NEW YORK (CNN/Money) - Even as the Mortgage Bankers Association reported Wednesday that mortgage refinancing hit a new record level last week, worries over what might happen when the refi boom ends were surfacing in the market.

Income has slowed, jobs have become scarcer and stock portfolios have done dramatic interpretations of the myth of Icarus, but money freed up by refinancing mortgages has allowed Americans to keep on buying SUVs and going to the mall. With business spending still on the rocks, the consumer has been the only thing propping up the U.S. economy. If you take away the refi boom, fretted Pimco's Bill Gross in his market outlook note for October, America could hit the skids.

It's not as splashy as the call for the Dow to fall to 5,000 he made last month, but the latest missive from Gross (who oversees more than $250 billion in assets) is maybe more troubling. While many observers -- even bearish ones -- were dismissive of Dow 5,000 ("Gross is a bond guy; of course he hates stocks), when it comes to refis people think he's on to something.

"I agree with Gross," said Northern Trust chief U.S. economist Paul Kasriel. "It's been refinancing of mortgages -- basically eating into one's seed corn -- that has been sustaining consumer spending. When that peters out, it's not clear what's going to kick in."

That the refi boom can't sustain itself forever is a certainty. Thirty-year mortgage rates have come down to record lows -- they averaged 5.84 percent last week -- but since Alan Greenspan doesn't have much room to cut rates anymore, they can't fall much further.

And even if the Fed cut its target rate to zero from the current 1.75 percent, according to Gross, mortgage rates simply can't get much lower than 5 percent because mortgage buyers (e.g. Pimco) would consider that incredibly risky.

The juice from refinancing comes because householders end up paying lower rates on their mortgages, giving them more discretionary spending or, in the case of a cashout, money up front. Once rates can't go any lower, no more refi boom.

"In the long run, you can't build a recovery on refi activity," said Morgan Stanley economist Bill Sullivan.

What needs to happen is for business spending to pick up before the refinancing boom goes bust. But if businesses are still acting cautious, look out.

"If the American refinancing boom ends before a new investment boom begins, we are in a world of hurt," he wrote. "Consumption withers, investment rejuvenation will not have begun, and the U.S. global economic locomotive, such as it is, will grind to a halt. How long do we have? Twelve months at the most, even if Greenspan drives rates toward zero."

Although Gross wrote that this isn't the most likely scenario, he worries that the chances of it occurring are getting higher. And he worries that it's the sort of environment where the economy would not just dip again into recession, but court deflation.

That would be a disaster for the debt-ridden U.S. economy. As prices fall, businesses and workers see little, if any, earnings growth. But they still need to honor the loans they committed to before deflation kicked in. To do that, they need to cut back on spending, which only drives prices down further.

"Debt and lack of pricing power is a dangerous combination," wrote Gross. "Gasoline and a match fall into the same category."

In worrying about deflation, too, Gross is hardly alone. Many market participants are urging the Fed to act.

"Deflation is not a risk the Fed should take," said Banc One Capital Markets head of research Dana Johnson. "If you ask me, should they ease, yes they should."