Tempering of the dollar puts world money men in a good mood
Karl Otto Pohl was joking. The powerful chairman of the West German central bank, after noting that the deutsche mark had strengthened to 2.99 to the US dollar Monday, remarked that he had two days of golf to look forward to at Hilton Head in South Carolina. This would make it cheaper for him.
That's the way it has been for the central bankers and finance ministers of the industrial nations gathered here for the annual meeting of the International Monetary Fund and the World Bank - everything has been coming up roses.
For example, only an hour earlier, at the start of a breakfast with Mr. Pohl and West German Finance Minister H. E. Gerhard Stoltenberg, it had cost 3.02 marks to buy a dollar. The dollar is weakening - modestly so far - and that is just what the industrial nations, including the United States, want to see.
Mr. Pohl admitted that his Bundesbank had been intervening a little Monday ''to smooth things out.'' It had sold dollars massively last Friday to force the dollar down and prevent what the Germans regarded as a ''disorderly market'' in foreign exchange.
The Germans were concerned that if the dollar got too strong, it could rebound too fast and rapidly become too weak. This, Pohl argued, would be ''a threat to prosperity,'' since it would suddenly boost import prices in Europe and Japan and renew inflation.
The United States has so far not intervened in the foreign-exchange markets. But there is wide speculation here that, perhaps through personal friendships, the US Treasury encouraged Morgan Guaranty Trust Company to drop its prime rate from 13 to 12.75 percent on Friday just as these world movers and shakers in world finance were gathering here.
Whatever the case, US Treasury Secretary Donald T. Regan was prompted to predict in a talk to the IMF's Interim Committee that interest rates are on the way down in the US because ''the markets are becoming convinced that inflation is down to stay.''
Of course, foreign officials are still grumbling about high interest rates in the US. But Morgan's action took some edge off the complaints. Altogether, the mood of the meeting is the cheeriest it has been for several years. The worst weight on the consciences of the officials is the grim economic conditions in most of black Africa.
Germany's Mr. Stoltenberg, after noting that finance ministers cannot be very emotional because of their needs to constantly turn down requests for money, admitted: ''The deterioration of conditions in some of these poorest countries is a very shocking state.''
The World Bank has proposed a new program to help sub-Saharan Africa. But it remains an open question as to whether sufficient new foreign aid will be rounded up to make a difference. Stoltenberg spoke of the ''absolute necessity, '' for ''human, social, economic, and political reasons,'' to tackle this African problem.
Aside from Africa, the world economy looks much better.
Jacques de Larosiere, managing director of the IMF, summed it up in his major address Monday: ''Since early 1983, economic expansion has proceeded at a rapid pace in the United States, and there is increasing evidence that growth is reviving in the rest of the industrial world. International trade has rebounded strongly. Inflation has been substantially reduced. And the balance-of-payments situation of heavily indebted developing countries has improved dramatically.''
A. W. Clausen, president of the World Bank, even had some brighter comments on the developing nations. Economic growth for these countries, where the majority of the world's population lives, will rise from 1 percent to 3.5 percent in 1984, he noted. Growth could reach 4.5 percent in these poorer countries next year, Mr. de Larosiere figured.
Moreover, the exports of these poorer nations, on average, will be up in volume by about 7.5 percent. Imports will be up 6 percent. ''This is heartening, '' said Mr. Clausen. The World Bank president also noted that an increasing number of both industrial and developing nations ''have embarked on the tough policy reforms necessary to secure sustained noninflationary growth.''
Clausen and de Larosiere expressed several concerns, however:
* ''The dead hand of pervasive and persistent poverty still smothers the hopes of millions upon millions of our fellow human beings,'' said Clausen. ''Their appalling condition is intolerable to all of us on this Earth!''
* De Larosiere spoke of ''difficult challenges'' in keeping the world expansion going.
The two heads of these multilateral institutions gave their 147 member nations plenty of stern advice. The ministers know just as well what they should be doing to improve economic policies in their own countries. And despite political difficulties, they are more often taking the tough decisions of fighting inflation, removing subsidies, managing budgets better, keeping social welfare costs under control. That is one reason the economic roses are blooming.