If You Ask Me: A Global Banker Reflects on Our Times
Wriston, Walter B.
The Value of a Dollar
At this time, what's your assessment of the package the Carter Administration put together to alleviate the strain on the dollar?
The dollar is battered periodically on the exchange markets because foreign traders don't see any consistent economic policy coming out of Washington. One member of the Federal Reserve Board said, "We're going to pump up the money supply if there's any slowing of the economy." Others guaranteed that recession would cause no discomfort, but they also saw no attenuation of inflation. The result was that the traders sold the dollar and moved into what they perceived to be harder currencies.
The amplitude of fluctuation in the dollar's exchange value got to be so great that the Fed put together a package to stabilize it. On balance, I think it's worked out pretty well. We've put a lot of chits around the world. We've issued a lot of foreign-denominated bonds that we're going to have to repay. So, we needed to do something. So far, on a temporary basis, it's been fairly effective.
Would you say this should have been implemented sooner?
On a hindsight basis, if we had articulated our policy better, it wouldn't have been necessary at all. The foreign exchange market is so huge that just putting 10, 20, or 30 billion dollars at the margin really doesn't mean much. It's about ten minutes of trading. What would mean something is a clear, logical statement from the authorities that they really do care about the value of the dollar.