| Summary: | Nineteen eighty-four found America's economy finally showing signs of recovery after a severe recession, with unemployment, inflation and interest rates all down. The growing trade deficit, however, remained a serious threat to the economy. In 1983 imports into the United States had grown explosively, almost doubling from the previous year. This increase was due in part to a natural rise in demand associated with the United States becoming one of the first nations to emerge from the recession, but it also was due to the strength of the U.S. dollar. Although good for American tourists and buyers of imports, the strong dollar also meant major problems for U.S. companies with foreign competition. The combined effect of relatively high interest rates and political stability in the U.S. had driven the dollar to dangerously high levels, in effect giving a subsidy to imported goods and placing a tariff on American exports. Faced with this competitive disadvantage, a number of American firms began to move overseas, taking American jobs with them. While many economists attributed the strength of the dollar to interest rates and the safe haven effect, American industries clamed the root of the problem was something even more basic: imbalances in the exchange rate system itself. In this episode, Deputy Secretary of the Treasury R.T. McNamar and A. Nicolas Filippello of the Monsanto Company discuss the causes of the dollar's strength, and address the question, is reform of the exchange rate system needed? Examines the factors causing a strong U.S. dollar and the effects its strength is having on the American economy.
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