Otmar Emminger, president of the West German central bank, today predicted there could be "a period of stability ahead for the dollar in which there is no need to intervene in the markets."
Emminger said, however, that his optimism was based on the ability of the United States to bring its balance of payments account into surplus and reduce inflation.
Treasury Secretary G. William Miller predicted here earlier this week that the U.S. would be able to shift from deficit to surplus in its balance of payments account and that there would be "a visible decline in the U.S. inflation rate."
But Emminger, one of the leading figures on the international economic scene for the past 30 years, said he "wouldn't bet" that the U.S. balance of payments account would show the $10 billion surplus predicted by the U.S. officials. He said, however, "the direction is going in the right way."
Emminger, who retires as president of the Bundesbank at the end of the year, said he thought the world was in better shape after the latest oil price shock than it was after the 1973 price rise because the industrial nations were in better shape and were in different stages of the business cycle.
Thus, although the U.S. will be in a mild recession, he said, West Germany and Japan are stronger. "The negative part of it," Emminger said, "is that the developing countries are much deeper in debt than they were in 1973 and 1974."
West German Finance Minister Hans Matthoefer, in a separate interview, said that neither the German nor American governments believe it is necessary to add to the resources both have made available for intervention.
"In our meeting in Hamburg last Saturday," Matthoefer said, "we both said that enough resources were available so as not to warrant new agreements."
But Matthoefer added that his government had no objections if the U.S. decided it wanted to float another Deutschmark denominated issue or issues in the German market. "There are other things they can do," Matthoefer said. "They can sell SDRs, they can sell gold, they can use the swap lines with us that they haven't fully tapped."
Nonetheless, technicians in Bonn and Washington are reported to be studying the "modalities" and terms of a new Deutschmark issue.
Emminger stressed that -- in the discussions in Hamburg and during the annual IMF-World Bank meeting here -- the U.S. and German sides had focussed on the "fundamentals" of the underlying economic situation, rather than any massive new intervention decision.
He acknowledged, as Solomon had reported, that more sophisticated techniques of intervention were examined, and that the Bundesbank and the New York Fed were going to exchange experts to learn about each other's systems.
"But intervention is only a temporary bridging . . . The rest is up to the fundamentals," Emminger said. "As a central bank, we can't finance the U. S. balance of payments deficit. We can intervene only to adjust disorderly markets or extremely wide movements."
Emminger forcefully echoed a point that was made yesterday by Secretary Miller in his speech to the joint meeting: except in its relation to the Deutschmark, the dollar has been stable.
"There has been a great misunderstanding about this," Emminger said. "There is a great danger in this one-sided measurement of the dollar only against the Deutschmark."
He produced figures showing that since last December through September 28 (when the dollar was down to 1.74 marks), it had actually increased on a trade-weighted basis against the six major currencies of the world, including the Deutschmark. The others are the Swiss franc, the yen, the pound, the French franc, and the Canadian dollar.
But the public mostly sees reports of the dollar -- Deuschmark relationship, he said, "because the Deuschmark is the only currency used for intervention by the U.S. authorities."