Word: dollar
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Dates: during 1970-1979
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...price much. The world's central banks and the IMF hold 40,000 tons of gold, about half the total ever mined. If a significant amount were thrown onto the market, the price would be knocked down hard, perhaps to $100 an ounce or so. As the dollar gained in value against gold, it might also rise against foreign currencies as well. But central banks are reluctant to part with the one reserve asset they hold that is increasing dramatically in worth...
...Raise interest rates to make dollar investments more attractive. The Federal Reserve moved last week, letting the Fed funds rate (at which banks lend to one another) rise from 7⅞% to 8%, and increasing the discount rate (at which member banks borrow from the Fed) from 7¼% to 7¾%. The U.S. could also try to borrow back some of the tens of billions of dollars now held by nervous foreign investors by offering them Treasury bonds paying compellingly high interest. The danger: interest rates high enough to induce investors to give back dollars might also be high...
...these moves would be sufficient to steady up the dollar over the long run, but some combination of them might buttress the buck long enough to permit fundamental market forces to take over. The Carter Administration has long hoped that the dollar's slide would eventually be self-correcting. It would boost U.S. exports by making them cheaper, cut imports by making them more expensive, and thus lower the trade deficit; then the dollar would rise again. There are some signs that the Administration's faith may not be in vain. For example, Japanese imports now account...
Even with a high level of imports, the dollar would be doing better if American exporters were more aggressive in tackling foreign markets. As Assistant Secretary of Commerce Frank Weil told TIME Correspondent William Drozdiak: "U.S. firms have been spoiled with a big market at home and have not felt impelled to sell more abroad...
Potentially more important, the dollar has become grossly undervalued in terms of its purchasing power vs. that of other currencies, with the possible exception of the Japanese yen. One example: $100, when converted into German marks or Swiss francs, will rent a 'first-class hotel room for a night in Frankfurt or Geneva. In New York City a comparable room in a high-priced hotel costs about $70. In a rational market, the dollar might be expected to rise to reflect its purchasing power more closely...