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Value of the Dollar in Domestic and International Markets Remarks Announcing Measures To Strengthen the Dollar.

November 01, 1978

THE PRESIDENT. Last week, I pledged my administration to a balanced, concerted, and sustained program to fight inflation.

That program requires effective policies to assure a strong dollar.

The basic factors that affect the strength of the dollar are heading in the right direction. We now have an energy program passed by Congress; our trade deficit is declining; and last week, I put in place a strong anti-inflation program.

The continuing decline in the exchange value of the dollar is clearly not warranted by the fundamental economic situation. That decline threatens economic progress at home and abroad and the success of our anti-inflation program.

As a major step in the anti-inflation program, it is now necessary to act to correct the excessive decline in the dollar which has recently occurred. Therefore, pursuant to my request that strong action be taken, the Department of the Treasury and the Federal Reserve Board are today initiating measures in both domestic and international monetary fields to assure the strength of the dollar.

The international components of this program have been developed with other major governments and with central banks. They intend to cooperate fully with the United States in attaining our mutual objectives.

Secretary Blumenthal and Chairman Miller are announcing detailed measures immediately.

Thank you very much.

SECRETARY BLUMENTHAL. In the past few months the United States has taken action to correct the imbalances that have characterized our economy. We have passed an energy bill which will lead to a reduction of our dependence on imported oil. We have implemented a program to enhance exports as a national priority. We have launched a tough and determined anti-inflation campaign. We have taken steps to reduce the Government's preemption of the Nation's financial resources by cutting dramatically our budget deficit. We have also moved decisively toward undoing the overregulation of our great economy. We have enacted a tax bill which will enhance capital formation and improve productivity. More must and will be done, but the prerequisites for improved economic performance are in place.

Recent moves in the dollar exchange rates have not only exceeded any decline related to the fundamental factors but plainly are hampering progress toward the price stability, balance-of-payments improvement, and enhanced climate for investment and growth which these measures are designed to bring about.

The time has, therefore, come to call a halt to these developments. At the President's direction, Chairman Miller and I are today announcing comprehensive corrective actions.

Effective immediately, the Federal Reserve is raising the discount rate from 8 1/2 to 9 1/2 percent, and is imposing a supplementary reserve requirement equal to 2 percentage points of time deposits of $100,000 or more.

In addition to domestic measures being taken by the Federal Reserve, the United States will, in cooperation with the Governments and central banks of Germany and Japan, and the Swiss National Bank, intervene in a forceful and coordinated manner in the amounts required to correct the situation. The United States has arranged facilities totaling $30 billion in the currencies of these three countries, which will finance the U.S. contribution to the coordinated market intervention activities of the four participating countries.

That $30 billion in the currencies of these three countries are being raised through a drawing of the U.S. reserve tranche of the International Monetary Fund; through the sale of SDR's to Germany, Japan, and Switzerland; through a substantial increase in the Federal Reserve swap lines with the Bundesbank, the Bank of Japan, and the Swiss National Bank; and through our intention to issue foreign currency denominated securities. Together, this will make up the $30 billion package.

In addition, the Treasury will increase its gold sales to at least 1 1/2 million ounces monthly, beginning in December.

The currency mobilization measures will be described in more detail, and Under Secretary Solomon is here to answer any questions. We'll have a brief break so that you can digest this and give you a few minutes, and then we'll go into the details of it.

The fact is that the foreign exchange situation that this program is designed to correct has gotten out of hand. It must end, and it will end. The dollar's deterioration has already led to a rise in import competitive prices, which further fuels inflation and perpetuates a vicious cycle. And the image of the American economy and its leadership is adversely affected by this.

We feel that failure to act now would be injurious to the American and to the world economy. Our economy is strong. Steps have been taken to strengthen it further, and the fundamental economic conditions and growth trends in the four nations that are a party to this agreement are moving toward a better international balance.

Assisted by the actions we have now announced, this will provide an improved framework for a restoration of more stable exchange markets and the correction of the recent excessive exchange rate movements.

Thank you very much.

Note: The President spoke at 9 a.m. to reporters assembled in the Briefing Room at the White House.

Following Secretary Blumenthal's remarks, Anthony M. Solomon, Under Secretary of the Treasury for Monetary Affairs, and he held a news conference on the Treasury Department and Federal Reserve System measures.

Jimmy Carter, Value of the Dollar in Domestic and International Markets Remarks Announcing Measures To Strengthen the Dollar. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/243750

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