"It's a sort of Alice in Wonderland situation," said a Frankfurt banker, "where down is up and up is now down, only we're not talking about a tea party."
The subject, rather, is money. The international system through which it flows has been virtually turned upside down in the last few months by the sudden rise of the dollar on foreign exchange markets and the related-cascade of the traditional hard currencies -- West Germany's mark, Switzerland's franc and Japan's yen.
For Americans living abroad -- and getting paid in dollars -- the return of the mightier dollar is certainly worth toasting with the extra schnapps it will buy. And it is a boost that affects more than just the pocketbook.
"After Iran and Afghanistan," remarked one American stationed in Bonn, "it's nice to have something going our way."
For those planning a trip to Europe, the greenback's comebackk is also good news, since it means European goods and hotels will be relatively cheaper -- assuming prices here are not hiked to make up the difference. European and Japanese exporting firms, too, will gain a competitive edge in U.S. markets as stronger dollars make everything from Swiss watches to Japanese radios relatively less expensive.
That is, if the recent switch in world currency roles lasts -- which happens to be something Europe's and Japan's governments are banking against. For them the revival of the dollar means economic strains at home and political tensions internationally at an inopportune time.
True, for months Europe and Japan chided U.S. officials for not doing enough to curb America's inflation and bolster the dollar. They said they wanted a stronger dollar. They said they did not want their own currencies to become substitutes in central bank reserve holdings. And while the Europeans did join forces to create their own monetary system as a shield against dollar gyrations, they bought dollars by the billions to brake the appreciation of their currencies and help support the U.S. currency.
Now European and Japanese monetary authorities are peddling just as fast the other way, unloading dollars by the vaultful to slow the dollar's climb and cushion the slide of their own currencies.
Dollar sales by the West Germans, Swiss and Japanese in the past month have totalled at least $6 to $7 billion -- one of the most intensive bouts of official intervention since exchange rates started to float in 1973.
The reason for such strong counter-action is that a strong dollar imposes an inflationary hardship on Europe and Japan, which import most of their oil and pay dollars for it. For instance, because of the dollar jump of about 10 percent against the German mark in the past month, a barrel of imported oil now costs West Germany $2.50 more than it did in February.
This in itself is hardly enough to send inflation in West Germany (now officially under 6 percent) soaring anywhere near the level it is in the United States. Bonn's traditional anti-inflation formula of disciplined money management, restrained consumer credit and cooperative labor-management relations is likely to hold.
But the added inflationary pressure brought on by a costlier dollar is sure to make management of Europe's and Japan's more finely tuned economies more difficult.
"Six months ago we were interested in a strong dollar. Today we are not," wrote Rudolf Hertl, financial correspondent for the German weekly Die Zeit.
The official view here is that, while the dollar rise is likely to continue for a time, it is only a temporary, monetary aberration caused principally by a ruse of foreign funds into dollar valued assets now paying exceptionally high interest rates.
"The dollar is now unduly strong," said Bonn's state finance secretary, Manfred Lahnstein. "It's rise is due to high interest rates, not to superior economic performance [in the United States]."
But the deeper concern in international monetary circles is that an international interest rate war could start which would choke off spending and investment so sharply as to send the industrialized world into a rapid recessionary spin.
The first shots have already been fired.
Following recent U.S. interest rate rises, Europe and Japan have frantically raised their own. They have gone further, sweeping away former barriers to foreigners holding their currencies.
After years of trying to dissuade other countries from keeping marks, francs, and yen in reserve, Germany, Switzerland and Japan have approved the issuance of short-term bonds denominated in their currencies which are intended to do just that.
How soon the new policies may weaken the dollar depends on how far and fast foreign central bankers will allow their own interest rates to rise.
Still U.S. interest rates generally remain far higher than those of West Germany, making them much more alluring to investors. The West German business borrowing rate, for instance, stands at around 10 percent, just about half the U.S. prime rate.
One effect of the attempt to foster the reserve use of the German mark, Swiss franc and Japanese yen, can only be to push the world further along the path toward a multiple currency reserve system, in which the dollar shares its international burden more equitably with other leading currencies.