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The original documents are located in Box K9, folder "Emminger, Otmar, 1969-1978" of
the Arthur F. Burns Papers, 1956 - 1990 at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Arthur Burns donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box K9 of the Arthur F. Burns Papers, 1956 - 1990 at the Gerald R. Ford Presidential Library
February 27, 1978
Dr. Otmar Emminger
President
Deutsche Bundesbank
Frankfurt, Germany
Dear Otmas:
I have just read your speech of January 31.
It is a truly excellent analysis, and I wanted you to
know how much I appreciate it.
With warm regards,
Sincerely,
Arthur F. Burns
AFB:ccm
FORD & LIBRARY GERALD
February 9. 1978
Dear Otmar:
Thank you very much for the copy of
your interview with Reuters that you recontly
sent me. I greatly appreciate having your
thoughtful comments.
With very best personal regards,
Sincerely yours,
Arthur F. Burne
Dr. Otmar Emminger
President
Deutschen Bundesbank
Wilhelm-Epstein-Strasse 14
6000 Frankfurt Am Main
Germany
NB:ja
GERALD FORD LIBRARY
10 m
BOARD OF GOVERNORS
OF THE
DR. OTMAR EMMINGER
FEDERAL RESERVE SYSTOM
WILHELM-EPSTEIN-STRASSE 14
6000 FRANKFURT AM MAIN
PRASIDENT DER DEUTSCHEN BUNDESBANK
1978 JAN 31 PM 12: 34
TELEFON 1581
RECEIVED
January 26, 1978
OFFICE OF THE CHAIRMAN
Professor Arthur Burns
Chairman
Federal Reserve System
Washington, D.C. 20551
Dear Arthur:
I just gave an interview to "Reuters" on the present
German external and internal situation.
You will find the text of this interview enclosed. It
is, of course, a somewhat simplified analysis of the situation.
With warmest personal regards,
Sincerely,
Encl.
Mmar Summy
FORD is LIBRARY GERALD
Interview by Dr. Otmar Emminger, President, Deutsche Bundesbank,
with Reuters on Wednesday, January 25, 1978
Emminger believes interest gap and excessive German cost level
will brake mark's attraction
The interest rate gap between West Germany and the U.S.,
coupled with abundant German monetary liquidity, will make
investment in mark assets unattractive to foreign funds once
speculative currency fever subsides, Bundesbank President
Dr. Otmar Emminger told Reuters. Together with the Federal
Reserve Bank of New York the Bundesbank is intervening in the
dollar market as a bridging action to smooth out erratic
movements and discourage speculative developments, he added
in an interview.
The present exchange rates of a few "strong" currencies
such as the mark or Swiss franc against the dollar are clearly
considerably higher than would correspond to the relative
purchasing power of these currencies in terms of prices and,
in particular, production costs, Emminger said. But the special
factors now influencing the U.S. balance of payments mean
it may take some time for these fundamental relationships to
make themselves felt on the exchange rate. The mark's present
rate seems out of line against the dollar not only compared
with price and cost relationships but also with regard to
developments in the German basic balance of payments
position, he added.
R FORD LIBRARY
GERALD
Asked if the Bundesbank could do anything to restore a
less lop-sided evaluation of the mark/dollar rate, Emminger
said the Bundesbank has contributed to lowering domestic interest
rates so that they are now the lowest among all major countries.
-2-
- 2 -
The differential compared to American rates is now four
to five pct on short-term funds and two to 2.50 pct on longer
term funds.
By the end of last week this year's dollar market inter-
vention by the U.S. and German central banks amounted to over
2.5 billion marks, Emminger said. "We (the Bundesbank) have
been fully satisfied both with the amounts and the method of
the Fed's intervention," he added.
Emminger noted, the present dollar problem is not a bilateral
problem between the dollar and mark as has erroneously been
maintained by some foreign observers. The U.S. payments deficit,
which has been the root cause of recent dollar weakness, is
primarily due to large trade deficits vis-à-vis OPEC countries and
Japan, while the U.S. runs a sizeable surplus with West Europe. "I
don't know if the U.S. current account deficit this year will
be as large as in 1977 but sooner or later it will improve.
Its effect on the dollar rate will depend on whether countries
with large dollar surpluses vis-à-vis the U.S. invest them in
dollar assets or not, If he said. Thus, the dollar rate will be
largely determined by the dollar's attractiveness as a
currency for investment, i.e. by American interest rates and
foreign confidence in the dollar's stability.
The German current account surplus has continually declined
over the last few years and is no longer very large, while, more
importantly, it has been more than compensated for by very
large long-term capital exports resulting in a very sizeable
basic payments deficit, Emminger said. The inflows of foreign
exchange into Germany since last October have been entirely
due to short-term capital flows, partly of a speculative nature
and partly motivated by hedging operations for commercial
payments. "As soon as these confidence movements subside, the
basic German deficit will reassert itself," he added.
GERALD LLORARY FORD
-3-
- 3 -
Emminger says enough has been done to stimulate German economy
Germany has already taken enough measures to stimulate
its economy in 1978, and there is a good prospect of the
country achieving a significant domestically-led recovery,
Bundesbank President Otmar Emminger said.
The probable effects of recent tax cuts and various public
expenditure programs, as well as the impact of cheap and
plentiful credit, are often underestimated by foreign observers.
"One cannot, of course, see the effect of these measures
reflected in the economic statistics overnight. However, the
most recent economic data begin to show already a definite
revival of domestic demand."
Emminger said he expects Germany's imports
rising six to seven pct in real terms or double the projected
3.5 pct growth in real demand in the German economy. The
real rise in German exports in 1978 may be less than five
pct, which is the figure he anticipates for the growth in
world trade volume this year.
The recent rise in the mark, which toughens conditions for
exporters, boosts imports from low-cost countries and increases
the tendency for German companies to shift production abroad,
will play a part in further reducing the payments surplus on
current account.
Even if the mark's appreciation may temporarily increase
the trade surplus in the next few months by cheapening imports,
this effect will soon be compensated by other more durable
factors.
GERALD FORD LIBRARY
-4-
- 4 -
Emminger said the mark's rise of the past few months will
squeeze company profits, and makes it more difficult to set
an investment recovery going. This justifies the present
expansive fiscal and monetary policies.
On the other hand, the mark's appreciation does help
efforts to cut inflation further, provided these are not
counteracted by exaggerated wage movements, he said. Excessive
wage increases would endanger jobs in industries exposed to
sharpened competition from abroad.
Emminger said central banks' recent foreign exchange
intervention has created more liquidity in the German banking
system than would normally be desirable.
However, part of this liquidity has already been absorbed
by other measures such as the increase in minimum reserves on
banks' foreign liabilities, open market operations, and
temporarily also by high federal government borrowing this
year.
"The foreign exchange purchases make achievement of our
eight pct monetary growth target for 1978 more difficult, but,
as of now, not impossible", he said.
GERALD FORD LIBRARY
December 13, 1977
The Homorable Otmar Emminger
President
Deutsche Bundesbank
Frankfurt Am Main, Germany
Dear Otmar:
I want to thank you and Mrs. Emminger for your
kind hospitality. My visit to Frankfurt made it possible for
me to exchange views with you and Karl during the day, and
the delightful dinner in the evening provided me with a
welcome opportunity to see some old friends.
I must also thank you for your thoughtfulness in
sending me the beautiful volume on medieval coinage that the
Deutsche Bundesbank has just published. The subject is of
considerable interest to me and I am pleased to add the
volume to my library.
Mrs. Burns joins me in conveying to you and Mrs.
Emminger our warm holiday greetings and our very best
wishes for the New Year.
Sincerely yours,
Arthur F. Burns
NB:ja
AFB
FORD is. LIBRARI
DEUTSCHE BUNDESBANK
DER PRASIDENT
FRANKFURT AM MAIN, in December 1977
Dr. Arthur F. Burns
Chairman of the Board of
Governors of the
Federal Reserve System
Washington, D.C. 20551
USA
Dear Prof. Burns,
I am pleased to send you*, as a small Christmas gift, a publication by the
Deutsche Bundesbank entitled
"Brakteaten der Stauferzeit 1138 - 1254"
(Bracteates from the period of the Hohenstaufen
Emperors 1138 - 1254)
It contains illustrations and descriptions of a selection of coins which are
stamped on one side only and are considered a peculiarity of medieval coinage.
Most of the coins are taken from the Bundesbank's money museum.
I hope that the book will give you pleasure.
With best wishes for Christmas and the New Year,
Yours sincerely,
GERALD FORD LIBRARY
Gurar Summy
*) under separate cover
Dinner at the "Schloßhotel Kronberg" on December 4, 1977, 8 p.m.
Mr. and Mrs. Abs,
Honorary Chairman of the
Deutsche Bank AG, Frankfurt
Mr. and Mrs. Becker,
Member of the Board of Management
Kreditanstalt für Wiederaufbau,
Frankfurt
Mr. and Mrs. von Bethmann,
Partner, private bank "Gebr. Bethmann"
Prof. Burns,
Chairman of the Board, Federal
Reserve System, Washington
Mr. and Mrs. Casper,
Member of the Board of Management
Metallgesellschaft AG, Frankfurt
Mr. and Mrs. Dhom,
Chairman of the Board of Management
Commerzbank AG, Frankfurt
Mr. and Mrs. Dietz,
President, Frankfurt Chamber of
Industry and Commerce
Mr. and Mrs. Emminger
President, Deutsche Bundesbank
Count and Countess Galen
Partner, private bank
"Schröder, Münchmeyer, Hengst & Co.",
Frankfurt
Mr. and Mrs. Geiger,
Chairman of the German Association
of Savings Banks, Bonn
Mr. and Mrs. Guth,
Chairman of the Board of Management,
Deutsche Bank AG, Frankfurt
Mr. and Mrs. Haeusgen,
Chairman of the Board of Management,
Dresdner Bank AG, Frankfurt
Mr. Hoffmann,
Member of the Board of Management,
Bank für Gemeinwirtschaft, Frankfurt
GERALD, FORD VISRABLE
-2-
- 2 -
Mr. and Mrs. Klasen,
Former President, Deutsche Bundesbank,
Hamburg
Count and Countess Lambsdorff, Minister of Economics, Bonn
Mr. and Mrs. Lehmann,
American General Consul, Frankfurt
Mr. and Mrs. Lichtenberg,
Chairman of the Board of Directors,
Commerzbank AG, Frankfurt
Mr. and Mrs. Meier-Preschany, Member of the Board of Management,
Dresdner Bank AG, Frankfurt
Mr. and Mrs. Pöhl,
Deputy Governor, Deutsche Bundesbank,
Frankfurt
Mr. Poullain,
Chairman of the Board of Management,
Westdeutsche Landesbank, Düsseldorf
Mr. and Mrs. Vaerst,
Chairman of the Board of Management,
Deutsche Bundesbahn, Frankfurt
LIBRARY BERALD FORD
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
DR. OTMAR EMMINGER
WILHELM-EPSTEIN-STRASSE 14
PRÄSIDENT DER DEUTSCHEN BUNDESBANK
1977 NOV 22 AM 10: 32
6000 FRANKFURT AM MAIN
TELEFON 1581
RECEIVED
OFFICE OF THE CHAIRMAN
November 18, 1977
Professor
Arthur E. Burns
Chairman
Federal Reserve System
Washington, D.C. 20551
#1714
Dear Professor Burns:
May I confirm in writing how much I look forward to
your coming to Frankfurt on Sunday, December 4. Mrs. Emminger
and I hope, of course, that you will be able to bring Mrs. Burns
with you.
Should you have time to continue your stay in Frankfurt
on Monday, December 5, it would give us great pleasure to show
you and Mrs. Burns something of the Rhine valley or some of
the medieval towns around Frankfurt.
All your friends are following the news about your
courageous campaign for stability with the greatest admiration,
and we wish you the best success.
Attached please find the text of my remarks at the
recent National Foreign Trade Convention in New York.
With best regards,
Sincerely,
Encl.
