The nasty R word (recession) is popping up again with increasing frequency. And mind you, that’s in the face of a peppy economy and widespread expectations that the third and fourth quarters will produce double-digit earnings growth.

“The economy is increasingly at risk, and chances of a recession are much larger right now,” the British economist J.C. Spender told me the other day. His scenario is pretty simple: There are many factors out there that could cause the consumer to stumble, leading to a recession. Chief among them:

* A negative savings rate.

* The failure of housing prices to stop rising, which seems likely. “People have pulled spending money out of housing,” notes Mr. Spender, “but what happens if prices start to fall?” (That’s what happened in New York City, where the average sales price for an apartment fell 13% in the third quarter from the second quarter.).

* Inflationary pressures, such as prices at the gas pump and the price of heating oil this winter, head higher.

* Further interest rate increases, which are widely expected.

“The American economy, instead of walking on flat feet, is walking on tip toes,” says Mr. Spender, a visiting professor at London’s Cranfield School of Management.” A big problem, he says, has been “the mismanagement of the economy over the past five years, with the transference of wealth from the poor and middle-class to the rich (in part due to favorable tax changes).” The economy, he argues, cannot survive on the buying by the rich alone.

Pointing to the sharp drop in consumer confidence, he notes the unanswered question (as far as a recession goes) is at what point it will seriously affect consumer spending, which he asserts “it will.” He says, in fact, the triggering events for a recession may have actually already happened, citing the war in Iraq, Hurricane Katrina, a savings rate that is practically zero, and spiraling gas prices.

An investment strategist at Prudential Securities, Edward Keon, says serious people are raising the question of whether America is on the brink of a recession. He felt compelled to address the issue to the firm’s clients in a special commentary. His best guess, he says, is that the country is not in recession, though he notes growth will almost surely slow in the third and fourth quarters, compared to pre-Katrina expectations. He observes, though, that no one yet knows whether a recession is in the cards, and economists and strategists tend not to realize a recession is imminent until it is well under way.

Why no recession? For starters, he refers to a research note he sent to clients about three years ago. In that note, subtitled, “Shopping is the great American pastime,” he looked at consumer spending as a function of the change in confidence and the change in incomes. He found in 50 of the 55 quarters since 1967 when incomes were up and confidence was down – which resembles today’s situation – consumer spending rose. Of course, he says, no two historical periods are exactly alike, but based on history, he believes there’s a 90% chance consumer spending will continue to climb despite the recent plunge in consumer confidence.

He acknowledges, of course, that high energy prices will extract a toll. But he believes that, with federal help and in some cases proceeds from insurance, even those hit by the hurricanes will likely increase spending to rebuild their lives over the next year or two. Another reason he doubts a recession will occur is that he believes homes will still be the consumer’s ATM. In other words, Americans will go on tapping home equity to fill up their gas tanks. If you’re about to say that’s a terrible thing, Mr. Keon argues it’s important to consider a number of relevant facts, based on data from the Fed’s flow of funds for the second quarter. Chief among them:

* Net worth of the country’s household sector hit a record in the second quarter – just shy of $50 million.

* Owners’ equity in real estate (net of debt) was just under $10.5 trillion, also a record, and up more than $3 trillion since 2001.

* Although mortgage debt also rose sharply to a record of just below $8 trillion, up 65% since 2000, the percentage of the value of their homes that individuals actually owned rose slightly in the second quarter to 56.8%, the highest level since 57.7% in 2001.

* Americans still have $10 trillion of equity in their homes, which is about equal to annual GDP.

* There is plenty of room, even if home appreciation slows down, to make up for the additional cost of energy through home equity.

dandordan@aol.com