Both the Dow and Nasdaq are down for the year 2004, the foreign trade deficit is at a record high level, the dollar is weakening against the euro, the federal deficit is larger than ever in US history, the price of gasoline is at a record high level and both jobs and household income are dwindling. All this is taking place when the cost of borrowing is at its lowest in history.
With the price of oil soon to reach $40 per barrel, inflation will rear its head. The fed will have to increase the prime rate to stave it off (or else lose the ability to borrow), which will increase the cost of debt service by both corporations and individuals, both of which have been borrowing at record levels because of the low rates.
It is said that the Fed won't dare raise interest rates before the November election fearing that doing so would trigger a dip in the "recovery" of businesses by lowering their profits. I think, however, that Greenspan is so wedded to his numbers that he'd hike the Fed rate regardless of the impact on Bush's re-election. He's served under both Democrat and Republican administrations and will act to keep inflation (his biggest enemy) under control, at all events.
My prognosis, for what it's worth, is that this summer's going to be a wild ride.
P.S. Just to show how "fair and balanced" this blog is, check out this sanguine report about the US economy.
P.P.S. And as to the question whether the decline in manufacturing in the US is due to decreased American consumer demand or increased imports of foreign manufactured goods, check out this article, which clearly shows that the latter is the case, meaning that the loss of US manufacturing isn't just a blip but a systemic phenomenon. Looks like we'll be the money-changers, the insurers, the lawyers, the burger-flippers to the world in the upcoming century.