WASHINGTON – It’s hard not to feel some sympathy for departing Treasury Secretary John Snow. He worked tirelessly for President George W. Bush, trudging all over the country to plug the administration’s policies. In 2005 Snow spoke at the Detroit Economic Club, the Omaha Chamber of Commerce and the Sony Technology Center in Mount Pleasant, Pa. For all his trouble, Snow earned only perfunctory public gratitude from the president and was subjected to repeated rumors that the White House was unhappy with his performance. Worse, he seemed to have had little effect on policy or the economy.

The same fate may befall Snow’s anointed successor, Henry “Hank” Paulson, head of the highly profitable investment banking firm Goldman Sachs. Of course, it’s not supposed to be this way. Paulson comes advertised as a Wall Street take-charge guy who will improve public economic confidence and reassert control over policy.

But how is that to happen? Unless he blunders badly, Paulson’s role as chief economic spokesman doesn’t matter much. Most Americans don’t know the name of the treasury secretary and don’t care. What they care about is $3-a-gallon gasoline and 6.5 percent mortgage rates.

It’s possible that Paulson will have more influence on policy than Snow. As economist Roger Kubarych of HVB America points out, there’s no shortage of challenges: trying to avert big bankruptcies (GM) in the auto industry; preventing disorderly shifts in global currency rates; curbing federal spending on retirement benefits; fixing the Pension Benefit Guaranty Corp., which insures defined-benefit pensions. The trouble is that Bush’s positions on most issues are already set. Even if they weren’t, many powerful interests – Congress, the United Auto Workers, China, AARP – may limit what Paulson can actually accomplish.

To excel as treasury secretary, Paulson needs something no one wants: an economic crisis that enables him to act as hero, much as former Treasury Secretary Robert Rubin (also once head of Goldman Sachs) and former Federal Reserve Chairman Alan Greenspan did during the 1997-98 Asian financial crisis. Any new upset would spotlight Paulson (assuming the Senate confirms him) along with new Fed Chairman Ben Bernanke. What are the odds of a crisis? Not great – but not negligible, either. After three years of strong performance (5.3 million new jobs, 4.6 percent unemployment), the U.S. economy could be at a tipping point. Two problems loom: one traditional, one not.

The traditional problem is inflation. It’s increasing, as it often does after a long business expansion. Strong demand allows companies to raise prices. Low unemployment puts upward pressure on wages. In the last 12 months, the consumer price index has increased 3.5 percent. It’s not just gasoline prices. So-called core inflation – all items minus food and energy prices – is 2.3 percent. By contrast, the CPI rose only 1.9 percent in 2003 and core inflation was only 1.5 percent.

All this creates a dilemma for the Fed. Since mid-2004, it has been raising short-term interest rates to stymie inflation by slowing the economy. That might be happening now. Housing construction and sales have weakened; consumer spending could follow. Should the Fed continue raising rates to ensure that inflation subsides? Or would that cause a sharp slowdown, even a recession?

The less traditional problem involves global financial markets – markets around the world for stocks, bonds and currencies. Since April, stock markets have declined. From their recent highs, the Dow is down 5.5 percent; the Nikkei (Tokyo), 12.4 percent; the Kospi (Seoul), 11.1 percent; and the Ibovespa (Sao Paulo), 13 percent. Although these declines are not huge, they all happened together. Meanwhile, interest rates on bonds have risen, and the dollar has dropped against the euro and yen.

It seems that national financial markets, once fairly compartmentalized, are increasingly interconnected and interdependent. Companies such as Goldman Sachs, mutual funds, pension funds and hedge funds (loosely regulated pools from small numbers of wealthy investors) can move money easily across borders and react to the same events.

The danger now is that these two developments will interact to create a chain reaction in financial markets that damages the world economy.

Investors worry that tighter credit in the United States – and Europe and Japan – will imperil expansion and expose speculative investment practices. Or the trigger could be huge trade imbalances (U.S. deficits, Asian surpluses), high oil prices, terrorism or protectionism against China, says economist Desmond Lachman of the American Enterprise Institute.

Just last week the European Central Bank warned that hedge funds posed a “major risk” to financial stability.

As treasury secretary, Paulson may be frustrated by longstanding problems that elude solution. Or he may grapple with a surprising crisis to prevent some greater calamity. With hindsight, people may conclude that Snow was fairly shrewd. He knew when to leave.