Museado / NARA Collection grf-0001 — Collection grf-0001
Recent Folios
Login Register
English (inglés) español magyar (húngaro) हिन्दी (hindi)

Survos folio page chat

Emminger, Otmar

Ask the Scholar

Page 1 of 1
I can add historical knowledge about this page.

Page image

Page 1

OCR

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 Arthur Burns donated to the United States of America his copyrights in all of his unpublished writings in National Archives collections.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 -12- - 12 - 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. -13- - 13 - 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 -14- - 14 - 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 -15- - 15 - 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 - 2 - LIBRARY - 2 - 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 - 3 - - 3 - 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 - 4 - - 4 - 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. - 5 - - 5 - 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 - 6 - - 6 - 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. - 7 - - 7 - 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. - 8 - 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. - 9 - - 9 - 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. -10- - 10 - 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 -11- - 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 -12- - 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. - 14 - - 14 - 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 Fist fultsin- m they org flat f all EEL combries. - 2 tirs you- ho only Xi L Luchne dellars - 3 towern 5EC mis fy L hystin R.FORD Sunly Lye L DIRECTO See this Rroye. - Care bes- care Amount - ga declare - Mills Eate Fn Lafe an 20! SLUE X Lider O'Bian 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

Document source description

This file contains material related to Deutsche Bundesbank.

Page data

Page
1
Source index
0
Type
document
Media ID
11c11b3946e58106
Size
unknown

Document data

ID
4512994
Core
doc
Type
document
DTO data 
{
    "id": "4512994",
    "sourceUrl": "https://catalog.archives.gov/id/4512994",
    "contentType": "document",
    "title": "Emminger, Otmar",
    "description": "This file contains material related to Deutsche Bundesbank.",
    "citationUrl": "https://catalog.archives.gov/id/4512994",
    "collections": [
        "Arthur F. Burns Papers",
        "Name Correspondence Files"
    ],
    "subjects": [
        "Germany (West)",
        "Monetary systems"
    ],
    "iiifBase": "https://s3.us-east-1.amazonaws.com/NARAprodstorage/lz/presidential-libraries/ford/grf-0001/565799/4512994.pdf",
    "thumbnailUrl": "https://s3.us-east-1.amazonaws.com/NARAprodstorage/lz/presidential-libraries/ford/grf-0001/565799/4512994.pdf",
    "largeImageUrl": "https://s3.us-east-1.amazonaws.com/NARAprodstorage/lz/presidential-libraries/ford/grf-0001/565799/4512994.pdf",
    "imageCount": 1,
    "hasImages": true,
    "source": "import",
    "hasTranscription": false
}

