With a growth rate of 2.4 percent last year, the American economy was operating at 0.6 percentage points above its physical limits to non-inflationary economic activity.

What are these physical limits? They are simply a combination of labor and capital resources and their ability to produce goods and services in an environment of stable costs and prices. Technically, that is also called the economy's (non-inflationary) growth potential.

And here is what that measure of the U.S. economy looks like. Taking last year's growth of the civilian labor force of 1 percent and a labor productivity growth of 0.8 percent gives the U.S. economy's growth potential of 1.8 percent.

That shows that the actual growth of the U.S. economy last year was quite good -- given that the economic system is still recovering from the disastrous financial crisis and its painful aftermath. Indeed, the lingering crisis hangover is the main reason why the economy's current ability to produce non-inflationary growth is more than a percentage point below the average growth potential of 2.9 percent observed during the period of 1990-2009.

A substantial decline in the growth of the labor force, productive capital stock and labor efficiency reflects the magnitude and the gravity of the problems that were created, and the fact that the U.S. Federal Reserve (Fed) still continues to struggle with errors of the past.

Catching the turning points

As always, the Fed's task of trying to achieve an acceptable combination of growth, employment and price stability is particularly difficult at times of major cyclical changes - exactly the situation they are facing at the moment.

Take labor markets as an example. In spite of 3 million jobs created over the twelve months to January, and the unemployment rate declining from 6.6 percent to 5.7 percent, the demand for labor remains relatively weak. Adding involuntary part-time workers and people marginally attached to the labor force, the actual unemployment rate is 11.4 percent - double the officially reported number.

That sounds like a hopeless European case. In fact, America's actual unemployment rate of 11.4 percent is higher than the jobless rate for the euro area, and is somewhere between the rates in the stagnating and recessionary French and Italian economies. The irony is that these two countries have been embroiled for some time in an acrimonious debate with Germany and Brussels bureaucrats for resisting structural reforms that were supposed to follow the U.S. example of a flexible, job-creating labor market.

The Fed may not be paying much attention to the European imbroglio, but its leaders' recent statements indicate that they are prepared to be "patient" and "flexible" with regard to interest rate changes, because "too many Americans remain unemployed or underemployed" and the " wage growth is still sluggish."

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I agree with the "unemployed and underemployed" part, but I think that the picture of sluggish wage growth (not the actual wage level) is deceptively simple. Last year's 2.3 percent increase in the nominal hourly labor compensation was still double the rate of increase of 1.1 percent in 2013. Unit labor costs (hourly compensation minus labor productivity) registered an even bigger jump, rising 1.5 percent from only 0.25 percent in 2013.

Please note that these sharply increasing labor costs were caused by a relatively modest strengthening of labor demand in the course of last year. The Fed may well be "patient," but further gains in employment growth and unit labor costs could put the inflation floor above the medium-term target of 2 percent.

The world loves dollar assets

The probability of such an outcome should not be underestimated. The most recent business surveys indicate that the U.S. service sector (90 percent of the economy) is firmly on an expansion path, new orders are growing and supplier deliveries are slowing. Similarly, the manufacturing industries are operating close to their long-term capacity utilization rate of 80 percent, and the industrial production in January was nearly 5 percent above its year-earlier level.

Net exports, however, remain a drag on U.S. economy. Last year, they took 0.2 percentage points off the U.S. domestic demand growth. This year things could be much worse as a result of weaker U.S. export markets and a strong dollar.

The euro area remains the proverbial black hole of the world economy. The monetary union's uncertain recovery, the weak euro, Germany's unrepentant austerity mantra and the ill-tempered policy corsets imposed on impoverished and unbearably indebted member countries will continue to create problems for one-fifth of U.S. exports.

Absurd fears about China's economic slowdown may also be a factor in Fed's policy considerations. But a real problem here for the U.S. is not China's 7 percent economic growth; it is rather a shrinking market for foreign exports as a result of China's wide-ranging import substitution and an increasingly competitive presence of Chinese goods and services on world markets.

Japan is an equally worrying problem for a different reason. The world's third-largest economy takes only a puny 4 percent of U.S. exports, and even that may be under a question mark in a situation of Japan's uncertain growth outlook and a strong dollar.

Read More The US economy is improving: Analyst

The bottom line is this: The Fed's interest rate decision hinges on a medium-term inflation outlook in an economy hitting against its physical limits to growth. Inflation concerns are tempered by America's weak export markets and the dollar's 16.4 percent trade-weighted appreciation over the last twelve months. That soaring greenback says that the U.S. is a destination of choice for global investors.

Investment thoughts

On current evidence, the pessimism - some of it literally grotesque -- about the growth prospects of the U.S. economy is totally groundless. The economic activity retains a considerable amount of forward momentum even in the face of headwinds from the rest of the world.

These headwinds and an extraordinarily strong dollar -- reflecting massive foreign purchases of U.S. assets -- offer the Fed a substantial leeway with regard to the timing and pace of widely expected interest rate changes.

Facing no particular urgency, the Fed can, and probably will, remain supportive of demand, output and employment for much longer than is currently anticipated.

Even if the S&P 500 (^GSPC) - currently trading at 19.86 times earnings -- looks too rich to you, remember that a friendly Fed, America's world-beating companies and the country's stable investment environment offer good hedges and solid long-term profit opportunities.

Michael Ivanovitch writes about world economy, geopolitics and investment strategy: @msiglobal9

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