To: Jim Willie CB who wrote (42261 ) 9/23/1999 1:27:00 PM From: gdichaz Read Replies (1) | Respond to of 152472
Comment? Chaz Summers Confident Dollar Will Be Fine 'I Think the Dollar Will Do Fine and, More Importantly, I Think the American Economy Will Do Fine,' He Said NEW HAVEN, Conn. (Sept. 22) - As doubts grow over the prospect of joint U.S.-Japanese intervention to boost the sagging dollar, U.S. Treasury Secretary Lawrence Summers said Wednesday the economy's health is what is crucial, implying he is not eager to meddle in foreign exchange markets. At two separate appearances before university audiences in Connecticut, Summers repeated the Clinton administration's familiar refrain that it believes a strong dollar is in the national interest. As he always does, the Treasury chief stopped short of saying specifically what officials would do to keep the dollar strong but he remarked that the currency's strength was dependent on the health of the economy, which he suggested was taking the focus. ''The old cliche is right: the buck stops here,'' Summers said during the question-and-answer session of an address at the University of Connecticut. ''As long as we keep the fundamentals of our economy strong (with) budget surpluses, low inflation and price stability, there may be periodic fluctuations in portfolio preferences or reserve holdings,'' he said. ''But I think the dollar will do fine and, more importantly, I think the American economy will do fine.'' He later hammered home the support for a strong dollar when questioned after a speech at Yale University in which he discussed the state of the global economy in advance of Saturday's meeting of the finance ministers of the Group of Seven rich nations. The fall of the dollar to its lowest level against the Japanese yen in three-and-a-half years is expected to feature high on the G7 agenda. Officials in Tokyo, worried about the blow to Japanese exporters if the yen continues its ascent, have been intervening in foreign-exchange markets to stem the dollar's slide and have sought U.S. assistance in that effort. But so far their appeals have yielded no results. The Treasury has long been wary of using market intervention and exchange-rate policy as an economic tool and instead wants currencies to reflect the underlying economic conditions. This position is bolstered by the fact that the dollar is holding up fairly well against other key currencies, notably the euro. Because much of the yen's strength stems from signs of improvement in Japan's moribund economy, many currency analysts believe currency intervention might have only fleeting effects. Summers acknowledged as much in the Yale speech when he described the Japanese recovery as ''well-established'' but prodded officials to do more to spur domestic demand. In the speech, Summers said the global economy was past the worst of its crisis but stressed it was key to make the world less vulnerable to future outbreaks of turmoil. ''Now that the thick of these crises is behind us, now that we see signs of repair and reviving confidence in emerging markets and more balanced growth in the industrial nations -- now is the moment to step back to reflect on these reform efforts,'' Summers said. ''As we do this, it will be crucial that we not turn our backs on the goal of a safe and sustainable, truly global financial system,'' he added. Specifically, he said countries should avoid using pegged exchange rates, except in the highly unusual cases where they are fully prepared to defend such regimes against all attacks. He also said that in rare instances, it may make sense for countries to restructure or reduce private debt, an apparent reference to Ecuador and Pakistan. Summers also announced the formation of a new group, the so-called G20 of key developed and developing economies. But he didn't offer specifics about who would make up the group and what its precise role would be.