The US economy has gone through a very interesting period over the last twenty years or so. There was a period of expansion that lasted for ten years, the largest ever recorded by an industrialised country. So much so that allegedly a ‘new economy’ emerged with rules, which were different from what, traditionally, had been known. The stock market produced enormous gains, especially so in the areas of Technology, Media and Telecommunications. Beginning March 2000 the stock market simply collapsed. The optimism surrounding the ‘new economy’ vanished with it, followed by pessimism. In fact, beginning March 2001 the US economy entered a period of recession. This prompted the Fed and the US fiscal authorities to pursue expansionary policies. There were no less than 13 reductions of the Fed Funds rate between the early parts of 2001 and mid- 2003, along with expansionary fiscal measures. The surplus in the government budget, created during the expansion, turned into a deficit and a higher government deficit is expected in the near future, especially in the second half of 2004.
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