Analysts caution that rapid foreign economic growth could induce a depreciation of the dollar, as international investors diversify their portfolios for higher returns abroad. Although we cannot establish a simple relationship between foreign growth and the dollar, we can conclude that if a desire to diversify out of dollars lies dormant among investors, faster growth abroad may stir it. This Economic Commentary discusses the features governments must incor-porate into their institutions in order to build an economic infrastructure that promotes prosperity. It is an excerpt of a paper presented by Jerry Jordan, President and CEO of the Federal Reserve Bank of Cleveland, at the 75th Annual Conference of the Western Economic Association International in Vancouver, B.C., Canada, on July 1, 2000. The full text of the paper will be available in Contemporary Economic Policy , vol.
Conventional wisdom says that a tough, independent central bank is all that is necessary.
Whether one accepts the conventional or the fiscal theory view has significant implications for the way central banks should do business. Americans are saving less than they used to. This Economic Commentary suggests that saving rates would have to be much higher for most American households if they are to maintain their living standards through retirement. Alexander Hamilton is perhaps the least known and most misunderstood of our nation's founders. His contributions include creating a monetary standard, forming the foundation of our banking system, and establishing the creditworthiness of our young nation.