A congressionally sponsored conference on problems of the international monetary system ended yesterday with many of the participants calling for a move back toward more government management of exchange rates.
But there were sharp differences over such issues as whether governments would be able to reach agreements about the appropriate levels of exchange rates and how adjustments would be made when rates got out of line. Some participants questioned whether governments have the ability or the will to alter the present arrangment under which major currencies float relative to the U.S. dollar.
The most frequently recommended step would be for industrial nations to agree to keep their respective exchange rates within some fairly wide band, perhaps 10 percent above or below some chosen rate.
Deputy Treasury Secretary Richard Darman said that, historically, governments have moved toward such target zones for exchange rates and that that seems to be happening now. However, Darman also said that there currently is no operating link between the international monetary system and the political system. In each major country, the political system would have to produce the domestic fiscal and monetary policies required to meet the international obligations imposed by the monetary system.
The agreement in September among the finance ministers and heads of central banks from the United States, Britain, West Germany, France and Japan, Darman said, was "a crude attempt to establish that link." Such an agreement, which did not establish any target zones for the five nation's currencies, may be the best that can be done, he added.
The conference's sponsors, Sen. Bill Bradley (D-N.J.) and Rep. Jack Kemp (R-N.Y.), said they are confident a meaningful reform of the monetary system is possible. For one thing, Bradley said, the threat of passage of legislation restricting imports into the United States to reduce competition from foreign goods in American markets has spurred congressional interest in a monetary reform that would produce a more realistic -- that is, a lower -- value for the U.S. dollar.
Kemp said the conference had highlighted the problems associated with exchange rate volatility and the misalignment of the dollar under the present floating rate system.
Among the skeptics at the conference was economist Alan Greenspan, former chairman of the Council of Economic Advisers.
"I've been listening to the proceedings of the last two days and come away with an element of despair," he told the meeting. "That something has gone wrong with the current system of general float is becoming increasingly clear."
A return to a gold standard with rates pegged to the price of gold would be a good idea, Greenspan continued. "I have come to doubt its feasibility, however," he said.
"Governments remain wedded to expansionary fiscal and monetary policies which would be severely constrained under such a regime. But one major purpose of a gold standard would be to do just that," Greenspan said.
"Alternative currency regimes, in my judgment, offer little," he went on. "It's an illusion to believe that . . . fixed rate regimes are sustainable in the context of chronically expansionary governmental policies. Target zones are in reality little better, when speculative pressures hit one side or the other of the band."
If a gold standard is not feasible, Greenspan concluded, "the current floating system with all its faults may be the best fallback position."