GEEALO FORD LIBERTY
Mmar Summjer
International Monetary Relations: Problems and Prospects
Remarks by Otmar Emminger, President of the Deutsche Bundesbank,
before the 64th National Foreign Trade Convention, New York,
November 14, 1977
I.
Over the last five years, our world economic and financial
system has been subjected to a multitude of strains and stresses
as never before in our post-war economic history, such as
world-wide galloping inflation, the breakdown of the Bretton
Woods system, the oil price explosion (which generated huge
payments disequilibria and financing problems), the worst recession
since the thirties, enormous structural shifts and dislocations
in world production and trade, and finally, as a consequence of
all these as well as other reasons, an obstinate unemployment
problem nearly everywhere.
II.
How well has our economic and monetary system stood up to all
these strains and challenges? Perhaps most remarkable is the
-2-
GERALD FORD LIBRARY
- 2 -
simple fact that our system has survived at all (which reminds
one of the French marquis who, when asked what he had done
during the French Revolution, replied: "j'ai survécu"). Our
system has survived battered and bruised, it is true, but
without having lost its essential quality of a predominantly free
market system, and without as yet! - too many protectionist
distortions (although the threat of them is unfortunately in-
creasing daily). If our system has shown a surprising degree of
resilience and shock-absorption power, some credit for it must
go to the more elastic exchange rate system. Elastic exchange
rates as shock absorbers are certainly preferable to damaging
protectionist trade measures.
As concerns in particular our international payments system,
it has since the oil price explosion . - contrary to a lot of
gloomy predictions - accommodated, without major breakdowns up
to now, gross balance of payments deficits (measured in terms of
deficits on current account, i.e. trade and invisibles) to the
tune of $ 60 to 75 billion annually, that is, more than seven
times the annual average of the sixties. And astonishingly enough,
the financing of these huge deficits has been accomplished
mostly through private credit and investment and with only a
relatively modest contribution from official financing.
Who would have thought it possible that after all these
strains and dislocations - world trade would recover within
two years to a level which in 1977 seems to have been 11 to
12 per cent higher in volume terms, and about 33 per cent
higher in dollar terms, than the pre-recession peak of 1974?
-3-
- 3 -
III.
These positive developments should not be underestimated.
On the other hand, the means by which some of them have been
brought about namely huge international lending and borrowing -
have left a legacy which will remain a deadweight.
This legacy consists of massive external indebtedness on the
one hand and a huge accumulation of foreign assets in a handful of
oil countries on the other. If present forecasts come true, by
1980 a few Arab oil countries will have accumulated between
$ 200 and 250 billion worth of foreign assets, that is to say
more than one half of what the United States, the world's strongest
economy, has accumulated over the last 100 years (gross! - and
nearly three times the amount which it has accumulated as a net
foreign position!). This implies an important shift in economic
power, but it imposes also an enormous responsibility for the
world economy on the oil-rich nations.
IV.
More than a year ago, at the Manila Meeting of the Inter-
national Monetary Fund and the World Bank, Mr. Witteveen, the
Managing Director of the Fund, proposed - with general acclaim -
that from now on more stress should be laid on the adjustment
of external positions, rather than on the mere financing of
deficits. How far have we come along the road toward better
adjustment of payments imbalances?
There have been surprising changes in the international
payments scene over the last 12 months. Last year the spotlight
was mainly on some extreme deficit countries in Europe and on
the group of less developed countries (LDCs) with their massive
external indebtedness. Now the spotlight is more on the United
States and Japan.
-4-
- 4 -
Distinct progress has been made in Europe. If we take
Britain, France and Italy together, their combined balance of
payments deficit on current account amounted to $ 23 billion
in 1974 (the first year after the oil price hike), $ 11 1/2
billion in 1976, and only about $ 2 billion in 1977. In the
case of Britain, North Sea oil has had a hand in it; but
there, as in the other cases, progress has also owed a lot to
courageous stabilisation policies. There still remains, however,
a hard core of smaller European deficit countries which have
hardly yet begun to grapple with their acute payments problems
- chief among them some Southern European countries. It is to
be hoped that the IMF, in advising them and lending them a
helping hand, will have similar success as in the cases of
Britain and Italy.
In parentheses I may add that another group of European
countries has recently also made headway in their balance of
payments adjustment, i.e. the countries of the Eastern bloc.
They have made a great effort to reduce their trade deficits,
mostly by restraining imports, not least in order to strengthen
their credit standing in international financial markets.
For the considerable, although as yet incomplete progress
in balance of payments adjustment in Europe a price has had to be
paid: the inevitable slowdown in the imports of the countries con-
cerned has been a factor in the lower expansion of world trade
in 1977. But we can hope that these countries will soon be able
to re-start economic expansion on a healthier and more stable
basis.
V.
In another problem area, namely the non-OPEC developing
countries, the payments situation and the credit rating of a
-5-
- 5 -
number of them has improved. A year ago some observers
painted the specter of an impending international financial
crisis on the wall as a consequence of these countries' payments
deficits and external indebtedness. This gloomy view appears in
retrospect to have at least in part been exaggerated. There
certainly are a few critical cases where a developing country
has reached, or maybe even overstepped, the limits of its
borrowing capacity, so that drastic measures have had to be
adopted.
But contrary to a widespread opinion, the LDCs as a group seem
to have fared relatively better over the last few years than
many industrial countries, especially as concerns their domestic
production. But in recent years also their exports have increased
significantly, not least their exports of industrial products
(which are increasingly forcing structural adjustments on the
economies of industrial countries). We can no longer classify
all the countries of the Third World as "less developed" and
lump them together into one single group.
If nevertheless we consider their balances of payments for
a moment in the aggregate, we arrive at the astonishing conclusion
that their external situation, which formerly aroused so much
concern, has practically reverted to normal. This is the con-
clusion of the experts of the International Monetary Fund.
According to them, the LDCs' global payments deficit on current
account in 1976 and 1977 (at about $ 26 and 22 billion respectively)
corresponded to their normal combined deficit before the oil
crisis, when adjustment is made for inflation and the increase
in real output (GNP). A net annual capital inflow of this magni-
tude can be financed without too great difficulties - the
gap which must be financed out of commercial sources is a net
amount of only $ 6 to 8 billion; it seems to be also within
their aggregate debt servicing capacity.
-6-
- 6 -
Even their accumulated external debt does not, on closer
analysis, look unmanageable. It is true that it has in-
creased about fourfold since 1968, but so has the value of
their total exports and GNP. But this is no ground for complacency.
It is not good enough to conclude that the LDCs as a group have
not thus far overborrowed. It is always risky to reason on
global figures. Some individual countries' debt problems look
rather grim, and further borrowing abroad by such countries
will depend on whether they are able to put their financial
houses in order. But I don't see these individual debtor pro-
blems posing an imminent threat to our world financial system
as a whole.
VI.
Let me add here a few remarks on international bank lending
and security markets in general.
The question of whether international bank lending is
over-extended has often been discussed as if it
concerned mainly lending to the developing countries. This is
a misconception. In reality the problem extends far beyond the
financing of LDCs.
Last year, for example, total international private lending
through banks and security markets is estimated to have increased
by a staggering $ 90 to 95 billion - of which, however, less than
one fifth was accounted for by lending to developing countries.
This huge international lending and borrowing activity
raises many questions, such as what can be done to improve the
flow of data needed to evaluate the creditworthiness of individual
borrowing countries, whether too easy commercial lending may not
undercut the IMF's attempt to ensure more economic discipline,
-7-
- 7 -
and what role parallel financing between the banks and the IMF
can play. I cannot go into these questions in detail here.
But I want to express my general feeling that international
commercial lending has recently reached magnitudes which should
prompt some soul-searching. The increase in 1976 of $ 90 to
95 billion which I mentioned was nearly twice the amount needed
in commercial resources for the financing of all current account
deficits in the world ($ 75 billion total deficits, minus
financing by official assistance and credit, direct investment
and trade credit), and nearly four times the OPEC surplus funds
that had to be recycled through the private markets (a $ 35 billion
"investible surplus", minus direct OPEC loans to deficit countries
and international agencies). Thus international lending has
extended far beyond what is necessary to ensure the recycling
of petro-dollars, and beyond the need to finance payments de-
ficits. A pause for reflection, and a period of consolidation in
international financing seems to be indicated.
VII.
Can the world economy be brought back at all into some sort
of balance as long as the huge payments surpluses of the oil-rich
countries continue unabated?
1. First of all, these surpluses need not in fact continue
unabated, as is sometimes supposed. There are estimates - by the
OECD and others - that under reasonable assumptions these sur-
pluses may fall, in the aggregate, from their present annual
rate of $ 35 to 40 billion to between $ 15 and 25 billion by the
beginning of the eighties, mainly through rapid increases in the
imports of the OPEC countries. Judging from our German experience,
the adjustment might proceed even more quickly. For we have now
-8-
- 8 -
fully balanced our trade account with the OPEC countries, thus
bearing the full burden of the adjustment to the higher oil
prices (real adjustment!) by a correspondingly greater transfer
of real resources to the OPEC countries. 1)
2. The future size of the OPEC surpluses will depend
decisively on the oil imports of the United States. At present,
at least one half of the combined current account surplus of
the OPEC countries is due to the "oil deficit" of the USA, that
is to say its current account deficit vis-à-vis these countries.
In a few years the insatiable appetite of the U.S. for oil may
account for even more than half the OPEC current account surplus.
Thus, the residual financial burden placed upon the rest of the
world by the OPEC surpluses at the beginning of the next decade
may be only one half of the estimated annual $ 15 to 25 billion
- provided the U.S. does not attempt to shift part of its own
oil deficit on to other oil-importing countries by increasing
its trade surplus with them.
3. The accumulation of foreign assets in the hands of the
OPEC countries has already assumed very large proportions,
namely an estimated $ 170 billion. I do not, however, believe
in the "doomsday scenario" according to which "an international
debt crisis" may be looming up on the horizon in the form of
massive withdrawals of liquid OPEC funds out of the dollar. I
have confidence in the sense of responsibility of the oil-rich
countries (which they have proven up to now in the management
of their foreign assets) and I also believe they are shrewd
enough to recognise their own best interests (since by suddenly
withdrawing a few billion out of their liquid dollar assets they
could disproportionately depreciate their large remaining dollar
assets).
1) And not, as was asserted quite recently in a Congressional
Report, by shifting the burden of adjustment to other oil-
importing countries, including the LDCs.
-9-
- 9 -
A judicious management of their foreign assets is one of
the new responsibilities toward the world community which have
devolved upon the oil-rich nations. Others comprise giving more
direct financial help to the less developed countries, contributing
to the stability of the international monetary system by giving
special support to the IMF (similar to the industrial countries
with strong currencies), and - last but not least - acting re-
sponsibly in fixing the oil price.
VIII.
Now let me make a jump from the extreme surplus side to the
extreme deficit side of the world payments ledger, where the U.S.
is now the record-holder with a deficit on current account of
about $ 16 to 18 billion this year. The dollar has been called
"the most important undiscussed issue at the September Meeting of
the IMF". I would also have preferred to pass over the dollar
problem entirely, for, like Caesar's wife, a currency like the
dollar should be above suspicion and not be talked about. But
the problem has in the meantime been so much publicized that
you probably expect a few words on it from me.
It is well known that the American payments deficit stems
to a large extent from the enormous increase in the oil bill
of the U.S., and to some extent from the faster economic ex-
pansion in the U.S. than abroad. Some would probably add another,
and more controversial, point, namely a loss of U.S. competitiveness
in comparative costs and prices. My assessment is that the U.S.
competitive position, measured by market shares or by a cost
and price comparison with the other industrial countries, may
have deteriorated slightly here and there over the last twelve
months. But over the whole period since the beginning of the
70's the U.S. has become more competitive in terms of relative
prices and wages by 20 to 30 per cent, depending on the criterion
-10-
- 10 -
applied. In some bilateral relations the shift has been even
larger. According to the U.S. Department of Labor, from 1970 to 1976
unit labor costs increased by 35 per cent in the U.S., but by
about 100 per cent (!) in Germany, when calculated in dollar terms.
