Word: greenback
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Dates: during 1970-1979
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Then Treasury Secretary W. Michael Blumenthal ticked off a list of drastic measures that the Treasury and the Federal Reserve Board will take to uphold the greenback. The key moves: 1) raising the federal discount rate by a full point to a record 9.5%, the sharpest jump in 45 years; 2) reducing by $3 billion the funds that U.S. banks have available to lend; 3) amassing $30 billion in foreign currencies, nearly all borrowed, to support dollar prices on foreign exchanges; 4) greatly increasing U.S. sales of gold...
Impressive as the dollar's immediate gains were, the greenback will stabilize in the long run only if Carter and the Fed demonstrate that they will stick to a tight-money policy as long as may be necessary to reduce inflation, which could be several years. Meanwhile, higher interest?New York's Citibank led the parade last week by increasing its prime rate to a numbing 10.75%?will raise the cost of borrowing by businessmen to build factories or buy machinery and by consumers to finance new homes, cars or college educations...
...long awaited and much battered energy and tax-cut bills, and by the President's Stage II anti-inflation program of wage-price guidelines. After all, money traders, finance ministers and central bankers agreed that the long decline had caused the dollar to be grossly undervalued. The greenback will now buy more coffee, clothes, steel or whatever when spent as a dollar in the U.S. than it will when converted into foreign currencies and spent overseas...
These huge imbalances not only cost American workers jobs and help fan U.S. inflation but have also contributed mightily to the weakening of the dollar. In theory, the 40% fall of the greenback against the yen over the past two years should have helped correct the U.S.-Japanese trade imbalance. This would happen if Japanese exports became more expensive and therefore less attractive to American buyers, thus cutting the cost of U.S. exports to Japan. To some extent, this has happened. For instance, Toyota's U.S. sales fell almost 8% in the first nine months of 1978, partly because...
...initial reaction to the speech, and the plan, was far from encouraging. Corporate money managers, bankers and speculators, apparently believing that Stage II is too weak and will not work, sent the dollar plunging. The greenback fell to its lowest exchange rate since World War II against the yen, the deutsche mark, the guilder, the Belgian franc and the Danish and Norwegian crowns. The price of gold, which moves inversely to the dollar, reached a new peak of $233.70 an ounce. "We had not expected much," explained one Zurich foreign-exchange dealer about Carter's plan, "but neither...