The Economy on the Edge

Will the U.S. succumb to a debt crisis brought on by years of profligate lending—or keep growing? Here are some markers to mind in figuring out where we're headed

No, it's not just you—the U.S. economy really is bewildering. The government says gross domestic product expanded at an annual rate of nearly 4% in the third quarter, the fastest pace in a year and a half. The stock market is still up by 4% for this year, despite a sharp 3% drop on Nov. 7. On the other hand, growth in consumer borrowing slowed unexpectedly in September. Some economists argue that the U.S. is teetering on the brink of a recession, if it isn't in one already.

Oil has exploded to nearly $100 a barrel, gold is near an all-time high, and the cost of food is soaring. It seems like high prices are breaking out all over, right? Yet the core rate of inflation is less than 2% a year, according to one widely followed measure. Confusion reigns right on up to the Federal Reserve, whose interest ratesetters are openly disagreeing about whether more cuts are needed.

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