How's fourth quarter growth and beyond?

Estimates are good, 3% plus, mainly on continued inventory growth. This seems at odds with the decline in brick and mortar stoores which Zero Hedge reports. But the brick and mortars took their losses during the crash, and continued bad news should not be a surose. Oil remains in the $95 range, high enough to make the frackers pofitable. Europe is no worse off than before.  The ten year rate has not gone beyond 3%. So all the conditions for the third year 4.1% remain in place.

What could go wrong?  Taxes come in short for DC causing Congress to lean heavily on the bond market. If that happens, Congress will drive rates up, faster than growth, and the economy will recede.  Look for a clue in the debt limit negotiations, when they become difficult, then we know, Congress cannot pay its bills, and we drop back to a 2.3% rate.

The issue is simple, this is a business cycle and we seem to be at its end, and this is our first time doing it with debt to gdp at nearly 100%.

How did we end the previous cycles? With a bout of inflation as the stock market corrects. Notice in the two previous peaks, inflation surged and held for a time as the market corrected. Can it happen again? CPI is one percent and declining!  What gives? That is the great unknown, but I fear it means a very sharp and sudden correction and a short burst of inflation hits the economy.  We would all wish for a signal, especially the Fed which is about as uncertain as anyone.

So where is inflation going to show up first? Not oil, not with the fracking machine. Its the great mystery, and it may take another quarter of growth before we find our limits.