No wonder our German industrialists find it so attractive to
invest and produce in the United States!
Needless to say, the large U.S. trade deficit vis-à-vis
Japan plays a special role. But it should also be mentioned that
the U.S. has a trade and current account surplus with the rest
of the world, and a particularly large one with Western Europe.
When the American payments deficit first emerged - and this
happened only about a year ago - it was at first saluted as
"a healthy sign" and as a benefit to the rest of the world. Now
there seems to be agreement, at least among those responsible
for economic and monetary policy on both sides of the Atlantic,
that the negative aspects of this deficit preponderate, that
it should be gradually reduced, and that it is of overriding
importance to keep the dollar strong, in the interests of both
America and the world economy.
You will not be surprised when I tell you that a sagging
dollar is not very popular in Europe and that countries are not
enthusiastic when their currency is driven up disproportionately
in relation to the dollar. But I want to stress that, contrary
to what still seems to be assumed occasionally in the U.S.,
Germany for instance has always accepted an appreciation of the
DMark brought about by underlying market forces, and has not
attempted to artifically counteract it. Thus, the DMark has
appreciated by 16 1/2 per cent against the dollar since the be-
ginning of 1976 and by no less than 43 per cent since 1972. In
both cases this goes considerably beyond the differences in cost
and price developments in the two countries (the "inflation
differential"), so that it has depressed the competitiveness
-11-
- 11 -
of our economy and increased the competitive position of
American industry. This is also true when we examine the
appreciation of the DMark in relation to a trade-weighted
basket of all major currencies and compare it with relative
cost and price developments. This has been one of our major,
and sometimes quite painful, contributions to the payments
adjustment process. The Japanese yen, which had at first lagged
behind, has recently also joined this upward movement vis-à-vis
the dollar and other currencies. But in passing I may note that
we are somewhat sensitive when the German and Japanese payments
cases are thrown into the same basket (as they sometimes have
been by American commentators), for Germany has not relied on
an export-led recovery, and it has already reduced its current
account surplus to near-zero (and its basic balance of payments,
i.e. including long-term capital, shows a large deficit), while
the Japanese trade and payments surplus is still rising to
record heights.
If we are in favor of a strong dollar, it is not only because
of our trade interests, but even more because of the pivotal role
of the dollar in the world monetary system. The dollar is not
just another currency, it is the key currency of the world. A
dollar which is constantly under a cloud of suspicion could
have a disruptive influence on world trade and payments, quite
apart from the possible effect of a sagging dollar on oil prices.
It is encouraging for the world community to see that the
resolve to maintain a strong dollar is widely supported in this
country. Chairman Arthur Burns - who has rightly been called
"the dollar's bodyguard" - has repeatedly stated that "the integrity
of the dollar must be defended", which is, of course, the opposite
to benign neglect, and he has found a sympathetic echo all over
the world. We in Germany also welcomed a statement by Secretary
Blumenthal during his recent visit to our country, which he
LIBRARY GERALD FORM
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underlined again in his keynote address this morning, namely
that the United States is fully committed to the maintenance of
a strong and stable dollar.
IX.
How can this be achieved in practical terms?
1. There is no need to stress that the most important measure
would be a meaningful U.S. energy program, because this would
attack the major payments problem at its roots. Its effect on
American oil imports will, however, be felt only over the longer
run.
2. Some contribution towards a better external balance could
also be expected from reducing the disharmony between the rates
of economic expansion in the U.S. and other countries. We in
Germany have accepted the principle that countries with strong
currencies should "maintain adequate demand, consistent with
anti-inflationary policies" (Undersecretary of the Treasury
A.M. Salomon). We hope that not only our economy but also that
of other countries will soon get back on an appropriate growth
track. This is not easy when you have to deal with an economy
like ours which has suffered from cost inflation and a prolonged
profit squeeze, the latter not unrelated to the continuous
appreciation of the DMark. But we are confident that the recently
enacted fiscal stimulation program of the German government,
supported by an appropriate monetary policy, will achieve the
desired results.
3. How far could exchange rate policy be used as a tool for
this payments adjustment? I would not deny that in individual
cases a country's exchange rate vis-à-vis the dollar has to be
adjusted to changed underlying market forces or inflation
differentials. But a generalized depreciation of the dollar would
probably not have much effect on the trade balance of the U.S.
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in the short run, especially not on its crucial balance
vis-à-vis the OPEC countries, and its negative effects
on the American capital account, not to mention its
unsettling effects on the world monetary system and on oil
prices, would quite certainly far outweigh its positive effects.
4. The question has been raised whether a deliberate and
cooperative management of the exchange rates of the dollar and
some other major currencies (such as the yen, the DMark, and
the Swiss franc) could not make a major contribution to more
stability in the world monetary system. In this connection, the
setting up of agreed target zones for the exchange rates of major
currencies has been suggested. The idea is not new; such target
zones were already discussed in the IMF some years ago, and were
foreseen as a possibility in the Fund's 1974 Guidelines for
managing exchange rates. But I feel that this is a non-starter
(as it was in the years after 1974). Even to agree on fixed target
zones themselves and the principles for their determination and
change would be extremely difficult. Fixed targets might also
create new, safe bets for currency speculation. Furthermore, an
obligation of other countries to intervene in the dollar market
in order to maintain certain exchange rate limits would
entail such an enormous commitment in quantitative terms that
it could not be compared to the commitments inside the European
"Snake".
I do not rule out a more coordinated intervention policy
among the major countries; on the contrary, I welcome it. We have,
indeed, already made some progress in this direction. The present
rule that interventions in the exchange market should be under-
taken "only to smooth out temporary fluctuations" could perhaps
be interpreted in a flexible way in view of the central position
of the dollar in our world monetary system. But we cannot solve
the payments imbalance between the U.S. and the rest of the world
mainly by foreign exchange intervention; and we should not rely
on massive intervention by monetary authorities to continue to act
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in bridging the payments gap as it has done in 1977. I can only
mention in passing the tremendous problems for domestic money
creation as well as for international monetary liquidity which
such massive intervention in the dollar market would entail.
During the transition period until the U.S. current account
gets into better shape, an overall payments equilibrium between
the U.S. and the rest of the world will have to be ensured by
capital imports into the U.S. This should not be too difficult.
A considerable part of the large current account deficit vis-à-vis
the OPEC countries should be self-financing, as these countries
in all likelihood will continue to invest part of their surpluses
in dollar assets. But to achieve this balancing act through
capital imports smoothly, American interest rates will have to
remain attractive and confidence in the dollar unimpaired. In the
final analysis, this will depend - and the strength of the dollar
will depend - crucially upon successful anti-inflation policies.
As concerns our general attitude toward the dollar problem,
I should like to associate myself with the advice recently given
by Professor Walter Heller: "we should not lose our cool nor
should we practice benign smugness". I say "we", as the health
of the dollar is not only America's concern but also that of
the rest of the world.
X.
Let me conclude: I have had to present to you a mixed picture as
concerns international monetary relations. Problems which had
seemed nearly intractable when the oil price explosion broke upon
us in 1973/74 have been at least partly overcome and no longer
look so threatening. New problems have arisen which confront us
with new challenges. To meet them, we will probably need even more
international coordination and cooperation than before. Never
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before has the economic interdependence of all the nations of
the world been more deeply impressed upon our minds than at
present. A precondition for the necessary cooperation and
coordination is a commonly agreed diagnosis of the problems.
It is encouraging that we seem to have achieved common views
on our major international monetary and payments problems on
both sides of the Atlantic. I am confident that on this basis
our cooperation in the international monetary field will be better
than ever before.
DR. OTMAR EMMINGER
PRÄSIDENT DER DEUTSCHEN BUNDESBANK
038ALD RD
FRANKFURT AM MAIN
At its meeting on August 25, 1977, the Central Bank Council
of the Deutsche Bundesbank took the following decisions:
1. The minimum reserve ratios will be reduced
by 10 % of their present level with effect from
September 1, 1977.
2. The banks' rediscount quotas will be raised by
about DM 2 billion with immediate effect.
Through the reduction in minimum reserves some DM 4 1/2 billion
of the compulsory non-interest-bearing deposits which the banks
maintain at the Bundesbank will be released. The raising of
the rediscount quotas will permit the banks to obtain additional
funds from the Bundesbank at the discount rate. This will enable
them to lower their present high level of short-term recourse
to the Bundesbank through lombard loans and open market trans-
actions in bills. These measures are in line with the monetary
policy the Bundesbank has been pursuing for some time.
DERALO FORD LIBRARY
OFFICE OF THE CHAIRMAN
RECEIVED
1977 AUG 31 AM 11: 20
FEDERAL RESERVE SYSTEM
OF
BOARD OF GOVERNORS
Deutsche Bundesbank
Pressenotiz
Frankfurt am Main, 25. August 1977
Der Zentralbankrat der Deutschen Bundesbank hat heute folgende Beschlüsse
gefaßt:
1. Die Mindestreservesätze werden ab 1. September d.J.
um 10% ihres bisherigen Standes gesenkt.
2. Die Rediskont-Kontingente der Kreditinstitute werden
ab sofort um rd. 2 Mrd. DM erhöht.
Mit der Mindestreservesenkung werden rd. 4 1/2 Mrd DM der bei der Bundes-
bank von den Kreditinstituten zinslos zu haltenden Pflichteinlagen freigegeben. Die
Erhöhung des Rediskontrahmens erlaubt den Kreditinstituten zusätzliche Refinanzierun-
gen zum Diskontsatz. Damit wird es den Kreditinstituten ermöglicht, ihre derzeitige
hohe kurzfristige Refinanzierung über Lombardkredit und Offenmarktgeschäfte mit
Wechseln abzubauen. Diese Maßnahmen entsprechen dem seit längerem verfolgten
geldpolitischen Kurs der Bundesbank.
LISTAGE GERALD FORD
Bei publizistischer Verwertung Angabe der Quelle erbeten
PRESSE UND INFORMATION
Frankfurt am Main, 25. August 1977
F/F 10
Präsident Dr. Emminger und das Mitglied des Direktoriums Dr. Irmler
vor der Presse nach der ZBR-Sitzung am 25. August 1977
(nach Bandaufnahme)
Meine Damen und Herren!
Ich begrüße Sie zu dieser Pressebesprechung. Der Beschluß, den der Zentralbank-
rat heute gefaßt hat, ist Ihnen bereits ausgehändigt worden. Mit der Freigabe
eines erheblichen Liquiditätsbetrages wollen wir die Versorgung der Kredit-
institute mit Notenbankliquidität auf eine dauerhaftere Grundlage stellen. In den
letzten Monaten mußten die Kreditinstitute einen erheblichen Anteil ihres Bedarfs
an Zentralbankgeld dadurch decken, daß sie kurzfristig Liquidität bei der Bundes-
bank gepumpt haben, und zwar durch Lombardkredit und durch die Zehntagesgeschäfte
mit Wechseln. Das hätte mit der Zeit zu einer gewissen Verklemmung führen
können, insbesondere weil mit dem September ein Monat vor uns steht, der
schon aus jahreszeitlichen Gründen ohnehin einen zusätzlichen Liquiditätsbedarf
aufweist. Infolgedessen haben wir heute beschlossen, diese kurzfristige und
provisorische Liquiditätsbereitstellung durch eine dauerhaftere Liquiditätsausstat-
tung abzulösen, nämlich durch eine Senkung der Mindestreserven und eine Er-
höhung der Rediskontkontingente.
Frage:
Inwieweit sind diese Maßnahmen im Rahmen Ihres vorgegebenen Geldmengenziels
zu verstehen, oder inwieweit haben Sie damit auch dem schleppenden Konjunktur-
verlauf Rechnung getragen, um mit einer vielleicht expansiveren Geldpolitik an-
regend zu wirken?
