MULFORD SAYS G-6 WANTS STABILITY
Treasury Assistant Secretary David
Mulford said the Paris agreement among leading industrial
nations is intended to produce "reasonable stability" in exchange
markets over the next few months.
    He told a Senate Banking subcommittee the Group of Five
nations and Canada agreed in Paris to "see if there can't be a
period of reasonable stability instead of volatility" to give
time for the committments in Paris to take place.
    Asked by Sen Phil Gramm (R-Tex) whether U.S. intervention
was not in fact overvaluing the dollar, Mulford replied that
the administration judged that after economic adjustments,
current exchange rates reflect underlying economic
fundamentals.
    In particular, the stability sought by the nations would
allow West Germany and Japan to stimulate their economies
domestically and the U.S. to cut its budget deficit, Mulford
said in his testimony.
    He stressed that a further sharp fall in the dollar would
hurt the ability of Germany and Japan to boost growth.
    Mulford noted that half of West Germany's economy was
affected by international developments.
    He also said increased Japanese domestic growth would
result in more U.S. exports to Japan and would not necessarily
lead to greater Japanese capital flows to the U.S., as Gramm
asserted, if Japan reformed its domestic capital market.
    Commenting on the Paris agreement, Mulford said, "I think
exchange rates ought to be stabilized so (Germany's and
Japan's) efforts can be carried out.
    Mulford rejected Gramm's argument that faster domestic
growth in Germany and Japan would result in an even lower
dollar.
    Mulford said the administration wanted to achieve a pattern
of higher growth overseas as a way of improving the U.S. trade
deficit.
    Otherwise, he said, the trade deficit would be resolved
either through a much lower dollar or a U.S. recession, both
alternatives he termed unacceptable and undesirable.
 Reuter
