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DEVALUING DOLLAR WON’T HELP U.S.

SHARE DEVALUING DOLLAR WON’T HELP U.S.

It's not easy to spend as much money as the federal government does each year. Sometimes you really have to work at being a wastrel. Take right now, when the alleged guardians of the public purse are merrily spending vast sums of the taxpayers' money . . . in order to make the taxpayers' money worth less.

Yes, you read that right. First they take the money from you in taxes. Then they spend it in a deliberate effort to lower the buying power of what you have left.Can't be so, even in Washington, you say? Alas, it is. For that is the precisely the effect of the Treasury Department's current loony effort to reduce the international worth of the American dollar.

Here's how it works: The government takes huge quantities of your presumably hard-earned dollars and uses them to buy foreign currencies - not because it has a sudden craving to own more pounds, francs, marks or yen but because it is trying with all its might to erode the value of its own currency.

Now, to the mere civilian, living in the real world that lies beyond the frontiers of the District of Columbia, eroding the value of the dollar might seem like an undesirable thing. It is, after all, a good handy definition of inflation - which laid this economy low in the 1970s and could do exactly the same thing in the 1990s.

Why, then, would our government want to commit what looks very much like financial hara-kiri? The answer is that public officials who habitually do dumb things start to believe their own press releases.

And what the press releases say is that a cheaper dollar is needed to increase U.S. exports and avoid recession. It sounds real good when you say it fast. But if you slow down and think, you're in trouble.

Fact is, U.S. exports have been booming as more and more companies have finally got their acts together. Fact is, Japanese exports - which theoretically should have been decimated by the rise in the value of the yen - have held up remarkably well. Fact is, maybe there's something a heck of a lot more important than the passing value of the currencies that's in operation here.

Government leaders can sometimes be made to talk sense when you turn off the microphones. And one of the highest economic officials in Washington confessed to me privately the other day that currency values - and, for that matter, trade restrictions - had very little to do with Japan's incredible success on the international trade scene. "They've been beating us by making better products," he acknowledged.

Yet the Washington spendthrifts still insist we'd be much better off if only the dollar were cheaper. American products would look more attractive to those who buy with foreign currencies - and American consumers would find it more difficult to afford foreign goods.

It's a great theory, as long as your memory span is as lightning-short as the average politician's. If it's any longer, however, you might recall that the strength of a nation's currency is more likely to be related directly to the strength of its economy. Countries like Japan (and, historically, the U.S.) have vividly demonstrated this. On the other hand, if driving down your currency were truly the key to driving up your economy, we would all now be marveling at the prosperity of Italy and India.

The dollar remains healthy because America remains healthy - and a haven of stability in a turbulent world. If the government insists on engaging in an international conspiracy to devalue the greenback, a more effective way, even short-term, would be to combine interest rate increases abroad with interest rate cuts at home.

In the long run, however, those lower American interest rates would again help strengthen the U.S. economy, and the hurt-the-dollar crowd would have a brand-new problem on its hands. Poor fellows; they don't know when to sit still and do nothing.