The stakes are high. Indications suggest that the United Statesand IMF prefer to address financial imbalances by encouragingexchange rate adjustments that will have the effect of inducing orextending the slow-growth trap in major countries. Most likely, theoutcome would fall short of the deflationary depression of theearly 1930s or the stagflation of the 1970s, and the situationmight not be perceived as a crisis, especially not to Americanvoters. But it would bring large-scale economic underperformanceand represent serious policy failure.

There are grounds for skepticism about how much the BushAdministration might accomplish or wish to accomplish. First is theadministration's obvious lack of interest in negotiations withallies and international organizations over a wide range of issues.Second is the respect still accorded to flexible exchange ratemechanisms as reflecting economic principle. Third is the tendencyof those in the American "heartland", well represented in the BushAdministration, to embrace "soft" money, which, in an internationalcontext, means a willingness to let the dollar sink. This tendencyhas deep historical roots, as many heartland farms and businesseswere often in debt to creditors in East Coast cities. But thebenefits from a different approach to managing international moneyshould be clear.