Context sent to Scholar

Document identity 
{
    "localId": "4512994",
    "label": "Emminger, Otmar",
    "core": "doc",
    "dtoType": "document",
    "citationUrl": "https://catalog.archives.gov/id/4512994"
}
Document source metadata 
{
    "id": "4512994",
    "sourceUrl": "https://catalog.archives.gov/id/4512994",
    "contentType": "document",
    "title": "Emminger, Otmar",
    "description": "This file contains material related to Deutsche Bundesbank.",
    "citationUrl": "https://catalog.archives.gov/id/4512994",
    "collections": [
        "Arthur F. Burns Papers",
        "Name Correspondence Files"
    ],
    "subjects": [
        "Germany (West)",
        "Monetary systems"
    ],
    "iiifBase": "https://s3.us-east-1.amazonaws.com/NARAprodstorage/lz/presidential-libraries/ford/grf-0001/565799/4512994.pdf",
    "thumbnailUrl": "https://s3.us-east-1.amazonaws.com/NARAprodstorage/lz/presidential-libraries/ford/grf-0001/565799/4512994.pdf",
    "largeImageUrl": "https://s3.us-east-1.amazonaws.com/NARAprodstorage/lz/presidential-libraries/ford/grf-0001/565799/4512994.pdf",
    "imageCount": 1,
    "hasImages": true,
    "source": "import",
    "hasTranscription": false
}
Document source extras 
{
    "url": "https://catalog.archives.gov/id/4512994",
    "naId": 4512994,
    "coverageEndDate": {
        "logicalDate": "1978-02-28",
        "month": 2,
        "year": 1978
    },
    "coverageStartDate": {
        "day": 1,
        "logicalDate": "1970-08-01",
        "month": 8,
        "year": 1970
    },
    "levelOfDescription": "fileUnit",
    "recordType": "description",
    "ocrSource": "nara-archive"
}
Page context 
{
    "seq": 1,
    "pageIndex": 0,
    "type": "document",
    "url": "https://s3.us-east-1.amazonaws.com/NARAprodstorage/lz/presidential-libraries/ford/grf-0001/565799/4512994.pdf",
    "mediaId": "11c11b3946e58106",
    "ocrText": "The original documents are located in Box K9, folder \"Emminger, Otmar, 1969-1978\" of\nthe Arthur F. Burns Papers, 1956 - 1990 at the Gerald R. Ford Presidential Library.\nCopyright Notice\nThe copyright law of the United States (Title 17, United States Code) governs the making of\nphotocopies or other reproductions of copyrighted material. Arthur Burns donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain. The copyrights to materials written by other individuals or organizations are presumed to\nremain with them. If you think any of the information displayed in the PDF is subject to a valid\ncopyright claim, please contact the Gerald R. Ford Presidential Library.\nDigitized from Box K9 of the Arthur F. Burns Papers, 1956 - 1990 at the Gerald R. Ford Presidential Library\nFebruary 27, 1978\nDr. Otmar Emminger\nPresident\nDeutsche Bundesbank\nFrankfurt, Germany\nDear Otmas:\nI have just read your speech of January 31.\nIt is a truly excellent analysis, and I wanted you to\nknow how much I appreciate it.\nWith warm regards,\nSincerely,\nArthur F. Burns\nAFB:ccm\nFORD & LIBRARY GERALD\nFebruary 9. 1978\nDear Otmar:\nThank you very much for the copy of\nyour interview with Reuters that you recontly\nsent me. I greatly appreciate having your\nthoughtful comments.\nWith very best personal regards,\nSincerely yours,\nArthur F. Burne\nDr. Otmar Emminger\nPresident\nDeutschen Bundesbank\nWilhelm-Epstein-Strasse 14\n6000 Frankfurt Am Main\nGermany\nNB:ja\nGERALD FORD LIBRARY\n10 m\nBOARD OF GOVERNORS\nOF THE\nDR. OTMAR EMMINGER\nFEDERAL RESERVE SYSTOM\nWILHELM-EPSTEIN-STRASSE 14\n6000 FRANKFURT AM MAIN\nPRASIDENT DER DEUTSCHEN BUNDESBANK\n1978 JAN 31 PM 12: 34\nTELEFON 1581\nRECEIVED\nJanuary 26, 1978\nOFFICE OF THE CHAIRMAN\nProfessor Arthur Burns\nChairman\nFederal Reserve System\nWashington, D.C. 20551\nDear Arthur:\nI just gave an interview to \"Reuters\" on the present\nGerman external and internal situation.\nYou will find the text of this interview enclosed. It\nis, of course, a somewhat simplified analysis of the situation.\nWith warmest personal regards,\nSincerely,\nEncl.\nMmar Summy\nFORD is LIBRARY GERALD\nInterview by Dr. Otmar Emminger, President, Deutsche Bundesbank,\nwith Reuters on Wednesday, January 25, 1978\nEmminger believes interest gap and excessive German cost level\nwill brake mark's attraction\nThe interest rate gap between West Germany and the U.S.,\ncoupled with abundant German monetary liquidity, will make\ninvestment in mark assets unattractive to foreign funds once\nspeculative currency fever subsides, Bundesbank President\nDr. Otmar Emminger told Reuters. Together with the Federal\nReserve Bank of New York the Bundesbank is intervening in the\ndollar market as a bridging action to smooth out erratic\nmovements and discourage speculative developments, he added\nin an interview.\nThe present exchange rates of a few \"strong\" currencies\nsuch as the mark or Swiss franc against the dollar are clearly\nconsiderably higher than would correspond to the relative\npurchasing power of these currencies in terms of prices and,\nin particular, production costs, Emminger said. But the special\nfactors now influencing the U.S. balance of payments mean\nit may take some time for these fundamental relationships to\nmake themselves felt on the exchange rate. The mark's present\nrate seems out of line against the dollar not only compared\nwith price and cost relationships but also with regard to\ndevelopments in the German basic balance of payments\nposition, he added.\nR FORD LIBRARY\nGERALD\nAsked if the Bundesbank could do anything to restore a\nless lop-sided evaluation of the mark/dollar rate, Emminger\nsaid the Bundesbank has contributed to lowering domestic interest\nrates so that they are now the lowest among all major countries.\n-2-\n- 2 -\nThe differential compared to American rates is now four\nto five pct on short-term funds and two to 2.50 pct on longer\nterm funds.\nBy the end of last week this year's dollar market inter-\nvention by the U.S. and German central banks amounted to over\n2.5 billion marks, Emminger said. \"We (the Bundesbank) have\nbeen fully satisfied both with the amounts and the method of\nthe Fed's intervention,\" he added.\nEmminger noted, the present dollar problem is not a bilateral\nproblem between the dollar and mark as has erroneously been\nmaintained by some foreign observers. The U.S. payments deficit,\nwhich has been the root cause of recent dollar weakness, is\nprimarily due to large trade deficits vis-à-vis OPEC countries and\nJapan, while the U.S. runs a sizeable surplus with West Europe. \"I\ndon't know if the U.S. current account deficit this year will\nbe as large as in 1977 but sooner or later it will improve.\nIts effect on the dollar rate will depend on whether countries\nwith large dollar surpluses vis-à-vis the U.S. invest them in\ndollar assets or not, If he said. Thus, the dollar rate will be\nlargely determined by the dollar's attractiveness as a\ncurrency for investment, i.e. by American interest rates and\nforeign confidence in the dollar's stability.\nThe German current account surplus has continually declined\nover the last few years and is no longer very large, while, more\nimportantly, it has been more than compensated for by very\nlarge long-term capital exports resulting in a very sizeable\nbasic payments deficit, Emminger said. The inflows of foreign\nexchange into Germany since last October have been entirely\ndue to short-term capital flows, partly of a speculative nature\nand partly motivated by hedging operations for commercial\npayments. \"As soon as these confidence movements subside, the\nbasic German deficit will reassert itself,\" he added.\nGERALD LLORARY FORD\n-3-\n- 3 -\nEmminger says enough has been done to stimulate German economy\nGermany has already taken enough measures to stimulate\nits economy in 1978, and there is a good prospect of the\ncountry achieving a significant domestically-led recovery,\nBundesbank President Otmar Emminger said.\nThe probable effects of recent tax cuts and various public\nexpenditure programs, as well as the impact of cheap and\nplentiful credit, are often underestimated by foreign observers.\n\"One cannot, of course, see the effect of these measures\nreflected in the economic statistics overnight. However, the\nmost recent economic data begin to show already a definite\nrevival of domestic demand.\"\nEmminger said he expects Germany's imports\nrising six to seven pct in real terms or double the projected\n3.5 pct growth in real demand in the German economy. The\nreal rise in German exports in 1978 may be less than five\npct, which is the figure he anticipates for the growth in\nworld trade volume this year.\nThe recent rise in the mark, which toughens conditions for\nexporters, boosts imports from low-cost countries and increases\nthe tendency for German companies to shift production abroad,\nwill play a part in further reducing the payments surplus on\ncurrent account.\nEven if the mark's appreciation may temporarily increase\nthe trade surplus in the next few months by cheapening imports,\nthis effect will soon be compensated by other more durable\nfactors.\nGERALD FORD LIBRARY\n-4-\n- 4 -\nEmminger said the mark's rise of the past few months will\nsqueeze company profits, and makes it more difficult to set\nan investment recovery going. This justifies the present\nexpansive fiscal and monetary policies.\nOn the other hand, the mark's appreciation does help\nefforts to cut inflation further, provided these are not\ncounteracted by exaggerated wage movements, he said. Excessive\nwage increases would endanger jobs in industries exposed to\nsharpened competition from abroad.\nEmminger said central banks' recent foreign exchange\nintervention has created more liquidity in the German banking\nsystem than would normally be desirable.\nHowever, part of this liquidity has already been absorbed\nby other measures such as the increase in minimum reserves on\nbanks' foreign liabilities, open market operations, and\ntemporarily also by high federal government borrowing this\nyear.\n\"The foreign exchange purchases make achievement of our\neight pct monetary growth target for 1978 more difficult, but,\nas of now, not impossible\", he said.\nGERALD FORD LIBRARY\nDecember 13, 1977\nThe Homorable Otmar Emminger\nPresident\nDeutsche Bundesbank\nFrankfurt Am Main, Germany\nDear Otmar:\nI want to thank you and Mrs. Emminger for your\nkind hospitality. My visit to Frankfurt made it possible for\nme to exchange views with you and Karl during the day, and\nthe delightful dinner in the evening provided me with a\nwelcome opportunity to see some old friends.\nI must also thank you for your thoughtfulness in\nsending me the beautiful volume on medieval coinage that the\nDeutsche Bundesbank has just published. The subject is of\nconsiderable interest to me and I am pleased to add the\nvolume to my library.\nMrs. Burns joins me in conveying to you and Mrs.\nEmminger our warm holiday greetings and our very best\nwishes for the New Year.\nSincerely yours,\nArthur F. Burns\nNB:ja\nAFB\nFORD is. LIBRARI\nDEUTSCHE BUNDESBANK\nDER PRASIDENT\nFRANKFURT AM MAIN, in December 1977\nDr. Arthur F. Burns\nChairman of the Board of\nGovernors of the\nFederal Reserve System\nWashington, D.C. 20551\nUSA\nDear Prof. Burns,\nI am pleased to send you*, as a small Christmas gift, a publication by the\nDeutsche Bundesbank entitled\n\"Brakteaten der Stauferzeit 1138 - 1254\"\n(Bracteates from the period of the Hohenstaufen\nEmperors 1138 - 1254)\nIt contains illustrations and descriptions of a selection of coins which are\nstamped on one side only and are considered a peculiarity of medieval coinage.\nMost of the coins are taken from the Bundesbank's money museum.\nI hope that the book will give you pleasure.\nWith best wishes for Christmas and the New Year,\nYours sincerely,\nGERALD FORD LIBRARY\nGurar Summy\n*) under separate cover\nDinner at the \"Schloßhotel Kronberg\" on December 4, 1977, 8 p.m.\nMr. and Mrs. Abs,\nHonorary Chairman of the\nDeutsche Bank AG, Frankfurt\nMr. and Mrs. Becker,\nMember of the Board of Management\nKreditanstalt für Wiederaufbau,\nFrankfurt\nMr. and Mrs. von Bethmann,\nPartner, private bank \"Gebr. Bethmann\"\nProf. Burns,\nChairman of the Board, Federal\nReserve System, Washington\nMr. and Mrs. Casper,\nMember of the Board of Management\nMetallgesellschaft AG, Frankfurt\nMr. and Mrs. Dhom,\nChairman of the Board of Management\nCommerzbank AG, Frankfurt\nMr. and Mrs. Dietz,\nPresident, Frankfurt Chamber of\nIndustry and Commerce\nMr. and Mrs. Emminger\nPresident, Deutsche Bundesbank\nCount and Countess Galen\nPartner, private bank\n\"Schröder, Münchmeyer, Hengst & Co.\",\nFrankfurt\nMr. and Mrs. Geiger,\nChairman of the German Association\nof Savings Banks, Bonn\nMr. and Mrs. Guth,\nChairman of the Board of Management,\nDeutsche Bank AG, Frankfurt\nMr. and Mrs. Haeusgen,\nChairman of the Board of Management,\nDresdner Bank AG, Frankfurt\nMr. Hoffmann,\nMember of the Board of Management,\nBank für Gemeinwirtschaft, Frankfurt\nGERALD, FORD VISRABLE\n-2-\n- 2 -\nMr. and Mrs. Klasen,\nFormer President, Deutsche Bundesbank,\nHamburg\nCount and Countess Lambsdorff, Minister of Economics, Bonn\nMr. and Mrs. Lehmann,\nAmerican General Consul, Frankfurt\nMr. and Mrs. Lichtenberg,\nChairman of the Board of Directors,\nCommerzbank AG, Frankfurt\nMr. and Mrs. Meier-Preschany, Member of the Board of Management,\nDresdner Bank AG, Frankfurt\nMr. and Mrs. Pöhl,\nDeputy Governor, Deutsche Bundesbank,\nFrankfurt\nMr. Poullain,\nChairman of the Board of Management,\nWestdeutsche Landesbank, Düsseldorf\nMr. and Mrs. Vaerst,\nChairman of the Board of Management,\nDeutsche Bundesbahn, Frankfurt\nLIBRARY BERALD FORD\nBOARD OF GOVERNORS\nOF THE\nFEDERAL RESERVE SYSTEM\nDR. OTMAR EMMINGER\nWILHELM-EPSTEIN-STRASSE 14\nPRÄSIDENT DER DEUTSCHEN BUNDESBANK\n1977 NOV 22 AM 10: 32\n6000 FRANKFURT AM MAIN\nTELEFON 1581\nRECEIVED\nOFFICE OF THE CHAIRMAN\nNovember 18, 1977\nProfessor\nArthur E. Burns\nChairman\nFederal Reserve System\nWashington, D.C. 20551\n#1714\nDear Professor Burns:\nMay I confirm in writing how much I look forward to\nyour coming to Frankfurt on Sunday, December 4. Mrs. Emminger\nand I hope, of course, that you will be able to bring Mrs. Burns\nwith you.\nShould you have time to continue your stay in Frankfurt\non Monday, December 5, it would give us great pleasure to show\nyou and Mrs. Burns something of the Rhine valley or some of\nthe medieval towns around Frankfurt.\nAll your friends are following the news about your\ncourageous campaign for stability with the greatest admiration,\nand we wish you the best success.\nAttached please find the text of my remarks at the\nrecent National Foreign Trade Convention in New York.\nWith best regards,\nSincerely,\nEncl.\nGEEALO FORD LIBERTY\nMmar Summjer\nInternational Monetary Relations: Problems and Prospects\nRemarks by Otmar Emminger, President of the Deutsche Bundesbank,\nbefore the 64th National Foreign Trade Convention, New York,\nNovember 14, 1977\nI.