For the past few years, governments, executives and ordinary citizens have been disturbed -- with good reason -- by the volatility, and therefore the unpredictability, of exchange-rate gyrations. It makes little sense when, in a relatively short span of time, the dollar is worth six French francs, soars in value to more than 10, then plunges to the present rate of seven francs.
A year ago, the dollar was worth 250 yen, but only about 166 this week -- a revaluation of the yen by almost 50 percent.
Or take the roller-coaster ride of the British pound, which dropped like a stone from $1.38 in the spring of 1984 to a low of $1.05 in February of 1985. Now it's back up to $1.50.
This erratic behavior has stirred the demand for greater "stability" -- in some minds, a euphemism for a return to semi-fixed-rate relationships.
Critics of fluctuating exchange rates mistakenly blame the course of events on the flexibility of the system, rather than on underlying errors in economic policy made by the United States, Japan, Germany and other major powers.
One must be on guard against the possibility that politicians seeking stability are really looking for a quick fix.
Central bankers are especially sensitive to this problem, knowing that finance ministers around the world, usually unable or unwilling to correct imbalances by changes in fiscal policy, are likely to put the pressure on them to influence exchange rates by changing monetary policy.
New York Federal Reserve Bank President Gerald Corrigan, a friend and protege of Federal Reserve Board Chairman Paul A. Volcker, put it this way in a recent interview in Boston:
"I'm not ruling out the possibility that there may be a better mousetrap, but I think that there's no black box that's going to provide a nice, neat, orderly world without having to work at it."
For the United States, as Corrigan sees it, the critical underlying question remains: Will the United States be able to cut its federal budget deficit from 5 percent of gross national product to 2.5 percent by 1988 -- or from about $200 billion to $100 billion a year?
"That creates breathing room, not just from a domestic point of view, but room whereby you materially reduce this dependency on foreign savings" to finance the deficit, Corrigan said.
That would then ease all the related burdens -- the trade deficit, the current-account deficit, America's new "debtor nation" status, and distorted exchange rates, he feels.
Corrigan, at 44, is in a strategic position to help shape monetary policy. As president of the New York bank, he is vice chairman of the powerful Federal Open Market Committee.
"He doesn't look for headlines, but he's a strong personality, hard-working and extremely bright," says a friend. "When Gerry speaks, he's influential among his fellow presidents and among board members."
His warning about the "black box" was triggered by the groundswell for a system of "target zones" to limit the changes in exchange rates to an agreed-upon range.
The zones could either be explicit, as suggested by the French government and some academic authorities, or implicit, as hinted in the agreement for surveillance of economic policy contained in the Tokyo economic-summit communique.
Corrigan is a strong supporter of Treasury Secretary James A. Baker III's initiative in this area and on the debt crisis, but warns against grandiose expectations.
What he and other central bankers fear most is that the major nations are beginning to count on monetary policy more than they should.
A European central bank colleague of Corrigan's, while also welcoming Baker's efforts for better policy coordination, told me, "The danger is that if some major exchange rate moves out of line, and it can't be corrected by intervention in the exchange markets, then policy changes would be called for.
"Then, the burden falls on us, because fiscal policy isn't easy to change, especially in the United States. That's dangerous. Imagine what would have happened if we had this coordination system, and monetary policy had been called on to correct the overvalued dollar."
The net result might then have been high inflation in the United States, or a recession in Europe or Japan -- or maybe both.
In the end, what is likely to happen is that the major nations will publicly pledge greater cooperation, and privately agree on secret target zones. It would be difficult to announce the actual targets, because once they become public, speculators would test the limits at either end.
The nations involved would either have to defend the zones, which could be costly, or admit defeat.
West German Central Bank President Karl Otto Poehl has talked of a system vaguely "somewhere in between" formal targets zones and secret numbers.
Presumably, the Plaza Agreement among the Group of 5 nations, leading to massive intervention for a while, was just such a mysterious hybrid. That deal worked when the underlying economic conditions were helping it along, but finally petered out.
Corrigan has the right idea: Coordination is great, but for it to have a chance of producing the desired stability of exchange rates, America's budget deficit will have to be reduced, while the Germans and Japanese undertake a real economic expansion.