See my article "An End to Currency Manipulation" in the Far Eastern Economic Review. The first paragraph:

The U.S. dollar last week appeared mercifully to end its plunge. World markets cheered, and the immediate financial crisis in the U.S. abated. But this week the dollar is retesting all-time lows versus the euro and yen, and commodity prices, capital flows, and trade remain vulnerable to its movements. Inflation in dollar-linked China is rising fast, and an over-strong yen could thwart Japan's recent recovery after its painful 1990s deflation. In the U.S., currency swings are destabilizing the economy and fueling anti-trade populism. After a decade of wild instability, it's time to rethink global currency markets and monetary policies.

Economist Reuven Brenner today expertly reinforces our views on the dollar, trade, and financial markets as expressed in our "Dereliction of the Dollar" article.

Writes Brenner:

You cannot restore trust while signaling that no steps will be taken to prevent the further fall of the greenback. Capital, be it to shore up financial institutions, or buy up much-devalued U.S. assets -- in terms of some currencies, U.S. real estate has plunged by more than 40% -- will stay on the sidelines as long as the Federal Reserve and the government do not take action to fix monetary policy.

In a Financial Times op-ed the other day, Alan Greenspan says that a measure of stability will be restored when house prices stabilize, which may be accurate. But why would capital flow into real estate denominated in dollars that are still expected to plunge?

The view expressed on this page by former Federal Reserve Board member Robert McTeer -- that the Fed now must give priority to the liquidity crisis and neglect the dollar -- is inaccurate, too. The liquidity crisis and the stable dollar are related. The vast extension of credit since 2002 could have never happened if the Fed had sustained a stable value for the dollar. . . .

The issue isn't that "we will never have a perfect model of risk," as Mr. Greenspan appears to think. What we need is accountability, not perfection. With the proper anchor, central banks can sustain a stable value for their currency, and that is what they must be held accountable for. If they do that, even if financial institutions experiment with a wide range of innovations they cannot expand credit too much.

The weak-dollar crowd only thinks of tradeable goods on international markets, a market that plays out over months or years. They make no space in their models for constantly adjusting asset prices and the crucial real-time investment decisions that drive the economy. With a more stable dollar, for instance, Bear Stearns could easily have found the capital to cover its losses and sustain its operations. But weak-dollar uncertainty causes panic and chases investors away.

As the dollar slides yet again Friday afternoon to another all-time low versus the euro, at $1.57, and gold hovers around $1,000 per ounce, the panic continues in global markets and on Wall Street. Is this what the weak-dollar advocates had in mind?

At yesterday's U.S. Chamber of Commerce "Declining Dollar" event, economist David Malpass made the cogent case for a stable currency. Businesses and investors, he insisted, must have a predictable foundation and unit of account on which to base their important long-run decisions. But it was clear from the other participants that the level of misunderstanding about the dollar, the trade deficit, and the financial markets is almost as bad as ever. The demand-side worldview still dominates. Here, the trade deficit forces the dollar to decline and "adjust" to mercifully relieve "imbalances." In this view, currencies must shift so that trade among nations can "balance." Relatively cheaper and rising exports can then compensate for more expensive and falling consumption of imports. The trade deficit goes poof. Hooray!

Never mind the accuracy of this theory: As the dollar weakened these last half-dozen years, the trade deficit actually grew, mostly because of surging imports of weak-dollar high-cost petroleum.

But even if the trade-deficit-is-bad-and-can-be-relieved-by-a-weak-dollar theory were correct, what do we get for it? Usually a recession. The last two times the U.S. briefly "achieved" a trade surplus was through recession in both 1990-91 and 1981-82. Consumption and business investment -- and therefore imports -- all plunged during these bad times, so the trade deficit very temporarily vanished.

Ten days ago I was at a conference in Paris. It's a wonderful place, but I thought, Oh great, I pick the very week the dollar hits an all-time low versus the euro. Having begun around parity, or 1 to 1, in 1999, the euro fell to just $0.80 during the super-strong dollar days of the late '90s and early '00s. But in the ensuing years, the currencies completely reversed course. By my visit the euro had rocketed to $1.52, making an already extravagantly expensive city positively absurd. As I bought little trinkets and chocolates for my children, I felt like a real sucker. I was clearly traveling the wrong way. All of Europe right now is in New York City buying up cheap luxuries and savoring perfectly affordable meals at Le Cirque.

Today, the dollar fell further, to $1.55 vs. the euro. So it turns out I did not get the absolute very worst deal of all time. Awesome. I feel so much better.

But seriously. The dollar has reached crisis levels. Oil and gold are at all-time highs. The inflation alarms are blinking fast and bright. After a rebound yesterday following the Fed's creative, targeted and short-term liquidity injection, stocks and bonds are back in panic mode.

A key point: The weak dollar is subtracting -- or at least diverting -- much of the liquidity the Fed thinks it is adding. People and companies are taking money out of the U.S. They're trying to get out of dollars and into oil, gold, Treasuries, Europe, and China as quickly as possible. Foreign investors, who have every reason to believe the U.S. approves of the dollar fall, aren't buying dollar assets for fear their investments will evaporate. Another side point: With our China yuan policy of forced appreciation, it creates a free hot money carry-trade into yuan and out of dollars.

