We’ve come a long way since last year. Twelve months ago, the government was pumping $45 billion into Bank of America (NYSE:BAC). And BAC wasn’t alone; JPMorgan Chase (NYSE:JPM), Goldman Sachs (NYSE:GS), and Morgan Stanley (NYSE:MS) also found themselves taking taxpayer money. But just this week, we learned that Bank of America is paying back the money it took, and the others already have. In addition, the Treasury is auctioning off its warrants in JPMorgan.

The economy finally grew in the third quarter, Cisco's (NASDAQ:CSCO) CEO has proclaimed the recession over, and Ford (NYSE:F) could be in the midst of a turnaround story, buoying hopes for the auto industry as a whole.

Despite all this good news, though, not all is well in America. Our budget deficit is ballooning, threatening the dollar with depreciation, while gold creeps higher. China is still highly dependent on the U.S., and continues to call for the dollar to appreciate.

Bob Pozen, chairman of MFS Investment Management and author of the book Too Big to Save? How to Fix the U.S. Financial System, stopped by Fool HQ recently to talk about some of these hot-button issues facing our economy and markets. He chatted with us about the sustainability of the market rally, rebalancing the global economy, the dollar, and gold. Here are some highlights from our conversation.

Can we count on this rally?
Equity markets have soared in recent months, thanks to near-zero interest rates and the stimulus money flowing through the system. But Pozen says there will come a transition point -- probably the middle or the end of next year -- when the government stimulus will wear off and the artificial supports for the capital markets will be drawn back.

At that point, Pozen says he is going to look to see if the private sector can stand on its own two feet. “[I want] to see if we’re going to have enough sustainability for earnings in the private sector,” he said. “[Specifically,] exports especially for U.S. companies [such] that we can really sustain the stock market rally without these very helpful supports. Interest rates [will] go back to normal, and we don’t get much government stimulus. So I’m looking for that transitional period to see how we can navigate that.”

We are the world
Pozen says we need to rectify the imbalance in the global economy. Specifically, he says the Chinese need to spend more and U.S. consumers need to save more. Pozen argues the reason China has a high personal savings rate is because it’s a rational response by the Chinese citizen to the country’s weak health-care and retirement system.

“You could say [that since] it’s a communist country, they should have a very strong system, but they don’t,” Pozen says. “Therefore, if you know you have a medical emergency, you’re going to have to pay out of pocket. If you know there’s no social security system, which is true for most of China, then it’s very rational to save. If we want to change that dynamic in China -- and we do -- China needs to deal with those two issues.”

As for the U.S., our personal savings rate has risen; however, Pozen says our budget spending has outrun our personal savings. He says if we’re going to net-net -- get our savings up as a country -- we’re going to have to control our budget deficits. “It doesn’t help us to have 6% personal savings if we have a 10% budget deficit,” said Pozen. “It’s a big challenge for any politician, especially at this point in our history when we have Social Security and Medicare.”

The dollar and China
The dollar has dropped like a rock this year, as investors have begun to regain their risk appetite. Since consumer demand is down, the weak dollar helps spur our exports, which in theory helps the U.S. economy. However, as Pozen points out, we haven’t seen a huge outpouring of exports. “So if we view this as a short-term phenomenon, I think a weak dollar is helping our exports,” he says. “But [the weak dollar has] become a major problem for the world, because China has chosen to tie itself to the U.S. dollar. Therefore, its currency is weakening even more. So it’s not really a U.S. problem -- it’s the fact that China has chosen to tie itself.”

But what about the fate of the U.S. dollar? Will it remain weak for some time to come? Pozen’s long-term prognosis for the dollar is positive relative to other countries’ currencies based on what he deems are the three major drivers of currencies: productivity, demography, and economy growth. “The key question is, are we going to inflate away our debt, or are we going to control our budget deficits? If we look at the fundamental factors -- productivity, demography, economy growth -- I think the U.S. is in pretty good shape,” Pozen says. “But our budget deficit is getting out of control, and we really need to come to grips with that. If we can do that, then I think we’ll be OK.”

No doubt gold is a safe haven from the uncertainty that surrounds the economy, the dollar, and the political situation. The question is, as prices have crossed $1,200 an ounce, are we seeing a run-up in gold equivalent to the one we saw in oil last year? Is speculation occurring? According to Pozen, gold is different. He says oil was being priced for its functional use, whereas gold is being priced because of fear.

Even so, Pozen says there may very well be a bubble in gold, “but it’s a different sort of bubble. It’s a safe-haven bubble. Prices will go down when it bursts, but I don’t think it’s likely to take down the whole world.”

For Related Foolishness:

Fool contributor Jennifer Schonberger owns shares of Bank of America, but does not own shares of any of the other companies mentioned in this article. The Motley Fool has a disclosure policy.