Editing Strong dollar policy (section)

== History ==

=== 1971–1973 ===
In spite of the [[Bretton Woods Conference|Bretton Woods agreement]], United States (U.S.) officials suspended gold convertibility and imposed a ten percent surcharge on imports in August 1971. This prompted the [[Smithsonian Agreement|G-10 Smithsonian Agreement]], a temporary agreement negotiated in 1971 among the ten leading developed nations in the world. The agreement pegged the [[Japanese yen]], the [[Deutsche Mark]], and the [[Pound sterling|British pound sterling]] and [[French franc]] at seventeen percent, fourteen percent, and nine percent, respectively, below the Bretton Woods parity.<ref>{{Cite web| title = Smithsonian Agreement of the Group of Ten.| url = https://www2.econ.iastate.edu/classes/econ355/choi/1971dec.html}}</ref> These proved unsustainable.<ref>{{Cite news| issn = 0261-3077| last = Keegan| first = William| title = William Keegan: Shock as continent cut adrift by Snow| work = The Guardian| date = 2004-11-21| url = https://www.theguardian.com/business/2004/nov/21/comment.economicpolicy}}</ref> Later in 1971, U.S. officials permanently floated the dollar; a second devaluation of the dollar against major currencies and a permanent “float” of major European currencies against the dollar followed in February 1973.<ref>{{Cite web| title = International Trade Negotiations| work = CQ Researcher by CQ Press| url = http://library.cqpress.com/cqresearcher/cqresrre1976051400}}</ref> When the dollar fell in value, the U.S. did little to slow or reverse the fall; this dollar slump incentivized European and Japanese officials to deliver expansionary policies.<ref name=":1">{{Cite book| publisher = Peterson Institute for International Economics| isbn = 978-0-88132-712-0| last = Frankel| first = Jeffrey| title = International Monetary Cooperation: Lessons from the Plaza Accord after Thirty Years| chapter = The Plaza Accord 30 Years Later| date = 2016-04-07}}</ref>

=== 1977–1978 ===
In 1977 the Carter administration advocated and initiated the “locomotive theory”, which posits that big economies pull along their smaller brethren. Carter’s theory asked for concessions from the smaller countries to benefit the U.S. for the high price the U.S. has incurred for their benevolence after the 1973-75 recession.<ref>{{Cite journal| issn = 0043-2636| volume = 115| issue = 1| pages = 38–50| last = Bronfenbrenner| first = Martin| title = On the Locomotive Theory in International Macroeconomics| journal = Weltwirtschaftliches Archiv| date = 1979| jstor = 40438717| doi = 10.1007/BF02696340| s2cid = 154245012}}</ref> The American initiative met with staunch German and Japanese resistance at first. In response, U.S. authorities let it be known that they would allow the dollar to depreciate against the dissenting countries' currencies in the absence of [[Macroeconomics|macroeconomic]] stimuli.<ref>{{Cite journal| doi = 10.2307/2131223| issn = 0022-3816| volume = 47| issue = 3| pages = 1001–1004| last = Scheuerman| first = William| title = United States International Economic Policy in Action: Diversity of Decision Making. Stephen D. Cohen, Ronald I. Meltzer| journal = The Journal of Politics| date = 1985-08-01| jstor = 2131223}}</ref> Eventually, Japanese prime minister [[Takeo Fukuda]] agreed to the U.S. stimulus request in late 1977.<ref>{{Cite news| issn = 0190-8286| last = Rowen| first = Hobart| title = Japan Acts To Approve Stimulus| newspaper = Washington Post| date = 1978-09-02| url = https://www.washingtonpost.com/archive/business/1978/09/02/japan-acts-to-approve-stimulus/216d79f5-642d-42a8-9a64-2af46b54c569/}}</ref> A year later at the [[4th G7 summit|Bonn Economic Summit]] in July 1978, German Chancellor [[Helmut Schmidt]] acceded to [[Fiscal policy|expansionary fiscal policy]] as a part of a package of mutual concessions.<ref>{{Cite book| publisher = Springer Science & Business Media| isbn = 978-1-4615-5143-0| last = Iida| first = Keisuke| title = International Monetary Cooperation Among the United States, Japan, and Germany| date = 2012-12-06}}</ref><ref>{{Cite book| edition = 2nd| publisher = Lexington, Mass. : Lexington Books| isbn = 978-0-669-05144-5| pages = [https://archive.org/details/copingwithusjapa00dest/page/243 243–70]| last1 = Destler| first1 = I. M.| last2 = Sato| first2 = Hideo| title = Coping with U.S.-Japanese economic conflicts| chapter = Locomotives on different tracks, macroeconomic diplomacy, 1977-1979| date = 1982| chapter-url = https://archive.org/details/copingwithusjapa00dest| url = https://archive.org/details/copingwithusjapa00dest/page/243}}</ref><ref>{{Cite book| edition = 1st| publisher = Brookings Institution Press| isbn = 978-0-8157-1178-0| pages = [https://archive.org/details/cannationsagreei0000unse/page/12 12–140]| last1 = Putnam| first1 = Robert D.| last2 = Henning| first2 = C. Randall| title = Can Nations Agree?| chapter = The Bonn Summit of 1978: A Case Study in Coordination| series = Issues in International Economic Cooperation| date = 1989| jstor = 10.7864/j.ctv80cd2w.5| chapter-url = https://archive.org/details/cannationsagreei0000unse/page/12}}</ref>

