The United States economy continues its amazing performance. It has just marked the longest economic expansion in the country’s history, growing for a record 107 consecutive months. The unemployment rolls are shrinking and inflation is under control. Whatever the explanation — and there is no good one, yet — the U.S. economy is defying expectations and blazing a trail that other countries can only dream about. Fortunately, other countries are sharing in the wealth being created, as the U.S. acts as an engine for global growth. If conditions suddenly reverse, however, the dream could become a global nightmare.

Eight years of expansion have created 20 million jobs and pushed down unemployment levels to 4 percent, a 30-year low. In January, consumer prices climbed a mere 0.2 percent, import prices increased half that amount and wholesale prices were unchanged. Productivity surged 3.25 percent last year. That is even better than the 2.9 percent annual increase that has been recorded since 1995, a figure that is more than twice the average annual increases of the two previous decades. Growth has swelled the federal government’s coffers, producing budget surpluses and allowing politicians to promise to eliminate the $3.6 trillion national debt within 15 years.

The administration of President Bill Clinton anticipates that growth will slow slightly, to 2.9 percent in 2000. Economists have been forecasting a slow-down for three years, but the pace has yet to falter. There is reason to think that it might happen this time, however.

In recent testimony to the U.S. Congress, Mr. Alan Greenspan, chairman of the U.S. Federal Reserve, repeated his concern about future inflation. In the last eight months, the Fed has raised interest rates a full percentage point, but that has hardly had an impact. In his appearance last week, the chairman made it plain — in his Delphic style — that more rate hikes are on the horizon. He is determined to slow the economy down and prepare for a “soft landing” if a reversal occurs.

Cheerleaders for the new economy have cried foul, protesting the Fed efforts to put a governor on the economy. They argue that the digital economy operates under new rules. Old tradeoffs between growth and inflation no longer exist. They may be right. By all indications the old road marks have been moved. Even so, there are danger signals that warrant action.

The first problem is the ballooning trade deficit. The expansion is not the only economic record the U.S. set last year. Even with record exports of $959 billion, the U.S. trade deficit reached a horrendous $271 billion (another record); this was attributable to imports of $1.23 trillion, an all-time high. Consumers, bolstered by low unemployment and soaring stock prices, are spending like mad.

The second problem is triggered by that spending: massive “dis-savings” by U.S. consumers. Ignore the Internet-bubble babble: The worry is the sheer volume of money in the stock market. Fear of missing “the next big thing” has driven personal savings to 2 percent, another historic low. If a correction occurs, and it is only a matter of time, vast amounts of personal wealth will evaporate. They may be paper losses, but they will be horrific in volume. And given the way that investors have leveraged those assets, a slide could quickly become an avalanche. Even the much-touted U.S. government budget surplus could disappear if the economy slips and tax revenues tumble.

Do not confuse concern with alarmism. U.S. growth is good for the world. After the economic crises of 1997, the insatiable appetites of U.S. consumers kept non-American businesses at work, as the country became the consumer of last resort. But the extraordinary circumstances that marked the last three years are ending, and that has two important consequences.

First, as the rest of the world recovers, there will be more competition for the capital that once flowed to the U.S. as investors sought a safe haven. The Internet bubbles rising elsewhere in the world are one indication of the new investment environment. Interest rates will have to respond to attract funds.

Second, the global economy’s ability to weather the crises of the past few years has led to a dangerous complacency. In fact, luck and deft management — by Mr. Greenspan, in one instance — got the world through a scary period. Debates and hand-wringing notwithstanding, the international financial system has changed very little.

The system needs to be strengthened. The speed with which Wall Street tremors rumble through other markets is proof that the financial system needs cushions and shock absorbers. If it is not fixed, the U.S. record books could get another entry — one that politicians would be considerably less proud of.

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