It's important to understand that one of the basic laws of economics has been this: that low employment leads to a rise in inflation. And a rise in unemployment makes a drop in inflation.
But for the most of the 1990s, the U.S. has defied this traditional tradeoff between inflation and unemployment. Low inflation plus low unemployment and high growth have combined to create what is being called a "new economy."
This puzzles traditional economists, and scares a lot of them, because it leaves policy makers without a compass to guide economic strategy.
There is a general belief that American-led breakthroughs in the invention and use of technology have helped mightily in the three-way combo of low unemployment, low inflation and high growth.
Also helpful has been a determined U.S. policy of open markets -- aggressively exporting but also welcoming imports. Having to meet tough foreign competition for customers at home has been a key for American business in keeping down costs and prices, which is to say inflation.
Heavy stuff? Well, yes. But it's essential to understanding what has been happening to our economy.