Something ominous is happening when the United States reports its biggest surge in productivity in twenty years, as it did Wednesday, and yet the dollar plunges to an all-time low against the euro.

The dollar is sinking these days on good news and bad, and the explanation is pretty simple: Investors around the world are worried that the Bush administration's policies are eroding the value of the U.S. currency. So they're rushing to unload greenbacks, in what could soon become a full-blown financial crisis.

"The dollar crisis is the story," warns James Harmon, an investment banker who headed the Export-Import Bank during the Clinton administration. "A lot of smart money has moved out of the dollar in the last six months," he explains. "Now the latecomers are rushing to sell, and that's adding to the momentum."

The dollar's decline during the Bush presidency has been remarkable. It has tumbled about 44 percent from its October 2000 high of about 83 cents to the euro. Over the past year alone, the decline has been more than 15 percent. Investors who trusted in the dollar as a store of value have been clobbered, so it's not surprising that they want to sell, even at current depressed prices. They fear that worse is coming.

If you haven't already gagged on your raisin bran, consider this nightmare scenario -- outlined by an investment banker who for many years headed his firm's currency-trading operations. This veteran trader contends that the markets have entered a cycle in which "overshooting" -- meaning a further sharp fall in the dollar's value -- "is a distinct possibility."

Nothing so unites a gaggle of economists as their reverence for productivity growth. Higher productivity allows us to make more, earn more and consume more; it is the stuff of which our standard of living is made.

... To optimists, this news was the robin that heralds spring. To the pessimists, it foretold a rain of pink slips as firms eight years from now make the same stuff they always have but with a smaller labor force.

The problem is that productivity growth does not automatically turn itself into economic growth. Productivity tells us our potential to grow, but not the actual result. Consider an economy spilling out 9% more "stuff" -- haircuts, computers, insurance, fast food, all of it -- every year without any need for new hires. Who will consume the fruits of this abundance? Incomes would need to rise by a like amount (or prices fall like a son of a gun) in order to snarf this stuff up.

Still, two issues remain. The first is: What happens next? If the economy does grow substantially in the year ahead, business demands for funds may start to compete with burgeoning federal borrowing, and the low interest rates that have helped propel the economy may start to unravel. Or the Asian lenders who are financing our deficits by soaking up Treasury bills may think twice about doing so, with the same result.

And the second issue is the human one. If productivity is surging, then some jobs will be harder to find -- read manufacturing.

We are told to think of the jobless as indolent, or unlucky in some self-fulfilling way. In fact, they are the victims of our country's economic fecundity. The story of productivity is that economic growth and change are irrevocably intertwined. We need an economic policy that promotes adjustment in order to make productivity the productive force it is supposed to be.