The "credit tsunami" that has swept the United States will have a severe impact on consumer spending and the employment market, Alan Greenspan has warned.

The former Federal Reserve chairman told a congressional panel that US consumers - many of whom are struggling with debt - are afraid for the security of their jobs and their savings, as well as facing a rapid reduction in the availability of loans and mortgages.

"Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment," he remarked. "The crisis … has morphed from one gripped by liquidity restraints to one in which fears of insolvency are now paramount."

Mr Greenspan suggested that the downturn will only come to an end when movements in property prices stabilize, which may not happen for many months.

The Associated Press reported earlier this month that experts were suggesting the "easy" days of obtaining credit were over.

Consumers struggling to access credit in the form of personal loans from banks may wish to consider pay day loans as an alternative arrangement.

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