Consumer spending made up about 70% of the Gross Domestic Product last year but there are already signs at the domestic level that consumer spending appears to be slowing. Since 1992, consumer spending has risen every quarter as consumers have shouldered most of the burden for domestic U.S. economic growth. However; this year's sub-prime mortgage meltdown may have eroded much of that strength. Consumer spending was up 4.7% in 2000 but had fallen to a modest 3.2% by 2006. Add to that, Americans have borrowed a record amount of equity out of their homes, an astounding $50 billion dollars to finance everything from new car purchases to college tuition just as the sub-prime mortgage mess has eroded the nationwide average price of a home by almost 12% say experts. April retail sales also dipped 0.2% from March and a weakened U.S. dollar is driving up the price of imported goods, even as the U.S. and China wrangle over inadequacies in each others' currencies- as we turn yet another page in the saga of the ever-widening trade gap between Washington and Beijing.

To further complicate matters; U.S. personal savings rate are at record lows- the lowest, in fact, since the Great Depression while consumer credit card debt has reached record levels- nearly $9800 for every U.S. household. Add ARM's to the brew, adjustable rate mortgages, and all this conjures up a recipe for a disastrous surge of mortgage foreclosures and personal bankruptcies. The lesson most Americans consumers still haven't learned yet is that debt and equity are two diametrically opposing things. They are forces that actually erode each other.

Yet all the news concerning the U.S. economy is not particularly bad. There are some bright sign posts. For the first quarter of 2007, almost 70% of U.S. companies reported an increase in earnings and incomes rose 5.3% in the 12 months leading up to February- more than twice the current rate of inflation which currently clocks in at just about 2.3%. The U.S. unemployment figures for March were also at a five-year low of 4.4%. All this has help propel the U.S. stock market into record territory but many wonder how long even that bull run will last with both the technology and financial sectors of the Dow lagging behind other prominent blue-chip gains.

The wave of rocket-market euphoria that has swept over the Dow has also been fueled in part by rising corporate earnings, the globalization of equity, and record returns on financial investments in 2006. All this has precipitated a tidal wave of private equity buyouts, acquisitions and corporate mergers both in the U.S. and Europe. Corporations all over the world are awash in excess cash and that's fueling two noticeable economic fundamentals: mergers and acquisitions and massive stock-repurchasing plans which in turn are driving up the equity of markets all over the world. Exxon Mobil, for example, spent $29 billion dollars on stock repurchases in 2006. IBM plans to spend $11.5 billion on a similar stock repurchase deal this year. Walmart, the world's largest retailer, has launched a similar initiative.

Goldman Sachs predicts that the world's economy will expand some 4.2% in 2007. That's nearly twice the pace of domestic U.S. growth.

But not everyone seems to be benefiting from this latest global economy boom. Cautious investors in the U.S. are still waiting on the side-lines trying to decipher the latest cryptic messages from financial oracles who foresee a minor correction to the U.S. stock market before the end of the summer and economists are sounding similar alarms about the record amounts of liquidity pouring into an over-ripe Chinese Market that is destined, say experts, for perhaps another correction sometime this year. And yes, it's true people are selling their homes in China to buy stocks to get in on the current economic boom.

China's 70 million plus traders have pushed the Shanghai benchmark index up nearly 50% since the beginning of the year, following a 130% gain in 2006. The problem, many financial analysts warn, is that China's market has no equity derivatives such as stock options are futures- and betting against stock downturns is banned by law. That means people only make money during a bull market and when the Shanghai Composite sinks- investors are much more apt to cut their loses and, sell stocks thereby divesting from the market to protect principle. The result- shares plummet. The so called Asian effect could rattle markets all over the world. However; trying to saddle expectations of a runaway Chinese economy that is growing at a record pace of 10% annually may be easier said than done. China is still trying to work out kinks in its Financial Futures Exchange that has, quite frankly, exceeded almost everyone's expectations. Earlier in May of this year, after mounting concerns about the growing over-evaluation of Chinese securities, China raised the stamp duty on stock trades in an effort to parlay some of the current trading frenzy on the Shanghai Exchange. It remains to be seen if the measures will have any noticeable effect on quelling international investors' fears. Liquidity could easily pour into other foreign emerging markets.

Meanwhile on Wall Street, half a world away from the economic fervor rocking Beijing, nervousness of a different sort is keeping U.S. investors and economists up at night.

The U.S. economy is incredibly resilient and though certainly not immune to global economic perturbations and general market volatility- the larger concern looming on many economists' minds is not a runaway U.S. stock market or a potential Asian melt-down but rather the ever-lingering threat of inflation, a weakened U.S. dollar, and a further depressed housing market here in the U.S. A recent run-in bond yields could also dilute stock strength.

However; if and when the U.S. economy does show signs of faltering; all eyes will once again turn to the Federal Reserve for a long- expected interest rate cut that may be needed before year's end to help propel the U.S. economy through the consumer-spending intensive treacherous hey-day of the fourth quarter.

Recently global trends have seen interest rates rising and the U.S. will probably be more likely to follow suit rather than break with tradition.

-Alvin Conway