The Dollar: How To Fight Back
Christopher Farrell misses the point in "The dollar doesn't deserve this thumping" (Cover Story, Mar. 20). The first problem for the dollar is the decade-long reversal of the U.S. from world's largest creditor to the world's largest debtor. Secondly, the policy of benign neglect toward the dollar has made it less and less attractive for foreign investors to continue financing the U.S.
The policy prescription is clear. The current-account deficit needs to be reduced. There needs to be further federal budget-deficit reduction. And the tax system should encourage higher savings and less consumption. The dangers of downplaying a weak dollar will be an even weaker dollar, further erosion of the dollar's reserve-currency status, and, ultimately, higher interest rates and lower economic activity in the U.S.
Chase Manhattan Bank