The United States, West Germany and other major nations should try to stabilize currency exchange rates, at least for the next six months, West German central bank President Karl Otto Poehl said here today.
In a meeting with reporters, Poehl said that "both exporters and importers and the countries concerned" need time to adjust to the huge swings that have taken place in exchange markets in the past few years.
"We have had an enormous upward movement of the dollar, and then an enormous downward movement. The D-mark/dollar rate is now where it was in 1981, but in the meantime it has gone up and down. I think we need some little pause," he said.
"These ups and downs make no economic sense whatsoever. No one can really explain why that is the case."
Poehl is attending a three-day conference of international commercial bankers, sponsored by the American Bankers Association, that opened today.
Poehl's proposal for what he described as "a pause" in exchange markets has similarities with Treasury Secretary James A. Baker III's initiative, ratified by last month's Tokyo summit, that calls for increased cooperation on international policy.
But Poehl intimated that the Tokyo summit plan was too vague. "We are moving in the right direction," he said, "but maybe that proposal is a little undeveloped. . . . We should really cooperate in practice, and try to stabilize exchange rates."
Poehl conceded that his proposal for a pause "is a little delicate and a bit touchy," because the nations involved would have to agree first on an acceptable level of exchange rates before agreeing to prevent further major changes.
"And maybe the Americans would want the dollar to go down some more, and the Japanese would want to prevent the yen from appreciating more, and we in Germany would be somewhere in the middle.
"But we should talk about a level that is acceptable for the time being, not necessarily forever," he said. Then, he added, the understanding would include "intervention as a legitimate instrument to be used from time to time as necessary," as well as coordination in central banks' interest rates.
The informal arrangements should involve both Treasury officials and central bankers, Poehl said. Presumably, he will have an opportunity to discuss his ideas further with Baker, who will address the conference at lunch Tuesday, and with Federal Reserve Board Chairman Paul A. Volcker and other central bankers, who will join him in a panel discussion Wednesday.
Poehl made clear that he was not calling for formal "target zones" -- fixed currency ranges that governments would have to defend -- but for a much more informal understanding "to coordinate our efforts to stabilize the rate."
Meanwhile, former Economic Council chairman Martin S. Feldstein told the opening session today that the dollar must fall significantly below its current level to reduce the U.S. trade deficit and end its accumulation of global debt.
Feldstein, president of the National Bureau of Economic Research and a professor of economics at Harvard University, did not say how much further the dollar should decline.
He said the critical problem for the United States is to move back into a trade surplus to meet the increased costs of servicing its debt overseas, which he said will have been increased by more than $500 billion by the end of this decade.
He predicted that, with the help of a sharply lower dollar, the United States will be running a trade surplus again by the early 1990s, creating deficits for our trade partners, who then will be faced with the protectionist threat that now haunts American policy makers.
The reaction was mixed here to Feldstein's insistence that the dollar continue the plunge that has brought it down about 30 percent in a year's time against the West German mark and Japanese yen.
A French banker said that most of his European colleagues do not want to see a further sharp decline in the dollar, although they agree it probably could ease a bit more. "The dollar is okay where it is now," he said.
But Rainer Gut, chairman of the board of Credit Suisse in Zurich, said that, although the official view in many countries is that their currencies shouldn't appreciate more against the dollar, many commercial bankers and businessmen support Feldstein's view.
On a related issue, U.S. Trade Representative Clayton Yeutter gave an optimistic assessment of a meeting of trade ministers that concluded over the weekend in Seoul. Yeutter, who flew here directly from South Korea, said that he was "encouraged by the convergence of views" on the prospective agenda for a new round of global trade negotiations planned for this fall.
He acknowledged that there still is no agreement specifying September as the starting date. But he said that the date "is a non-issue", and accused the press of "building it into something that's not necessary."
Several European bankers challenged Yeutter's optimism on the trade round, saying that France and other countries would resist to the end the American effort to force the European Common Market to reduce its protective agricultural policies.