=== 1980–1985 ===
There was a twenty-six percent appreciation of the dollar between 1980 and 1984<ref>{{Cite web| last = Board of Governors of the Federal Reserve System (US)| title = Trade Weighted U.S. Dollar Index: Major Currencies| work = FRED, Federal Reserve Bank of St. Louis| access-date = 2019-01-04| date = 1973-01-02| url = https://fred.stlouisfed.org/series/DTWEXM}}</ref> as the result of a combination of tight monetary policy during the 1980-82 period under [[Chair of the Federal Reserve|Federal Reserve Chairman]] [[Paul Volcker]] and expansionary fiscal policy associated with [[Ronald Reagan|Ronald Reagan's]] administration during the 1982-84 period. The combination of these events pushed up Long-term interest rates, which in turn attracted a capital inflow and appreciated the U.S. dollar.<ref name=":1" /> The 1981-84 Reagan administration had an explicit policy of "benign neglect" toward the foreign exchange market.<ref name=":2">{{Cite book| publisher = Institute for International Economics| isbn = 978-0-88132-079-4| last1 = Destler| first1 = I. M.| last2 = Henning| first2 = C. Randall| title = Dollar Politics: Exchange Rate Policymaking in the United States| date = 1989| url = https://archive.org/details/dollarpoliticsex0000dest}}</ref><ref>{{Cite book| edition = 2nd| publisher = Peterson Institute for Intl. Economics| isbn = 978-0-88132-097-8| last = Yoichi| first = Funabashi| title = Managing the Dollar: From the Plaza to the Louvre| location = Washington, D.C| date = 1989-03-01}}</ref> Some U.S. trade partners expressed concerns over the magnitude of the dollar's appreciation, advocating for intervention in the foreign exchange market in order to dampen such moves.<ref name=":1" /> However, Secretary of the Treasury [[Donald Regan]] and other administration officials rejected these notions, arguing that a strong dollar was a vote of confidence in the U.S. economy.<ref>{{Cite book| publisher = Springer| isbn = 978-3-319-41105-7| last = Sargen| first = Nicholas P.| title = Global Shocks: An Investment Guide for Turbulent Markets| date = 2016-10-05}}</ref> At the [[8th G7 summit|Versailles Summit]] of G-7 leaders in 1982, the U.S. agreed to the requests of other member nations to allow an expert study of the effectiveness of foreign exchange interventions. The eponymous "Jurgenson Report", named after its lead researcher Phillipe Jurgenson, was submitted to the 1983 [[9th G7 summit|Williamsburg Summit]] where the requesting nations were disappointed that the findings did not support their advice.<ref>{{Citation| publisher = Federal Reserve| last1 = Henderson| first1 = Dale| last2 = Sampson| first2 = Stephanie| title = Intervention in Foreign Exchange Markets: A Summary of Ten Staff Studies.| date = 1983| url = https://fraser.stlouisfed.org/files/docs/publications/FRB/pages/1980-1984/32029_1980-1984.pdf}}</ref><ref>{{Cite conference| publisher = National Bureau of Economic Research| last = Obstfeld| first = Maurice| title = The Effectiveness of Foreign-Exchange Intervention: Recent Experience| date = December 1988| url = http://www.nber.org/papers/w2796}}</ref><ref>{{Cite conference| publisher = s.n.| last = Jurgensen| first = Philippe| title = Report of the Working Group on Exchange Market Intervention| location = s.l.| date = January 1983| url = https://catalog.hathitrust.org/Record/010584839}}</ref> Only slightly deterred, the [[Plaza Accord]]s in 1985 occurred. (The Plaza Accords were an impetus for the [[Group of Seven|G-7 Finance Ministers]] as the group of officials that had met in New York were the first officials for it.)<ref name=":2" /><ref>{{Cite book| edition = 1st| publisher = Northwestern University Press| isbn = 978-0-8101-2489-9| last1 = III| first1 = James A. Baker| last2 = Fiffer| first2 = Steve| title = Work Hard, Study . . . and Keep Out of Politics!| location = Evanston, Ill| date = 2008-06-02}}</ref> However, the U.S. began “talking down” the dollar further in order to encourage stimuli to domestic demand in Japan and Germany.<ref name=":0" />

=== 1990s ===
In 1992, following a [[Early 1990s recession|recession]] with a slow recovery and a delayed response in the labor markets, [[Bill Clinton|Bill Clinton's]] administration signaled the desirability of yen appreciation against the dollar: "I would like to see a stronger yen.”<ref>{{Cite news| issn = 0190-8286| title = THOSE MARKETS AREN'T CRAZY| newspaper = Washington Post| date = 1994-05-31| url = https://www.washingtonpost.com/archive/opinions/1994/05/31/those-markets-arent-crazy/ca27af03-a598-49e5-96da-1ebb35b9a200/}}</ref> Also, in February 1993, then-Treasury Secretary [[Lloyd Bentsen]] reiterated the position when he was asked if he'd like to see a weaker dollar.<ref>{{Cite news| issn = 0099-9660| last = Kilgore| first = Tomi| title = Stocks Shouldn't Blindly Follow Dollar's Guidance| work = Wall Street Journal| date = 2010-10-28| url = https://www.wsj.com/articles/SB10001424052702303362404575580223424648704}}</ref> These comments were to influence the USDJPY so as to protect against Japanese export-growth at the expense of the U.S. [[Current account (balance of payments)|current account position]].<ref name=":0" /> Afterwards, the dollar slumped against the yen, moving the yen to the 100 level against the dollar in the 1993 summer.<ref>{{Cite book| publisher = Springer| isbn = 978-1-4039-0710-3| last1 = Brown| first1 = B.| last2 = Aliber| first2 = Robert Z.| title = The Yo-Yo Yen: and the Future of the Japanese Economy| date = 2002-05-01}}</ref>