NEWPORT BEACH – Three years after the global financial crisis, the global economy remains a confusing place – and for good reasons.

Should we draw comfort from gradual healing in advanced countries and solid growth in emerging economies? Or should we seek refuge against high oil prices, geopolitical shocks in the Middle East, and continued nuclear uncertainties in Japan, the world’s third largest economy?

Many are opting for the first, more reassuring view of the world. Having overcome the worst of the global financial crisis, including a high risk of a worldwide depression, they are heartened by a widely shared sense that composure, if not confidence, has been restored.

This global view is based on multispeed growth dynamics, with the healing and healthy segments of the global economy gradually pulling up the laggards. It is composed of highly profitable multinational companies, now investing and hiring workers; advanced economies’ rescued banks paying off their emergency bailout loans; the growing middle and upper classes in emerging economies buying more goods and services; a healthier private sector paying more taxes, thereby alleviating pressure on government budgets; and Germany, Europe’s economic power, reaping the fruit of years of economic restructuring.

Much, though not all, of the recent data support this global view. Indeed, the world has embarked on a path of gradual economic recovery, albeit uneven and far less vibrant than history would have suggested. If this path is maintained, the recovery will build momentum and broaden in both scope and impact.

But "if” is where the second, less rosy view of the world comes in – a view that worries about both lower growth and higher inflation. While the obstacles are not yet sufficiently serious to derail the ongoing recovery, only a fool would gloss over them. I can think of four major issues – ranked by immediacy and relevance to the well being of the global economy – that are looming larger in importance and becoming more threatening in character.

First, and foremost, the world as a whole has yet to deal fully with the economic consequences of unrest in the Middle East and the tragedies in Japan. While ongoing for weeks or months, these events have not yet produced their full disruptive impact on the global economy. It is not often that the world finds itself facing the stagflationary risk of lower demand and lower supply at the same time. And it is even more unusual to have two distinct developments leading to such an outcome. Yet such is the case today.

The Middle Eastern uprisings have pushed oil prices higher, eating up consumer purchasing power while raising input prices for many producers. At the same time, Japan’s trifecta of calamities – the massive earthquake, devastating tsunami, and paralyzing nuclear disaster – have gutted consumer confidence and disrupted cross-border production chains (especially in technology and car factories).

The second big global risk comes from Europe, where Germany’s strong performance is coinciding with a debt crisis on the European Union’s periphery. Last week, Portugal joined Greece and Ireland in seeking an official bailout to avoid a default that would undermine Europe’s banking system. In exchange for emergency loans, all three countries have embarked on massive austerity. Yet, despite the tremendous social pain, this approach will make no dent in their large and rising debt overhang.

Meanwhile, housing in the United States is weakening again – the third large global risk. Even though home prices have already fallen sharply, there has been no meaningful rebound. Indeed, in some areas, prices are again under downward pressure, which could worsen if mortgage finance becomes less readily available and more expensive, as is possible.

With housing being such a critical driver of consumer behavior, any further substantial fall in home prices will sap confidence and lower spending. It will also make relocating even more difficult for Americans in certain parts of the country, aggravating the long-term-unemployment problem.

Finally, there is the increasingly visible fiscal predicament in the US, the world’s largest economy – and the one that provides the "global public goods” that are so critical to the healthy functioning of the world economy. Having used fiscal spending aggressively to avoid a depression, the US must now commit to a credible medium-term path of fiscal consolidation. This will involve difficult choices, delicate execution, and uncertain outcomes for both the federal government and the US Federal Reserve.

The longer the US postpones the day of reckoning, the greater the risk to the dollar’s global standing as the world’s main reserve currency, and to the attractiveness of US government bonds as the true "risk-free” financial benchmark.

The world has changed its supplier of global public goods in the past. The last time it happened, after World War II, an energized US replaced a devastated Britain. By contrast, there is no country today that is able and willing to step in should the US fail to get its act together.

These four risks are material and consequential, and each is growing in importance. Fortunately, none of them is yet transformational for the global economy, and together they do not yet constitute a disruptive critical mass. But this is not to say that the global economy is in a safe zone. On the contrary, it is caught in a duel between healing and disruptive influences, in which it can ill afford any further intensification of the latter.

Mohamed A. El-Erian is Chief Executive of PIMCO and author of When Markets Collide. This article is based on a lecture he gave at Princeton University’s Center for Economic Policy Studies.

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