\nOver the last five years, our world economic and financial\nsystem has been subjected to a multitude of strains and stresses\nas never before in our post-war economic history, such as\nworld-wide galloping inflation, the breakdown of the Bretton\nWoods system, the oil price explosion (which generated huge\npayments disequilibria and financing problems), the worst recession\nsince the thirties, enormous structural shifts and dislocations\nin world production and trade, and finally, as a consequence of\nall these as well as other reasons, an obstinate unemployment\nproblem nearly everywhere.\nII.\nHow well has our economic and monetary system stood up to all\nthese strains and challenges? Perhaps most remarkable is the\n-2-\nGERALD FORD LIBRARY\n- 2 -\nsimple fact that our system has survived at all (which reminds\none of the French marquis who, when asked what he had done\nduring the French Revolution, replied: \"j'ai survécu\"). Our\nsystem has survived battered and bruised, it is true, but\nwithout having lost its essential quality of a predominantly free\nmarket system, and without as yet! - too many protectionist\ndistortions (although the threat of them is unfortunately in-\ncreasing daily). If our system has shown a surprising degree of\nresilience and shock-absorption power, some credit for it must\ngo to the more elastic exchange rate system. Elastic exchange\nrates as shock absorbers are certainly preferable to damaging\nprotectionist trade measures.\nAs concerns in particular our international payments system,\nit has since the oil price explosion . - contrary to a lot of\ngloomy predictions - accommodated, without major breakdowns up\nto now, gross balance of payments deficits (measured in terms of\ndeficits on current account, i.e. trade and invisibles) to the\ntune of $ 60 to 75 billion annually, that is, more than seven\ntimes the annual average of the sixties. And astonishingly enough,\nthe financing of these huge deficits has been accomplished\nmostly through private credit and investment and with only a\nrelatively modest contribution from official financing.\nWho would have thought it possible that after all these\nstrains and dislocations - world trade would recover within\ntwo years to a level which in 1977 seems to have been 11 to\n12 per cent higher in volume terms, and about 33 per cent\nhigher in dollar terms, than the pre-recession peak of 1974?\n-3-\n- 3 -\nIII.\nThese positive developments should not be underestimated.\nOn the other hand, the means by which some of them have been\nbrought about namely huge international lending and borrowing -\nhave left a legacy which will remain a deadweight.\nThis legacy consists of massive external indebtedness on the\none hand and a huge accumulation of foreign assets in a handful of\noil countries on the other. If present forecasts come true, by\n1980 a few Arab oil countries will have accumulated between\n$ 200 and 250 billion worth of foreign assets, that is to say\nmore than one half of what the United States, the world's strongest\neconomy, has accumulated over the last 100 years (gross! - and\nnearly three times the amount which it has accumulated as a net\nforeign position!). This implies an important shift in economic\npower, but it imposes also an enormous responsibility for the\nworld economy on the oil-rich nations.\nIV.\nMore than a year ago, at the Manila Meeting of the Inter-\nnational Monetary Fund and the World Bank, Mr. Witteveen, the\nManaging Director of the Fund, proposed - with general acclaim -\nthat from now on more stress should be laid on the adjustment\nof external positions, rather than on the mere financing of\ndeficits. How far have we come along the road toward better\nadjustment of payments imbalances?\nThere have been surprising changes in the international\npayments scene over the last 12 months. Last year the spotlight\nwas mainly on some extreme deficit countries in Europe and on\nthe group of less developed countries (LDCs) with their massive\nexternal indebtedness. Now the spotlight is more on the United\nStates and Japan.\n-4-\n- 4 -\nDistinct progress has been made in Europe. If we take\nBritain, France and Italy together, their combined balance of\npayments deficit on current account amounted to $ 23 billion\nin 1974 (the first year after the oil price hike), $ 11 1/2\nbillion in 1976, and only about $ 2 billion in 1977. In the\ncase of Britain, North Sea oil has had a hand in it; but\nthere, as in the other cases, progress has also owed a lot to\ncourageous stabilisation policies. There still remains, however,\na hard core of smaller European deficit countries which have\nhardly yet begun to grapple with their acute payments problems\n- chief among them some Southern European countries. It is to\nbe hoped that the IMF, in advising them and lending them a\nhelping hand, will have similar success as in the cases of\nBritain and Italy.\nIn parentheses I may add that another group of European\ncountries has recently also made headway in their balance of\npayments adjustment, i.e. the countries of the Eastern bloc.\nThey have made a great effort to reduce their trade deficits,\nmostly by restraining imports, not least in order to strengthen\ntheir credit standing in international financial markets.\nFor the considerable, although as yet incomplete progress\nin balance of payments adjustment in Europe a price has had to be\npaid: the inevitable slowdown in the imports of the countries con-\ncerned has been a factor in the lower expansion of world trade\nin 1977. But we can hope that these countries will soon be able\nto re-start economic expansion on a healthier and more stable\nbasis.\nV.\nIn another problem area, namely the non-OPEC developing\ncountries, the payments situation and the credit rating of a\n-5-\n- 5 -\nnumber of them has improved. A year ago some observers\npainted the specter of an impending international financial\ncrisis on the wall as a consequence of these countries' payments\ndeficits and external indebtedness. This gloomy view appears in\nretrospect to have at least in part been exaggerated. There\ncertainly are a few critical cases where a developing country\nhas reached, or maybe even overstepped, the limits of its\nborrowing capacity, so that drastic measures have had to be\nadopted.\nBut contrary to a widespread opinion, the LDCs as a group seem\nto have fared relatively better over the last few years than\nmany industrial countries, especially as concerns their domestic\nproduction. But in recent years also their exports have increased\nsignificantly, not least their exports of industrial products\n(which are increasingly forcing structural adjustments on the\neconomies of industrial countries). We can no longer classify\nall the countries of the Third World as \"less developed\" and\nlump them together into one single group.\nIf nevertheless we consider their balances of payments for\na moment in the aggregate, we arrive at the astonishing conclusion\nthat their external situation, which formerly aroused so much\nconcern, has practically reverted to normal. This is the con-\nclusion of the experts of the International Monetary Fund.\nAccording to them, the LDCs' global payments deficit on current\naccount in 1976 and 1977 (at about $ 26 and 22 billion respectively)\ncorresponded to their normal combined deficit before the oil\ncrisis, when adjustment is made for inflation and the increase\nin real output (GNP). A net annual capital inflow of this magni-\ntude can be financed without too great difficulties - the\ngap which must be financed out of commercial sources is a net\namount of only $ 6 to 8 billion; it seems to be also within\ntheir aggregate debt servicing capacity.\n-6-\n- 6 -\nEven their accumulated external debt does not, on closer\nanalysis, look unmanageable. It is true that it has in-\ncreased about fourfold since 1968, but so has the value of\ntheir total exports and GNP. But this is no ground for complacency.\nIt is not good enough to conclude that the LDCs as a group have\nnot thus far overborrowed. It is always risky to reason on\nglobal figures. Some individual countries' debt problems look\nrather grim, and further borrowing abroad by such countries\nwill depend on whether they are able to put their financial\nhouses in order. But I don't see these individual debtor pro-\nblems posing an imminent threat to our world financial system\nas a whole.\nVI.\nLet me add here a few remarks on international bank lending\nand security markets in general.\nThe question of whether international bank lending is\nover-extended has often been discussed as if it\nconcerned mainly lending to the developing countries. This is\na misconception. In reality the problem extends far beyond the\nfinancing of LDCs.\nLast year, for example, total international private lending\nthrough banks and security markets is estimated to have increased\nby a staggering $ 90 to 95 billion - of which, however, less than\none fifth was accounted for by lending to developing countries.\nThis huge international lending and borrowing activity\nraises many questions, such as what can be done to improve the\nflow of data needed to evaluate the creditworthiness of individual\nborrowing countries, whether too easy commercial lending may not\nundercut the IMF's attempt to ensure more economic discipline,\n-7-\n- 7 -\nand what role parallel financing between the banks and the IMF\ncan play. I cannot go into these questions in detail here.\nBut I want to express my general feeling that international\ncommercial lending has recently reached magnitudes which should\nprompt some soul-searching. The increase in 1976 of $ 90 to\n95 billion which I mentioned was nearly twice the amount needed\nin commercial resources for the financing of all current account\ndeficits in the world ($ 75 billion total deficits, minus\nfinancing by official assistance and credit, direct investment\nand trade credit), and nearly four times the OPEC surplus funds\nthat had to be recycled through the private markets (a $ 35 billion\n\"investible surplus\", minus direct OPEC loans to deficit countries\nand international agencies). Thus international lending has\nextended far beyond what is necessary to ensure the recycling\nof petro-dollars, and beyond the need to finance payments de-\nficits. A pause for reflection, and a period of consolidation in\ninternational financing seems to be indicated.\nVII.\nCan the world economy be brought back at all into some sort\nof balance as long as the huge payments surpluses of the oil-rich\ncountries continue unabated?\n1. First of all, these surpluses need not in fact continue\nunabated, as is sometimes supposed. There are estimates - by the\nOECD and others - that under reasonable assumptions these sur-\npluses may fall, in the aggregate, from their present annual\nrate of $ 35 to 40 billion to between $ 15 and 25 billion by the\nbeginning of the eighties, mainly through rapid increases in the\nimports of the OPEC countries. Judging from our German experience,\nthe adjustment might proceed even more quickly. For we have now\n-8-\n- 8 -\nfully balanced our trade account with the OPEC countries, thus\nbearing the full burden of the adjustment to the higher oil\nprices (real adjustment!) by a correspondingly greater transfer\nof real resources to the OPEC countries. 1)\n2. The future size of the OPEC surpluses will depend\ndecisively on the oil imports of the United States. At present,\nat least one half of the combined current account surplus of\nthe OPEC countries is due to the \"oil deficit\" of the USA, that\nis to say its current account deficit vis-à-vis these countries.\nIn a few years the insatiable appetite of the U.S. for oil may\naccount for even more than half the OPEC current account surplus.\nThus, the residual financial burden placed upon the rest of the\nworld by the OPEC surpluses at the beginning of the next decade\nmay be only one half of the estimated annual $ 15 to 25 billion\n- provided the U.S. does not attempt to shift part of its own\noil deficit on to other oil-importing countries by increasing\nits trade surplus with them.\n3. The accumulation of foreign assets in the hands of the\nOPEC countries has already assumed very large proportions,\nnamely an estimated $ 170 billion. I do not, however, believe\nin the \"doomsday scenario\" according to which \"an international\ndebt crisis\" may be looming up on the horizon in the form of\nmassive withdrawals of liquid OPEC funds out of the dollar. I\nhave confidence in the sense of responsibility of the oil-rich\ncountries (which they have proven up to now in the management\nof their foreign assets) and I also believe they are shrewd\nenough to recognise their own best interests (since by suddenly\nwithdrawing a few billion out of their liquid dollar assets they\ncould disproportionately depreciate their large remaining dollar\nassets).\n1) And not, as was asserted quite recently in a Congressional\nReport, by shifting the burden of adjustment to other oil-\nimporting countries, including the LDCs.\n-9-\n- 9 -\nA judicious management of their foreign assets is one of\nthe new responsibilities toward the world community which have\ndevolved upon the oil-rich nations. Others comprise giving more\ndirect financial help to the less developed countries, contributing\nto the stability of the international monetary system by giving\nspecial support to the IMF (similar to the industrial countries\nwith strong currencies), and - last but not least - acting re-\nsponsibly in fixing the oil price.\nVIII.\nNow let me make a jump from the extreme surplus side to the\nextreme deficit side of the world payments ledger, where the U.S.\nis now the record-holder with a deficit on current account of\nabout $ 16 to 18 billion this year. The dollar has been called\n\"the most important undiscussed issue at the September Meeting of\nthe IMF\". I would also have preferred to pass over the dollar\nproblem entirely, for, like Caesar's wife, a currency like the\ndollar should be above suspicion and not be talked about. But\nthe problem has in the meantime been so much publicized that\nyou probably expect a few words on it from me.\nIt is well known that the American payments deficit stems\nto a large extent from the enormous increase in the oil bill\nof the U.S., and to some extent from the faster economic ex-\npansion in the U.S. than abroad. Some would probably add another,\nand more controversial, point, namely a loss of U.S. competitiveness\nin comparative costs and prices. My assessment is that the U.S.\ncompetitive position, measured by market shares or by a cost\nand price comparison with the other industrial countries, may\nhave deteriorated slightly here and there over the last twelve\nmonths. But over the whole period since the beginning of the\n70's the U.S. has become more competitive in terms of relative\nprices and wages by 20 to 30 per cent, depending on the criterion\n-10-\n- 10 -\napplied. In some bilateral relations the shift has been even\nlarger. According to the U.S. Department of Labor, from 1970 to 1976\nunit labor costs increased by 35 per cent in the U.S., but by\nabout 100 per cent (!) in Germany, when calculated in dollar terms.