US Economy is hot.

[Opti]

Personally I think sentiment is a larger factor than you appear to.. but its interesting you talk about the deficit! Government spending more than any other single factor creates Grass Roots sentiment and that is where the upturn we are seeing now is being driven from imho.

(bear in mind I am outside looking in and have no way to gauge all the little factors like an American would.. so I would never argue I am right and anyone else is wrong about this.. just an observation)

Probably just in time for Kerry, if elected, to inherit a 4th quarter 2005 slowdown for the Republicans to say he ruined the Bush recovery and for the Democrats to say it's really the fault of Bush.

From this statement I am guessing you imagine a post election downturn is likely at some point.. I think it's almost guaranteed.. it would be worse if Kerry wins too is my tip. My reason for thinking this is that the US government must stop spending soon... and when a government stops spending it undermines the communities grass roots sentiment 10 times harder and faster than it rises.

Although I dont think a deficit in itself is anything bad.... and I do think a high level of government spending is usually a good thing.... ramping it up to a level that is not sustainable (as appears to be the case now) is a suicidal move in the long term.. as at some point it has to be cut back.. a good government should always leave enough breathing space to let them scale back as gradually as possible if ever needed.

Anyway... I'm raving now and no certain I am making my point.

Basically I expect volatility "like we have never seen before" ;-) in the US economy over the next 2 years minimum... and it worries me!


Oh yeah... I'm not sure what effect China will have... and maybe Americans are freaking out more about gas prices right now than i realise... But although I have seen the news reports about $2/gallon I have been thinking it appeared Americans are not as spooked by high oil prices as they once were... Again harking back to the sentiment thing.. if this is true, its a very positive thing imho, in that it reduces OPECs power and should help make the growth of chinese oil demand impact less than doomsdayers predict on America.. and ergo.. the world.

The US GDP has increased about $700 billion this year. Of that $700billion, the breakdown is roughly:

1. 63% private consumption expenditures
2. 29% Gross private domestic investment
3. 14% Government expenses
4. -6% Exports

I wonder if any area contributed a disproportionate amount... if one did my bet would be on #3