(5 of 5)
The Administration must also put together an anti-inflation program that consists of more than constant disavowals of wage-price controls. What that program should be is a legitimate subject for urgent national debate; the very fact of a debate would reassure foreigners that the U.S. is not content just to hope that inflation will go away. Further, Carter might appoint a task force to study ways of increasing U.S. exports, and thus shaving the trade deficit, without trusting to a sinking dollar to do the job. Another useful step would be to ditch the provision of Carter's tax "reform" plan that calls in effect for higher levies on export profits.
Finally, the U.S. should announce, and carry out, a program of aggressively buying up dollars, borrowing all the foreign currency it can from central banks to make the purchases. Such intervention alone would not shore up the dollar for long; it would succeed only if backstopped by effective energy and anti-inflation policies. But it probably is essential to break the psychology of fear that has gripped exchange markets.
Restoring confidence in the dollar will be a long process, but it must be started. Washington's handling of its role as the world's central banker is a matter of both substance and style, and for too long the U.S. has paid only passing attention to how the rest of the world sees its actions from either perspective. The perils of the U.S.'s ignoring its responsibilities go beyond economic stability, vital as that is. Just as war is too important to be left to generals, international finance has become too essential to be entrusted to money traders. If the U.S. cannot develop effective policies to pursue for the health of the world economy, or its own self-interest, can it be trusted as the leader of a Western military or political alliance? Fortunately, no one is yet asking that fundamental question, and Washington had better make sure it does not come up. Today, as always, the American dollar remains the worldwide symbol of the U.S. itself; if the currency is weak and friendless, the nation eventually will be too. — Christopher Byron