\nNo wonder our German industrialists find it so attractive to\ninvest and produce in the United States!\nNeedless to say, the large U.S. trade deficit vis-à-vis\nJapan plays a special role. But it should also be mentioned that\nthe U.S. has a trade and current account surplus with the rest\nof the world, and a particularly large one with Western Europe.\nWhen the American payments deficit first emerged - and this\nhappened only about a year ago - it was at first saluted as\n\"a healthy sign\" and as a benefit to the rest of the world. Now\nthere seems to be agreement, at least among those responsible\nfor economic and monetary policy on both sides of the Atlantic,\nthat the negative aspects of this deficit preponderate, that\nit should be gradually reduced, and that it is of overriding\nimportance to keep the dollar strong, in the interests of both\nAmerica and the world economy.\nYou will not be surprised when I tell you that a sagging\ndollar is not very popular in Europe and that countries are not\nenthusiastic when their currency is driven up disproportionately\nin relation to the dollar. But I want to stress that, contrary\nto what still seems to be assumed occasionally in the U.S.,\nGermany for instance has always accepted an appreciation of the\nDMark brought about by underlying market forces, and has not\nattempted to artifically counteract it. Thus, the DMark has\nappreciated by 16 1/2 per cent against the dollar since the be-\nginning of 1976 and by no less than 43 per cent since 1972. In\nboth cases this goes considerably beyond the differences in cost\nand price developments in the two countries (the \"inflation\ndifferential\"), so that it has depressed the competitiveness\n-11-\n- 11 -\nof our economy and increased the competitive position of\nAmerican industry. This is also true when we examine the\nappreciation of the DMark in relation to a trade-weighted\nbasket of all major currencies and compare it with relative\ncost and price developments. This has been one of our major,\nand sometimes quite painful, contributions to the payments\nadjustment process. The Japanese yen, which had at first lagged\nbehind, has recently also joined this upward movement vis-à-vis\nthe dollar and other currencies. But in passing I may note that\nwe are somewhat sensitive when the German and Japanese payments\ncases are thrown into the same basket (as they sometimes have\nbeen by American commentators), for Germany has not relied on\nan export-led recovery, and it has already reduced its current\naccount surplus to near-zero (and its basic balance of payments,\ni.e. including long-term capital, shows a large deficit), while\nthe Japanese trade and payments surplus is still rising to\nrecord heights.\nIf we are in favor of a strong dollar, it is not only because\nof our trade interests, but even more because of the pivotal role\nof the dollar in the world monetary system. The dollar is not\njust another currency, it is the key currency of the world. A\ndollar which is constantly under a cloud of suspicion could\nhave a disruptive influence on world trade and payments, quite\napart from the possible effect of a sagging dollar on oil prices.\nIt is encouraging for the world community to see that the\nresolve to maintain a strong dollar is widely supported in this\ncountry. Chairman Arthur Burns - who has rightly been called\n\"the dollar's bodyguard\" - has repeatedly stated that \"the integrity\nof the dollar must be defended\", which is, of course, the opposite\nto benign neglect, and he has found a sympathetic echo all over\nthe world. We in Germany also welcomed a statement by Secretary\nBlumenthal during his recent visit to our country, which he\nLIBRARY GERALD FORM\n-12-\n- 12 -\nunderlined again in his keynote address this morning, namely\nthat the United States is fully committed to the maintenance of\na strong and stable dollar.\nIX.\nHow can this be achieved in practical terms?\n1. There is no need to stress that the most important measure\nwould be a meaningful U.S. energy program, because this would\nattack the major payments problem at its roots. Its effect on\nAmerican oil imports will, however, be felt only over the longer\nrun.\n2. Some contribution towards a better external balance could\nalso be expected from reducing the disharmony between the rates\nof economic expansion in the U.S. and other countries. We in\nGermany have accepted the principle that countries with strong\ncurrencies should \"maintain adequate demand, consistent with\nanti-inflationary policies\" (Undersecretary of the Treasury\nA.M. Salomon). We hope that not only our economy but also that\nof other countries will soon get back on an appropriate growth\ntrack. This is not easy when you have to deal with an economy\nlike ours which has suffered from cost inflation and a prolonged\nprofit squeeze, the latter not unrelated to the continuous\nappreciation of the DMark. But we are confident that the recently\nenacted fiscal stimulation program of the German government,\nsupported by an appropriate monetary policy, will achieve the\ndesired results.\n3. How far could exchange rate policy be used as a tool for\nthis payments adjustment? I would not deny that in individual\ncases a country's exchange rate vis-à-vis the dollar has to be\nadjusted to changed underlying market forces or inflation\ndifferentials. But a generalized depreciation of the dollar would\nprobably not have much effect on the trade balance of the U.S.\n-13-\n- 13 -\nin the short run, especially not on its crucial balance\nvis-à-vis the OPEC countries, and its negative effects\non the American capital account, not to mention its\nunsettling effects on the world monetary system and on oil\nprices, would quite certainly far outweigh its positive effects.\n4. The question has been raised whether a deliberate and\ncooperative management of the exchange rates of the dollar and\nsome other major currencies (such as the yen, the DMark, and\nthe Swiss franc) could not make a major contribution to more\nstability in the world monetary system. In this connection, the\nsetting up of agreed target zones for the exchange rates of major\ncurrencies has been suggested. The idea is not new; such target\nzones were already discussed in the IMF some years ago, and were\nforeseen as a possibility in the Fund's 1974 Guidelines for\nmanaging exchange rates. But I feel that this is a non-starter\n(as it was in the years after 1974). Even to agree on fixed target\nzones themselves and the principles for their determination and\nchange would be extremely difficult. Fixed targets might also\ncreate new, safe bets for currency speculation. Furthermore, an\nobligation of other countries to intervene in the dollar market\nin order to maintain certain exchange rate limits would\nentail such an enormous commitment in quantitative terms that\nit could not be compared to the commitments inside the European\n\"Snake\".\nI do not rule out a more coordinated intervention policy\namong the major countries; on the contrary, I welcome it. We have,\nindeed, already made some progress in this direction. The present\nrule that interventions in the exchange market should be under-\ntaken \"only to smooth out temporary fluctuations\" could perhaps\nbe interpreted in a flexible way in view of the central position\nof the dollar in our world monetary system. But we cannot solve\nthe payments imbalance between the U.S. and the rest of the world\nmainly by foreign exchange intervention; and we should not rely\non massive intervention by monetary authorities to continue to act\n-14-\n- 14 -\nin bridging the payments gap as it has done in 1977. I can only\nmention in passing the tremendous problems for domestic money\ncreation as well as for international monetary liquidity which\nsuch massive intervention in the dollar market would entail.\nDuring the transition period until the U.S. current account\ngets into better shape, an overall payments equilibrium between\nthe U.S. and the rest of the world will have to be ensured by\ncapital imports into the U.S. This should not be too difficult.\nA considerable part of the large current account deficit vis-à-vis\nthe OPEC countries should be self-financing, as these countries\nin all likelihood will continue to invest part of their surpluses\nin dollar assets. But to achieve this balancing act through\ncapital imports smoothly, American interest rates will have to\nremain attractive and confidence in the dollar unimpaired. In the\nfinal analysis, this will depend - and the strength of the dollar\nwill depend - crucially upon successful anti-inflation policies.\nAs concerns our general attitude toward the dollar problem,\nI should like to associate myself with the advice recently given\nby Professor Walter Heller: \"we should not lose our cool nor\nshould we practice benign smugness\". I say \"we\", as the health\nof the dollar is not only America's concern but also that of\nthe rest of the world.\nX.\nLet me conclude: I have had to present to you a mixed picture as\nconcerns international monetary relations. Problems which had\nseemed nearly intractable when the oil price explosion broke upon\nus in 1973/74 have been at least partly overcome and no longer\nlook so threatening. New problems have arisen which confront us\nwith new challenges. To meet them, we will probably need even more\ninternational coordination and cooperation than before. Never\n-15-\n- 15 -\nbefore has the economic interdependence of all the nations of\nthe world been more deeply impressed upon our minds than at\npresent. A precondition for the necessary cooperation and\ncoordination is a commonly agreed diagnosis of the problems.\nIt is encouraging that we seem to have achieved common views\non our major international monetary and payments problems on\nboth sides of the Atlantic. I am confident that on this basis\nour cooperation in the international monetary field will be better\nthan ever before.\nDR. OTMAR EMMINGER\nPRÄSIDENT DER DEUTSCHEN BUNDESBANK\n038ALD RD\nFRANKFURT AM MAIN\nAt its meeting on August 25, 1977, the Central Bank Council\nof the Deutsche Bundesbank took the following decisions:\n1. The minimum reserve ratios will be reduced\nby 10 % of their present level with effect from\nSeptember 1, 1977.\n2. The banks' rediscount quotas will be raised by\nabout DM 2 billion with immediate effect.\nThrough the reduction in minimum reserves some DM 4 1/2 billion\nof the compulsory non-interest-bearing deposits which the banks\nmaintain at the Bundesbank will be released. The raising of\nthe rediscount quotas will permit the banks to obtain additional\nfunds from the Bundesbank at the discount rate. This will enable\nthem to lower their present high level of short-term recourse\nto the Bundesbank through lombard loans and open market trans-\nactions in bills. These measures are in line with the monetary\npolicy the Bundesbank has been pursuing for some time.\nDERALO FORD LIBRARY\nOFFICE OF THE CHAIRMAN\nRECEIVED\n1977 AUG 31 AM 11: 20\nFEDERAL RESERVE SYSTEM\nOF\nBOARD OF GOVERNORS\nDeutsche Bundesbank\nPressenotiz\nFrankfurt am Main, 25. August 1977\nDer Zentralbankrat der Deutschen Bundesbank hat heute folgende Beschlüsse\ngefaßt:\n1. Die Mindestreservesätze werden ab 1. September d.J.\num 10% ihres bisherigen Standes gesenkt.\n2. Die Rediskont-Kontingente der Kreditinstitute werden\nab sofort um rd. 2 Mrd. DM erhöht.\nMit der Mindestreservesenkung werden rd. 4 1/2 Mrd DM der bei der Bundes-\nbank von den Kreditinstituten zinslos zu haltenden Pflichteinlagen freigegeben. Die\nErhöhung des Rediskontrahmens erlaubt den Kreditinstituten zusätzliche Refinanzierun-\ngen zum Diskontsatz. Damit wird es den Kreditinstituten ermöglicht, ihre derzeitige\nhohe kurzfristige Refinanzierung über Lombardkredit und Offenmarktgeschäfte mit\nWechseln abzubauen. Diese Maßnahmen entsprechen dem seit längerem verfolgten\ngeldpolitischen Kurs der Bundesbank.\nLISTAGE GERALD FORD\nBei publizistischer Verwertung Angabe der Quelle erbeten\nPRESSE UND INFORMATION\nFrankfurt am Main, 25. August 1977\nF/F 10\nPräsident Dr. Emminger und das Mitglied des Direktoriums Dr. Irmler\nvor der Presse nach der ZBR-Sitzung am 25. August 1977\n(nach Bandaufnahme)\nMeine Damen und Herren!\nIch begrüße Sie zu dieser Pressebesprechung. Der Beschluß, den der Zentralbank-\nrat heute gefaßt hat, ist Ihnen bereits ausgehändigt worden. Mit der Freigabe\neines erheblichen Liquiditätsbetrages wollen wir die Versorgung der Kredit-\ninstitute mit Notenbankliquidität auf eine dauerhaftere Grundlage stellen. In den\nletzten Monaten mußten die Kreditinstitute einen erheblichen Anteil ihres Bedarfs\nan Zentralbankgeld dadurch decken, daß sie kurzfristig Liquidität bei der Bundes-\nbank gepumpt haben, und zwar durch Lombardkredit und durch die Zehntagesgeschäfte\nmit Wechseln. Das hätte mit der Zeit zu einer gewissen Verklemmung führen\nkönnen, insbesondere weil mit dem September ein Monat vor uns steht, der\nschon aus jahreszeitlichen Gründen ohnehin einen zusätzlichen Liquiditätsbedarf\naufweist. Infolgedessen haben wir heute beschlossen, diese kurzfristige und\nprovisorische Liquiditätsbereitstellung durch eine dauerhaftere Liquiditätsausstat-\ntung abzulösen, nämlich durch eine Senkung der Mindestreserven und eine Er-\nhöhung der Rediskontkontingente.\nFrage:\nInwieweit sind diese Maßnahmen im Rahmen Ihres vorgegebenen Geldmengenziels\nzu verstehen, oder inwieweit haben Sie damit auch dem schleppenden Konjunktur-\nverlauf Rechnung getragen, um mit einer vielleicht expansiveren Geldpolitik an-\nregend zu wirken?\nEmminger:\nZunächst möchte ich in Erinnerung rufen, daß ich schon Mitte Juli, vor den\nSommerferien, als wir das letzte Mal hier zusammen waren, in Aussicht ge-\nstellt hatte, daß wir uns im August vor der Notwendigkeit sehen würden, einen\nLiquiditätsbeschluß zu fassen. Sie sehen daraus, daß dies ein Beschluß ist, der\nim Rahmen unserer längerfristigen Geldmengenpolitik,unserer längerfristigen\nGERALD R. LISBARY FORD\n2\n2\nLiquiditätsversorgung liegt. Ich hatte damals sogar ziemlich genau gesagt, in\n4 oder 6 Wochen, und das hieß- eben, entweder am 11. oder 25. August würde\ndies eintreten; und zwar deswegen, weil wir einen solchen Beschluß zur länger-\nfristigen Verbesserung der Liquiditätsausstattung der Kreditinstitute natürlich\nzweckmäßigerweise zu einem Zeitpunkt fassen, an dem aus Saisongründen sowieso\neine zusätzliche Anspannung auf uns zukommt. Aber diese saisonmäßige Anspan-\nnung ist nicht ein primärer Grund, es ist nur der Anlaß für das Timing, für den\nZeitpunkt. Im übrigen ist das Ausmaß, das relativ hoch erscheinen könnte immer-\nhin 4 1/2 Mrd DM Senkung der Mindestreserven und zusätzlich noch eine Erwei-\nterung des Rediskontrahmens um 2 Mrd DM -,weitgehend dadurch bestimmt wor-\nden, daß gerade in den letzten 2 Monaten die Banken zur Deckung ihres Liquiditäts-\nbedarfs stark auf diese provisorischen, kurzfristigen Liquiditätshilfen, den Lombard-\nkredit und die Zehntagesgeschäfte, angewiesen waren. Natürlich hat auch mitge-\nspielt, daß wir es bei der heutigen Konjunkturlage vermeiden wollen, auch nur\nvorübergehend eine Verknappung oder Verklemmung bei den Kreditinstituten ein-\ntreten zu lassen. Insofern hat im Hintergrund auch die Konjunkturlage eine Rolle\ngespielt. Sie würde es heute sicherlich nicht angebracht erscheinen lassen, durch\nvorübergehende Liquiditätsverklemmungen etwa plötzliche Ausschläge z.B. bei\nden Zinsen hervorzurufen. Aber dieser Gesichtspunkt fügt sich, und deswegen\nder letzte Satz in unserer Pressenotiz, in den längerfristigen geldpolitischen Kurs\nder Bundesbank nahtlos ein.