Eleven countries in Europe (plus Greece, early next year) peg the value of their currencies to the euro, and starting next year the common currency itself will be introduced. But the euro has had a rough time of it since being introduced in January 1999 at a value of $1.17. Since then, it has lost 30 percent of its value against the U.S. dollar, and threatens to dip still lower.

The falling value upsets anyone who earns in euro-pegged currencies, and particularly those who have savings in such currencies. That's why the topic remains such a politically touchy issue, and why German Chancellor Gerhard Schroeder's office had to scramble for cover last month when he said in a speech that "the current euro-dollar rate is more of a reason to be happy than concerned."

As Michael Kinsley's Rule of Gaffes indicates, a politician is always in trouble when he slips up and tells the truth by accident. This appears to be what Schroeder did -- following Italy's Prime Minister Giuliano Amato who, a day earlier, said there was "no euro problem."

Countless economists have underestimated the durability of the current record-setting U.S. economic expansion, so caution is always in order. But if the dollar falters, the so-called euro zone could suck up available investment capital and create big problems across the Atlantic. Since the U.S. trade and current-accounts deficits keep ballooning higher all the time, it's a sobering scenario.

Based on second-quarter figures, the U.S. current-account deficit for this year would work out to a record $450 billion.

"What that means is the U.S. has to continue to attract $450 billion more in capital than it is sending out just to have our accounts balanced," said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal think tank. "The question is, how long can we do that? My guess is, probably not very long. Once you start seeing movement the other way, you end up with a situation where you can see the dollar falling much faster than the euro did."

Sound complicated? It is. But keep in mind that the amazingly durable U.S. expansion has been fueled -- and sustained -- in large part by foreign participation. The dollar remains very strong in part because foreign investment in the United States remains so high. If perceptions change, and investors brace for a major correction, the dreaded "hard landing" for the U.S. economy will be upon us.

Not that many in America pay much heed to this sort of forecast. No matter how many Molotov cocktails and bricks are thrown by protesters in places like Prague, Davos or Seattle, the U.S. model of capitalism-led liberal democracy has never been more ascendant on the global stage. That at least is how the people with the money to invest are thinking. But what happens when other wealthy nations start to catch up? Policymakers in Europe are starting to worry aloud about that, as Institute of International Finance managing director Charles Dallara did last week.

"Policymakers should be prepared for the contingency of a reversal or even significant slowdown in these inflows and a consequent fall in the dollar if structural changes in Europe start to capture investors' attention and U.S. equity markets continue to languish," he said in a letter to British Chancellor Gordon Brown.

Americans may be paying little attention, and the topic has received scant attention in the presidential campaign, but the facts are stark. As the Economist has noted, European investment in the United States has helped drive the euro down and the dollar up: "Since the launch of the euro, according to Merrill Lynch, net inflows of capital into America from the euro area have been $261 billion -- over four percent of the euro area's GDP -- with half going into the stock market. If the dollar were to start falling, these investors would earn less attractive returns and might become increasingly concerned about investing in dollar assets. That might in turn mean that both share and bond prices would fall."

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