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Sprinkel Says Intervention Won't Lower Dollar's Value

April 03, 1985|From Reuters

WASHINGTON — President Reagan's newly designated chief economic adviser said Tuesday that he opposes large-scale intervention by the United States to lower the high international value of the dollar.

Beryl Sprinkel, named to fill the long-vacant post as chairman of the President's Council of Economic Advisers, told his Senate confirmation hearing he believes that the value of the dollar will drop, but he refused to speculate when.

"We should not encourage frequent intervention," he said. "It won't work."

Governments enter international financial markets by selling or buying currencies to stabilize money. Sprinkel did not rule out all intervention but appeared to favor limiting it to disorderly market situations.

Sprinkel, deputy undersecretary at the Treasury for the past four years, was named to fill the spot left vacant by the resignation of Martin Feldstein nine months ago.

When he went to the Treasury, he told the Senate Banking Committee, he discovered to his amazement that the Carter Administration had intervened massively. Studies since then have shown that intervention did not stabilize currencies, he said. Sprinkel said recent intervention by central banks totaled $11 billion, against total daily currency transactions of about $100 billion. He said the dollar is staying high--he refused to say it is overvalued--because investors believe that present and prospective U.S. economic growth is "vastly superior" to that of its trading allies.

On domestic matters, Sprinkel opposed a tax hike to cut federal deficits, saw room for interest rates to fall and said he believed that the Federal Reserve Board had lowered the growth of the money supply recently.

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