WASHINGTON -- Political leaders must take a long-term view of the economy to ensure that the dollar remains the world's dominant currency, Federal Reserve Board Governor Lawrence Lindsey said Thursday.
Mr. Lindsey, speaking at a conference celebrating the 50th anniversary of Bretton Woods, said policymakers must battle for low-inflation, open capital markets, and liberal trade if they want the dollar to keep its role in the world economy.
Mr. Lindsey' said the dollar's status means foreign investors 'want to hold it, These holdings act as an interest-free loan to,the United States, freeing up $200 million a year for extra spending.
But, he said the dollar's worldwide prominence rests on maintaining a credible, anti-inflation program. If foreigners loose faith in the dollar, they will hold other currencies. This will rob the country of that interest-free extra spending, he said.
