This development promised a higher sustainable rate of growth in the US economy and higher corporate earnings growth. That expectation contributed to a rapid rise in equity prices, especially in the "high tech" sectors, which in turn helped stimulate both business investment in the US and consumer demand causing the private sector to move into financial deficit. It also attracted massive direct and portfolio investment inflows from abroad which over-financed an increasing current account deficit in the US and caused the dollar to strengthen against other currencies. By the first half of last year the US economy was expanding at a rate of over 5%, which even on the most optimistic view of underlying productivity growth was clearly unsustainable. The pace of demand growth in the US needed to slowdown – as of course it has. The big questions now are about the extent of the slowdown and how long it will last. And the reality is that no one can be confident that they know the answers. What we do know is that the US data on the whole have not so far been as weak as many commentators predicted. Consumer spending in particular has held up reasonably well, though there has been a fall-off in investment growth, as well as a sharp downwards stocks adjustment and an associated decline in US imports.
There is a parallel presumption in favour of freedom of capital movements, and much greater openness around the world to foreign investment. BIS Review 47/2001  1  Among other things on the supply-side, there is a shared emphasis on the need to direct public spending to developing human resources through education and training, to effective health care, and affordable social safety nets. There has been a global trend to privatisation through which governments have increasingly returned essentially commercial activities, in which they have no necessary comparative advantage, to market disciplines. And there is a common recognition of the need for reforms in labour and product markets designed to remove unnecessary regulation, and to reduce distortions, which impede the efficient allocation of resources. But broad agreement on the principles, does not make them any easier to apply in practice. This is evident from the imbalances which have built up within and between the major industrial countries in recent years. It is uncertainty as to how those imbalances are likely to be corrected that underlies much of the current concern about the prospects for the global economy. The major uncertainty relates to the situation in the United States which has experienced a period of exceptionally strong economic growth with relatively low inflation until quite recently. Briefly – and no doubt oversimply – this very strong performance is widely seen as driven largely by exceptional productivity gains, as the application of new information and communications technologies spread through the economy.