Strong Dollar Is a Policy in Name Only

But those words had, and still have, meaning -- at least to short-term currency traders. The strong dollar policy came about when memories were still fresh of Lloyd Bentsen's "benign neglect" of the dollar and a depreciation strategy under Ronald Reagan's Treasury Secretary James Baker, unveiled at the Plaza Accord in September 1985. Baker's strategy led to sustained dollar weakness, ultimately contributing to the October 1987 stock market crash.

Some observers worry about a possible repeat in the current environment. An accelerated decline in the dollar likely would be "concurrent with the literal crash of U.S. equities," said Rhame. (She isn't forecasting such a cataclysm, but many hard-core bears do.)

Since early 2001, there's been a very high correlation between the S&P 500 and the Dollar Index. In part that's because foreign investors are selling the trillions of U.S. assets they gobbled up in the 1990s; holdings that are suffering even more than yours when currency translations are accounted for.

There has been no mass exodus by foreign investors, as some doomsayers prophesize, but direct foreign investment in the U.S. fell 45% last year to $46 billion. Furthermore, U.S. direct investment abroad exceeded foreigners' investment here for the first time since 1995, The New York Times reported.

A weaker dollar also would cause higher prices for imported goods and likely drive Treasury rates higher, affecting bond funds and mortgage rates alike. It also would greatly hamper Japan's efforts to export its way out of prolonged economic contraction. Given all that, "there's no chance in hell the Bush administration is going to abandon the language of a 'strong dollar policy,'" Gilmore said.

But some believe they've already abandoned it, or at least tried to modify it, which is almost as bad.

To many, Snow's comments last Tuesday were eerily similar to those of his immediate predecessor. Paul O'Neill was viewed as a maverick, and Snow was supposed to bring more discipline to the secretary's role as chief spokesman for the dollar. But last week's comments had some wondering if maybe O'Neill was merely doing the White House's bidding in trying to (not so) subtly undermine the dollar, and Snow was picking up the beat.