Last year, my concern was with the slowdowns emerging in Asia, Japan, Latin America and Russia. The summer's Russian failure caught me by surprise, and it looked like our economy would be dragged down, too. As we all know, it didn't happen. The collapse of world demand has not fostered a domestic slowdown. Instead, it has helped keep a lid on inflation, enabling the Federal Reserve Board to avoid restrictive behavior.
Economists tend to see potential growth defined by technological limits.
Labor, employment growth, unemployment, productivity, inflation, interest, money supply, public and private debt, and anticipated tax changes drive our models. All are bound by the danger of an active Federal Reserve or the debilitating impact of government policies. These constraints have changed. Solid productivity dampens the impact of wage gains. Combined with a slower world economy, we have not seen the anticipated inflationary push.