Erdman was, of course, speaking before the Fed's latest interest rate cut this week.)

So, by the end of last year, interest rate increases had slowed the overall growth rate in the US from 8 per cent to 1 per cent. The Goldman Sachs Index had hit 800 but has dropped to about 100. About $5 trillion (#5.7 trillion) in company value has "gone up in smoke", according to Dr Erdman - an amount equal to about half the total gross domestic product of the US.

Such declines have led many to wonder if the US economy is heading towards a crash similar to that in Japan, a country that, in the 1980s, also saw a rampant stock market, skyrocketing property values, and much instant-wealth creation. The eventual crash compressed the Nikkei index from a high of 40,000 to its current level of 13,000, and brought property prices tumbling by 75 per cent.

"That won't happen here," insisted Dr Erdman, although he believes "this game of wealth dispersal has not yet fully played itself out". The worst is over, he said, but there's still more to come.

California's energy problems will continue to cause distress and will bring "hesitation on the part of these big technology companies for expansion in the [San Francisco] Bay Area".

But he doesn't see any other outside shocks affecting the US or global economies. Japan will slowly recover, while what he calls "Eurosclerosis" is disappearing from the EU - "they seem to have shaken that off completely".

Indeed, he believes the economic climate in Europe will be "much more favourable than [in the US] for the next 18 months".

"But if you're looking for the bright spot on earth, it's not Europe - it's China," said Dr Erdman. China's currency reserves are the strongest in Asia - more than $50 billion in foreign investment a year is pouring in, mostly into high technology - it is entering the World Trade Organization and "it will be the other major power" now that the former Soviet states are in economic disarray, he said. It was a prediction that caused some shifting about in seats, given the standoff then taking place between the US and Chinese governments over the grounded US spy plane.

In the United States, the economy might seem to be in meltdown but Dr Erdman believes that is not the case. "Our American economy is slowed to a stop. There is no doubt that the rest of this year is going to be difficult. But I expect by the first quarter of next year that all of this will be a bad dream," he said. He is looking forward to the next phase of Internet expansion - which he is calling Internet II - when the Net will not be "a stand-alone phenomenon" but a business platform producing "real income, real business models, etcetera".

Much of that shift will be due to a near-total cleaning out of the dotcom companies and the focus instead on the established "clicks-and-mortar" companies that are beginning to embrace the Net. Already, he said, "instead of talking about eBay, we're talking about General Motors, Sears and Wal-Mart". The economy will grow by 3 to 4 per cent next year; the US economy will go through a "tunnel" of six to nine months before going into recovery, he said.

Dr Erdman left his audience with a modest thumbs-up for the future. "The Internet economy is no doubt bruised. It's definitely not broken," he said. "What we're seeing now is a slowdown of its over-momentum." It all sounds like a potential setting for the next Erdman thriller.