Word: dollar
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Dates: during 1970-1979
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Until very recently the Carter Administration had tried to find benefits in a weaker dollar, claiming that it would encourage American sales abroad; and a year ago, Treasury Secretary W. Michael Blumenthal was arguing that the dollar was too expensive, and tried to talk its value down. Fortunately that view has been forcefully dismissed. Says Federal Reserve Chairman G. William Miller: "Any idea that it is in the interest of the U.S. to have a weak dollar, to have a lower dollar, is false prophecy. It is just not right...
...American policy to lift the dollar will have to overcome that past mistake because worldly bankers and investors are very skeptical about the commitment of the Administration, and they have adopted a "show me" attitude. Quipped one top banker at the annual meeting of the International Monetary Fund in Washington last week: "He who talketh down the dollar cannot talk it back up." Of course, the stability of the American economy and the world financial system demands a decisive policy that goes much beyond talk. It should be a threefold strategy, of immediate steps to stem the dollar...
SUPPORT THE DOLLAR. Everyone from Swiss gnomes to Brooklyn cabbies agrees that the dollar is grossly undervalued. It can buy much more at home than abroad. Says Yale Economist Robert Triffin: "I used to buy all my suits in Europe because they cost half as much as in America. Now the situation is exactly reversed, and I buy my clothes...
...prevent a further fall in the value of the greenback, the U.S. Government, in close cooperation with leading foreign central banks, should step in and buy large quantities of dollars on world markets. This would require assembling a vast war chest of funds to show currency speculators that Washington has the money to back up that policy. Two fast and impressive steps would be increasing sales from the nation's $60 billion gold reserves, as former Federal Reserve Chairman Arthur Burns suggests, and enlarging the so-called swap network of dollar defense funds from $25 billion to $100 billion...
Critics of intervention argue that there is $400 billion to $600 billion in surplus dollars floating around foreign money markets -nobody knows the exact total-and Washington could not begin to buy them all. But if the U.S. expressed willingness and made funds available to buy huge amounts, speculators would conclude that the price would stay up, and so they would not sell their dollars. In short, a war chest to defend the dollar, coupled with a strong determination to use it if necessary, would act much like a nuclear deterrent: the more impressive it is, the less likely...