UNIVERSITY DAILY KANSAN
Thursday, March 9, 1995
5B
Federal deficit to blame for dollar's fall, Greenspan says
The Associated Press
WASHINGTON — Federal Reserve Chairman Alan Greenspan told Congress yesterday the dollar's sharp decline on global currency markets was "unwelcome and troublesome," and said the federal government's huge budget deficit was partly to blame.
In his first public comment since the dollar began plummeting a week ago, Greenspan said the sliding U.S. currency could increase inflationary pressure on the U.S. economy.
The dollar, which has hit record lows against the Japanese yen and the German mark, rallied in early trading yesterday. Analysts said Greenspan's comments probably would be helpful.
In prepared remarks, Greenspan made no mention of the possibility that the Federal Reserve could be near the end of its interest rate increases. Greenspan had hinted two weeks ago that the Fed not only could be through tightening interest rates, but also could start to lower them.
Those comments had been blamed as contributing to the dollar's plunge as global investors withdrew their funds from the United States, searching for better returns in Germany and other countries.
But yesterday, Greenspan stressed that the economy — while slowing — was still vibrant and that
the Federal Reserve was on alert for any signs of inflation.
The dollar, which fell as low as 1.360 marks in New York on Tuesday, traded at 1.3852 German marks at midday in Europe. It also dropped at one point Tuesday to 89.05 yen, but was trading at 91.20 yen early in New York.
"The dollar crisis may have a salutary effect," said economist Bruce Steinberg of Merrill Lynch & Co. "It keeps the pressure on Washington types to reduce the deficit, and Greenspan is trying to keep the pressure on."
Greenspan said making deficit reduction a top priority would help convince financial markets that the dollar's future was stable.
"All told, a credible program of fiscal restraint that moves the government's finances to a sounder footing almost surely will find a favorable reception in financial markets," he said.
And, Greenspan said, strong financial markets would ease the impact of an economic slowdown from reduced federal spending.
"That market reaction, by itself, should serve as a source of stimulus that would help to offset in whole or in part the drag on spending that otherwise would be associated with reductions in federal outlays," he said.
Greenspan said that the economy appeared to be slowing in the wake
of seven increases in interest rates engineered by the Fed since February 1994.
But, he said, "We need to remain watchful to ensure that any upswing in the inflation rate does not become firmly entrenched."
The latest sign that the economy was easing was a Fed report Tuesday that consumer credit in January rose at an annual rate of 4.8 percent, the smallest increase in 20 months. A decline in borrowing for automobile buying helped hold down the increase, which was smaller than analysts had predicted.
Meanwhile, members of Congress continued to hammer away at the Clinton administration's rescue package for Mexico — asserting it was the main reason for the dollar's collapse.
Congressional critics charged that the dollar's plunge in the past week was spurred by fears that the administration's $20 billion support package for Mexico had hamstring U.S. ability to defend its currency.
"We must not allow the peso to cause the collapse of the U.S. dollar," said Rep. Sherrod Brown, D-Dohio. "To make Mexico the centerpiece of our economic and foreign policy is a tragic mistake."
The United States tried twice last week to shore up the dollar. But the effort failed and the downward spiral resumed.
Gingrich calls editorials socialist
The Associated Press
WASHINGTON — House Speaker Newt Gingrich says many newspaper editorial boards contain "socialists" and suggested that businesses should reconsider advertising in papers that oppose their views.
market is bad."
"I think it's perfectly legitimate in a free society for people to decide where they'll put their money and their impact," Gingrich said yesterday.
Gingrich declined to identify by name those he referred to as socialists, but said, "I'd be glad to get you a collection of editors that only make sense if people believe that government's good and the free
"Surely you can't really argue that there aren't a substantial number of news editorial pages that start from an extraordinary pro-government, anti-free market bias," he said.
Gingrich told business executives at a private dinner Monday night that the establishment press was the "mortal enemy" of GOP reformers, according to The Washington Post.
the newspaper quoted Gingrich as saying that he had told the executives they needed to find alternative methods of getting their messages across.
When asked in the interview whether he was advocating an
advertising boycott, Gingrich replied that he merely was suggesting that executives who advertise should go to the publishers and say they disliked the newspaper's editorial stance.
Tony Blankley, Gingrich's press secretary, was quoted as saying that the Georgia Republican had made similar comments in the past.
One of Gingrich's definitions of a socialist is someone who believes that raising or lowering taxes has no effect on economic conduct, Blankley said.
But, Blankley added, according to the Post, "Certainly there's nothing un-American about being a socialist."
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