Emminger:
Zunächst möchte ich in Erinnerung rufen, daß ich schon Mitte Juli, vor den
Sommerferien, als wir das letzte Mal hier zusammen waren, in Aussicht ge-
stellt hatte, daß wir uns im August vor der Notwendigkeit sehen würden, einen
Liquiditätsbeschluß zu fassen. Sie sehen daraus, daß dies ein Beschluß ist, der
im Rahmen unserer längerfristigen Geldmengenpolitik,unserer längerfristigen
GERALD R. LISBARY FORD
2
2
Liquiditätsversorgung liegt. Ich hatte damals sogar ziemlich genau gesagt, in
4 oder 6 Wochen, und das hieß- eben, entweder am 11. oder 25. August würde
dies eintreten; und zwar deswegen, weil wir einen solchen Beschluß zur länger-
fristigen Verbesserung der Liquiditätsausstattung der Kreditinstitute natürlich
zweckmäßigerweise zu einem Zeitpunkt fassen, an dem aus Saisongründen sowieso
eine zusätzliche Anspannung auf uns zukommt. Aber diese saisonmäßige Anspan-
nung ist nicht ein primärer Grund, es ist nur der Anlaß für das Timing, für den
Zeitpunkt. Im übrigen ist das Ausmaß, das relativ hoch erscheinen könnte immer-
hin 4 1/2 Mrd DM Senkung der Mindestreserven und zusätzlich noch eine Erwei-
terung des Rediskontrahmens um 2 Mrd DM -,weitgehend dadurch bestimmt wor-
den, daß gerade in den letzten 2 Monaten die Banken zur Deckung ihres Liquiditäts-
bedarfs stark auf diese provisorischen, kurzfristigen Liquiditätshilfen, den Lombard-
kredit und die Zehntagesgeschäfte, angewiesen waren. Natürlich hat auch mitge-
spielt, daß wir es bei der heutigen Konjunkturlage vermeiden wollen, auch nur
vorübergehend eine Verknappung oder Verklemmung bei den Kreditinstituten ein-
treten zu lassen. Insofern hat im Hintergrund auch die Konjunkturlage eine Rolle
gespielt. Sie würde es heute sicherlich nicht angebracht erscheinen lassen, durch
vorübergehende Liquiditätsverklemmungen etwa plötzliche Ausschläge z.B. bei
den Zinsen hervorzurufen. Aber dieser Gesichtspunkt fügt sich, und deswegen
der letzte Satz in unserer Pressenotiz, in den längerfristigen geldpolitischen Kurs
der Bundesbank nahtlos ein.
Frage:
Herr Dr. Emminger, in welchem Umfang sind bisher diese provisorischen Liquidi-
tätshilfen in Anspruch genommen worden, wie hoch war das Gesamtvolumen der
in Anspruch genommenen Zehntageswechsel, der Lombardkredite, und in welchem
Umfang waren bisher die Rediskontkontingente ausgenutzt?
Emminger:
Das ist eine diffizile Rechnung, vor allem, weil diese Zahlen sich natürlich
ständig verändern. Sie können das anhand unserer Wochenausweise verfolgen.
Auch der aktuelle Stand besagt deshalb nicht viel, weil innerhalb weniger Tage
große Veränderungen eintreten können.
Irmler:
Deswegen würde ich nicht den letzten Stand nennen wollen. Im Verlauf des August
ist bisher im Tagesdurchschnitt etwa 2 1/2 Mrd DM Lombard genommen worden;
außerdem standen etwa 5 1/2 Mrd DM Zehntagesgeschäfte aus. Im Tagesdurch-
schnitt des August macht das zusammen also rd. 8 Mrd DM.
3
3
Frage:
Wie hoch waren die Wechselkredite, der Wechselrediskont, in Anspruch genommen?
Irmler:
Im Tagesdurchschnitt des August bisher mit 63%.
Frage:
Wie groß sind die Rediskontkontingente insgesamt?
Irmler:
Das sind jetzt etwa 22 Mrd DM einschließlich der heute beschlossenen Erhöhung
der Rediskontkontingente.
Frage:
Herr Präsident Emminger, Sie sprachen vom Ablösen der "provisorischen" Liqui-
ditätshilfen; heißt das beispielsweise, daß das Volumen der Pensionsgeschäfte
künftig herabgesetzt wird?
Emminger:
Das ist durchaus möglich; die heutige Freigabe ist ja so reichlich, daß wir eigent-
lich bald nach Inkrafttreten dieser Regelung Anfang September wahrscheinlich auf
die Zehntagesgeschäfte mit Wechseln verzichten könnten. Aber ich will mich hier
nicht festlegen, weil, wie Sie wissen, wir bei dieser Offenmarktpolitik mit Zehn-
tageswechseln bewußt flexibel bleiben wollen. Erwünscht aber ist es,und angestrebt
wird es, daß wir Anfang September von dieser provisorischen Methode, wie ich
es einmal nennen möchte, herunterkommen.
Frage:
Wie sieht denn die Devisenbilanz aus? Im Juli kam es doch über die Währungs-
reserven zu einem Zufluß von etwa 2 Mrd DM, in der zweiten Augustwoche ist
wohl ein Rückgang bei den Nettowährungsreserven eingetreten. Könnten Sie dies
einmal erläutern?
Emminger
Sie haben ganz recht gesagt, es gab im Juli einen Nettozufluß von rd. 2 Mrd DM.
Wir haben im bisherigen Verlauf des Monats August einen Nettoabfluß von nicht
ganz 650 Mio DM gehabt, so daß also noch nicht alles spekulative Geld, das uns
im Juli zugeschwemmt worden ist, schon wieder abgeflossen ist. In der gesamten
4
FORD
'if
GERALD
4
Devisenbilanz seit Anfang d.J. bis heute haben wir 430 Mio DM Nettozufluß
gehabt; praktisch ist das also eine Null-Bilanz. Das heißt, von der Devisenseite
her, wenn wir von Anfang d.J. bis gestern rechnen, haben wir einen so geringen
Nettozufluß, daß wir sagen können, unsere Devisenbilanz ist im Gleichgewicht und
ebenso unsere Gesamtzahlungsbilanz. Aber noch ein anderer Zahlungsbilanzbegriff
ist wichtig, nämlich die sogenannte Grundbilanz. Diese "basic balance of payments"
der Bundesrepublik, das heißt Leistungsbilanz plus langfristiger Kapitalverkehr,
ist im ersten Halbjahr d.J. im Defizit gewesen, und zwar ganz beachtlich mit
rd. 2 1/2 Mrd DM. Das bedeutet Unser Leistungsbilanzüberschuß der nicht ganz
5 1/2 Mrd DM betrug, ist weit überkompensiert worden durch langfristige Netto-
Kapitalexporte. In den sieben Monaten von Januar bis einschließlich Juli haben wir
einen Überschuß der Leistungsbilanz von 4,1 Mrd DM gehabt. Der langfristige
kapitalverkehr hat mit einem Defizit von 8,6 Mrd DM abgeschlossen, so daß die
Grundbilanz in diesen sieben Monaten ein Defizit von 4;5 Mrd DM aufwies. Wenn
man also von der Bundesrepublik immer als einem Überschußland spricht und glaubt,
daß dieser Überschuß den D-Mark-Kurs vom Markt her in die Höhe treiben müßte,
so ist das eben nur eine Teilbetrachtung; denn man läßt dabei außer acht, daß wir
durch unsere sehr niedrigen Zinssätze einen sehr hohen Nettokapitalexport lang-
fristiger Art haben. Wir haben heute ein Zinsniveau, das 1 1/2 bis 2% niedriger als
das in den Vereinigten Staaten ist.
Frage:
Herr Dr. Emminger, wie sehen denn die letzten Schätzungen aus für das Wachstum
des Bruttosozialprodukts im 2. Quartal?
Emminger:
Wir haben für das 2. Quartal keine eigenen Schätzungen vorliegen. Sie wissen,
daß wirklich verläßliches statistisches Material ja immer noch Seltenheitswert hat,
aber ich glaube wohl sagen zu können aber Herr Schlesinger, korrigieren Sie
mich, wenn ich es falsch formuliere -, daß im 2. Vierteljahr d.J. das reale
Wachstum ganz geringfügig war, Es war sicher nicht weit entfernt von einer
Stagnation, und zwar, um es präzise zu sagen, vom ersten zum zweiten Vierteljahr
gerechnet. Gegenüber dem Vorjahr war auch das 2. Vierteljahr immer noch im
Plus, aber nicht mehr so wie in den vorangegangenen Vierteljahren.
Frage:
Und die Schätzung für das 1. Vierteljahr, das bleibt bei 4 %?
5
GERALD
5
Emminger:
Das bleibt bei ungefähr 4 %, ja!
Frage:
Herr Dr. Emminger. Was sollte die Bundesregierung nach Auffassung der Noten-
bank zur Stabilisierung der Konjunktur tun?
Emminger:
Das ist eine Frage, die ich Ihnen zu meinem Bedauern heute nicht beantworten
kann. Erstens wüßte ich es gerne selber,und zweitens, wenn ich es wüßte, dann
könnte ich es Ihnen heute mit Sicherheit nicht sagen.
Frage:
Soll überhaupt etwas getan werden?
Emminger
Dazu kann ich Ihnen nichts sagen; allenfalls dieses: Wir haben darüber auch heute
im Zentralbankrat gesprochen. Wir teilen die Ansicht derjenigen, die meinen, daß
es entscheidend wichtig ist, daß Beschlüsse, wenn sie gefaßt werden sollten, so
rasch wie möglich kommen, d.h., daß diese Periode der Ungewißheit so rasch wie
möglich beendet wird. Das ist wirklich, wie ja schon mehrfach gesagt worden ist,
Gift für die Wirtschaft, das verstärkt den Attentismus, und der Attentismus ist
sowieso zur Zeit einer der hemmenden Faktoren für einen normalen Fortgang der
Konjunktur. Man kann also nur sagen, je rascher, desto besser, oder: Es muß
so schnell wie möglich entschieden werden.
Frage:
Ich hatte vorhin etwas gefragt, es bezog sich noch einmal auf die Rediskontkontin-
gente. Wo sehen Sie denn die praktische Wirkung der Freigabe oder der Erhöhung
der Rediskontkontingente um 2 Mrd DM, wenn die jetzigen bei 22 Mrd DM ohnehin
nur zu 63% in Anspruch genommen werden?
Emminger
Der Sinn dieser Erhöhung ist folgender: Wir gehen davon aus, daß es von Zeit zu
Zeit. immer wieder Perioden geben wird, in denen wir keine Zehntagesgeschäfte
mit Wechseln offerieren. Heute ist die Ausnutzung der Rediskontkontingente deswegen
so relativ gering, weil es für die Kreditinstitute viel einfacher ist, ihre Wechsel
FORD
7
GERALD
6
bei uns auf 10 Tage in Pension zu geben, als sie zu rediskontieren, wo sie sich,
dann auf 4, 5 oder 6 Wochen fest binden müssen. Wenn dagegen, was wir hoffen
und erwarten, die Zehntagesgeschäfte mit Wechseln wegfallen, dann werden mit
großer Wahrscheinlichkeit, wenn nicht sogar Sicherheit, die normalen Rediskont-
kontingente wieder stärker ausgenutzt. Und wenn nun der Rahmen für diese Rediskont-
kontingente höher ist, besteht auch die Chance, daß sie stärker ausgenutzt werden.
Das ist der Sinn. Sie müssen das in Einem sehen, wir wollen weg von dieser Finan-
zierung über provisorische Mittel und mehr auf die normalen, traditionellen
Instrumente zurückkommen.
Frage:
Aber, Herr Dr. Emminger, besteht nicht angesichts der wirtschaftlichen Stagnation
die Gefahr, daß ein großer Teil dieser insgesamt 6 1/2 Mrd DM an freigegebener
Liquidität ins Ausland geht, weil dort höhere Zinsen geboten werden, so wie dieses
auch in letzter Zeit aufgrund der Zahlen, die Sie genannt haben, geschehen ist?
Dann wäre dies eigentlich für die innere Entwicklung, wollen wir einmal sagen,
keine Initialzündung?