\nFrage:\nHerr Dr. Emminger, in welchem Umfang sind bisher diese provisorischen Liquidi-\ntätshilfen in Anspruch genommen worden, wie hoch war das Gesamtvolumen der\nin Anspruch genommenen Zehntageswechsel, der Lombardkredite, und in welchem\nUmfang waren bisher die Rediskontkontingente ausgenutzt?\nEmminger:\nDas ist eine diffizile Rechnung, vor allem, weil diese Zahlen sich natürlich\nständig verändern. Sie können das anhand unserer Wochenausweise verfolgen.\nAuch der aktuelle Stand besagt deshalb nicht viel, weil innerhalb weniger Tage\ngroße Veränderungen eintreten können.\nIrmler:\nDeswegen würde ich nicht den letzten Stand nennen wollen. Im Verlauf des August\nist bisher im Tagesdurchschnitt etwa 2 1/2 Mrd DM Lombard genommen worden;\naußerdem standen etwa 5 1/2 Mrd DM Zehntagesgeschäfte aus. Im Tagesdurch-\nschnitt des August macht das zusammen also rd. 8 Mrd DM.\n3\n3\nFrage:\nWie hoch waren die Wechselkredite, der Wechselrediskont, in Anspruch genommen?\nIrmler:\nIm Tagesdurchschnitt des August bisher mit 63%.\nFrage:\nWie groß sind die Rediskontkontingente insgesamt?\nIrmler:\nDas sind jetzt etwa 22 Mrd DM einschließlich der heute beschlossenen Erhöhung\nder Rediskontkontingente.\nFrage:\nHerr Präsident Emminger, Sie sprachen vom Ablösen der \"provisorischen\" Liqui-\nditätshilfen; heißt das beispielsweise, daß das Volumen der Pensionsgeschäfte\nkünftig herabgesetzt wird?\nEmminger:\nDas ist durchaus möglich; die heutige Freigabe ist ja so reichlich, daß wir eigent-\nlich bald nach Inkrafttreten dieser Regelung Anfang September wahrscheinlich auf\ndie Zehntagesgeschäfte mit Wechseln verzichten könnten. Aber ich will mich hier\nnicht festlegen, weil, wie Sie wissen, wir bei dieser Offenmarktpolitik mit Zehn-\ntageswechseln bewußt flexibel bleiben wollen. Erwünscht aber ist es,und angestrebt\nwird es, daß wir Anfang September von dieser provisorischen Methode, wie ich\nes einmal nennen möchte, herunterkommen.\nFrage:\nWie sieht denn die Devisenbilanz aus? Im Juli kam es doch über die Währungs-\nreserven zu einem Zufluß von etwa 2 Mrd DM, in der zweiten Augustwoche ist\nwohl ein Rückgang bei den Nettowährungsreserven eingetreten. Könnten Sie dies\neinmal erläutern?\nEmminger\nSie haben ganz recht gesagt, es gab im Juli einen Nettozufluß von rd. 2 Mrd DM.\nWir haben im bisherigen Verlauf des Monats August einen Nettoabfluß von nicht\nganz 650 Mio DM gehabt, so daß also noch nicht alles spekulative Geld, das uns\nim Juli zugeschwemmt worden ist, schon wieder abgeflossen ist. In der gesamten\n4\nFORD\n'if\nGERALD\n4\nDevisenbilanz seit Anfang d.J. bis heute haben wir 430 Mio DM Nettozufluß\ngehabt; praktisch ist das also eine Null-Bilanz. Das heißt, von der Devisenseite\nher, wenn wir von Anfang d.J. bis gestern rechnen, haben wir einen so geringen\nNettozufluß, daß wir sagen können, unsere Devisenbilanz ist im Gleichgewicht und\nebenso unsere Gesamtzahlungsbilanz. Aber noch ein anderer Zahlungsbilanzbegriff\nist wichtig, nämlich die sogenannte Grundbilanz. Diese \"basic balance of payments\"\nder Bundesrepublik, das heißt Leistungsbilanz plus langfristiger Kapitalverkehr,\nist im ersten Halbjahr d.J. im Defizit gewesen, und zwar ganz beachtlich mit\nrd. 2 1/2 Mrd DM. Das bedeutet Unser Leistungsbilanzüberschuß der nicht ganz\n5 1/2 Mrd DM betrug, ist weit überkompensiert worden durch langfristige Netto-\nKapitalexporte. In den sieben Monaten von Januar bis einschließlich Juli haben wir\neinen Überschuß der Leistungsbilanz von 4,1 Mrd DM gehabt. Der langfristige\nkapitalverkehr hat mit einem Defizit von 8,6 Mrd DM abgeschlossen, so daß die\nGrundbilanz in diesen sieben Monaten ein Defizit von 4;5 Mrd DM aufwies. Wenn\nman also von der Bundesrepublik immer als einem Überschußland spricht und glaubt,\ndaß dieser Überschuß den D-Mark-Kurs vom Markt her in die Höhe treiben müßte,\nso ist das eben nur eine Teilbetrachtung; denn man läßt dabei außer acht, daß wir\ndurch unsere sehr niedrigen Zinssätze einen sehr hohen Nettokapitalexport lang-\nfristiger Art haben. Wir haben heute ein Zinsniveau, das 1 1/2 bis 2% niedriger als\ndas in den Vereinigten Staaten ist.\nFrage:\nHerr Dr. Emminger, wie sehen denn die letzten Schätzungen aus für das Wachstum\ndes Bruttosozialprodukts im 2. Quartal?\nEmminger:\nWir haben für das 2. Quartal keine eigenen Schätzungen vorliegen. Sie wissen,\ndaß wirklich verläßliches statistisches Material ja immer noch Seltenheitswert hat,\naber ich glaube wohl sagen zu können aber Herr Schlesinger, korrigieren Sie\nmich, wenn ich es falsch formuliere -, daß im 2. Vierteljahr d.J. das reale\nWachstum ganz geringfügig war, Es war sicher nicht weit entfernt von einer\nStagnation, und zwar, um es präzise zu sagen, vom ersten zum zweiten Vierteljahr\ngerechnet. Gegenüber dem Vorjahr war auch das 2. Vierteljahr immer noch im\nPlus, aber nicht mehr so wie in den vorangegangenen Vierteljahren.\nFrage:\nUnd die Schätzung für das 1. Vierteljahr, das bleibt bei 4 %?\n5\nGERALD\n5\nEmminger:\nDas bleibt bei ungefähr 4 %, ja!\nFrage:\nHerr Dr. Emminger. Was sollte die Bundesregierung nach Auffassung der Noten-\nbank zur Stabilisierung der Konjunktur tun?\nEmminger:\nDas ist eine Frage, die ich Ihnen zu meinem Bedauern heute nicht beantworten\nkann. Erstens wüßte ich es gerne selber,und zweitens, wenn ich es wüßte, dann\nkönnte ich es Ihnen heute mit Sicherheit nicht sagen.\nFrage:\nSoll überhaupt etwas getan werden?\nEmminger\nDazu kann ich Ihnen nichts sagen; allenfalls dieses: Wir haben darüber auch heute\nim Zentralbankrat gesprochen. Wir teilen die Ansicht derjenigen, die meinen, daß\nes entscheidend wichtig ist, daß Beschlüsse, wenn sie gefaßt werden sollten, so\nrasch wie möglich kommen, d.h., daß diese Periode der Ungewißheit so rasch wie\nmöglich beendet wird. Das ist wirklich, wie ja schon mehrfach gesagt worden ist,\nGift für die Wirtschaft, das verstärkt den Attentismus, und der Attentismus ist\nsowieso zur Zeit einer der hemmenden Faktoren für einen normalen Fortgang der\nKonjunktur. Man kann also nur sagen, je rascher, desto besser, oder: Es muß\nso schnell wie möglich entschieden werden.\nFrage:\nIch hatte vorhin etwas gefragt, es bezog sich noch einmal auf die Rediskontkontin-\ngente. Wo sehen Sie denn die praktische Wirkung der Freigabe oder der Erhöhung\nder Rediskontkontingente um 2 Mrd DM, wenn die jetzigen bei 22 Mrd DM ohnehin\nnur zu 63% in Anspruch genommen werden?\nEmminger\nDer Sinn dieser Erhöhung ist folgender: Wir gehen davon aus, daß es von Zeit zu\nZeit. immer wieder Perioden geben wird, in denen wir keine Zehntagesgeschäfte\nmit Wechseln offerieren. Heute ist die Ausnutzung der Rediskontkontingente deswegen\nso relativ gering, weil es für die Kreditinstitute viel einfacher ist, ihre Wechsel\nFORD\n7\nGERALD\n6\nbei uns auf 10 Tage in Pension zu geben, als sie zu rediskontieren, wo sie sich,\ndann auf 4, 5 oder 6 Wochen fest binden müssen. Wenn dagegen, was wir hoffen\nund erwarten, die Zehntagesgeschäfte mit Wechseln wegfallen, dann werden mit\ngroßer Wahrscheinlichkeit, wenn nicht sogar Sicherheit, die normalen Rediskont-\nkontingente wieder stärker ausgenutzt. Und wenn nun der Rahmen für diese Rediskont-\nkontingente höher ist, besteht auch die Chance, daß sie stärker ausgenutzt werden.\nDas ist der Sinn. Sie müssen das in Einem sehen, wir wollen weg von dieser Finan-\nzierung über provisorische Mittel und mehr auf die normalen, traditionellen\nInstrumente zurückkommen.\nFrage:\nAber, Herr Dr. Emminger, besteht nicht angesichts der wirtschaftlichen Stagnation\ndie Gefahr, daß ein großer Teil dieser insgesamt 6 1/2 Mrd DM an freigegebener\nLiquidität ins Ausland geht, weil dort höhere Zinsen geboten werden, so wie dieses\nauch in letzter Zeit aufgrund der Zahlen, die Sie genannt haben, geschehen ist?\nDann wäre dies eigentlich für die innere Entwicklung, wollen wir einmal sagen,\nkeine Initialzündung?\nEmminger:\nWenn das eintreten sollte, was Sie eben sagten, würde das ja zunächst primär die\nWirkung haben, daß der DM-Kurs etwas nach unten und der Dollarkurs etwas nach\noben gedrückt würde, was auch nicht zu verachten ist. Außerdem haben wir, das\nhabe ich damit schon ausgedrückt, das Floaten, und es wird nicht wahrscheinlich\nsein, daß in einem Regime des Floatens plötzlich Milliardenbeträge per Saldo ins\nAusland gehen. Vor allem werden die Banken diese dauerhafte Verbesserung ihrer\nLiquiditätsgrundlagen nun dazu verwenden, um die provisorischen Refinanzierungen\nabzulösen. Man hat sogar hören können, daß manche Kreditinstitute glaubten, sie\nkämen allmählich in eine Verklemmung durch diese sehr provisorische Refinan-\nzierung bei der Bundesbank, und gerade solche Verklemmungen wollen wir auf\ndiese Weise vermeiden. Ich glaube nicht, daß es schon echte Verklemmungen gibt,\naber wir wollen das auf alle Fälle vermeiden, und dann werden eben diese Freigaben\ndazu verwendet, um die Liquiditätsbasis der Kreditinstitute auf eine dauerhaftere\nBasis zu stellen.\nFrage:\nHerr Emminger, noch zwei kurze Fragen. Einmal, Minister Ehrenberg war doch\nvor wenigen Tagen bei Ihnen: Hat Herr Ehrenberg irgendwie die Bundesbank gebeten,\nFORD\nLIBRARY\n7\nGERALD\n7\nvielleicht der Bundesregierung mit einer expansiveren Geldpolitik zu helfen?\nDas ist die eine Frage; die andere: Sieht die Bundesbank überhaupt noch Möglich-\nkeiten, mit ihrem Instrumentarium etwas zu tun, um die Konjunktur anzuregen,\noder sind Sie nicht mit Ihren Mitteln, die Sie zur Verfügung haben, eigentlich am\nEnde Ihres Lateins?\nEmminger:\nZur ersten Frage kann ich Ihnen sagen, daß Minister Ehrenberg sein volles Einver-\nständnis und seine Zufriedenheit mit unserer Geld- und Kreditpolitik ausgedrückt\nund keine zusätzlichen Anregungen gegeben hat. Zum zweiten, wir haben tatsächlich\nmit unserem geldpolitischen Instrumentarium schon eine ganze Menge in dem Sinne\nbewirkt, wie Sie es eben andeuteten, denn wir haben von der Finanzierungsseite her\ndoch wirklich sehr gute Grundlagen für ein Wachstum der Volkswirtschaft gelegt.\nWir haben nun ein Zinsniveau, wie wir es seit 13 oder 15 Jahren nicht mehr hatten.\nWir haben reichliches Geld, und mehr kann man eigentlich von der Geldseite aus\nnicht dazu tun. Reichliche Finanzierungsbedingungen zu. billigen Zinsen, das ist\ndas, was wir von uns aus anbieten können. Eines kann ich noch hinzufügen: Es ist\nüberall anerkannt, daß die Bundesbank mit ihrem bisherigen Kurs das, was von\nder Geldseite her überhaupt getan werden kann, getan hat, und daß die Hemmnisse,\ndie heute bestehen, die Schwächen, die heute in unserer Konjunktur immer wieder\nspürbar werden, nichts mit der monetären Seite zu tun haben, sondern, daß da ganz\nandere Faktoren im Spiele sind. Das ist heute allgemeine Überzeugung, und deswegen\ngibt es keinerlei Druck oder Forderungen gegenüber der Bundesbank.\nFrage:\nHerr Emminger, der 2 Milliarden-Dollar-Kredit an Italien wird im nächsten\nMonat,wie vorgesehen, noch mal verlängert werden?\nEmminger:\nIch kann Ihnen dazu jetzt nichts sagen. Bei der nächsten Gelegenheit hoffe ich,\nIhnen das genauer explizieren zu können, aber heute kann ich Ihnen dazu keinen\nKommentar geben.\nFrage:\nHerr Dr. Emminger, rechnen Sie damit, daß die Mindestreservefreigabe insgesamt\nauch noch billigere Kredite bedeuten kann?\nFORD\n8\n8\nEmminger:\nAn sich ist im Augenblick bei den Sollzinsen immer noch eine Zinssenkung im\nGange, und ich rechne schon damit, daß durch diese ziemlich massive Freigabe\nvon Mindestreserven die Zinssenkung, die ja sowieso im Gange ist, noch einen\nweiteren Push nach unten bekommen wird. Das würde ich schon vermuten, aber\nich möchte keine ganz feste Prognose stellen. Wohl aber glaube ich sagen zu\nkönnen, daß die Zinssenkung, die sich bisher vollzogen hat, dadurch mit Sicherheit\neine festere und dauerhaftere Grundlage bekommen wird.\nFrage:\nBeziehen Sie das auch auf den Kapitalmarktzins oder nur auf die Sollzinsen?\nEmminger:\nDas würde ich auch auf den Kapitalmarktzins beziehen.\nFrage:\nIst vorgesehen, daß der Bund im nächsten Monat eine Anleihe auf den Markt\nbringt?\nEmminger:\nDa gibt es noch keine festen Beschlüsse oder Absichten.\nIch danke Ihnen meine Damen und Herren.\nGERALD R FORD LIBRARY\nBOARD OF GOVERNORS\nOF THE\nFEDERAL RESERVE SYSTEM\nDR. OTMAR EMMINGER\n6 FRANKFURT AM MAIN\nPRÄSIDENT DER DEUTSCHEN BUNDESBANK\n1977 JUN 13 AM WLKELM-EPSTEIN-STRASSE 14\nTELEFON 1581\nOFFICE RECEIVED OF THE CHAIRMAT's June 1977\nProf. Arthur F. Burns\nChairman\nBoard of Governors\nFederal Reserve System\nWashington, D.C.20551/USA\nDear Prof. Burns,\nYou were good enough to congratulate me in a particularly\nnice way on my appointment as President of the Deutsche\nBundesbank. Many thanks to you and to your colleagues.\nThe words of encouragement from so many friends abroad\nmean a great deal to me.\nI fully share your view that continued close relations\nbetween our institutions can be of great help in the pre-\nsent troubled times.\nLooking forward to meeting you soon in Washington, I\nremain,\nSincerely yours,\nMmar Sammar\nGERALD R. LIBRARY FORD\nDecember 23, 1975\nDr. Otmar Emminger\nVice President\nDeutsche Bundesbank\n6 Frankfurt AM Main\nGermany\nDear Dr. Emminger:\nUpon returning from our Paris meeting, I was pleased\nto find your London address on my desk. I have read it with\nthe greatest interest.\nI would like to reciprocate by sending you two of my\nrecent speeches, and I am glad to have this opportunity to\nwish you the very best for the coming year.\nSincerely yours,\nArthur F. Burns\nSERALD R-FORD\nBOARD OF GOVERNORS\nOF THE\nFEDERAL RESERVE SYSTEM\n6 FRANKFURT AM MAIN\nDR. OTMAR EMMINGER\n1975DEC 19 PM 3: 12\nWILHELM-EPSTEIN-STRASSE14\nVIZEPRÄSIDENT DER DEUTSCHEN BUNDESBANK\nTELEFON 1581\nRECEIVED\nOFFICE OF THE CHAIRMAN\nDecember 16, 1975\nProfessor Arthur E. Burns\nChairman\nBoard of Governors\n#2055\nFederal Reserve System\nWashington, D.C. 20551\nDear Professor Burns,\nI have pleasure in sending you the text of an\naddress which I gave in London a few days ago.\nYou will find in some of my remarks the influence\nof your various speeches. I have also quoted you on page 11.