The Carter administration yesterday applied some shock treatment to the financial market - but only after the markets had administered a week of shock treatment to President Carter and his new anti-inflation program.
The question that should be asked is whether the drastic measures announced yesterday to help the dollar would have been necessary if the president had been willing to address the legitimate anti-inflation concerns of dollar holders abroad a week earlier instead of ignoring them entirely in his "frank talk" to the nation.
Although the president still must be scratching his head wondering what he did wrong in his low-key appeal to fight inflation he is in effect slipped on an invisible bannana peel and generated an international crisis of confidence in his administration's ability to handle the economic problems facing the country.
The president's sins were more in what he failed to say than in what he did say, according to leading Wall Street observers.
The financial markets wanted to hear that the Carter administration finally recognized what role undisciplined government monetary and fiscal policies had played in fueling the current finlation and was prepared to so something about these problems.
Instead, the president made a token commitment to cut the federal budget in fiscal 1980 - which does not even begin until a year from now - to $30 billion. And the $30 billion level is what most analysts would put the deficit at next year even in the absence of concerted budget-cutting actions.
So that made no impact.
And he made no mention at all of the surgin money supply and the Federal Reserves role in monetary policy, but merely reiterated populist concerns about high interest rates.
But the rate at which the government is printing money is one of the things that worries foreigners holding dollars in most, because they see this as direct evidence that their dollars could only be worth less in the months and years to come.
"The president somehow thought he was taking a firm position, but what the markets were saying is he did not," said Alan Greenspan, head of Townsend-Greenspan and the former chairman of the council of Economic Advisers in the Ford administration. "The markets felt he was merely moving along the same paths of guidelines and then mandatory controls."
"The market prior to the speech had at least a reasonable expectation that he might do something drastic or substantial," said Greenspan. "I don't mean mandatory controls, but a cut in the federal deficits, not to $30 billion, but to $15 billion, or some major program of vetoing government expenditures."
"There was no doubt the speech kicked off the market throes," said one leading New York banker. "There was a final recognition that the U.S. authorities did not perceive the problems in the way the people outside of the United States do. The people in Washington feel they have a wage-price problem and not a money supply fiscal problem.
"The failure to perceive the real character of the present situation and the extent to which monetary and fiscal problems are viewed as paramount overseas is what caused this full-fledged dollar crisis," this banker added.
A. Gary Shilling, an economist who heads his own consulting firm, believes, "the president had one shot and he blew it last week."
"The administration was therefore forced to react to the way the stock market - which is the best barometer of domestic sentiment - and the dollar - which is the best barometer of international sentiment - responded," he noted.
Shilling said yesterday's steps - under duress - "deal with the mechanics but not with the substance of the problems. They did something yesterday only because they were forced to. And the question is really whether they are going to continue to react or whether they are finally going to anticipate the problems."
The consensus seems to be that yesterday's moves will only prove to be a temporary help for the dollar unless they are followed with convincing measures to deal with what are seen as the underlying dynamics of the country's inflation.