Emminger:
Wenn das eintreten sollte, was Sie eben sagten, würde das ja zunächst primär die
Wirkung haben, daß der DM-Kurs etwas nach unten und der Dollarkurs etwas nach
oben gedrückt würde, was auch nicht zu verachten ist. Außerdem haben wir, das
habe ich damit schon ausgedrückt, das Floaten, und es wird nicht wahrscheinlich
sein, daß in einem Regime des Floatens plötzlich Milliardenbeträge per Saldo ins
Ausland gehen. Vor allem werden die Banken diese dauerhafte Verbesserung ihrer
Liquiditätsgrundlagen nun dazu verwenden, um die provisorischen Refinanzierungen
abzulösen. Man hat sogar hören können, daß manche Kreditinstitute glaubten, sie
kämen allmählich in eine Verklemmung durch diese sehr provisorische Refinan-
zierung bei der Bundesbank, und gerade solche Verklemmungen wollen wir auf
diese Weise vermeiden. Ich glaube nicht, daß es schon echte Verklemmungen gibt,
aber wir wollen das auf alle Fälle vermeiden, und dann werden eben diese Freigaben
dazu verwendet, um die Liquiditätsbasis der Kreditinstitute auf eine dauerhaftere
Basis zu stellen.
Frage:
Herr Emminger, noch zwei kurze Fragen. Einmal, Minister Ehrenberg war doch
vor wenigen Tagen bei Ihnen: Hat Herr Ehrenberg irgendwie die Bundesbank gebeten,
FORD
LIBRARY
7
GERALD
7
vielleicht der Bundesregierung mit einer expansiveren Geldpolitik zu helfen?
Das ist die eine Frage; die andere: Sieht die Bundesbank überhaupt noch Möglich-
keiten, mit ihrem Instrumentarium etwas zu tun, um die Konjunktur anzuregen,
oder sind Sie nicht mit Ihren Mitteln, die Sie zur Verfügung haben, eigentlich am
Ende Ihres Lateins?
Emminger:
Zur ersten Frage kann ich Ihnen sagen, daß Minister Ehrenberg sein volles Einver-
ständnis und seine Zufriedenheit mit unserer Geld- und Kreditpolitik ausgedrückt
und keine zusätzlichen Anregungen gegeben hat. Zum zweiten, wir haben tatsächlich
mit unserem geldpolitischen Instrumentarium schon eine ganze Menge in dem Sinne
bewirkt, wie Sie es eben andeuteten, denn wir haben von der Finanzierungsseite her
doch wirklich sehr gute Grundlagen für ein Wachstum der Volkswirtschaft gelegt.
Wir haben nun ein Zinsniveau, wie wir es seit 13 oder 15 Jahren nicht mehr hatten.
Wir haben reichliches Geld, und mehr kann man eigentlich von der Geldseite aus
nicht dazu tun. Reichliche Finanzierungsbedingungen zu. billigen Zinsen, das ist
das, was wir von uns aus anbieten können. Eines kann ich noch hinzufügen: Es ist
überall anerkannt, daß die Bundesbank mit ihrem bisherigen Kurs das, was von
der Geldseite her überhaupt getan werden kann, getan hat, und daß die Hemmnisse,
die heute bestehen, die Schwächen, die heute in unserer Konjunktur immer wieder
spürbar werden, nichts mit der monetären Seite zu tun haben, sondern, daß da ganz
andere Faktoren im Spiele sind. Das ist heute allgemeine Überzeugung, und deswegen
gibt es keinerlei Druck oder Forderungen gegenüber der Bundesbank.
Frage:
Herr Emminger, der 2 Milliarden-Dollar-Kredit an Italien wird im nächsten
Monat,wie vorgesehen, noch mal verlängert werden?
Emminger:
Ich kann Ihnen dazu jetzt nichts sagen. Bei der nächsten Gelegenheit hoffe ich,
Ihnen das genauer explizieren zu können, aber heute kann ich Ihnen dazu keinen
Kommentar geben.
Frage:
Herr Dr. Emminger, rechnen Sie damit, daß die Mindestreservefreigabe insgesamt
auch noch billigere Kredite bedeuten kann?
FORD
8
8
Emminger:
An sich ist im Augenblick bei den Sollzinsen immer noch eine Zinssenkung im
Gange, und ich rechne schon damit, daß durch diese ziemlich massive Freigabe
von Mindestreserven die Zinssenkung, die ja sowieso im Gange ist, noch einen
weiteren Push nach unten bekommen wird. Das würde ich schon vermuten, aber
ich möchte keine ganz feste Prognose stellen. Wohl aber glaube ich sagen zu
können, daß die Zinssenkung, die sich bisher vollzogen hat, dadurch mit Sicherheit
eine festere und dauerhaftere Grundlage bekommen wird.
Frage:
Beziehen Sie das auch auf den Kapitalmarktzins oder nur auf die Sollzinsen?
Emminger:
Das würde ich auch auf den Kapitalmarktzins beziehen.
Frage:
Ist vorgesehen, daß der Bund im nächsten Monat eine Anleihe auf den Markt
bringt?
Emminger:
Da gibt es noch keine festen Beschlüsse oder Absichten.
Ich danke Ihnen meine Damen und Herren.
GERALD R FORD LIBRARY
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
DR. OTMAR EMMINGER
6 FRANKFURT AM MAIN
PRÄSIDENT DER DEUTSCHEN BUNDESBANK
1977 JUN 13 AM WLKELM-EPSTEIN-STRASSE 14
TELEFON 1581
OFFICE RECEIVED OF THE CHAIRMAT's June 1977
Prof. Arthur F. Burns
Chairman
Board of Governors
Federal Reserve System
Washington, D.C.20551/USA
Dear Prof. Burns,
You were good enough to congratulate me in a particularly
nice way on my appointment as President of the Deutsche
Bundesbank. Many thanks to you and to your colleagues.
The words of encouragement from so many friends abroad
mean a great deal to me.
I fully share your view that continued close relations
between our institutions can be of great help in the pre-
sent troubled times.
Looking forward to meeting you soon in Washington, I
remain,
Sincerely yours,
Mmar Sammar
GERALD R. LIBRARY FORD
December 23, 1975
Dr. Otmar Emminger
Vice President
Deutsche Bundesbank
6 Frankfurt AM Main
Germany
Dear Dr. Emminger:
Upon returning from our Paris meeting, I was pleased
to find your London address on my desk. I have read it with
the greatest interest.
I would like to reciprocate by sending you two of my
recent speeches, and I am glad to have this opportunity to
wish you the very best for the coming year.
Sincerely yours,
Arthur F. Burns
SERALD R-FORD
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
6 FRANKFURT AM MAIN
DR. OTMAR EMMINGER
1975DEC 19 PM 3: 12
WILHELM-EPSTEIN-STRASSE14
VIZEPRÄSIDENT DER DEUTSCHEN BUNDESBANK
TELEFON 1581
RECEIVED
OFFICE OF THE CHAIRMAN
December 16, 1975
Professor Arthur E. Burns
Chairman
Board of Governors
#2055
Federal Reserve System
Washington, D.C. 20551
Dear Professor Burns,
I have pleasure in sending you the text of an
address which I gave in London a few days ago.
You will find in some of my remarks the influence
of your various speeches. I have also quoted you on page 11.
With my very best wishes to you and Mrs. Burns
for the Christmas days and for a good New Year I remain
very sincerely
yours
Encl.
amar Summy
GERALD R. FORD
The International Monetary Situation - a European View
Remarks by Otmar Emminger, Deputy Governor of the
Deutsche Bundesbank,
at the Annual Conference of
"The Financial Analysts Federation" in Chicago,
June 2nd, 1975
The international monetary situation bristles with unsolved
problems let me only mention inflation, international payments
difficulties, petrodollars, foreign exchange fluctuations, the
position of the dollar, and, finally, international monetary re-
form. George Santayana once wrote: "There are two kinds of pro-
blems: those that are soluble but are of minor importance, and
the really important ones which are usually insoluble". Fortu-
nately he did not exclude the possibility that in exceptional
cases even important problems can be solved.
I. Inflation
One important problem that urgently needs solution is infla-
tion. Inflation is not only an awesome domestic problem but has
also become a major disruptive force in international monetary
relations. Last year the average inflation rate in the industrial
countries, as measured by consumer prices, was nearly 14 per cent.
However, there were strongly divergent trends; the scale of
price increases ranged from 7 to 24 per cent in these countries.
In a world subject to such disruptive inflationary forces
it is, of course, impossible to maintain stable exchange rates.
Accelerating inflation has officially been cited as one of the
major reasons why the attempt at a comprehensive reform of the
international monetary system . the "grand design" - had to be
given up in the summer of 1974. Inflation has also been termed
"the greatest enemy to European economic integration". It is
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LIBRARY
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within the European Community that we have experienced the
widest gaps in inflation rates. The solemn pledges of the E.E.C.
members to attain monetary and economic union by 1980 have gone
by the board, mainly because there is no prospect of achieving
the requisite harmonisation and stabilisation of economic and
monetary developments in the member countries. It is noteworthy
that a few weeks ago a high-level group of E.E.C. experts con-
firmed the failure of the approach to monetary and economic
union on the basis of permanently fixed exchange rates and pro-
posed to secure at least a modicum of monetary integration
inside the E.E.C., with controlled floating taking account of
inflation differentials.
Where do we stand now, in the middle of 1975, in the battle
against inflation?
The rate of price increases has slowed down in nearly all
major European countries, with one albeit important exception,
namely Britain. In the European industrial countries minus Britain,
consumer prices increased on average at an annual rate of 9 per
cent between the last quarter of 1974 and the first quarter of
this year, compared with the peak of over 13 per cent last
year. This slowdown in the inflation rate has been less marked
than in the United States, where between the last quarter of
1974 and the first quarter of 1975 inflation came down to an
annual rate of 7 per cent. On the other hand, the slowdown in
business activity has also been less pronounced in Europe than
in the United States.
Let me mention a few noteworthy features of the present in-
flation scene, as viewed from Europe.
First, despite recent recessionary developments the support
for stabilisation policies is still strong. It has been more
and more widely recognised by public opinion that over the longer
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run there is no real trade-off between inflation and under-
employment and that, on the contrary, inflation is sooner or
later likely to bring recession and unemployment in its train.
A recent convert to a stabilisation policy has been France,
and this with notable success. Its impending return to the
European currency bloc, called the "snake", is also expressly
motivated by a desire to submit its economy to the monetary dis-
cipline inherent in the "snake" arrangement. In some countries,
at least, politicians have a better chance of winning votes
through a firm stabilisation policy than by inflationary per-
missiveness.
I don't, however, want to convey the impression that anything
like a uniform "European" attitude towards inflation has evolved
of late. On the contrary, Europe is split on this issue. There
are unfortunately some European countries where the national
consensus among the various social and political groups has dis-
integrated to the point of creating a general "let the devil
take the hindmost" attitude with serious consequences for inflation
and the economic system as a whole.
Second, although in a number of European countries some initial
battles have been won against inflation, we do not yet know
whether the war against inflation will be won in the end. We are
not quite sure whether the present lower rate of inflation -
which we in Germany hope to bring down to about 5 per cent by the
end of the year . is only a temporary lull brought on by recession,
or whether the coming business upturn will not fan the fire
again. There is, therefore, at present some reluctance to relax
the monetary reins too much in order not to generate a new round
of inflation. We in Germany feel rather confident that business
activity will recover in the second half of 1975. We would, how-
ever, prefer a gradual and longer-lasting upturn to a sudden spurt
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into high-speed expansion. It seems that in the United States
and Japan, too, a recovery can be expected in the second half
of this year. Thus, the three major industrial countries of
the western world would take the lead in lifting the world economy
out of its doldrums, and fortunately all three are free from
balance-of-payments constraints to pursue such a policy.
A third interesting feature is the adoption of monetarist
ideas in the formulation of economic policy goals. In Germany,
the Bundesbank announced last December for the first time a
quantitative goal for money growth for the full year 1975; accord-
ing to this goal, it will permit an increase in the monetary base
("central bank money") of 8 per cent over the year - a fairly
moderate rate in our institutional setup, permitting nevertheless
some real growth. This is intended to guide expectations and
to provide a monetary framework within which wage negotiations,
government borrowing, and other economic decisions are expected
to be accommodated. Up to now, we have been reasonably well on
target.