\nWith my very best wishes to you and Mrs. Burns\nfor the Christmas days and for a good New Year I remain\nvery sincerely\nyours\nEncl.\namar Summy\nGERALD R. FORD\nThe International Monetary Situation - a European View\nRemarks by Otmar Emminger, Deputy Governor of the\nDeutsche Bundesbank,\nat the Annual Conference of\n\"The Financial Analysts Federation\" in Chicago,\nJune 2nd, 1975\nThe international monetary situation bristles with unsolved\nproblems let me only mention inflation, international payments\ndifficulties, petrodollars, foreign exchange fluctuations, the\nposition of the dollar, and, finally, international monetary re-\nform. George Santayana once wrote: \"There are two kinds of pro-\nblems: those that are soluble but are of minor importance, and\nthe really important ones which are usually insoluble\". Fortu-\nnately he did not exclude the possibility that in exceptional\ncases even important problems can be solved.\nI. Inflation\nOne important problem that urgently needs solution is infla-\ntion. Inflation is not only an awesome domestic problem but has\nalso become a major disruptive force in international monetary\nrelations. Last year the average inflation rate in the industrial\ncountries, as measured by consumer prices, was nearly 14 per cent.\nHowever, there were strongly divergent trends; the scale of\nprice increases ranged from 7 to 24 per cent in these countries.\nIn a world subject to such disruptive inflationary forces\nit is, of course, impossible to maintain stable exchange rates.\nAccelerating inflation has officially been cited as one of the\nmajor reasons why the attempt at a comprehensive reform of the\ninternational monetary system . the \"grand design\" - had to be\ngiven up in the summer of 1974. Inflation has also been termed\n\"the greatest enemy to European economic integration\". It is\n- 2 -\nLIBRARY\n- 2 -\nwithin the European Community that we have experienced the\nwidest gaps in inflation rates. The solemn pledges of the E.E.C.\nmembers to attain monetary and economic union by 1980 have gone\nby the board, mainly because there is no prospect of achieving\nthe requisite harmonisation and stabilisation of economic and\nmonetary developments in the member countries. It is noteworthy\nthat a few weeks ago a high-level group of E.E.C. experts con-\nfirmed the failure of the approach to monetary and economic\nunion on the basis of permanently fixed exchange rates and pro-\nposed to secure at least a modicum of monetary integration\ninside the E.E.C., with controlled floating taking account of\ninflation differentials.\nWhere do we stand now, in the middle of 1975, in the battle\nagainst inflation?\nThe rate of price increases has slowed down in nearly all\nmajor European countries, with one albeit important exception,\nnamely Britain. In the European industrial countries minus Britain,\nconsumer prices increased on average at an annual rate of 9 per\ncent between the last quarter of 1974 and the first quarter of\nthis year, compared with the peak of over 13 per cent last\nyear. This slowdown in the inflation rate has been less marked\nthan in the United States, where between the last quarter of\n1974 and the first quarter of 1975 inflation came down to an\nannual rate of 7 per cent. On the other hand, the slowdown in\nbusiness activity has also been less pronounced in Europe than\nin the United States.\nLet me mention a few noteworthy features of the present in-\nflation scene, as viewed from Europe.\nFirst, despite recent recessionary developments the support\nfor stabilisation policies is still strong. It has been more\nand more widely recognised by public opinion that over the longer\n- 3 -\n- 3 -\nrun there is no real trade-off between inflation and under-\nemployment and that, on the contrary, inflation is sooner or\nlater likely to bring recession and unemployment in its train.\nA recent convert to a stabilisation policy has been France,\nand this with notable success. Its impending return to the\nEuropean currency bloc, called the \"snake\", is also expressly\nmotivated by a desire to submit its economy to the monetary dis-\ncipline inherent in the \"snake\" arrangement. In some countries,\nat least, politicians have a better chance of winning votes\nthrough a firm stabilisation policy than by inflationary per-\nmissiveness.\nI don't, however, want to convey the impression that anything\nlike a uniform \"European\" attitude towards inflation has evolved\nof late. On the contrary, Europe is split on this issue. There\nare unfortunately some European countries where the national\nconsensus among the various social and political groups has dis-\nintegrated to the point of creating a general \"let the devil\ntake the hindmost\" attitude with serious consequences for inflation\nand the economic system as a whole.\nSecond, although in a number of European countries some initial\nbattles have been won against inflation, we do not yet know\nwhether the war against inflation will be won in the end. We are\nnot quite sure whether the present lower rate of inflation -\nwhich we in Germany hope to bring down to about 5 per cent by the\nend of the year . is only a temporary lull brought on by recession,\nor whether the coming business upturn will not fan the fire\nagain. There is, therefore, at present some reluctance to relax\nthe monetary reins too much in order not to generate a new round\nof inflation. We in Germany feel rather confident that business\nactivity will recover in the second half of 1975. We would, how-\never, prefer a gradual and longer-lasting upturn to a sudden spurt\n- 4 -\n- 4 -\ninto high-speed expansion. It seems that in the United States\nand Japan, too, a recovery can be expected in the second half\nof this year. Thus, the three major industrial countries of\nthe western world would take the lead in lifting the world economy\nout of its doldrums, and fortunately all three are free from\nbalance-of-payments constraints to pursue such a policy.\nA third interesting feature is the adoption of monetarist\nideas in the formulation of economic policy goals. In Germany,\nthe Bundesbank announced last December for the first time a\nquantitative goal for money growth for the full year 1975; accord-\ning to this goal, it will permit an increase in the monetary base\n(\"central bank money\") of 8 per cent over the year - a fairly\nmoderate rate in our institutional setup, permitting nevertheless\nsome real growth. This is intended to guide expectations and\nto provide a monetary framework within which wage negotiations,\ngovernment borrowing, and other economic decisions are expected\nto be accommodated. Up to now, we have been reasonably well on\ntarget.\nFourth and finally, we have had in Europe some examples of\nhow destructive uncontrolled inflation can be for the very basis\nof a private-enterprise economy. Time does not allow me to go\ninto details here. However, what we see in a few European\ncountries tempts me to quote Keynes, who is so often criticised\nas being the father of monetary permissiveness. But it was he\nwho once wrote: \"There is no less conspicuous, yet simultaneously\nsurer, way of destroying the present foundations of society\nthan through the corruption of the currency. This frees the\nhidden forces of economics - which not one in a million can\ndiagnose in a destructive way\". This could have been written,\nword for word, by Professor Burns.\n- 5 -\n- 5 -\nII. International Payments - Petrodollars\nIn one respect it is very easy to diagnose the hidden forces\nof corrupted money, namely in their disruptive effects on the\nbalance of payments. After one and a half years of exorbitantly\nhigh oil prices we can say now that inflation has distorted the\ninternational payments system nearly as much as the quadrupling\nof oil prices. We are, indeed, faced with a dual balance-of-\npayments problem in the world: on the one hand, the huge global\nimbalance between the oil-exporting and oil-importing countries;\non the other hand, the disequilibria among the oil-importing\ncountries themselves, due in the main to inflation differentials\nand cyclical lags.\nIt is remarkable that despite this dual payments strain we\nhave not been confronted with a major currency crisis - let\nalone currency breakdown - since the beginning of 1974. I would\nascribe this astonishing fact mainly to two factors: first, the\nrecycling of petrodollars, i.e. the surplus funds of the oil\ncountries, has up to now functioned better than most people had\nanticipated; second, flexible exchange rates have cushioned the\nstrains on the payments system.\nAs concerns the oil-induced payments disequilibria, we have\nrecently witnessed a significant reduction in them. This has\nin some quarters produced the euphoric feeling that the payments\nproblems created by the oil price hike are as good as over. This\neuphoria is, in my view, misplaced, because at least part of the\nimprovement has been due to temporary factors. What are the\nfacts? The financial surplus of the OPEC countries was about\n55 billion dollars in 1974 and according to the most recent fore-\ncasts is likely to fall to around 45 billion dollars (or perhaps\neven less) in 1975. Both figures are lower than was estimated\n- 6 -\n- 6 -\nearlier, partly because imports of goods into the OPEC countries\nhave increased by leaps and bounds (in dollar terms by 70 per\ncent in 1974, with a similar jump likely in 1975), partly\nbecause of the high level of financial aid granted by OPEC\ncountries to their political affiliates, and partly also due\nto a lower volume of oil imports and a recent slight easing in\noil prices.\nBut these lower oil imports are clearly a temporary phe-\nnomenon only, being mainly due to the recession. There are also\nominous noises that another increase in oil prices may occur\nbefore the year is out. So we should not be lulled into com-\nplacency by the fact that since the beginning of the year pay-\nments deficits have been shrinking in a number of industrial\ncountries.\nThere still remain enough payments problems:\n- With the impending business upturn the world's oil\nbill is bound to grow larger again, quite apart\nfrom the possibility of a new price increase.\n- In the course of time the financing problem will\nincrease in difficulty for countries with persistent\nlarge payments deficits.\n- In many developing countries the payments situation\nhas not improved at all but is, on the contrary,\ndeteriorating.\n- And finally, even with the downward-adjusted present\nestimates, the accumulated financial surplus of OPEC\ncountries may have reached the massive amount of\nabout $ 200 billion by the beginning of the 'eighties.\n- 7 -\n- 7 -\nI mentioned already that up to now the financing of oil-\ninduced payments deficits has worked surprisingly smoothly; maybe\neven too smoothly in some respects.\nThe oil-importing countries, taken as a group, have not been\nforced to run down their monetary reserves; these are even\ngreater now than one and a half years ago. During the same period\nthe monetary reserves of the OPEC countries expanded by about\n34 billion dollars; and this whole reserve increase was financed,\nin the final analysis, not by a reserve transfer from deficit\ncountries, but by borrowing reserves and reserve creation within\nthe world monetary system. This rather uncanny potential of the\nworld's reserve system to expand was recently stressed by the\nManaging Director of the IMF, who reminded us that the collective\ncontrol of international liquidity has always been one of the\nmajor goals of international monetary reform since this is one\nof the conditions for successfully fighting world-wide inflation.\nTrue - but I don't quite see how we can gain effective control\nover the various sources of international reserve creation, such\nas Euromarkets, voluntary accumulation of dollar and other cur-\nrency reserves by OPEC countries, etc.\nIn 1974, oil funds equivalent to about 7 billion dollars were\ninvested in sterling assets. Thus the British payments deficit,\nthe biggest deficit of all, could be financed \"painlessly\" for\nquite some time. This easy financing may have contributed toward\nmaintaining that particular deficit for too long and at too high\na level. The large inflow of petrodollars into Britain also de-\nlayed the otherwise inevitable - adjustment in the external\nvalue of the pound sterling to its internal loss of purchasing\npower; and when the sterling exchange rate recently caught up with\nthe domestic inflation rate inside a short time span, this created\na certain dramatic atmosphere, although it was a natural process.\n- 8 -\nFORD LIBRARY\nR.\n- 8 -\nIII. Flexible Exchange Rates\n\"Floating\" exchange rates came into being on a world-wide\nscale in March 1973 when a group of European currencies went\nover to \"bloc floating\" in relation to the U.S. dollar. In my\nview, \"floating\" has worked well and stood its test during the\nvery difficult period since then.\nThere are differences of view about this. Some observers have\nbecome increasingly sceptical and critical of flexible exchange\nrates, particularly among European central bankers. Some, in-\ncluding well-known financial experts in the United States, have\neven called it \"a failure\".\nI shall leave aside the criticism that floating is accompanied\nby some inconveniences and costs for foreign trade, or that\noccasionally it appears to have exerted some inflationary influence\non the world as a whole. This could be said equally - and as\nconcerns inflation even far more - of a crisis-prone system of\nfixed parities. In this connexion it may interest you that in\nGermany we date the beginning of successful stabilisation policies\nfrom March 1973, i.e. the beginning of floating; for only since\nthen have we regained control over our domestic money supply.\nFloating has certainly disappointed the expectation of its\nmore naive proponents that it would more or less automatically\nequilibrate distorted balances of payments. However, in spite of\nfloating some large payments disequilibria still persist among\nindustrial countries. But this is not at all surprising. Floating\nalone cannot do the job unless a deficit country accepts the ad-\njustment effect of a depreciation in its currency in real terms,\ni.e. a relative lowering of its standard of living as compared\nwith other countries. If this primary effect of depreciation is\nimmediately compensated by increases in nominal wages - as has\nbeen the case in some European countries - the country concerned\nwill end up in a vicious inflationary spiral. Or to put it in a\nnutshell: there just does not exist a painless short-cut toward\nthe elimination of large payments deficits.