Word: dollarization
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Dates: during 1980-1989
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...official intervention in the currency markets continued on Thursday and Friday, but the dollar stabilized and recovered a bit. Still, central bankers seemed satisfied with the results of their efforts. Their goal was merely to throw a scare into speculators and keep them from bidding the dollar to unrealistic levels...
TIME's economists viewed last week's dip in the dollar as a healthy development, but said that a sharp plunge could be dangerous. Admitted Greenspan: "The dollar has long been a great worry of mine." If foreigners lost confidence in the dollar, they might start pulling large sums of money out of American investments. That could lead to a run-up in U.S. interest rates and slower growth than the economists now predict...
...TIME board members doubted, however, that last week's drop signaled the beginning of a sustained decline in the dollar. Its value is still more than 60% higher than it was five years ago against an average of major currencies. Said Charles Schultze, who was President Carter's chief economic adviser: "I do not see the dollar in a free fall. Central bank intervention by itself in the markets is not likely to do any good in the long run." Rimmer de Vries, chief international economist of New York's Morgan Guaranty Trust, thinks that the dollar may remain strong...
...fall in the dollar would delight many American businessmen. Its rise has made their products more expensive abroad and foreign goods cheaper in the U.S. That has hurt every company that exports or competes with imports. Largely because of the strong dollar, the U.S. ran a record-shattering $123 billion trade deficit last year, up from $69 billion in 1983. The trade gap widened to $10.3 billion in January from $8 billion in December. Such a huge imbalance is unsustainable, TIME's economists agreed, and could eventually undermine U.S. growth...
...other hand, the strong dollar has played a key role in dousing inflation. Faced with fierce competition from cheap imports, companies have been forced to cut costs and hold down prices, and workers have had to settle for modest wage hikes. Consumer prices rose at an annual rate of just 2.3% in January, which was even lower than the 4% increase for all of 1984. The economists predicted that prices will rise only 3.6% this year...