Fed chairman Alan Greenspan and president George W Bush are busy pumping up the leaky equity and real-estate bubbles. They can postpone their collapse but they won't be able to blow them up any bigger.
The bulls claim improvements in US household and corporate balance sheets will ensure economic growth hits the 4.6% now predicted for 2004. True, the turnround has been dramatic. Households have gained $3.5 trillion in net worth (mainly from equities), since the lows of autumn 2002. And US corporations don't need to borrow to invest: cashflow is so strong that they now have a financing surplus.
However, consumption is being fuelled by more debt rather than sustainable labour income. That's unsurprising the Fed has slashed interest rates and foreign central banks' insatiable demand for treasuries has driven down mortgage rates.
Meanwhile, US Inc has made no attempt to restore jobs lost since the recession. Income from work in rich countries will stay under pressure from poor employment levels and the competitive pressures of China and India.
Surveys show companies are optimistic. Equities have had a good run and economic growth has surged. But the double-digit rate of business investment growth in the past few quarters isn't that inspiring compared with economic activity and the recovery seen in corporate profits.