Following is the text of a joint statement issued by Treasury Secretary W. Michael Blumenthal and Federal Reserve Board Chairman G. William Miller.
Recent movement in the dollar exchange rate has exceeded any decline related to fundamental factors, is hampering progress toward price stability and is damaging the climate for investment and growth. The time has come to call a halt to the this development. The Treasury and Federal Reserve are today announcing comprehensive corrective actions.
In addition to domestic measures being taken by the Federal Reserve, the United States will, in cooperation with the governments and central banks of Germany and Japan, and the Swiss National Bank, intervene in a forceful and coordinated manner in the amounts required to correct the situation. The U.S. has arranged facilities totaling $30 billion in the currencies of these three countries for its participation in the coordinated market intervention activities. In addition, the Treasury will increase its gold sales to at least million ounces monthly beginning in December.
The currency mobilization measures, described in the attached annex, include drawings on the U.S. reserve tranche [shares] in the IMP [International Monetary Fund], for part of which we contemplate that the General Arrangements to Borrow will be activated; sales of Special Drawing Rights; increases in central bank swap facilities, and issuance of foreign currency denominated securities by the U.S. Treasury.
Fundamental economic conditions and growth trends in the four nations and moving toward a better international balance.This will provide an improved framework for a restoration of more stable exchange markets and a correction of recent excessive exchange rate movements.
A. Actions in the International Monetary Fund:
1. Drawing of U.S. reserve tranche, $3 billion.
(U.S. would draw DM [deutschemarks] and yen totaling the equivalent of $2 billion immediately.An additional $1 billion equivalent drawing would be made shortly thereafter, for which GAB activation would be contemplated.)
2. Sale of SDR, $2 billion.
B. Actions increasing Federal Reserve swap lines:
1. Increase in swap line with Bundesbank to $6 billion.
2. Increase in swap line with Bank of Japan to $3 billion.
3. Increase in swap line with Swiss National Bank to $4 billion.
C. Issuance of foreign currency denominated securities up to $10 billion.
TOTAL, $30 billion. (Of this total, approximately $1.8 billion has been utilized in earlier operations under Fed swap lines, but the total excludes Treasury swap facility with Bundesbank.)
Following is the text of a statement issued yesterday by President Carter.
Last week I pledged my administration to a balanced, concerted and sustained program to fight inflation. That program requires effective policies to assure a strong dollar.
The basic factors that affect the strength of the dollar are heading in the right direction. We now have an energy program, our trade deficit is declining, and last week I put in place a strong anti-inflation program. The continuing decline threatens economic progress at home and abroad and the success of our anti-inflation program.
As a major step in the anti-inflation program, it is now necessary to act to correct the excessive decline in the dollar which has recently incurred. Therefore, pursuant to my request that strong action be taken, the Department of the Treasury and the Federal Reserve Board are today initiating measures in both the domestic and international monetary fields to assure the stength of the dollar.
The international components of this program have been developed with other major governments and central banks, and they intend to cooperate fully with the United States in attaining our mutual objectives . . .