Tomorrow I'll participate in an event at the U.S. Chamber, where one of our favorite economists, David Malpass of Bear Stearns, will survey the dollar problem and the global economy and offer a relatively easy and free solution to the Administration: Demand a stronger dollar.

People would be amazed not only how fast the dollar would reverse course but also how quickly other markets would turn up as well.

With the dollar at crisis levels, as it exacerbates the subprime, credit, and inflation problems, I'm holding out hope this little event could finally jolt Washington to its senses and turn the currency, commodity, credit, and stock markets around.

The weak dollar is roiling not only the U.S. economy but world markets as well, as this good page-one summary in The Wall Street Journal makes clear.

What's also interesting is that finally -- finally -- even straight news articles are making the connection that I wrote about in August 2006. Namely, that monetary policy and the weak dollar are the key drivers of high commodity prices, including oil. At the time, only a few like-minded economist friends shared the view. But slowly it has become common wisdom. Here's the Journal:

The weak dollar has played a role in the latest surge in commodity prices. Yesterday, it held relatively steady, though it was languishing near an all-time low it hit last week against the euro. This year, it has weakened 4.9% against the European common currency and 8.7% against the Japanese yen.

When the dollar weakens, commodities priced in dollars effectively become cheaper for buyers holding other currencies, spurring demand. At the same time, the producers of these commodities have an incentive to boost prices, since they are getting paid in less-valuable dollars.

But high oil prices aren't the only destructive byproduct of an over-easy monetary policy. As I forewarned 20 months ago:

It is these periods of transition, where the value of the currency is changing fast, but before price changes filter through all commerce and contracts, when financial and political disruptions often take place.

And since, financial disruptions are what we got.

The stock market is back up today after its worst three-day run since the dismal year of 2002. Markets have been unstable and volatile as they sort out the implications of the real-estate correction, Big Bank write-downs, 100-dollar-oil, uncertainty at the Federal Reserve, populist protectionism on the campaign trail, and a possible return to 1970s style disco-nomics in Washington. Paul Krugman this morning tried to explain these events by endorsing Ben Bernanke's (and Alan Greenspan's) view that a world savings glut poured money into the U.S. and created the trade deficit.

The global origins of our current mess were actually laid out by none other than Ben Bernanke, in an influential speech he gave early in 2005, before he was named chairman of the Federal Reserve. Mr. Bernanke asked a good question: “Why is the United States, with the world’s largest economy, borrowing heavily on international capital markets — rather than lending, as would seem more natural?”

His answer was that the main explanation lay not here in America, but abroad. In particular, third world economies, which had been investor favorites for much of the 1990s, were shaken by a series of financial crises beginning in 1997. As a result, they abruptly switched from being destinations for capital to sources of capital, as their governments began accumulating huge precautionary hoards of overseas assets.

The result, said Mr. Bernanke, was a “global saving glut”: lots of money, all dressed up with nowhere to go.

As so many economists do, Krugman, Greenspan, and Bernanke ignore the obvious and central factor: the value of the U.S. dollar. Steve Forbes, with Occam's Razor in hand, far more cogently details the simple origins of today's global instability in real estate, energy, credit, and stocks.

The geopolitical fallout from the weak dollar is all around us: Terrorist Iran gets massive windfalls for its oil; ditto Venezuela under its wounded but still reigning lunatic, Hugo Chávez; Russia becomes more truculently anti-American with each uptick in the price of oil; so-called sovereign funds buy up U.S. corporate assets at fire-sale prices; China, which outsourced its monetary policy to the Fed in the mid-1990s when it tied the yuan to the greenback, now faces increasingly destabilizing inflation; and oil-lacking developing countries, many of them fledgling democracies, are being hit with potentially destabilizing economic squeezes.

The prices of oil and other commodities are surging primarily because of the weak dollar. Between mid-2003 and the beginning of 2008 oil has zoomed from $25 a barrel to almost $100. Real demand in oil didn't suddenly massively increase to justify a nearly fourfold rise in price. The best indicator of inflation is gold. In this same time period the yellow metal has zoomed from around $350 an ounce to more than $800 an ounce. More than $50 of the per-barrel price of oil today comes from inflation and the speculation that inflation induces.

The value of money is the bedrock of all world decisions and transactions. Crack that foundation, and everything built on top of it goes wobbly.

Why have markets been so volatile recently, and even over the past decade, dating back to the Asian crisis of 1997-98?

It's pretty simple, argues David Malpass, chief economist at Bear Stearns, in a superb article this morning. The value of the dollar -- the globe's key reserve currency and unit of account -- has been swinging wildly about. The dollar is the foundation of enterprise. A foundation must be sturdy and stable, or the investments, businesses, and trade we build on top of it can sway or even collapse. The dollar is central to all U.S. and global commerce.