But, significantly, even at these historically high interest rates, unlike now, the world became cagey about continuing to lend to the USA in US Dollars to a point that the USA almost came to issuing the so-called Reagan Bonds, i.e. US treasuries denominated in Deutschemark, Pound Sterling & Yen.
Going forward, however, things were normalized as a result of the Plaza Accord between G-5 countries. Adoption of capital account convertibility leads inevitably to the so-called “Impossible Trinity” which involves having to choose between an autonomous exchange rate policy and interest rate/monetary policy. In an increasingly open capital account context, the appropriate exchange rate regime would be a flexible exchange rate regime.