Word: dollarization
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Dates: during 1980-1989
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...budget summiteers hoped to reach agreement this week, and waiting any longer could push the financial markets into a deep funk. But for the moment investors took consolation in the temporary halt of the dollar's worrisome slide. In a calculated strategy orchestrated by Treasury Secretary James Baker in the wake of Black Monday, the Government has been allowing the dollar to decline. Baker believed not only that a lower dollar would help ease the trade deficit by making American goods more competitive but also that propping up the currency would force the U.S. to keep interest rates too high...
Besides rekindling the threat of U.S. inflation, the strategy has angered other industrial countries. West Germany and Japan, in particular, fear that their economies will be crippled by the escalation of their currencies against the dollar. Finally last week Reagan seemed determined to shore up the dollar once again. As he posed for photographs with Israeli President Chaim Herzog, the President was asked about the currency's future direction. "I don't look for a further decline," he said. "We're not doing anything to bring it down." Those words immediately acted like a parachute on the dollar's drop...
...some respects, the U.S. did. President Reagan gave verbal, albeit offhand, support for the dollar, helping halt the currency's plunge, which has alarmed governments from Japan to West Germany during recent weeks. Even more upbeat was the announcement that the U.S. trade deficit, the closely watched barometer of America's global competitive woes, improved by a gratifying degree during September. But at week's end the financial world was left holding its breath for what had been promised as the most reassuring development of all: a bipartisan agreement to cut the U.S. budget deficit. After three weeks of daily...
...dollar got a far less ambiguous boost later in the week with the Commerce Department's announcement that the U.S. trade deficit shrank during September to $14.1 billion, down from $15.7 billion in August. The decline was sharper than expected, especially by comparison with the disappointingly small improvement in the previous month's results. The disclosure of those results on Oct. 14 helped trigger the crash five days later. Despite September's narrowing, the trade gap remains huge by any standard. At the current rate, the 1987 deficit is likely to exceed last year's record of $156 billion...
...latest figures, in which exports climbed 3.8% and imports fell 2.4% from the previous month, indicated that the dollar's two-year drop is at last beginning to have an impact on the competitiveness of U.S. products. At the same time, consumers are finally starting to turn up their noses at the rising prices of foreign imports. Last week Porsche, the West German sports-car manufacturer, announced plans to cut production because of sharply declining sales in the U.S., where the company sells fully 60% of its output. Meanwhile, the Administration is continuing its efforts to force other countries...