The Fed has already indicated that its bias is towards tightening rates. This could set in motion a downturn in the US economy, which has been responsible for one-third of the increase in world economic output over the past three years. But present economic conditions are far from normal. Over the past three years spending in the US economy has been financed by an unprecedented growth in debt. Savings rates have reached historical lows, and have now turned negative, meaning that spending is higher than income.
Corporate debt is also on the rise.
The London Evening Standard columnist Andrew Smithers underscored the precarious nature of the US boom on Monday. He pointed out that while the International Monetary Fund had acknowledged that it did not predict the Asian financial crisis, IMF deputy director Stanley Fischer has said he will recognise the signs of a crisis in the future. The US qualifies on all three counts. Last year's trade figures were bad and 1999's promise to be much worse. The first-quarter figures showed net imports rising at an annual rate equal to 2.5 percent of gross domestic product.