COUNTRIES SOMETIMES confuse currency exchange rate with flags, anthems and all the other symbols of national prestige. The U.S. dollar in recent months had been slipping slowly downward in relation to several other currencies, mostly notably West Germany's and Japan's. The question is whether that's bad - whether it's a sign, you might say, of national decline. The short answer is no. But large changes seem to be overtaking the world's economy, and the shifting exchange rates are a response to them.
For one thing, the United States is now running a huge deficit in its foreign trade. It will be about $30 billion this year, and it may be even a bit bigger next year. As the Secretary of the Treasury, W. Michael Blumenthal, observed a few days ago, a trade deficit on that scale cannot be sustained indefinitely. In contrast to this deficit, both West Germany and Japan are running large trade surpluses. That tends to push the dollar down against the Deutschemark and the yen.
As the Treasury has been arguing for some time, there are two reasons for that deficit. One is the low growth in Western Europe and Japan, which holds down their demand for U.S. exports. The other reason is, of course, American oil imports, which will run to $45 billion this year. But neither of those conditions is likely to change quickly.
Mr. Blumemthal, speaking recently in New York, went on to talk about the structural changes overtaking the world's economy. Growth rates "may well be significantly lower in the last quarter of the twentieth century than they were during the third quarter," he suggested. The pattern of growth economy may also be moving geographically. The American economy, having expand more slowly than those in most other industrial countries since World War II, is now showing more resilience than the rest.
If these highly tentative observations turn out to be correct, the present currency movements are hardly more than the beginning of a long and difficult process of adjustment. The current rise of the Deuschemark and the yen have had, so far, very little effect on the internal American economy. While they have been going up, the Canadian dollar has been going down in relation to the U.S. dollar, and this country does more trade with Canada than with West Germany and Japan combined.
As time passes, it is quite possible that the dollar will decline further. The exchange rate, remember, are now being set by the market, in the daily buying and selling of currencies by the international banks and traders. It would be quite wrong for the Treasury to tamper with that process. Mr. Blumenthals has repeatedly sworn that he will not intervene to depress tha dollar, to make American exports artificially - and illicitly - cheap abroad. It would be equal unwise for him to attempt to prop the dollar up artificially if it slides.
Some of the presures on the dollar are beyond American control - for example, the economic policies of other countries and their trade surpluses. But there is one massive pressure that only Americans can deal with, and that is the level of oil consumption in this country. As long as this country spends steadily more for imported oil without increasing its exports to pay the bill, the result is likely to show up in the value of the dollar. That's one more reason to take President Carter seriously when he talks about the urgent necessity to hold down the rate at which this country uses oil.