\n- 9 -\n- 9 -\nThis implies that \"floating\" has also disappointed those\noptimists who had thought that it would give a country a\ncarte blanche for its domestic economic policy. Of course,\nit does not. \"Clean\" floating quickly reflects, in the\nexternal currency value and in import prices, the degree of\ndomestic inflation a country indulges in; and the exchange\nrate may temporarily even over-react because of time lags in\nthe adjustment of foreign trade. Thus it brings home, in a\nvery direct way, the effects of domestic extravagance, and\nin this way exerts perhaps more pressure on economic policy\nthan a gradual outflow of reserves in a fixed parity system\nwould do. Moreover, interest rates as well as other monetary\nand financial developments can have a significant, and some-\ntimes undesired, influence on the external value of a currency;\nand this may again act as a restraint on domestic policies.\nWe have indeed the word of a well-known high American official\nthat he is not sure whether a country like the United States\nhas not been more restrained in its monetary policies under a\nfloating rate system than under the old Dollar Standard where\nfor years it could pursue a policy of \"benign neglect\" with\nimpunity.\nThe fact that, particularly in a time of generalised\ninflation, a depreciation of a country's exchange rate is\nusually unpopular (except with the exporting community) explains\nperhaps why we have not seen any of the much-feared \"competitive\ndepreciation\" of currencies up to now. Since 1974 we have,\nrather, witnessed cases where the external value of certain\ncurrencies was artificially propped up by heavy intervention\nin the exchange markets or officially-induced external bor-\nrowing. I should like to add, in parentheses, that even in\nthe more difficult circumstances of the 'thirties, contrary\nto a widely-held belief, the exchange rate system was not\ncharacterised by competitive depreciations.\n-10-\n- 10 -\nWhatever the pros and cons in the present discussion on\n\"floating\", they will probably have little effect on the\nactual exchange rate system we are likely to have in the\nnear future. And this for the simple fact that, at least as\nconcerns the relationship between the dollar and other major\ncurrencies, we don't have a realistic alternative to floating.\nThere are three main reasons for this:\nfirst, world-wide inflation, and the large inflation\ndifferentials that inevitably go with it;\nsecond, the gigantic dollar overhang and the existence\nof the Eurodollar market;\nthird, the oil price hike and its attendent payments strains\nand uncertainties.\nThus, even those who are highly critical of \"floating\"\nwill have to resign themselves to living with it for the fore-\nseeable future.\nAll this applies, however, only to exchange rates in a\nworld-wide context, and in particular to their relationship\nwith the dollar. Regional parity systems are not precluded.\nOn the contrary: a regional system like the European cur-\nrency bloc (\"snake\" arrangement) has good chances of expanding\namong countries which have reasonably harmonised economic\npolicies and not too large gaps in inflation rates. Thus,\nin the years to come we are likely to witness a rather\ndiversified exchange rate system in the world economy:\na) currencies floating in isolation, b) regional parity\nsystems like the \"snake\" arrangement, with joint floating\n-11-\n- 11 -\nagainst the dollar and other currencies, and c) currencies\npegged to the dollar, to sterling, to other currencies, or to\na unit of SDRs (Special Drawing Rights). It may interest you\nthat at present countries whose currencies are floating in-\ndependently have a share of about 48 per cent of world trade,\nwhile those in the European joint-floating bloc comprise\nabout 22 1/2 per cent; but the latter group will very soon\nincrease its share at the expense of the former if and when\nFrance, and possibly also Switzerland, join the \"snake\".\nIV. International Monetary Reform\nWill the world monetary scene one day be changed by inter-\nnational monetary reform? This seems to be a topical question\nat a moment when the world's finance ministers are about to\ngather in Paris for an important monetary conference, the\nmeeting of the so-called \"Interim Committee\" of the Inter-\nnational Monetary Fund, on June 10 and 11.\nMy answer is: no major change is likely in the near (or\neven foreseeable) future. After the \"grand design\" reform\nfoundered on the rocks of inflation, oil, et cetera in 1974,\nthe Fund and its members resigned themselves to an evolutionary\napproach by piecemeal reform. At the Paris Monetary Con-\nference three problems will be in the limelight: a general\nincrease of members' quotas in the Fund coupled with a re-\nshuffling of quota shares; future rules for official gold\ntransactions; and a number of revisions of other Fund rules,\nincluding the legalisation of \"floating\". Contrary to some\npessimistic forecasts, my guess is that the chances for\nagreement on some, if not all, of these problems are better\nthan even. But I doubt if it will in fact make much difference\n-12-\n- 12 -\nto the world's exchange rate system whether \"floating\" is\nput on an equal footing with an adjustable parity system in\nthe new IMF Statutes (as the majority of the IMF members seem\nto prefer) or whether it is relegated to being an exception\nto the general rule (as some others strongly request). The\nmixed exchange rate system which I outlined as the most\nlikely one in the near future will be imposed on the world\neconomy not by formulas on paper but by hard economic facts.\nThe gold problem will be high on the agenda for discussion\n- gold always has an almost mystical lure for officials and\njournalists alike. But even an agreement on new rules for\ngold will not greatly change the monetary realities of the\nworld, at least not in the immediate future. Gold transactions\namong central banks at freely agreed prices may be sanctioned\n(possibly with some self-imposed restraint agreed upon for a\ntransitional period). But I cannot visualise any large-scale\nuse of this new freedom because of the practical difficulties\ninvolved. It is more likely that gold will be used for the\nsettlement of balance-of-payments deficits only in exceptional\ncases; and this will be more easily done in a form already\npermitted at present, i.e. using gold as a collateral for\nbalance-of-payments loans, like the 2 billion dollar loan\ngranted last autumn by the Bundesbank to the Italian central\nbank. Sales of official gold on the free gold market are per-\nmitted already under present rules, anyway. The real difficulty\nin the field of gold is the question of what to do with the\nFund's own gold worth about 6 1/2 billion dollars at the old\nofficial gold price. If no agreement can be reached on this\nproblem, it will probably be shelved for many years to come\nunder some vague formula. It would, of course, be regrettable\nto let a valuable Fund asset - worth about 25 billion dollars at\ntoday's market prices - lie dormant for many years, while at\nleast part of it could be used in a non-inflationary way for\nsome useful purposes.\n- 13 -\n- 13 -\nV. Concluding Remarks\nWhat then are the really important problems in the inter-\nnational monetary situation? They are first of all inflation\nand balance-of-payments disequilibria. Both primarily require\nappropriate national action. At present, it is the particular\nresponsibility of the major industrial countries to strike\nthe right balance between fighting today's recession and avoid-\ning tomorrow's inflation.\nThere is also great scope for better international cooperation\nin economic and monetary policies. There are two fields where\ncooperation between the United States and the European cur-\nrency bloc is particularly important, namely interest rate\npolicies and intervention policies in the exchange markets.\nThe exchange rate of the dollar in relation to the major\nEuropean currencies is at least as much influenced by capital\nmovements as by competitiveness in goods and services. This is\none of the reasons why I would not venture to join the chorus\nof those who proclaim that \"the dollar is undervalued\". It is\nsimply impossible to know this. The proper valuation of a cur-\nrency like the dollar is not only a matter of relative costs\nand prices, or relative balances of goods and services. It is\nalso dependent on factors determining the external capital balance\n- not to speak of the dollar overhang in the world. Sizeable\ndifferences in interest rates exert a great influence in this\nfield. It is, therefore, very much to be welcomed that cooperation\nbetween the American and several European monetary authorities\nin this field has been intensified of late.\nThe same is true of intervention policies in the exchange\nmarkets. Here the guiding principle has been to maintain \"orderly\nexchange markets\". This implies a smoothing out not only of the\ndaily ups and downs but also of weekly or even monthly fluctua-\ntions which have the appearance of being temporary in nature.\n- 14 -\n- 14 -\nThe dollar is still by far the most important intervention\ncurrency in the world. It is noteworthy that recently the French\nsuggested a greater use of dollar intervention even within the\nEuropean currency bloc. The dollar is also by far the most\nimportant currency in which foreign exchange reserves are held.\nAbout three quarters of the 155 billion dollars worth of official\nexchange reserves in the world are denominated in U.S. dollars\n(although not all of them are held directly in the United\nStates).\nWhen it comes to the stability of the world monetary system,\nwe have primarily to look towards the dollar. So I will leave\nwith you a final European view: if and when the dollar has fully\nregained its stability in terms of costs and prices, this will\nnot only strengthen the dollar's external value in the exchange\nmarkets; it will also strengthen and stabilise the world's\nmonetary system as a whole.\nFORD LIBRARY\nOctober 29, 1974\nDear Dr. Emminger:\nThe analysis presented in your Madrid\naddress is forthright and incisive. The paper\ndeserves to be read widely, and I am grateful\nto you for favoring me with a copy.\nWith kind regards,\nSincerely yours,\nArthur F. Burns\nDr. Otmar Emminger\nVice President\nDeutsche Bundesbank\nFrankfurt, Germany\nAFB:ccm\nFORD of LIBRARY\nThe\n076839\n10/3/174\nSeptember 4, 1974\nTo:\nMr. George Spencer\nFrom: Charles Siegman\nWe were given the attached letter\nfrom 0. Emminger to the Chairman by Mrs. Mallardi.\nSince Mr. Lucht and his associates are interested\nin an area of the System's activities not related\nto the Division of International Finance, it would\nseem more efficient that arrangements for the\nvisit be handled through your office. If we can\nbe of assistance in connection with this visit,\nplease let me know.\nWe would appreciate it if you would\nkeep us informed about the final arrangements for\nthis visit.\nFORD\nLIBRARY\nCCB Mrs. Mallardi\nMr. R. Bryant\n074835\nAttachment: Aug 21 74 ltr Omninger to Burns re\nvisit of 3 staff members of Bundesbank\nre automation.\nCJSieguan:dcj\nBOARD OF GOVERNO\n07\nTHE\nFEDERAL RESERVE SYSTEM\nDR. OTMAR EMMINGER\n6 FRANKFURT AM MAIN\nVIZEPRÄSIDENT DER DEUTSCHEN BUNDESBANK\n1974 AUG 28 AM11:45\nWILHELM-EPSTEIN-STRASSE 14\nTELEFON 1581\nRECEIVED\nOFFICE OF THE CHAIRMAN\nAugust 21, 1974\nProfessor Dr. Arthur F. Burns\n# 1556\nChairman\nBoard of Governors of the\nFederal Reserve System\nWashington, D.C. 20551\nU.S.A.\nRB-\nDear Professor Burns:\nMay I submit to you the following matter:\nIn October this year a member of our Board, Herr Werner Lucht,\nwho is responsible for questions of automation, would like to\nacquaint himself with the state of automated payments and the\nestablishment of data banks in the non-statistical sector and\nalso with the Federal Reserve System's plans in this field for\nthe future.\nFor this purpose he plans to visit the Federal Reserve Board\non October 9, 1974 together with his staff members, Herr Hans\nScholz and Herr Rolf Engler. Subsequently visits to the Federal\nReserve Banks of Richmond, New York, Kansas City, San Francisco\nand Atlanta have been foreseen.\nI would be most grateful if the member of the Federal Reserve\nBoard who is responsible for this field could receive Herr Lucht\nand his accompanying staff on that date at a time convenient\nto him.\nThanking you in advance, I am,\nYours sincerely,\nFORD & LIBRARY 07V839\nAmar Summyer\nJuly 19, 1973\nDear Dr. Emminger:\nI am enclosing a copy of a letter that I\nhave just sent to Dr. Klasen. My understanding\nis that he is away on vacation and I therefore\nwant to keep you informed.\nI look forward to seeing you at the\nministerial meeting later this month.\nWith kind regards,\nSincerely yours,\nArthur F. Burns\nDr. Otmar Emminger\nVice President\nDeutsche Bundesbank\nFrankfurt, Germany\nEnclosure\nCHOS\nLIBRARY\nAFB:ccm\nBOARD OF GOVERNORS\nOF THE\nFEDERAL RESERVE SYSTEM\nOffice Correspondence\nDate April 23, 1973\nTo Mrs. Mallardi\nSubject: Summary of Journalist's\nFrom Martin J. Kohn\nInterview with Dr. Emminger\nIn the attached clipping, Dr. Emminger discusses international mone-\ntary matters in an interview in the March 28 issue of the Swiss weekly\nnewspaper, \"Die Weltwoche.\" I briefly summarize below points he makes\nthat might be of interest to the Chairman.\nDr. Emminger says that \"all experts\" now believe that the arrange-\nments agreed to recently in Brussels and Paris have brought the dollar into\na correct relationship with other major currencies and that this relationship\n(in the sense of the value of the dollar vis-à-vis other currencies) should\nlast for an extended period. [He obviously has in mind not only the events\nof last March, but the February devaluation of the dollar as well.] Dr.\nEmminger notes that, in the opinion of the IMF's Managing Director, if any\nerror has been made, it has been on the side of devaluing the dollar too\nmuch, rather than too little. Dr. Emminger's own view is that the cuntrent\nstructure of parities -- \"including the position of the yen, which has been,\nor still will be, reached\" -- \"corresponds to the economic realities.\"\nDr. Emminger also speaks approvingly of the exchange rate flexibility\nprovided for by the \"solution\" reached in March. Such flexibility is useful\nmainly as \"an effective weapon for defense against disruptive short-term\nmonetary and capital movements.\"\nDr. Emminger sees the floating of the dollar against the \"European\nBlock\" as a temporary arrangement. Fixed but adjustable parities remain\nFORD is LIBRARY 077830\nMrs. Mallardi\n-2-\nthe goal. The presumably interim float should last until the dollar \"has re-\ngained its strength\" -- so that disturbances in the exchange markets caused\nby the weakness of the dollar for once and for all disappear -- and until the\noutline of the new international monetary system becomes clearer. Dr.\nEmminger declines to predict how long the float will continue but says it\nmay last at least until the annual IMF meetings in Nairobi in September.