One of the great mysteries of our time seems to be why the U.S. economy is so good. An article on the front page of the Wall Street Journal in early 1997 summed it up nicely: “Pinch me,” the reporter wrote. “A lot of good things are inexplicably happening. The economy tops the list. Economists remain mystified why.”
It’s no mystery that the current state of the U.S. economy is good. The numbers are undeniable. The U.S. economy grew almost 4 percent in the fourth quarter of 1996. Inflation is low, interest rates are low, and job creation continues at a slow, but steady, pace.
The mystery is why it is so good. What factors brought about this relatively blissful economic state? And will those factors continue to operate in the future?
In some quarters there is increasing concern about the long-term prospects for prosperity and special concern about the stock market. Alan Greenspan, the chairman of the Federal Reserve, has even warned about the “irrational exuberance” of today’s investors.