THE U.S. ECONOMY, we were told at the beginning of the year, is in trouble. The boom in house prices is producing a bubble that will burst, with consequences even more dire than the bursting of the Internet bubble. The dollar will fall and the federal budget deficit rise, increasing inflationary pressures, and forcing a growth-stifling rise in interest rates. And soaring oil prices will be the final straw that breaks the economy’s back.

In the event, the housing market remains strong, with sales at record levels and prices in most markets continuing to rise. Instead of falling, the dollar has risen, helped along by the sag in the euro as it becomes increasingly apparent that the eurozone economic model is on a road to nowhere. Thanks to robust receipts, and in spite of a battle between President Bush and Congress for the prize as America’s top profligate, the budget deficit has declined. Inflation has remained tame and long-term interest rates have not responded significantly to Federal Reserve Board Alan Greenspan’s efforts to force them up by raising short-term rates. The phrase “Goldilocks economy” is once again heard in the land.