\nDr. Emminger indicates his belief that the imposition of additional\ncapital controls by many European countries at the time the joint float was\ninitiated was illogical, since the float itself should prove an effective\n\"shield\" against dollar capital inflows. The explanation of the new capital\ncontrols, Dr. Emminger says, was the fear among Common Market countries that\nannouncement of the joint float would trigger a new surge in demand for their\ncurrencies.\nDr. Emminger says that gold will continue to play an important role\nin the world monetary system if only because 30 per cent of world reserves --\n$45 million at the present gold-dollar parity -- are in gold. He voices\nsupport for allowing central banks to sell gold in the free market to damp\nspeculation. He considers the March 1968 agreement forbidding such sales\nto have been a dead letter since August 1971. In advocating anti-speculation\ngold-sales, Dr. Emminger emphasizes, however, that he is opposed to inter-\nvention designed to drive the free market gold price down to the official\ngold price of $42 an ounce.\nLIBRARY\nFORD\nis\n07V835\nMrs. Mallardi\n-3-\nDr. Emminger denies that the DM is still undervalued. He notes that\nthe mark has been revalued 43 per cent against the dollar since 1969. He\npredicts that the DM, largely because of the 3 per cent revaluation in March,\nwill be at the bottom of the European snake.\nDr. Emminger expresses confidence that the United States realizes\nthe dollar exchange rate is not a matter of purely national concern. He\nsays the United States has abandoned adherence to \"benign neglect\" in favor\nof a policy of \"benign interest\" in its own exchange rate. Dr. Emminger\nthen adds, \"If the Americans are ready to document [this change of attitude]\nthrough appropriate intervention, so much the better, even if this inter-\nvention must be financed by European central banks.\"\nFORD\ni\nGERALD\nAlexander Sachs:\nGERALD 8.10RD LIBRARY\nSome items in this folder were not digitized because it contains copyrighted\nmaterials. Please contact the Gerald R. Ford Presidential Library for access to\nthese materials.\n28. März 1973 / 13\nDIE WELTWOCHE\nWunder dauern etwas länger\nFORTSETZUNG VOM-SEITE.17\netwas beruhigend am freien Goldmarkt\nare Aufrechterhaltung eines wichtigen\neingreifen. Mehr aber nicht. Irgendwel-\nPrinzips von Bretton Woods, nämlich\nche Absprachen hinsichtlich solcher\ndie Anerkennung, dass die Wechselkurs-\nMassnahmen bestehen gegenwärtig\npolitik keine rein nationale Angelegen-\nnicht.\nheit ist, sondern eine Angelegenheit des\nbeiderseitigen Interesses. Drittens hat\nIn der Schweiz. Herr Dr. Emminger,\ndie US-Regierung klar bekundet, dass\nherrscht Skepsis. Skepsis über die Дак-\nsie am Kurs des Dollars ein eigenes\nerhattigkeit der jüngsten Arrangements,\nInteresse nimmt. Es ist also ein klares\nSkepsis über die Angemessenheit insbe-\nAbrücken von der Theorie des benign\nsondere der neuen DM-Parität, die\nneglect, es ist ein Uebergehen zu der\nnork\n28. März 1973 / Nr. 13\nDIE WELTWOCHE\nWIRTSCHAFT\nWunder dauern etwas länger\nWolfgang Winter unterhielt sich mit dem deutschen Bundesbank-Vize Otmar Emminger über die Währungslage\nDen Schreibtisch droben im 12. Stockwerk des gigantischen Bundesbank-Neubausd Deutschen Bundesbank, öhnehin der weltweit anerkannte gewiefteste Wäh-\nam Stadtrand von Frankfurt ziert ein Aschenbecher in Form einer leicht geknitter-\nrungspolitiker der Bundesrepublik, an den jüngsten Arrangements massgeblich\nten Dollarnote. Hausherr Dr. Otmar Emminger (62), Vizepräsident und damit auf\nbeteiligt und zwischen Einführung des europäischen «Block-Floating», der Wie-\ndem höchsten Sessel, der einem CDU-Sympathisanten in der heutigen politischen\nderöffnung der Devisenbörsen und der «nächsten Währungskrise» noch sorg-\nKonstellation der BundesrepubNk zugünglich ist, schnickt respektlos seine Zigarren-\nsumer auf die bei Notenbankiers übliche Vorsicht der Formulierung bedacht, hat\nasche drauf. Nicht nur das: eine Ecke des tönernen Dollars ist abgeschlagen. Der\nFreude am Gleichnis: «Eine Putzfrau hat den Dollar-Ascher 'runtergeworfen,\nsolange Karl. Klasen seine Gesundheit pflegen muss amtierende Präsident noch nicht diesen federnden Teppich hier hatten. Aber den haben wir ja nun\n«Weltwoche»: Der in Brüssel und jene Länder, die glauben, dass sie\ndass dieser wichtige Teil der Währungs-\nParis geknüpfte «federnde Teppich»\nuntereinander realistische Paritäten ha-\nDr. Otmar Emminger wurde am\nreserven auch weiterhin eine Rolle\nwird der Ihrer Meinung nach der Wels\nben und sie auch durchhalten können,\n2. März 1911 in Augsburg geboren.\nspielen wird. Die andere Frage ist, ob\nauf längere Dauer währungspolitische\nversuchen. ihre Wechselkursbeziehun-\nNach einem juristischen und volks-\ndas Gold auch in Zukunft der Wert-\nRuhe schenken?\nso zu regalm, dass cin möglichet\nwirtschaftlichen Studium in Berlin,\nmassstab des Systems sein wird oder\ngrosser Teil des Handels auf der Basis\nMünchen, Edinburgh und London,\nDr. Emminger: In solchen Fragen gibt\ndiese Rolle an die SZR abgeben wird.\ndas mit der Promotion zum Dr. oec.\nes keine Garantie für ewige Dauer. Aber\nstabiler Wechselkurse abgewickelt wer-\nAber wie ich schon sagte, solange die\nman kann eines sagen: Das jetzt Er-\nden kann. Ich möchte nicht ausschlies-\npubl. und mit-dem juristischen Asses-\nSonderziehungsrechte selbst in Gold\nsen. dass dieses gegenwärtige System der\nsor-Examen: abgeschlossen wurde,\nreichte stellt eine gründlichere Lösung\ndefiniert sind, wäre eine solche Aende-\ndar als alle bisherigen. Nach menschli-\nBeweglichkeit gegenüber dem Dollar\nwar Dr., Emminger mehrere Jahre'\nrung nur formal und ohne sachliche\nauch im September zur Zeit der Jahres-\nMitarbeiter am Institut für Konjunk-\nchem Ermessen und nach dem Urteil\nBedeutung.\ntaging des IWF in Nairobi noch\nturforschung in Berlin.\naller Experten ist nun die auf längere\nDie dritte Frage ist. ob die bisherige\nSicht richtige Relation zwischen dem\nbestehen könnte und bestehen wird.\nZur Deutschen Bundesbank bzw.\nAbstinenz der Notenbanken gegenüber\nDollar und den anderen wichtigeren\nAberies handelt sich um ein System der\nder früheren Bank deutscher Länder\ndem freien. Goldmarkt aufrechterhalten\nWechselkursfreigabe gegenüber dem\nkam Dr. Emminger im Jahr 1950.\nWährungen hergestellt. Nach dem Urteil\nbleiben soll. Wir haben gesehen, dass bei\ndes Geschäftsführenden Direktors des\nDollar. nicht um ein System der völligen\nDrei Jahre später wurde er ins\nInternationalen Währungsfonds (IWF)\nBeweglichkeit aller Wechselkurse insge-\nDirektorium der Bank berufen, wo\n«Die Notenbanken sollten in\nist sogar damit zu rechnen, dass die\nsandt.\ner hauptsächlich für die internationa-\nlen Währungsbeziehungen veran-\nDollar-Abwertung gegenüber den Wah-\nAber auch gegen ein solch beschränk-\nhochspekulativen Situationen\nwortlich war. Seit 1958 ist er gleich-\nrungen der anderen Industrielander sich\ntes Beweglichkeltasystem müsste der\nzeitig Mitglied des Zentralbankrats\nberuhigend am Goldmarkt\nauf die Dauer eher als etwas zu stark als\nInternationale Währungsfonds Einwen-\nder Deutschen Bundesbank. Mit Wir.\neingreifen können»\nzu gering herausstellen wird. Allerdings\nduagen erheben. Oder sind dessen Statu-\nkung vom 1. Januar 1970 wurde Dr.\nKann man das erst nach einigen Jahren\nmittlerweile nur noch tote Buchsta-\nEmminger zum Vizepräsidenten der\nmit Sicherheit beurteilen. Jedenfalls\nben?\nDeutschen Bundesbank ernannt, wo-\nder letzten grossen Dollarkrise das\nentspricht die Paritätenstruktur, die nun\nDer Internationale Währungsfonds,\nmit er auch stellvertretender Vorsit-\nHinaufschnellen des Goldpreises am\nzwischen den wichtigsten Währungen\nvidmehr sein Geschäftsführender Di-\nzender des Zentralbankrats wurde.\nfreien Markt auf über 90 $ je Unze mit\nerreicht ist, einschliesalich der Stellung\nfestor. hat schon gewisse Bedenken\nNeben seiner Tätigkeit im Direk-\nzu den Elementen gehört hat. die die\ndes japanischen Yen, die durch das\nerroben gegen die zu weitgehende\ntorium der Bundesbank war Dr.\nUnruhe und die such die spekulativen\nFloaten erreicht ist oder noch erreicht\nAswendung des Floating, weil er be-\nEmminger von 1953 bis 1959 deut.\nAngriffe auf den Dollar verstärkt ha-\nwerden wird, den ökonomischen Reali-\nfurchtete, dass damit das Paritäten-\nscher Exekutivdtrektor beim Interna-\nben. Daraus ergibt sich die Frage, ob\ntaten und Verburgt daher eine gewisse\nDeter. Die andere fundamentale Neue-\nsystem uberhaupt aufgegeben würde. Wie\ntionalen Wahrungsfonds in Washing\nman nicha in solchen spekulativen\nrung. die diese Lösung von aften frühe-\nsich jedoch die Dinge inzwischen ent-\nton. Seit 1958 ist er Mitglied und\nUeberhitzungssituationen mit relative\nren Not- und Aushilfslösungen abhebt.\nwickelt haben, namlich, dass in Europa\nVizepräsidens des Währungsaus-\nringen Interventionen am freien Gold-\nist die Tatsache, dass nun die wichtig-\ngin Block von Ländern versucht, unter-\nschusses der EWG.\nmarkt einmal eingreifen solite, um für\nstep Währungen der Industrieländer\neinander stabile Wechselkurse aufrecht-\nIm Jahr 1963 wurde Dr. Emmin-\nBeruhigung zu sorgen und ein die\ngegeniber dem Dollar beweglicher ge-\nzuerhalten. und dass dieser Block insge-\nper Mitglied des uStellvertreter-Aus-\nSpekulation einheizendes Element aus-\nworden sind, d. h., dass hier ein Element\nsamt gegenüber dem Dollar die Wech-\nschusses» der Zehner-Gruppe.\nzuschalten.\nFR 468\n(Rev. 3-63)\nBOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM\nMEMO\nDate\n4/10\nTime\nTo:\nMr. Bryant\nFrom:\nCatherine Mallardi\nTel. No.\nExt.\nPlease call\nFor your approval\nReturned your call\nFor your information\nWill call again\nNote and return\nPhone me re attached\nFor comments and suggestions\nSee me re attached\nPreparation of reply\nMESSAGE:\nIs there anything in this paper\nthat the Chairman would be\nwould be interested in reading?\nThe OF wh GOVERNORS OF THE 3/2/73 FEDERAL Enmings RESERVE SYSTEM\nkimming w\nFist fultsin- m\nthey org flat f\nall EEL combries. -\n2\ntirs you-\nho only Xi L\nLuchne dellars -\n3\ntowern 5EC\nmis fy L hystin\nR.FORD\nSunly Lye L\nDIRECTO\nSee this Rroye. -\nCare bes- care Amount -\nga declare - Mills Eate\nFn Lafe\nan 20! SLUE X Lider O'Bian\nITT World Communic\nTELEGRAM\nLEASED WIRE SERVICE\nRECEIVED AT WASHINGTON\nBurus\n1973 FEB 8 AM II 08\n440043 FEDR UI\nBOARD OF GOVERNORS\nZCZC AWA774 VIA ITT XYI3844 DP403\nof\nSt. N.W. Washington, D.C. Phone 296-6200\nFEDERAL RESERVE SYSTEM\nUIWA CO DPFF 147\nFRANKFURT AM MAIN/TLX 147 8 1340 PAGE 1/50\nFEDRESERVE\nWASHINGTON/DO\nATTENTION MR. DR BURNS CHAIRMAN THE CENTRAL BANK\nCOUNCIL OF THE DEUTSCHE BUNDESBANK AT ITS\nMEET ING ON FEBRUARY 7 1973 IN THE PRESENCE OF HERR\nPOEHL STATE SECRETARY AT THE FEDERAL MINISTRY\n1709 L St. N.W. Washington, D.C. Phone 296-6200\nOF FINANCE , AND DR. SCHLECHT , STATE SECRETARY AT\nTHE FEDERAL MINISTRY\nCOL 7 1973\nDP403 1TG201 FEDRESERVE PAGE 2/450\nOF ECONOMICS , TOOK THE FOLLOWING DECISION :\nRECOURSE TO THE REDISCOUNT QUOTAS FIXED\nFOR THE INDIVIDUAL BANKS IS WITH IMMEDIATE\nEFFECT AND UNTIL FURTHER NOTICE PERMITTED ONLY\nITT World Communications Inc.\nUP TO 60 0/0 OF THE TOTAL AMOUNT\nSHO ULD THIS FIGURE ALREADY HAVE BEEN EXCEEDED\n,\nNO NEW BILLS OF EXCHANGE\nCOL60 0/0\nDP4031TG201 FEDRESERVE PAGE 3/47\nMAY BE PRESENTED WITH THIS MEASURE THE\nDEUT SCHE BUNDESBANK IS REDUCING IN STAGES THE\nBANKS SCOPE FOR RESORTING TO CENTRAL BANK\nITT World Communications Inc.\nCREDIT BY THE AMOUNT BY WHICH THEY HAVE BECOME\nMORE LIQUID SINCE LAST WEEK THROUGH THE BUNDESBANK , S\nFORE IGN EXCHANGE PURCHASES\nDR. EMMINGER\n\"nm favorry despone town\njudgety's\n1 Makh\n1709 L St. N.W. Washington, D.C. Phone 296-6200\n440043 FEDR UI\nJanes\nJanuary 18, 1973\nDear Dr. Emminger:\nThank you very much for your cable informing the\nBoard of the changes in the discount and Lombard\nrates of the Deutsche Bundesbank. We greatly\nappreci ate being so promptly informed of these\nmoves and the reasons for making them.\nSincerely yours,\nArthur F. Burns\nDr. Otmar Emminger\nVice President\nDeutsche Bundesbank\n4-6 Taunusanlage\n6 Frankfurt AM Main 1\nGermany\nMJK:cmn\nFORD\n8.\n30\nDEC 14 1972\nThe Honorable Dr. Otmar Eminger\nVice President\nDeutsche Bundesbank\n4-6 Taunusanlage\n6 Frankfurt am Main 1\nGermany\nDear Dr. Erminger:\nThank you for informing us of the latest changes\nin credit policy of the Deutsche Bundesbank. My colleagues\nand I appreciate your taking the time to add the explanatory\nremarks which we find most useful.\nSincerely yours,\n(Signed) Arthur F. Burns\nArthur F. Burns\nJS:rck\n12/12/72\nCC: Mrs. Mallardi (2)\nLIBRARY\nR.\nDr. Otmar Emminger\nJuly 18, 1972\nVice President\nDeutsche Bundesbank\nTaunusanlage 4-6\nD-6 Frankfurt 1, GERMANY\nRegret I am scheduled to be in California July 20-21, but\nhave scheduled appointment for you with Chairman Burns at\napproximately 4:00 p.m. July 21.\nFEDRESERVE\nJ. Dewey Daane\n1\nLIBRARY\nFORD\n&\nGERALD\nNNNN\nAAZCZC YW476 GTX548 DP4034TG324\nURWA CO DPFF 072\nFRANKFURT AM MAIN/TLX 72 14 1828 PAGE 1/ SUSPECTED DUPLICATE\nGOVERNOR DEWEY DAANE MEMBER OF THE BOARD OF GOVERNORS FEDERAL\nRESERVE SYSTEM\nWASHINGTOND.C.20551\nReply via RCA: call 558-4321\nDEAR DEWEY 9 I SHALL BE IN WASHINGTON ON THURSDAY\nAND FRIDAY 9 JULY TWENTY AND TWENTYONE\nAS THURSDAY WILL PROBABLY BE TAKEN UP BE TALKS IN THE\nfor 15 will\nTREASURY I SHOULD LIKE TO PAY A VISIT\nCOL 20551\nFORD\nLIBRARY\nis\nDP4034TG324 GOVERNOR PAGE 2/\nGERALD\nReply via RCA: call 558-4321\nTO THE FEDERAL RESERVE BOARD ON FIRDAY s WILL THERE BE A\nPOSSIBILITY OF SEEING PROFESSOR BURNS ? BEST REGARDS\nOTMAR EMMINGER\nJUN 16 1971\nDear Dr. Emminger:\nI appreciate your letter of June 4, in which\nyou provide some facts concerning the speculative out-\nbreak of early May, I an also grateful to have a copy\nof your most interesting statement before the Munich\nConference.\nWe must continue to exchange thoughts frankly\nand freely.\nWith best regards,\nSincerely yours,\nArthur F. Burns\nDr. Otmar Emminger\nVice President\nDeutsche Bundesbank\nTaunusenlage 4-6\nFrankfurt (Main), Germany\nRS:nss\n6/15/71\ncc: Mrs. Mallardi\nAUG 17 1970\nAIR MAIL\nDr. Otmar Erminger\nVice-President\nDeutsche Bundesbank\n4 - 6 Teunusanlage\n6 Frankfurt an Main 1\nGermany\nDear Dr. Emminger:\nThank you very much for your cable informing\nus of the Central Bank Council's decisions of August 12\nregarding the minimum reserve requirements of German\ncredit institutions and explaining the reasons why these\nmeasures were taken. We are, of course, very interested\nin economic developments in the Federal Republic and\nappreciate your keeping us closely and promptly informed.\nSincerely yours,\n(Signed) Arthur \" BOX\nArthur F. Burns\ncc: Mrs. Mallardi (2)\nMr. Rudmen\nMiss Noonan\nBJR:ren\n8/13/70\nFORD information\nR.\nGENALD"
}