When President George W. Bush addresses the Economic Club of New York on Friday, his comments on the dollar crisis will be the crucial issue for markets and the economy. The best thing he could do would be to state clearly that he wants a stronger dollar. That would draw liquidity back to the U.S., lower inflation risks, and head off the growing calls for government bailouts and support programs.

Absent administration support for the dollar, recent Fed rate cuts have simply sped up the flood of capital away from the U.S. without providing enough domestic stimulus. The rest of the world is already full of cheap dollars, pushing gold and oil to new highs, European tourists onto Madison Avenue, and petro-dollar sovereign wealth funds into building islands to use up their excess.

A clear presidential preference for a stronger dollar could cause an immediate leap in financial markets. U.S. stocks and corporate bonds are attractively priced -- except for the dollar risk. No matter how high a bond yield or how strong the track record of a U.S. private-equity manager, the threat of continued dollar weakness holds global liquidity at bay. The prospect of a stronger dollar would reverse that.

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This week, Mr. Bush may well use the same inadequate mantras that the administration has repeated since 2001: A strong dollar is in the "national interest," and the dollar should reflect U.S. economic "fundamentals." U.S. Treasury Secretary Hank Paulson used these standard phrases, now taken to be code words for a weaker dollar, on March 3, with predictable results -- the dollar hit new lows last week. Jean-Claude Trichet, the hard-money head of the European Central Bank, perhaps holding his nose, voiced similar encouragement for the dollar on March 3 (and yesterday): "I consider it very important what has been affirmed and reaffirmed by the U.S. authorities . . . according to whom a strong dollar is in the interest of America."

Damned by faint praise. The officials are not saying they want a stronger dollar, or that they will do something to stop the dollar's plunge. In fact, the U.S. has repeatedly prevented the G-7 group of finance ministers and central bankers from discussing ways to strengthen the dollar, most recently by imposing a dollar-lite agenda at the February G-7 meeting.

The current dollar mantra, coined in the 1990s, never made sense. Saying a strong dollar is in our "national interest" ignored the need for dollar stability. It set no upper bound on the dollar's strength, causing a destructive global deflation cycle from 1997 to 2001.

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