PAUL VOLCKER'S nomination to be head of the Federal Reserve Board signals a welcome change in the Carter administration' view of economic necessity. It constitutes recognition of the overriding importance, in this country's monetary affairs, of the international value of the dollar. The decline of the dollar abroad is not only the result of past inflation in this country. It is also an increasingly serious cause of future inflation. Mr Volcker is a specialist in the operation of the world's money markets and, for the extremely demanding job of currency management ahead of the Fed, there is no one in the country of higher standing than he.
His predecessor, G. William Miller, was chosen early last year at a time when President Carter defined the Fed's main responsibilities as the support of continued growth of the domestic economy. Mr. Miller's back-ground lay in manufacturing industry, and when he tried to encourage industry to invest and expand - by speaking, for example, of his hopes for an early decline in interest rates - he shook the financial institutions that set the dollar's exchange rates. They thought that he was hinting at a pre-election surge of easy money ind the manner of 1972. But whatever may have been maladroit in President Carter's reorganization of his administration this month, the reassignment of Mr. Miller and the recruiting of Mr. Volcker work out well. The administration will retain Mr. Miller's considerable abilities and experience in a job, as secretary of treasury, to which they are better suited. At the Fed, Mr. Volcker's reputation is accepted by the financial traders as a guarantee that there won't be any politically inspired games with the money supply.
Even the greatest of administrative skill and the best of technial management cannot, alone, stabilize the dollar. Mr. Carter rightly observed in his press conference Wednesday night that the value of the country's currency is set, inevitably, by the strength and stability of the national economy. But appearances are important in the highly volatile world of the currency speculators, and the arrival of a well-known and highly respected figure like Mr. Volcker can only strengthen the authority, here and abroad, of the nation's central bank.
There is always an interesting degree of ambiguity between a president and the Federal Reserve Board. The Fed is neither part of the administration nor, as a practical matter, entirely separate from it. It suits every president's purpose to emphasize in principle the total independence of the Fed. And yet nearly every president goes through moments of wanting urgently to bend it to his purpose. But Mr. Carter's chief purpose now, the campaign against inflation, benefits from the arrival of a notably - with accelerating inflation, declining output and the election campaign beginning - the Volcker appointment is both good policy and good politics.
THE OTHER APPOINTMENT the president announced on Wednesday - that of Hedley Donovian to be a senior White House adviser - does not have the obvious policy implications of Mr. Volcker's.And it is not yet entirely clear what kind of role Mr. Carter has in mind for his new adviser. In a way it doesn't matter. For Mr. Donovan, the newly retired editor-in-chief of Time Ic. and a current board member of The Star, is a man of such enormous professional talent and personal distinction that whatever he does for the Carter presidency is bound to be a plus. We suppose that, to protect ourselves against some unforeseen misadventure, it would be wise to take out a little qualifying insurance here - a few "unlesses" and a couple of "provided thats." But we won't: Hedley Donovan's addition to the White House staff and to the range of voices Mr. Carter will regularly hear is a good thing - period.