Fourth and finally, we have had in Europe some examples of
how destructive uncontrolled inflation can be for the very basis
of a private-enterprise economy. Time does not allow me to go
into details here. However, what we see in a few European
countries tempts me to quote Keynes, who is so often criticised
as being the father of monetary permissiveness. But it was he
who once wrote: "There is no less conspicuous, yet simultaneously
surer, way of destroying the present foundations of society
than through the corruption of the currency. This frees the
hidden forces of economics - which not one in a million can
diagnose in a destructive way". This could have been written,
word for word, by Professor Burns.
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II. International Payments - Petrodollars
In one respect it is very easy to diagnose the hidden forces
of corrupted money, namely in their disruptive effects on the
balance of payments. After one and a half years of exorbitantly
high oil prices we can say now that inflation has distorted the
international payments system nearly as much as the quadrupling
of oil prices. We are, indeed, faced with a dual balance-of-
payments problem in the world: on the one hand, the huge global
imbalance between the oil-exporting and oil-importing countries;
on the other hand, the disequilibria among the oil-importing
countries themselves, due in the main to inflation differentials
and cyclical lags.
It is remarkable that despite this dual payments strain we
have not been confronted with a major currency crisis - let
alone currency breakdown - since the beginning of 1974. I would
ascribe this astonishing fact mainly to two factors: first, the
recycling of petrodollars, i.e. the surplus funds of the oil
countries, has up to now functioned better than most people had
anticipated; second, flexible exchange rates have cushioned the
strains on the payments system.
As concerns the oil-induced payments disequilibria, we have
recently witnessed a significant reduction in them. This has
in some quarters produced the euphoric feeling that the payments
problems created by the oil price hike are as good as over. This
euphoria is, in my view, misplaced, because at least part of the
improvement has been due to temporary factors. What are the
facts? The financial surplus of the OPEC countries was about
55 billion dollars in 1974 and according to the most recent fore-
casts is likely to fall to around 45 billion dollars (or perhaps
even less) in 1975. Both figures are lower than was estimated
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earlier, partly because imports of goods into the OPEC countries
have increased by leaps and bounds (in dollar terms by 70 per
cent in 1974, with a similar jump likely in 1975), partly
because of the high level of financial aid granted by OPEC
countries to their political affiliates, and partly also due
to a lower volume of oil imports and a recent slight easing in
oil prices.
But these lower oil imports are clearly a temporary phe-
nomenon only, being mainly due to the recession. There are also
ominous noises that another increase in oil prices may occur
before the year is out. So we should not be lulled into com-
placency by the fact that since the beginning of the year pay-
ments deficits have been shrinking in a number of industrial
countries.
There still remain enough payments problems:
- With the impending business upturn the world's oil
bill is bound to grow larger again, quite apart
from the possibility of a new price increase.
- In the course of time the financing problem will
increase in difficulty for countries with persistent
large payments deficits.
- In many developing countries the payments situation
has not improved at all but is, on the contrary,
deteriorating.
- And finally, even with the downward-adjusted present
estimates, the accumulated financial surplus of OPEC
countries may have reached the massive amount of
about $ 200 billion by the beginning of the 'eighties.
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I mentioned already that up to now the financing of oil-
induced payments deficits has worked surprisingly smoothly; maybe
even too smoothly in some respects.
The oil-importing countries, taken as a group, have not been
forced to run down their monetary reserves; these are even
greater now than one and a half years ago. During the same period
the monetary reserves of the OPEC countries expanded by about
34 billion dollars; and this whole reserve increase was financed,
in the final analysis, not by a reserve transfer from deficit
countries, but by borrowing reserves and reserve creation within
the world monetary system. This rather uncanny potential of the
world's reserve system to expand was recently stressed by the
Managing Director of the IMF, who reminded us that the collective
control of international liquidity has always been one of the
major goals of international monetary reform since this is one
of the conditions for successfully fighting world-wide inflation.
True - but I don't quite see how we can gain effective control
over the various sources of international reserve creation, such
as Euromarkets, voluntary accumulation of dollar and other cur-
rency reserves by OPEC countries, etc.
In 1974, oil funds equivalent to about 7 billion dollars were
invested in sterling assets. Thus the British payments deficit,
the biggest deficit of all, could be financed "painlessly" for
quite some time. This easy financing may have contributed toward
maintaining that particular deficit for too long and at too high
a level. The large inflow of petrodollars into Britain also de-
layed the otherwise inevitable - adjustment in the external
value of the pound sterling to its internal loss of purchasing
power; and when the sterling exchange rate recently caught up with
the domestic inflation rate inside a short time span, this created
a certain dramatic atmosphere, although it was a natural process.
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FORD LIBRARY
R.
- 8 -
III. Flexible Exchange Rates
"Floating" exchange rates came into being on a world-wide
scale in March 1973 when a group of European currencies went
over to "bloc floating" in relation to the U.S. dollar. In my
view, "floating" has worked well and stood its test during the
very difficult period since then.
There are differences of view about this. Some observers have
become increasingly sceptical and critical of flexible exchange
rates, particularly among European central bankers. Some, in-
cluding well-known financial experts in the United States, have
even called it "a failure".
I shall leave aside the criticism that floating is accompanied
by some inconveniences and costs for foreign trade, or that
occasionally it appears to have exerted some inflationary influence
on the world as a whole. This could be said equally - and as
concerns inflation even far more - of a crisis-prone system of
fixed parities. In this connexion it may interest you that in
Germany we date the beginning of successful stabilisation policies
from March 1973, i.e. the beginning of floating; for only since
then have we regained control over our domestic money supply.
Floating has certainly disappointed the expectation of its
more naive proponents that it would more or less automatically
equilibrate distorted balances of payments. However, in spite of
floating some large payments disequilibria still persist among
industrial countries. But this is not at all surprising. Floating
alone cannot do the job unless a deficit country accepts the ad-
justment effect of a depreciation in its currency in real terms,
i.e. a relative lowering of its standard of living as compared
with other countries. If this primary effect of depreciation is
immediately compensated by increases in nominal wages - as has
been the case in some European countries - the country concerned
will end up in a vicious inflationary spiral. Or to put it in a
nutshell: there just does not exist a painless short-cut toward
the elimination of large payments deficits.
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This implies that "floating" has also disappointed those
optimists who had thought that it would give a country a
carte blanche for its domestic economic policy. Of course,
it does not. "Clean" floating quickly reflects, in the
external currency value and in import prices, the degree of
domestic inflation a country indulges in; and the exchange
rate may temporarily even over-react because of time lags in
the adjustment of foreign trade. Thus it brings home, in a
very direct way, the effects of domestic extravagance, and
in this way exerts perhaps more pressure on economic policy
than a gradual outflow of reserves in a fixed parity system
would do. Moreover, interest rates as well as other monetary
and financial developments can have a significant, and some-
times undesired, influence on the external value of a currency;
and this may again act as a restraint on domestic policies.
We have indeed the word of a well-known high American official
that he is not sure whether a country like the United States
has not been more restrained in its monetary policies under a
floating rate system than under the old Dollar Standard where
for years it could pursue a policy of "benign neglect" with
impunity.
The fact that, particularly in a time of generalised
inflation, a depreciation of a country's exchange rate is
usually unpopular (except with the exporting community) explains
perhaps why we have not seen any of the much-feared "competitive
depreciation" of currencies up to now. Since 1974 we have,
rather, witnessed cases where the external value of certain
currencies was artificially propped up by heavy intervention
in the exchange markets or officially-induced external bor-
rowing. I should like to add, in parentheses, that even in
the more difficult circumstances of the 'thirties, contrary
to a widely-held belief, the exchange rate system was not
characterised by competitive depreciations.
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Whatever the pros and cons in the present discussion on
"floating", they will probably have little effect on the
actual exchange rate system we are likely to have in the
near future. And this for the simple fact that, at least as
concerns the relationship between the dollar and other major
currencies, we don't have a realistic alternative to floating.
There are three main reasons for this:
first, world-wide inflation, and the large inflation
differentials that inevitably go with it;
second, the gigantic dollar overhang and the existence
of the Eurodollar market;
third, the oil price hike and its attendent payments strains
and uncertainties.
Thus, even those who are highly critical of "floating"
will have to resign themselves to living with it for the fore-
seeable future.
All this applies, however, only to exchange rates in a
world-wide context, and in particular to their relationship
with the dollar. Regional parity systems are not precluded.
On the contrary: a regional system like the European cur-
rency bloc ("snake" arrangement) has good chances of expanding
among countries which have reasonably harmonised economic
policies and not too large gaps in inflation rates. Thus,
in the years to come we are likely to witness a rather
diversified exchange rate system in the world economy:
a) currencies floating in isolation, b) regional parity
systems like the "snake" arrangement, with joint floating
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- 11 -
against the dollar and other currencies, and c) currencies
pegged to the dollar, to sterling, to other currencies, or to
a unit of SDRs (Special Drawing Rights). It may interest you
that at present countries whose currencies are floating in-
dependently have a share of about 48 per cent of world trade,
while those in the European joint-floating bloc comprise
about 22 1/2 per cent; but the latter group will very soon
increase its share at the expense of the former if and when
France, and possibly also Switzerland, join the "snake".
IV. International Monetary Reform
Will the world monetary scene one day be changed by inter-
national monetary reform? This seems to be a topical question
at a moment when the world's finance ministers are about to
gather in Paris for an important monetary conference, the
meeting of the so-called "Interim Committee" of the Inter-
national Monetary Fund, on June 10 and 11.
My answer is: no major change is likely in the near (or
even foreseeable) future. After the "grand design" reform
foundered on the rocks of inflation, oil, et cetera in 1974,
the Fund and its members resigned themselves to an evolutionary
approach by piecemeal reform. At the Paris Monetary Con-
ference three problems will be in the limelight: a general
increase of members' quotas in the Fund coupled with a re-
shuffling of quota shares; future rules for official gold
transactions; and a number of revisions of other Fund rules,
including the legalisation of "floating". Contrary to some
pessimistic forecasts, my guess is that the chances for
agreement on some, if not all, of these problems are better
than even. But I doubt if it will in fact make much difference
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- 12 -
to the world's exchange rate system whether "floating" is
put on an equal footing with an adjustable parity system in
the new IMF Statutes (as the majority of the IMF members seem
to prefer) or whether it is relegated to being an exception
to the general rule (as some others strongly request). The
mixed exchange rate system which I outlined as the most
likely one in the near future will be imposed on the world
economy not by formulas on paper but by hard economic facts.
The gold problem will be high on the agenda for discussion
- gold always has an almost mystical lure for officials and
journalists alike. But even an agreement on new rules for
gold will not greatly change the monetary realities of the
world, at least not in the immediate future. Gold transactions
among central banks at freely agreed prices may be sanctioned
(possibly with some self-imposed restraint agreed upon for a
transitional period). But I cannot visualise any large-scale
use of this new freedom because of the practical difficulties
involved. It is more likely that gold will be used for the
settlement of balance-of-payments deficits only in exceptional
cases; and this will be more easily done in a form already
permitted at present, i.e. using gold as a collateral for
balance-of-payments loans, like the 2 billion dollar loan
granted last autumn by the Bundesbank to the Italian central
bank. Sales of official gold on the free gold market are per-
mitted already under present rules, anyway. The real difficulty
in the field of gold is the question of what to do with the
Fund's own gold worth about 6 1/2 billion dollars at the old
official gold price. If no agreement can be reached on this
problem, it will probably be shelved for many years to come
under some vague formula. It would, of course, be regrettable
to let a valuable Fund asset - worth about 25 billion dollars at
today's market prices - lie dormant for many years, while at
least part of it could be used in a non-inflationary way for
some useful purposes.
- 13 -
- 13 -
V. Concluding Remarks
What then are the really important problems in the inter-
national monetary situation? They are first of all inflation
and balance-of-payments disequilibria. Both primarily require
appropriate national action. At present, it is the particular
responsibility of the major industrial countries to strike
the right balance between fighting today's recession and avoid-
ing tomorrow's inflation.
