The Free Float
The fact that America was preparing to embark on two risky economic experiments in the 1980s inspired by conservative theories did not go entirely unnoticed by the general public. Any reader, if willing, could have found debates over the wisdom of supply-side economics and perhaps even monetarism somewhere in the popular media. At least one did not have to resort to inscrutable economics texts in order to find out what supply-side economics and monetarism were all about.
The third experiment of the 1980s was different. It was largely ignored before, during, and after its execution. If there is a reason for this omission it probably rests with the arcane nature of international finance, an area of public policy once reserved for aristocrats and their bankers. Currency crises, devaluations, and balance of payments problems all conjure up images of distinguished gentlemen rushing off to New York, Paris, or London for secret talks with their international counterparts. The actual substance of such talks would seldom seep much further than the pages of the Wall Street Journal or the Economist.
Consequently, when the U.S. Treasury announced that it was embarking on an experiment of "free floating" in 1981, it was met with a loud yawn. But three years later, with the dollar grossly overvalued relative to other currencies and the trade deficit at the