Post by unlawflcombatnt on Mar 6, 2010 16:28:46 GMT -6
In 1985, then President Reagan implemented the Plaza Accord. Though Reagan had been an ardent free-traitor up to this time. However, he realized the dollar-strengthening caused by Paul Volcker's monetary tightening was worsening the US trade deficit, and costing American jobs.
As a result, he implemented a policy that went counter to his previous idiotology.
The Plaza Accord--agreed to by Japan, Germany, Britain, and France--weakened the dollar by overt intervention in the currency market by central banks. The hope was that this would reduce imports into the US by making them more expensive, and increase US exports by making the less expensive in foreign markets.
The move was supposedly successful with the European trade deficit. But it had limited effect on the trade balance with Japan, due to various other trade barriers imposed by Japan.
from Wikpedia:
The Plaza Accord
"In the first half of 1980s, USD was stronger than DEM, FRF, GBP and JPY, but before and after the Plaza Accord, USD was depreciated[1].
The Plaza Accord or Plaza Agreement was an agreement between the governments of France, West Germany, Japan, the United States, and the United Kingdom, to depreciate the U.S. dollar in relation to the Japanese yen and German Deutsche Mark by intervening in currency markets. The 5 governments signed the accord on September 22, 1985 at the Plaza Hotel in New York City.
The exchange rate value of the dollar versus the yen declined by 51% from 1985 to 1987. Most of this devaluation was due to the $10 billion spent by the participating central banks.[citation needed] Currency speculation caused the dollar to continue its fall after the end of coordinated interventions. Unlike some similar financial crises of the 1990s, such as the Mexican and the Argentine financial crises of 1994 and 2001 respectively, this devaluation was planned, done in an orderly, pre-announced manner and did not lead to financial panic in the world markets."
Below is a graphic of the effect of the Plaza Accord on the involved currencies:
(DEM:German, FRF:French, GBP:British, JPY:Japanese)
"The reason for the dollar's devaluation was 2-fold: to reduce the U.S. current account deficit, which had reached 3.5% of the GDP, and to help the U.S. economy to emerge from a serious recession that began in the early 1980s.
The U.S. Federal Reserve System under Paul Volcker had overvalued the dollar enough to make industry in the U.S. (particularly the automobile industry) less competitive in the global market. *Devaluing the dollar made U.S. exports cheaper to its trading partners, which in turn meant that other countries bought more American-made goods and services.
The Plaza Accord was successful in reducing the U.S. trade deficit with Western European nations but largely failed to fulfill its primary objective of alleviating the trade deficit with Japan because this deficit was due to structural rather than monetary conditions. U.S. manufactured goods became more competitive in the exports market but were still largely unable to succeed in the Japanese domestic market due to Japan's structural restrictions on imports. The recessionary effects of the strengthened yen in Japan's export-dependent economy created an incentive for the expansionary monetary policies that led to the Japanese asset price bubble of the late 1980s.
The Louvre Accord was signed in 1987 to halt the continuing decline of the U.S. dollar."
As a result, he implemented a policy that went counter to his previous idiotology.
The Plaza Accord--agreed to by Japan, Germany, Britain, and France--weakened the dollar by overt intervention in the currency market by central banks. The hope was that this would reduce imports into the US by making them more expensive, and increase US exports by making the less expensive in foreign markets.
The move was supposedly successful with the European trade deficit. But it had limited effect on the trade balance with Japan, due to various other trade barriers imposed by Japan.
from Wikpedia:
The Plaza Accord
"In the first half of 1980s, USD was stronger than DEM, FRF, GBP and JPY, but before and after the Plaza Accord, USD was depreciated[1].
The Plaza Accord or Plaza Agreement was an agreement between the governments of France, West Germany, Japan, the United States, and the United Kingdom, to depreciate the U.S. dollar in relation to the Japanese yen and German Deutsche Mark by intervening in currency markets. The 5 governments signed the accord on September 22, 1985 at the Plaza Hotel in New York City.
The exchange rate value of the dollar versus the yen declined by 51% from 1985 to 1987. Most of this devaluation was due to the $10 billion spent by the participating central banks.[citation needed] Currency speculation caused the dollar to continue its fall after the end of coordinated interventions. Unlike some similar financial crises of the 1990s, such as the Mexican and the Argentine financial crises of 1994 and 2001 respectively, this devaluation was planned, done in an orderly, pre-announced manner and did not lead to financial panic in the world markets."
Below is a graphic of the effect of the Plaza Accord on the involved currencies:
(DEM:German, FRF:French, GBP:British, JPY:Japanese)
"The reason for the dollar's devaluation was 2-fold: to reduce the U.S. current account deficit, which had reached 3.5% of the GDP, and to help the U.S. economy to emerge from a serious recession that began in the early 1980s.
The U.S. Federal Reserve System under Paul Volcker had overvalued the dollar enough to make industry in the U.S. (particularly the automobile industry) less competitive in the global market. *Devaluing the dollar made U.S. exports cheaper to its trading partners, which in turn meant that other countries bought more American-made goods and services.
The Plaza Accord was successful in reducing the U.S. trade deficit with Western European nations but largely failed to fulfill its primary objective of alleviating the trade deficit with Japan because this deficit was due to structural rather than monetary conditions. U.S. manufactured goods became more competitive in the exports market but were still largely unable to succeed in the Japanese domestic market due to Japan's structural restrictions on imports. The recessionary effects of the strengthened yen in Japan's export-dependent economy created an incentive for the expansionary monetary policies that led to the Japanese asset price bubble of the late 1980s.
The Louvre Accord was signed in 1987 to halt the continuing decline of the U.S. dollar."