There is also great scope for better international cooperation
in economic and monetary policies. There are two fields where
cooperation between the United States and the European cur-
rency bloc is particularly important, namely interest rate
policies and intervention policies in the exchange markets.
The exchange rate of the dollar in relation to the major
European currencies is at least as much influenced by capital
movements as by competitiveness in goods and services. This is
one of the reasons why I would not venture to join the chorus
of those who proclaim that "the dollar is undervalued". It is
simply impossible to know this. The proper valuation of a cur-
rency like the dollar is not only a matter of relative costs
and prices, or relative balances of goods and services. It is
also dependent on factors determining the external capital balance
- not to speak of the dollar overhang in the world. Sizeable
differences in interest rates exert a great influence in this
field. It is, therefore, very much to be welcomed that cooperation
between the American and several European monetary authorities
in this field has been intensified of late.
The same is true of intervention policies in the exchange
markets. Here the guiding principle has been to maintain "orderly
exchange markets". This implies a smoothing out not only of the
daily ups and downs but also of weekly or even monthly fluctua-
tions which have the appearance of being temporary in nature.
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The dollar is still by far the most important intervention
currency in the world. It is noteworthy that recently the French
suggested a greater use of dollar intervention even within the
European currency bloc. The dollar is also by far the most
important currency in which foreign exchange reserves are held.
About three quarters of the 155 billion dollars worth of official
exchange reserves in the world are denominated in U.S. dollars
(although not all of them are held directly in the United
States).
When it comes to the stability of the world monetary system,
we have primarily to look towards the dollar. So I will leave
with you a final European view: if and when the dollar has fully
regained its stability in terms of costs and prices, this will
not only strengthen the dollar's external value in the exchange
markets; it will also strengthen and stabilise the world's
monetary system as a whole.
FORD LIBRARY
October 29, 1974
Dear Dr. Emminger:
The analysis presented in your Madrid
address is forthright and incisive. The paper
deserves to be read widely, and I am grateful
to you for favoring me with a copy.
With kind regards,
Sincerely yours,
Arthur F. Burns
Dr. Otmar Emminger
Vice President
Deutsche Bundesbank
Frankfurt, Germany
AFB:ccm
FORD of LIBRARY
The
076839
10/3/174
September 4, 1974
To:
Mr. George Spencer
From: Charles Siegman
We were given the attached letter
from 0. Emminger to the Chairman by Mrs. Mallardi.
Since Mr. Lucht and his associates are interested
in an area of the System's activities not related
to the Division of International Finance, it would
seem more efficient that arrangements for the
visit be handled through your office. If we can
be of assistance in connection with this visit,
please let me know.
We would appreciate it if you would
keep us informed about the final arrangements for
this visit.
FORD
LIBRARY
CCB Mrs. Mallardi
Mr. R. Bryant
074835
Attachment: Aug 21 74 ltr Omninger to Burns re
visit of 3 staff members of Bundesbank
re automation.
CJSieguan:dcj
BOARD OF GOVERNO
07
THE
FEDERAL RESERVE SYSTEM
DR. OTMAR EMMINGER
6 FRANKFURT AM MAIN
VIZEPRÄSIDENT DER DEUTSCHEN BUNDESBANK
1974 AUG 28 AM11:45
WILHELM-EPSTEIN-STRASSE 14
TELEFON 1581
RECEIVED
OFFICE OF THE CHAIRMAN
August 21, 1974
Professor Dr. Arthur F. Burns
# 1556
Chairman
Board of Governors of the
Federal Reserve System
Washington, D.C. 20551
U.S.A.
RB-
Dear Professor Burns:
May I submit to you the following matter:
In October this year a member of our Board, Herr Werner Lucht,
who is responsible for questions of automation, would like to
acquaint himself with the state of automated payments and the
establishment of data banks in the non-statistical sector and
also with the Federal Reserve System's plans in this field for
the future.
For this purpose he plans to visit the Federal Reserve Board
on October 9, 1974 together with his staff members, Herr Hans
Scholz and Herr Rolf Engler. Subsequently visits to the Federal
Reserve Banks of Richmond, New York, Kansas City, San Francisco
and Atlanta have been foreseen.
I would be most grateful if the member of the Federal Reserve
Board who is responsible for this field could receive Herr Lucht
and his accompanying staff on that date at a time convenient
to him.
Thanking you in advance, I am,
Yours sincerely,
FORD & LIBRARY 07V839
Amar Summyer
July 19, 1973
Dear Dr. Emminger:
I am enclosing a copy of a letter that I
have just sent to Dr. Klasen. My understanding
is that he is away on vacation and I therefore
want to keep you informed.
I look forward to seeing you at the
ministerial meeting later this month.
With kind regards,
Sincerely yours,
Arthur F. Burns
Dr. Otmar Emminger
Vice President
Deutsche Bundesbank
Frankfurt, Germany
Enclosure
CHOS
LIBRARY
AFB:ccm
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date April 23, 1973
To Mrs. Mallardi
Subject: Summary of Journalist's
From Martin J. Kohn
Interview with Dr. Emminger
In the attached clipping, Dr. Emminger discusses international mone-
tary matters in an interview in the March 28 issue of the Swiss weekly
newspaper, "Die Weltwoche." I briefly summarize below points he makes
that might be of interest to the Chairman.
Dr. Emminger says that "all experts" now believe that the arrange-
ments agreed to recently in Brussels and Paris have brought the dollar into
a correct relationship with other major currencies and that this relationship
(in the sense of the value of the dollar vis-à-vis other currencies) should
last for an extended period. [He obviously has in mind not only the events
of last March, but the February devaluation of the dollar as well.] Dr.
Emminger notes that, in the opinion of the IMF's Managing Director, if any
error has been made, it has been on the side of devaluing the dollar too
much, rather than too little. Dr. Emminger's own view is that the cuntrent
structure of parities -- "including the position of the yen, which has been,
or still will be, reached" -- "corresponds to the economic realities."
Dr. Emminger also speaks approvingly of the exchange rate flexibility
provided for by the "solution" reached in March. Such flexibility is useful
mainly as "an effective weapon for defense against disruptive short-term
monetary and capital movements."
Dr. Emminger sees the floating of the dollar against the "European
Block" as a temporary arrangement. Fixed but adjustable parities remain
FORD is LIBRARY 077830
Mrs. Mallardi
-2-
the goal. The presumably interim float should last until the dollar "has re-
gained its strength" -- so that disturbances in the exchange markets caused
by the weakness of the dollar for once and for all disappear -- and until the
outline of the new international monetary system becomes clearer. Dr.
Emminger declines to predict how long the float will continue but says it
may last at least until the annual IMF meetings in Nairobi in September.
Dr. Emminger indicates his belief that the imposition of additional
capital controls by many European countries at the time the joint float was
initiated was illogical, since the float itself should prove an effective
"shield" against dollar capital inflows. The explanation of the new capital
controls, Dr. Emminger says, was the fear among Common Market countries that
announcement of the joint float would trigger a new surge in demand for their
currencies.
Dr. Emminger says that gold will continue to play an important role
in the world monetary system if only because 30 per cent of world reserves --
$45 million at the present gold-dollar parity -- are in gold. He voices
support for allowing central banks to sell gold in the free market to damp
speculation. He considers the March 1968 agreement forbidding such sales
to have been a dead letter since August 1971. In advocating anti-speculation
gold-sales, Dr. Emminger emphasizes, however, that he is opposed to inter-
vention designed to drive the free market gold price down to the official
gold price of $42 an ounce.
LIBRARY
FORD
is
07V835
Mrs. Mallardi
-3-
Dr. Emminger denies that the DM is still undervalued. He notes that
the mark has been revalued 43 per cent against the dollar since 1969. He
predicts that the DM, largely because of the 3 per cent revaluation in March,
will be at the bottom of the European snake.
Dr. Emminger expresses confidence that the United States realizes
the dollar exchange rate is not a matter of purely national concern. He
says the United States has abandoned adherence to "benign neglect" in favor
of a policy of "benign interest" in its own exchange rate. Dr. Emminger
then adds, "If the Americans are ready to document [this change of attitude]
through appropriate intervention, so much the better, even if this inter-
vention must be financed by European central banks."
FORD
i
GERALD
Alexander Sachs:
GERALD 8.10RD LIBRARY
Some items in this folder were not digitized because it contains copyrighted
materials. Please contact the Gerald R. Ford Presidential Library for access to
these materials.
28. März 1973 / 13
DIE WELTWOCHE
Wunder dauern etwas länger
FORTSETZUNG VOM-SEITE.17
etwas beruhigend am freien Goldmarkt
are Aufrechterhaltung eines wichtigen
eingreifen. Mehr aber nicht. Irgendwel-
Prinzips von Bretton Woods, nämlich
che Absprachen hinsichtlich solcher
die Anerkennung, dass die Wechselkurs-
Massnahmen bestehen gegenwärtig
politik keine rein nationale Angelegen-
nicht.
heit ist, sondern eine Angelegenheit des
beiderseitigen Interesses. Drittens hat
In der Schweiz. Herr Dr. Emminger,
die US-Regierung klar bekundet, dass
herrscht Skepsis. Skepsis über die Дак-
sie am Kurs des Dollars ein eigenes
erhattigkeit der jüngsten Arrangements,
Interesse nimmt. Es ist also ein klares
Skepsis über die Angemessenheit insbe-
Abrücken von der Theorie des benign
sondere der neuen DM-Parität, die
neglect, es ist ein Uebergehen zu der
nork
28. März 1973 / Nr. 13
DIE WELTWOCHE
WIRTSCHAFT
Wunder dauern etwas länger
Wolfgang Winter unterhielt sich mit dem deutschen Bundesbank-Vize Otmar Emminger über die Währungslage
Den Schreibtisch droben im 12. Stockwerk des gigantischen Bundesbank-Neubausd Deutschen Bundesbank, öhnehin der weltweit anerkannte gewiefteste Wäh-
am Stadtrand von Frankfurt ziert ein Aschenbecher in Form einer leicht geknitter-
rungspolitiker der Bundesrepublik, an den jüngsten Arrangements massgeblich
ten Dollarnote. Hausherr Dr. Otmar Emminger (62), Vizepräsident und damit auf
beteiligt und zwischen Einführung des europäischen «Block-Floating», der Wie-
dem höchsten Sessel, der einem CDU-Sympathisanten in der heutigen politischen
deröffnung der Devisenbörsen und der «nächsten Währungskrise» noch sorg-
Konstellation der BundesrepubNk zugünglich ist, schnickt respektlos seine Zigarren-
sumer auf die bei Notenbankiers übliche Vorsicht der Formulierung bedacht, hat
asche drauf. Nicht nur das: eine Ecke des tönernen Dollars ist abgeschlagen. Der
Freude am Gleichnis: «Eine Putzfrau hat den Dollar-Ascher 'runtergeworfen,
solange Karl. Klasen seine Gesundheit pflegen muss amtierende Präsident noch nicht diesen federnden Teppich hier hatten. Aber den haben wir ja nun
«Weltwoche»: Der in Brüssel und jene Länder, die glauben, dass sie
dass dieser wichtige Teil der Währungs-
Paris geknüpfte «federnde Teppich»
untereinander realistische Paritäten ha-
Dr. Otmar Emminger wurde am
reserven auch weiterhin eine Rolle
wird der Ihrer Meinung nach der Wels
ben und sie auch durchhalten können,
2. März 1911 in Augsburg geboren.
spielen wird. Die andere Frage ist, ob
auf längere Dauer währungspolitische
versuchen. ihre Wechselkursbeziehun-
Nach einem juristischen und volks-
das Gold auch in Zukunft der Wert-
Ruhe schenken?
so zu regalm, dass cin möglichet
wirtschaftlichen Studium in Berlin,
massstab des Systems sein wird oder
grosser Teil des Handels auf der Basis
München, Edinburgh und London,
Dr. Emminger: In solchen Fragen gibt
diese Rolle an die SZR abgeben wird.
das mit der Promotion zum Dr. oec.
es keine Garantie für ewige Dauer. Aber
stabiler Wechselkurse abgewickelt wer-
Aber wie ich schon sagte, solange die
man kann eines sagen: Das jetzt Er-
den kann. Ich möchte nicht ausschlies-
publ. und mit-dem juristischen Asses-
Sonderziehungsrechte selbst in Gold
sen. dass dieses gegenwärtige System der
sor-Examen: abgeschlossen wurde,
reichte stellt eine gründlichere Lösung
definiert sind, wäre eine solche Aende-
dar als alle bisherigen. Nach menschli-
Beweglichkeit gegenüber dem Dollar
war Dr., Emminger mehrere Jahre'
rung nur formal und ohne sachliche
auch im September zur Zeit der Jahres-
Mitarbeiter am Institut für Konjunk-
chem Ermessen und nach dem Urteil
Bedeutung.
taging des IWF in Nairobi noch
turforschung in Berlin.
aller Experten ist nun die auf längere
Die dritte Frage ist. ob die bisherige
Sicht richtige Relation zwischen dem
bestehen könnte und bestehen wird.
