I returned to Israel last Friday after two weeks in America to find that several things had changed. An unofficial truce with Hamas has taken hold along the border with Gaza. An early summer has arrived, with temperatures soaring into the nineties. And as the thermometer has risen, the dollar has continued to drop. Worth 3.67 Israeli shekels on the day I flew to New York, it was worth 3.43 when I returned.

This only begins to reflect the strengthening of the shekel, which briefly reached a historic high of more than 4.80 against the dollar in late 2005. And yet, whereas for most of the subsequent period it was simply following in the wake of other currencies that were also climbing dollar-wise, recently it has begun an ascent of its own. In the last several months it has outperformed the euro, the yen, the Swiss franc, and the English pound.

To those with memories of Israel’s traditionally feeble shekel, and especially of the decimating inflation of the early 1980s, when the shekel threatened to go the way of the German mark of the Weimar Republic, this is all but unbelievable. Had anyone predicted 20, 10, five, or even three years ago that the shekel would one day vie for the honor of being the world’s strongest currency, he would have risked psychiatric commitment.

Of course, it may yet prove a short-lived moment of glory. Yet it’s by no means a fluke. The shekel has elbowed its way to the fore by dint of hard work, starting with the economic reforms of Finance Minister Benjamin Netanyahu in 2003-2005; continuing with scrupulously balanced Israeli budgets, a conservative monetary policy, and relatively high rates of interest; prodded by an economy with a high growth rate; and topped by an extremely innovative and successful high-tech sector, many of whose start-ups have been sold to international companies for large sums that have poured foreign currency into Israel and driven down its price.

For the average Israeli this has been — so far — marvelous. It has lowered the price of imported goods, helped keep inflation low despite falling unemployment, and made vacations abroad (of which Israelis are extremely fond) more affordable. The problem is that it has also badly hurt Israeli exporters, who, restricted in their ability to raise prices in a competitive world market, have watched their profits dwindle as the foreign currency they earn, particularly in dollars, is worth less and less at home.

Up to now these exporters have operated on progressively thinner margins while continuing to produce and sell, but if the shekel rises any further, many will be in bad trouble. Ultimately, this would mean retrenchments, job cuts, and the end of the economic good times. This is why the Bank of Israel, for the first time in its history, has cautiously begun to buy dollars on the foreign currency market in the hope of forcing the shekel back down before economic developments do it more painfully.

Meanwhile, every pay check in dollars that I get from The New York Sun buys me less shekels to pay my bills with. To tell the truth, I could probably forgive the Bush administration in Washington for driving the dollar into the ground if the only victim of it were me, or even Israeli exporters in general. America has more important things to think about than my grocery bills.

But America does not have more important things to think about than its position in the world, and in this respect, its economic policies have been less forgivable. Indeed, future historians writing about the eight years of the George W. Bush presidency may well conclude that the disparity between its military and strategic objectives, on the one hand, and its economic behavior, on the other, was nothing less than schizophrenic.

I have always, until recently, thought that the Bush administration would be judged entirely on the basis of the success or failure of the war in Iraq, which has seemed, and continues to seem, to me a praiseworthy undertaking. If the war ended badly, as it might, Mr. Bush would be written about as one of the most blundering of American presidents. If it ended well, he would be remembered as one of the bravest and most unfairly maligned.

But the war in Iraq is ultimately about America’s ability to project power in a chaotic world in which no other country is equally able to defend democracy and democratic values — and this power has been seriously compromised by ruinous economic policies that have aggravated long-term tendencies for which the Bush administration is by no means solely responsible.

The subprime crisis is simply the latest chapter. An America that nourishes itself with foreign products that it cannot afford to pay for, that is trillions of dollars in debt to other countries, that produces little that these countries wish to buy in return, and whose sinking currency is kept from hitting bottom only because the governments holding it are afraid to depress its value even further by dumping it, is not capable of doing a great deal of good in the world even if things work out well in Iraq. Nor, in fact, are things very likely to work out well in Iraq if maintaining a strong military presence there proves beyond America’s means.

Those of us who earn dollars want them to be strong. But those of us who depend on America’s shield to protect us — and this includes, in the final analysis, most of the population of this planet — want even more for America itself to be strong. Luckily, there’s no conflict of interest, because the two things go together.

Mr. Halkin is a contributing editor of The New York Sun.