Ground Floor: Although George W might have said in his recent inaugural address that the US's influence was not unlimited, he clearly wasn't taking about its economic influence.

In economics, regardless of the new kids on the block like China or India, or regardless of Europe's continuing efforts to be a major economic force, the US is still the economy that leads the way.

Besides which, America is in hock to the rest of us and you know the old saying about who has who by the balls when the sums owed are so large.

The re-elected president's inaugural speech was big on freedom and low on the economy which, I guess, is what most people wanted from it.

Naturally, politicians and economic analysts are different, but rhetoric will have to give way to concrete proposals quite soon.

However, right now many people are in a warm and fuzzy-feeling sort of place about the US economy. The recently published Beige Book has shown that activity continued to grow during the start of the year, and a number of Fed districts also noted that the pace of that expansion had picked up.

Consumer spending was higher and retail sales during the critical holiday period were also up on the previous year as consumers bought iPods and digital televisions, while corporates were back spending on new equipment again.

Manufacturing activity went up in three-quarters of the districts reporting, the housing market was strong, hotel occupancy rates were up and employment levels improved.

According to the National Association for Business Economics, 51 per cent of respondents expect GDP to grow 3-4 per cent in 2005 and 60 per cent expect capital spending to increase.

A cornucopia pot of positive news, especially since the Fed also reported that inflation remained steady with little or no increases in the service sector.

All of this good news has made market-watchers a little worried about next month's Fed meeting at which the FOMC will make a decision on the future course of interest rates.

The general consensus remains that rates will move up a quarter of a percentage point (to 2.5 per cent) but there was a continuing rumble that the current policy of small rate hikes may soon give way to something a bit more aggressive.

Despite the relatively modest increases shown in inflation so far, Alan Greenspan and Co are less worried about growth in the economy than possible inflationary pressures.

They're also worried about the market's views, suggesting that there is "excessive risk-taking" in financial markets right now.

At the moment, although the growth versus inflation debate has gathered momentum, there doesn't seem to be any great impetus towards a sudden more aggressive tightening of rates.

If inflationary pressures are building gradually, it's more than likely that the Fed's response will be equally gradual.

Profit margins, which Mr Greenspan picked on last year as being a problem in terms of inflation, seem to have levelled off and the general belief is that firms will be less likely to try to increase costs to customers as competition intensifies.

According to a recent report in Business Week, Mr Greenspan is "not in favour of accelerating the current pace of monetary tightening".

Nevertheless, not everyone is totally happy about the relatively benign scenario at the start of George W's second and final term at the helm.

Warren Buffet, along with half the western world, is still concerned that the trade deficit will continue to undermine the dollar.

You can't talk about the US without coming back to the scary trade and current account deficits and some analysts are suggesting that they cost fourth-quarter growth a couple of percentage points.

A survey of 65 central banks in the Financial Times showed that 70 per cent of them had increased their exposure to the euro over the past two years.

If central bankers are abandoning the dollar as their currency of choice, market traders won't feel the need to prop it up either. Losing its status as a reserve currency would be cataclysmic for the dollar and the US economy.

Mr Buffett - unlike many who believe that 2005 will be the year of the bull thanks to 2.2 million new jobs and consumer confidence at a five-month high - has once again mused that he's having trouble identifying stocks to buy.

Perhaps his latest board member, Bill Gates, may lead him deeper into the technology sector.

Actually, the technology sector was one which, despite all of the enthusiasm, started the year somewhat badly, led by eBay's announcement that it had missed its fourth-quarter forecasts - an admission that knocked 20 per cent off the share price.

It wasn't a complete disaster - earnings per share were 33 cents against forecasts of 34 cents - but the company also announced a two-for-one stock split and investors got skittish.

Other US technology firms had a rough time too, with Qualcomm, Lucent and Motorola all suffering. Despite the fact that Qualcomm and Motorola had both posted good earnings, their forecasts were weaker than expected and that was enough to knock the shares back.

But Apple Computer quadrupled first-quarter profits (possibly due to the fact that iTunes is now available in Ireland and I obviously lost the run of myself in buying iTunes Music Store albums).

The music industry - now there's one to ponder about. With the ease of downloading songs as well as albums legally, how likely is it that CDs will continue to hit the shelves?

I know the argument was made about books, but downloading a book meant either reading it on screen or printing out reams of paper which was nothing like the real thing. However, downloading music tracks, listening on your MP3 player or burning your own CD - this surely is a threat to high-street stores. Hopefully they like a challenge.

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