Zur Deutschen Bundesbank bzw.
Abstinenz der Notenbanken gegenüber
Dollar und den anderen wichtigeren
Aberies handelt sich um ein System der
der früheren Bank deutscher Länder
dem freien. Goldmarkt aufrechterhalten
Wechselkursfreigabe gegenüber dem
kam Dr. Emminger im Jahr 1950.
Währungen hergestellt. Nach dem Urteil
bleiben soll. Wir haben gesehen, dass bei
des Geschäftsführenden Direktors des
Dollar. nicht um ein System der völligen
Drei Jahre später wurde er ins
Internationalen Währungsfonds (IWF)
Beweglichkeit aller Wechselkurse insge-
Direktorium der Bank berufen, wo
«Die Notenbanken sollten in
ist sogar damit zu rechnen, dass die
sandt.
er hauptsächlich für die internationa-
len Währungsbeziehungen veran-
Dollar-Abwertung gegenüber den Wah-
Aber auch gegen ein solch beschränk-
hochspekulativen Situationen
wortlich war. Seit 1958 ist er gleich-
rungen der anderen Industrielander sich
tes Beweglichkeltasystem müsste der
zeitig Mitglied des Zentralbankrats
beruhigend am Goldmarkt
auf die Dauer eher als etwas zu stark als
Internationale Währungsfonds Einwen-
der Deutschen Bundesbank. Mit Wir.
eingreifen können»
zu gering herausstellen wird. Allerdings
duagen erheben. Oder sind dessen Statu-
kung vom 1. Januar 1970 wurde Dr.
Kann man das erst nach einigen Jahren
mittlerweile nur noch tote Buchsta-
Emminger zum Vizepräsidenten der
mit Sicherheit beurteilen. Jedenfalls
ben?
Deutschen Bundesbank ernannt, wo-
der letzten grossen Dollarkrise das
entspricht die Paritätenstruktur, die nun
Der Internationale Währungsfonds,
mit er auch stellvertretender Vorsit-
Hinaufschnellen des Goldpreises am
zwischen den wichtigsten Währungen
vidmehr sein Geschäftsführender Di-
zender des Zentralbankrats wurde.
freien Markt auf über 90 $ je Unze mit
erreicht ist, einschliesalich der Stellung
festor. hat schon gewisse Bedenken
Neben seiner Tätigkeit im Direk-
zu den Elementen gehört hat. die die
des japanischen Yen, die durch das
erroben gegen die zu weitgehende
torium der Bundesbank war Dr.
Unruhe und die such die spekulativen
Floaten erreicht ist oder noch erreicht
Aswendung des Floating, weil er be-
Emminger von 1953 bis 1959 deut.
Angriffe auf den Dollar verstärkt ha-
werden wird, den ökonomischen Reali-
furchtete, dass damit das Paritäten-
scher Exekutivdtrektor beim Interna-
ben. Daraus ergibt sich die Frage, ob
taten und Verburgt daher eine gewisse
Deter. Die andere fundamentale Neue-
system uberhaupt aufgegeben würde. Wie
tionalen Wahrungsfonds in Washing
man nicha in solchen spekulativen
rung. die diese Lösung von aften frühe-
sich jedoch die Dinge inzwischen ent-
ton. Seit 1958 ist er Mitglied und
Ueberhitzungssituationen mit relative
ren Not- und Aushilfslösungen abhebt.
wickelt haben, namlich, dass in Europa
Vizepräsidens des Währungsaus-
ringen Interventionen am freien Gold-
ist die Tatsache, dass nun die wichtig-
gin Block von Ländern versucht, unter-
schusses der EWG.
markt einmal eingreifen solite, um für
step Währungen der Industrieländer
einander stabile Wechselkurse aufrecht-
Im Jahr 1963 wurde Dr. Emmin-
Beruhigung zu sorgen und ein die
gegeniber dem Dollar beweglicher ge-
zuerhalten. und dass dieser Block insge-
per Mitglied des uStellvertreter-Aus-
Spekulation einheizendes Element aus-
worden sind, d. h., dass hier ein Element
samt gegenüber dem Dollar die Wech-
schusses» der Zehner-Gruppe.
zuschalten.
FR 468
(Rev. 3-63)
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
MEMO
Date
4/10
Time
To:
Mr. Bryant
From:
Catherine Mallardi
Tel. No.
Ext.
Please call
For your approval
Returned your call
For your information
Will call again
Note and return
Phone me re attached
For comments and suggestions
See me re attached
Preparation of reply
MESSAGE:
Is there anything in this paper
that the Chairman would be
would be interested in reading?
The OF wh GOVERNORS OF THE 3/2/73 FEDERAL Enmings RESERVE SYSTEM
kimming w
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they org flat f
all EEL combries. -
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ITT World Communic
TELEGRAM
LEASED WIRE SERVICE
RECEIVED AT WASHINGTON
Burus
1973 FEB 8 AM II 08
440043 FEDR UI
BOARD OF GOVERNORS
ZCZC AWA774 VIA ITT XYI3844 DP403
of
St. N.W. Washington, D.C. Phone 296-6200
FEDERAL RESERVE SYSTEM
UIWA CO DPFF 147
FRANKFURT AM MAIN/TLX 147 8 1340 PAGE 1/50
FEDRESERVE
WASHINGTON/DO
ATTENTION MR. DR BURNS CHAIRMAN THE CENTRAL BANK
COUNCIL OF THE DEUTSCHE BUNDESBANK AT ITS
MEET ING ON FEBRUARY 7 1973 IN THE PRESENCE OF HERR
POEHL STATE SECRETARY AT THE FEDERAL MINISTRY
1709 L St. N.W. Washington, D.C. Phone 296-6200
OF FINANCE , AND DR. SCHLECHT , STATE SECRETARY AT
THE FEDERAL MINISTRY
COL 7 1973
DP403 1TG201 FEDRESERVE PAGE 2/450
OF ECONOMICS , TOOK THE FOLLOWING DECISION :
RECOURSE TO THE REDISCOUNT QUOTAS FIXED
FOR THE INDIVIDUAL BANKS IS WITH IMMEDIATE
EFFECT AND UNTIL FURTHER NOTICE PERMITTED ONLY
ITT World Communications Inc.
UP TO 60 0/0 OF THE TOTAL AMOUNT
SHO ULD THIS FIGURE ALREADY HAVE BEEN EXCEEDED
,
NO NEW BILLS OF EXCHANGE
COL60 0/0
DP4031TG201 FEDRESERVE PAGE 3/47
MAY BE PRESENTED WITH THIS MEASURE THE
DEUT SCHE BUNDESBANK IS REDUCING IN STAGES THE
BANKS SCOPE FOR RESORTING TO CENTRAL BANK
ITT World Communications Inc.
CREDIT BY THE AMOUNT BY WHICH THEY HAVE BECOME
MORE LIQUID SINCE LAST WEEK THROUGH THE BUNDESBANK , S
FORE IGN EXCHANGE PURCHASES
DR. EMMINGER
"nm favorry despone town
judgety's
1 Makh
1709 L St. N.W. Washington, D.C. Phone 296-6200
440043 FEDR UI
Janes
January 18, 1973
Dear Dr. Emminger:
Thank you very much for your cable informing the
Board of the changes in the discount and Lombard
rates of the Deutsche Bundesbank. We greatly
appreci ate being so promptly informed of these
moves and the reasons for making them.
Sincerely yours,
Arthur F. Burns
Dr. Otmar Emminger
Vice President
Deutsche Bundesbank
4-6 Taunusanlage
6 Frankfurt AM Main 1
Germany
MJK:cmn
FORD
8.
30
DEC 14 1972
The Honorable Dr. Otmar Eminger
Vice President
Deutsche Bundesbank
4-6 Taunusanlage
6 Frankfurt am Main 1
Germany
Dear Dr. Erminger:
Thank you for informing us of the latest changes
in credit policy of the Deutsche Bundesbank. My colleagues
and I appreciate your taking the time to add the explanatory
remarks which we find most useful.
Sincerely yours,
(Signed) Arthur F. Burns
Arthur F. Burns
JS:rck
12/12/72
CC: Mrs. Mallardi (2)
LIBRARY
R.
Dr. Otmar Emminger
July 18, 1972
Vice President
Deutsche Bundesbank
Taunusanlage 4-6
D-6 Frankfurt 1, GERMANY
Regret I am scheduled to be in California July 20-21, but
have scheduled appointment for you with Chairman Burns at
approximately 4:00 p.m. July 21.
FEDRESERVE
J. Dewey Daane
1
LIBRARY
FORD
&
GERALD
NNNN
AAZCZC YW476 GTX548 DP4034TG324
URWA CO DPFF 072
FRANKFURT AM MAIN/TLX 72 14 1828 PAGE 1/ SUSPECTED DUPLICATE
GOVERNOR DEWEY DAANE MEMBER OF THE BOARD OF GOVERNORS FEDERAL
RESERVE SYSTEM
WASHINGTOND.C.20551
Reply via RCA: call 558-4321
DEAR DEWEY 9 I SHALL BE IN WASHINGTON ON THURSDAY
AND FRIDAY 9 JULY TWENTY AND TWENTYONE
AS THURSDAY WILL PROBABLY BE TAKEN UP BE TALKS IN THE
for 15 will
TREASURY I SHOULD LIKE TO PAY A VISIT
COL 20551
FORD
LIBRARY
is
DP4034TG324 GOVERNOR PAGE 2/
GERALD
Reply via RCA: call 558-4321
TO THE FEDERAL RESERVE BOARD ON FIRDAY s WILL THERE BE A
POSSIBILITY OF SEEING PROFESSOR BURNS ? BEST REGARDS
OTMAR EMMINGER
JUN 16 1971
Dear Dr. Emminger:
I appreciate your letter of June 4, in which
you provide some facts concerning the speculative out-
break of early May, I an also grateful to have a copy
of your most interesting statement before the Munich
Conference.
We must continue to exchange thoughts frankly
and freely.
With best regards,
Sincerely yours,
Arthur F. Burns
Dr. Otmar Emminger
Vice President
Deutsche Bundesbank
Taunusenlage 4-6
Frankfurt (Main), Germany
RS:nss
6/15/71
cc: Mrs. Mallardi
AUG 17 1970
AIR MAIL
Dr. Otmar Erminger
Vice-President
Deutsche Bundesbank
4 - 6 Teunusanlage
6 Frankfurt an Main 1
Germany
Dear Dr. Emminger:
Thank you very much for your cable informing
us of the Central Bank Council's decisions of August 12
regarding the minimum reserve requirements of German
credit institutions and explaining the reasons why these
measures were taken. We are, of course, very interested
in economic developments in the Federal Republic and
appreciate your keeping us closely and promptly informed.
Sincerely yours,
(Signed) Arthur " BOX
Arthur F. Burns
cc: Mrs. Mallardi (2)
Mr. Rudmen
Miss Noonan
BJR:ren
8/13/70
FORD information
R.
GENALD