THE ANNUAL CRISIS of the dollar seems to have arrived three weeks earlier than it did last year. The causes are similar to those of the dollar's troubles last October. Inflation here is high, and the traders fear that it may go higher. Inflation in Germany is low, relatively, and investors are trying to take advantage of it. But two things have happened over the past year that make the management of the dollar more difficult this time. The worldwide flight from money has picked up greater momentum, driving up the price of gold. The latest surge in oil prices has simultaneously aggravated all the other strains in the worldwide balance.
All of those things are the causes and effects of each other. Higher oil prices send more dollars, by the billions, to the Middle East, and much of the frantic buying of gold seems to be coming from Middle Eastern oil-exporting countries. Higher oil prices make inflation worse throughout the industrial world. Germany has responded by raising interest rates. That gives Americans a choice between further increasing their own interest rates or watching their dollar drop against the deutschemark. Currently they are gloomily doing both.
In response to last October's dollar crisis, the United States properly began with a renewed attempt to get inflation under control. President Carter announced a program of voluntary guidelines. That's the dilemma: guidelines are useful, but they wear out rapidly and leave a residue of cynicism.
The Carter guidelines of last October might have lasted longer if inflation had turned downward, as the administration expected. But it had miscalculated, stimulating the economy too strongly. The Teamsters settlement in the spring breached the guidelines. The United Auto Workers settlement last month destroyed them. Now the president has revived them in a form that is a little looser and a little different. But the idea is the same -- to try to keep the lid on, to persuade people that they have a common interest in restraint, to remind the violators that they are hurting their neighbors. The president has brought the labor unions directly into the process this time, a tactic not only necessary but also desirable for an election year. He has recruited John T. Dunlop to preside over the renewed effort, suggesting a return to private negotiation and intricate settlements shrewdly designed to avoid inflammatory precedents. How will it work?It will buy a little time. The real question is how that time is to be used.
Meanwhile, an international effort will stabilize the dollar again, temporarily. Americans will again be left to reflect that the currency, the inflation rate and the price of oil will remain essentially unmanageable until the country finds a way to manage all three together.