Word: peg
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Dates: during 1960-1969
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This rise of 8.5%* is more than the 6.25% proposed by Economics Minister Karl Schiller last spring. It is also more than the 7.25% revaluation carried out by market forces in the four weeks since the mark was cut loose from its old peg. Schiller called the new rate "the golden mean-courageous but not foolhardy." It was clearly a compromise. Schiller wanted a change large enough to anticipate a continuing higher inflation rate outside Germany, but German industrialists argued for a lower figure. By making German exports more expensive and foreign countries' exports more competitive, the change should...
Closer to Reality. There are many varieties of crawling-peg plans. Some would adjust exchange rates annually, some quarterly, some monthly. Other versions would make adjustments optional and not automatic-that is, at the discretion of each government. All advocates agree that it is essential to make the parity changes frequent but small-perhaps 1% to 2% yearly. Sup porters believe that, under such a system, the value of a country's currency would reflect the realities of its balance of payments position and the amount of its inflation. The crawling peg would also avoid sharp devaluations and revaluations...
Opposition is formidable. Common Market officials fear that frequent changes in the value of the Market's six currencies would wreck their system of uniform farm prices. Some German and Swiss bankers argue that the crawling peg would depress international trade and investment by creating uncertainty as to what any currency would be worth in the future. Supporters reply that under the present system, threats of large devaluations or revaluations create even greater uncertainty-and that all too many governments depress trade by imposing controls on the movement of goods and capital in order to preserve unrealistic exchange rates...
...Road Ahead. At its September meeting in Washington, the International Monetary Fund is expected to appoint a committee to study the many peg plans. IMF Executive Director Pierre-Paul Schweitzer has invited official discussion of the peg and a companion plan for greater exchange-rate flexibility, the "wider band." Under this plan, currencies would be allowed to swing 2% to 3% above or below their official parity. A wider band would give the crawling peg more room in which to crawl, and would lessen the frequency with which central banks have to intervene in world money markets to support...
France's Giscard d'Estaing believes that a peg system could be operating a year or two after a decision to go ahead. Other economists recall that Special Drawing Rights-so-called "paper gold"-took five years to move from the status of a radical academic idea to a reform that the 111 IMF nations are actually about to institute. However long reform may take, more and more moneymen regard the crawling peg as an idea whose time has come...