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The Carter Administration has not even begun. Instead, its words and actions so far have merely accelerated the erosion of confidence. In the early months of the Administration, Treasury Secretary W. Michael Blumenthal actually tried to talk the then overvalued dollar down, in the hope that a decline in its value would help U.S. exports by making them cheaper. He reaped a phenomenal harvest of bitterness among U.S. allies, who feared damage to their own economies as a result. In West Germany, for example, current mordant humor invokes the World War II Morgenthau Plan to have occupying armies dismantle German industry and turn the nation into an agrarian country; that plan, Germans say, has been reborn as the Blumenthal Plan to accomplish the same result by monetary manipulation.
Lately Washington has begun expressing concern, but most of the Administration's utterances picture the dollar drama as a self-correcting problem. Earlier this month, for example, President Carter patronizingly remarked at a press conference that the slide would stop once money traders realized that the dollar is now cheap enough to make investment in the U.S. attractive.
What he failed to point out then—and in a similar statement at last week's press conference—is that if all those billions in greenbacks now tucked away in foreign hands began circulating through the U.S. economy, inflation could shoot through the roof.
Administration officials also have sent out weak and wavering signals on how far the U.S. is prepared to go in buying unwanted dollars to prop up their price. Washington grudgingly announced in January that it would begin some support buying, touching off an explosive but momentary dollar rally. However, the U.S. has stressed that it intends only to prevent "disorderly" trading, implying to currency dealers that it is still ready to let the dollar sink provided the decline is gradual. Last week the New York Federal Reserve Bank announced that from November through January the U.S. Treasury had spent $1.5 billion in foreign currency on purchases designed to bolster the dollar—a record sum, but too little to steady the dollar or keep markets orderly. Small wonder that foreigners are confused. Says West Germany's influential Frankfurter Allgemeine Zeitung: "What the Americans do with—or let happen to—the dollar is incomprehensible to Europeans. It is, of course, the dollar of the Americans. But it is also the dollar of all of us. People feel left in the lurch by America, the great and admired leading power."