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Recently the dollar has been tumbling while the price of gold has climbed. Officially, recent U.S. presidents and their advisers say a strong U.S. dollar is in the national interest.

But as NPR's John Ydstie reports, their rhetoric hasn't prevented the long slide in the dollar's value.

JOHN YDSTIE: Back in March of 2008, before the financial crisis, the dollar was at historic lows against a basket of currencies. Then, when the financial storm struck, the dollar strengthened as investors rushed to the safety of U.S. Treasury securities. Now that the worst of the crisis appears to have passed, the dollar is sliding again. It's down more than 12 percent from its recent peak.

Fred Bergsten of the Peterson Institute for International Economics says sentiment about the dollar has now turned negative.

Dr. FRED BERGSTEN (Director, Peterson Institute for International Economics): Some private investors worry that the dollar may weaken systematically over time because of the big budget and trade deficits. So there's a search for alternatives to the dollar.

YDSTIE: For some investors the alternative is gold. For others, like some central banks around the world, the alternative is keeping more of their reserves in euros and yen. In fact, there's been renewed talk in some quarters of finding an alternative for the dollar as the world's major reserve currency.

Bergsten says to counter the loss of confidence in the dollar, the Obama administration needs to take policy actions to shrink huge U.S. budget deficits projected to be over a trillion dollars a year for the next decade.

Dr. BERGSTEN: Social Security reform would be a perfect example where you could decide to change the benefit formula, increase the retirement age. All of that would phase in over a period of time. It would be sizable and credible, but it would not dampen the recovery from the recession.

YDSTIE: Bergsten also thinks the U.S. economy will bounce back from the recession more quickly than expected, which could strengthen the dollar.

Former Treasury official David Malpass, who now heads the firm Encima Global, disagrees. He thinks the U.S. currency will continue to slide unless the Obama administration shifts the way the U.S. government talks about the dollar.

Mr. DAVID MALPASS (President, Encima Global): You'd get quite a bit of change, upward movement and more prosperity for Americans, more capital flowing into the United States if the president would say he'd like the dollar to be stronger.

YDSTIE: Malpass says the current administration line, which is a strong dollar is in the national interest, has lost its meaning. He says while that's been the U.S. mantra for the last 15 years, the dollar has been sliding now for eight years. He says some past U.S. administrations have been comfortable with a cheaper dollar, because they think it makes the U.S. more competitive globally. Malpass argues that's not true.

Mr. MALPASS: The currency keeps getting weaker. Jobs keep moving overseas because that's where the capital is. Money wants to go to where it can get a steady return in real money, not in funny money. And in many ways the dollar is becoming the funny money currency for the world, and that's not good for our competitiveness. That's not good for our living standard.

YDSTIE: Malpass says the change in rhetoric about the dollar could have a positive effect immediately, even if it weren't backed up by big changes in U.S. policy.

Mr. MALPASS: There wouldn't need to be much backing. It would come as a shock, the markets would then fall into line and start strengthening the dollar.

YDSTIE: Malpass argues that eventually the shift in rhetoric by the president would lead to changes in government policy that would support the goal. But it's safe to say the consensus is that rhetoric won't be enough, and that credible efforts to reduce deficits will be needed to restore confidence in the dollar.

John Ydstie, NPR News, Washington.

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