The rosy view says that the economy is growing briskly. A more accurate view is that spending has been growing briskly as recent data shows the personal savings rate has fallen to 0.2%.

The spending spree in government is being fuelled by imported savings as Asian central banks recycle the profits (savings) earned from selling to the US consumer. When does this stop?

It stops when the Asian economies slow. Which is real soon now. Japan was never really growing, and looks to be falling back into recession. The Chinese authorities are busily trying to slow down the investment rampage that has been sucking up the world’s resources in commodities. The US consumer who has driven exports from these economies is also slowing, as shown by the gloomy holiday retail sales reports. This all means less savings to recycle. Therefore either the government must slow spending or expect to pay much higher interest rates to attract new savings. Either is likely to have serious economic consequences in the US. Jimmy Rogers is reported to have said that the Chinese economy will crash in 2005. I think he is right. What he didn’t say was that the US will crash too.