A strong dollar is good for America, right? Well ...

At his recent news conference, Ben S. Bernanke, the Federal Reserve chairman, was asked about the falling dollar. He parried the question, saying that the Treasury secretary was the government's spokesman on the exchange rate -- and, of course, that the United States favors a strong dollar.

Listening to that statement, I flashed back to one of my first experiences as an adviser to Barack Obama. In November 2008, I was sharing a cab in Chicago with Larry Summers, the former Treasury secretary and a fellow economic adviser to the president-elect.

To help prepare me for the interviews and the hearings to come, Larry graciously asked me questions and critiqued my answers.

When he asked about the exchange rate for the dollar, I began: "The exchange rate is a price much like any other price, and is determined by market forces."

"Wrong!" Larry boomed. "The exchange rate is the purview of the Treasury. The United States is in favor of a strong dollar."

For the record, my initial answer was much more reasonable. Our exchange rate is just a price -- the price of the dollar in terms of other currencies. It is not controlled by anyone. And a high price for the dollar, which is what we mean by a strong dollar, is not always desirable.

Some countries, like China, essentially fix the price of their currency. But since the early 1970s, the United States has let the dollar's value move in response to changes in the supply and demand of dollars in the foreign exchange market.

In practice, all that "the exchange rate is the purview of the Treasury" means is that no official other the than Treasury secretary is supposed to talk about it (and even he isn't supposed to say very much).

That strikes me as a shame. Perhaps if government officials could talk about the exchange rate forthrightly, there would be more understanding of the issues and more rational policy discussions.

Such discussions would start with some basic economics. The desire to trade with other countries or invest in them is what gives rise to the market for foreign exchange. You need euros to travel in Spain or to buy a German government bond, so you need a way to exchange currencies.

The supply of dollars to the foreign exchange market comes from Americans who want to buy goods, services or assets from abroad. The demand for dollars comes from foreigners who want to buy from the United States.

Anything that increases the demand for dollars or reduces the supply drives up the dollar's price. Anything that lowers the demand for dollars or raises the supply causes the dollar to weaken.

Such innovation will also make Americans want to buy more goods and assets in the United States -- and fewer abroad. The supply of dollars to the foreign exchange market will fall, further strengthening the dollar.

This example describes very well the conditions of the late 1990s -- when the dollar was indeed strong.

Now suppose the United States runs a large budget deficit that causes domestic interest rates to rise. Higher American interest rates make both foreigners and Americans want to buy more American bonds and fewer foreign bonds.

Thus the demand for dollars increases and the supply decreases. The price of the dollar will again rise.

This example describes conditions in the early 1980s, when President Ronald Reagan's tax cuts and military buildup led to large deficits. Those deficits, along with the anti-inflationary policies of the Fed, where Paul A. Volcker was then the chairman, led to high American interest rates. The dollar was very strong in this period.

The point is that there is no universal good or bad direction for the dollar to move. The desirability of any shift in the exchange rate depends on why the dollar is moving.

Fed policy is determined by inflation and unemployment in the United States. But if Bernanke could discuss the exchange rate openly, he would probably tell you that one way any monetary expansion helps a distressed economy is by weakening the dollar.

That is taught in every introductory economics course, yet the Fed is asked to pretend it isn't true.

Likewise, fiscal policy is determined by domestic considerations. But trimming our budget deficit, as we should over the coming years, would also weaken the dollar. And that, in turn, would blunt the negative impact of deficit reduction on employment and output in the short run.

Strangely, every politician seems to understand that it would be desirable for the dollar to weaken against one particular currency: the Chinese renminbi.

But in the very next breath, the same members of Congress shout about the importance of a strong dollar. If a decline in its value relative to the renminbi would be beneficial, a fall relative to the currency of many countries would help even more in the current situation.

To say this openly risks being branded as un-American. Perhaps it is time for a more adult conversation. The exchange rate is the purview of market economics, not of the Treasury or strong-dollar ideologues.