If the US followed the Japanese example of appointing people as "national living treasures", this select few would almost certainly include John Kenneth Galbraith.

The political economist of Scots-Canadian ancestry recently turned 90. His most influential book, The Affluent Society, in which he coined the term "conventional wisdom", has just been republished with a new introduction to mark its 40th anniversary.

The retired Harvard professor has remained one of the most liberal voices in the US this century. In The Affluent Society, the author drew world attention to the "clean house, dirty streets" syndrome of increased consumer spending power in the midst of public squalor. He now warns that the Asian turmoil, the Russian meltdown and the recent US stock market plunge and recovery, may be the signal of a more severe depression to come.

Prof Galbraith lives in a pink, timber-frame house on picturesque Francis Avenue, dubbed "the smartest street in Boston". This stretch of real estate houses some of the most high-powered brains in the US, including senior professors in African and Far Eastern studies, as well as writer Robert D. Kaplan and Senator Daniel Patrick Moynihan.

At 90, Prof Galbraith still has the chiselled features of a 1940s matinee idol. In his wood panelled living room hangs a tapestry embroidered with the words: "Modesty is a vastly overrated virtue." He points out that he predicted the market turmoil of August and early September in a series of lectures last spring. He added: "Though I know one should never praise his own predictions because your wrong ones are more likely to be remembered than your right ones."

The economist now suggests that the recent downturn and recovery in the US stock market may be the dip that precedes a big crisis. A similar pattern occurred before the Great Depression. He said: "In 1929, there was a substantial break in the stock market in the spring of that year - the so-called Warburg break. Then again in September there was an even more severe break in the market, also named for the person who predicted it, the Babson break. Maybe what we had in early August/September was a Babson break."

According to Prof Galbraith, the likelihood of the situation deteriorating again depends on the conduct of speculators. "We shall have to see if the lesson of speculation has been learned," he said.

"Some of the major insanities like Long Term Capital Management - the hedge fund - have been exposed. One must assume there is a new scepticism. But the possibility of people again seeing prices going up on the stock market, coming in, and by that action shoving them up further in the classic speculative bubble - that problem is still with us. It could happen again."

One of Prof Galbraith's most widely read books, The Great Crash, an analysis of the 1929 stock market collapse, has been continuously in print since the 1950s. "Every time it has been about to go out of print, there has been a new sense of crisis or fear in the stock market and it has got published again," he said.

When the book first hit the best-seller list, he recalls searching for it at the bookstore in La Guardia airport, New York. "The lady in charge came up to me and asked if I was looking for something. I was rather ashamed to admit that I was looking for my own book, but she had nailed me so I had to say something. So I said, `I rather forget the author's name but I remember the title, it was called The Great Crash.' She looked at me solemnly, almost wiped a tear out of her eye and said, `Not a book you can sell in an airport'."

Prof Galbraith does not expect the advent of a single European currency to have a significant impact on the global economy. "The European currency will be convenient, but I think its role is greatly exaggerated," he said.

"The European economies have grown closer together since World War Two. We have the increased role of the multinational enterprise, which on the whole I favour. As part of that, fiscal systems and welfare systems have become more alike. That creates the opportunity for a single currency.

"It is the prior institutional development which makes [EMU] possible. The currency is the period at the end of a sentence."

Prof Galbraith believes that Britain will ultimately join economic and monetary union.

He said: "Eventually it will, but there is a certain residue of stubborness in the case of Britain that will have to wear off more gradually. Englishmen think more warmly of the pound than the French do of the franc."

Prof Galbraith casts aside any fears about loss of national sovereignty after signing up for EMU: "I hope it is [lost] to some extent, because I am certainly not an advocate of sovereignty. In my lifetime we have paid an enormous price for sovereign pride."

The concept of "conventional wisdom" described in The Affluent Society has inevitably changed in the past 40 years. "Privatisation is now part of the conventional wisdom," he said.

"This is something which I don't accept myself, because behind any privatisation you will always find someone interested in making money. What is thought to be socially good is in reality economically advantageous for someone."

Prof Galbraith regards the mass of poverty in urban America as his country's "prime disgrace". He said: "The people who most need schools, libraries, law enforcement, and above all a secure income base are the people who don't vote. If we had a real democracy with everyone going to the polls, that problem would soon be settled."

The walls of Prof Galbraith's study are lined with pictures of him with presidents and princes, as well as artifacts from his time as US ambassador to India. In one photo, he appears in a white tuxedo, Jackie Kennedy on his arm.

Prof Galbraith still works in the office several hours a day: "I get psychiatrically distraught if I don't do some writing every day." He is currently writing an account of his association with political leaders from Franklin D. Roosevelt, Harry Truman, Lyndon Johnson, J.F.K. and the Kennedy circle. The book will be titled Name Dropping.

"Nothing so disarms the critics as premature confession of guilt," he said.

The economist was personally closer to J.F.K. than any other president: "He was a most attractive figure - intelligent, incisive, amusing." Prof Galbraith was very close to Lyndon Johnson, until he went public with his objections to the US involvement in the Vietnam War. "To my sorrow, I never saw Lyndon again."

But he regards Franklin D. Roosevelt as the most impressive political figure he encountered. "F.D.R. contended with the two greatest issues of the century, the Great Depression and the defeat of Hitler."

In his own long career, Prof Galbraith regards his own time in government as the anti-inflationary "Price Czar" during the second World War as the most important and successful exercise of his life.

A Democrat, he has known President Clinton for some years and does not believe he deserves to be impeached. "Economics, politics, social welfare all require a certain amount of knowledge and intelligence to be effective. But on sex every body has an equal start," he said.

"Therefore this is the opportunity for people who don't know anything about anything else . . . to appear on television. That has been the basis of the whole Lewinsky affair."

Prof Galbraith's superior, ironic style has been the hallmark of books that combine his sometimes unorthodox economic ideas with keen social observation.

"Nothing has given me more pleasure than the people who have been affected adversely by something I've written. I've never finished a page without saying `I hope someone dislikes that'."