Mitterrand economic plan based on outdated view, say US experts
Washington — French President Francois Mitterrand, who urges a drastic revamping of the international monetary system, is looking back toward a world that no longer exists.
That, in essence, is the view of United States monetary experts who reject Mr. Mitterrand's ideas as unrealistic in a world of massive currency flows.
''Fluctuations between the dollar and the yen and between the dollar and the mark,'' says Treasury Secretary Donald Regan, ''are so huge that it would require tens of billions of dollars (of intervention) to stabilize their movement.''
The French President's views, as so far spelled out, appear to call for a return to managed exchange rates, especially among the dollar, the yen, and the European currency unit, representing a ''basket'' of European currencies.
Currently the world's currencies float in value against each other in response to market forces, with the US dollar - the medium of exchange for more than 60 percent of all international transactions - exerting enormous influence on other moneys.
Mitterrand's suggestion was made at a ministerial meeting of the Organization for Economic Cooperation and Development (OECD) in Paris, a grouping of 24 industrial nations of the West. The two-day meeting ended Tuesday with a general commitment to promote faster economic growth.
Mitterrand reportedly intends to enlarge upon his proposal at the forthcoming Williamsburg economic summit meeting of seven leading Western powers. Summit leaders already differ sharply with one another on issues of foreign trade.
President Reagan, who will host the Williamsburg gathering May 28-30, hopes to have a low-key summit, avoiding a public airing of divisive issues and concentrating instead on general principles.
''The world is so marked by wide divergencies in underlying economic trends, '' says former US Assistant Treasury Secretary C. Fred Bergsten, ''that central banks cannot be expected to intervene to maintain fixed rates among currencies.''
In Dr. Bergsten's view, differing inflation and interest rates, and divergent government policies to handle these and other problems, militate against a ''new Bretton Woods,'' modeled after the 1944 agreement that established the world's postwar monetary system.
Other factors that now unsettle the world's monetary outlook include $600 billion worth of debts owed by developing nations and the last decade's massive shift of funds from oil-importing nations to the oil producers of the OPEC cartel.
Behind the French-American disagreement on currency stabilization lie fundamental differences on how best to pull the world out of recession.
The Reagan administration places top emphasis on operation of private markets , both commercial and financial, while Mitterrand's Socialist regime favors government intervention in the French economy and in world monetary affairs.
As the US economy begins to recover, France still struggles to regain international confidence in Mitterrand policies. Loss of confidence has caused the value of the franc to plunge, which among other things makes imports more expensive for Paris to finance.
Although the West displays a spectrum of economic views, the conservative regimes of Britain and West Germany tend to agree with the US view on the proper road to recovery.
Western Europe and Japan unite, however, in complaints that the White House and Congress are not doing enough to bring down US interest rates. High American interest rates cause rates to rise in other nations. This slows economic activity and keeps unemployment high.
The Bretton Woods conference took place at a time when the dollar reigned supreme and confidence in the value of the US currency was universal. This brought about an international monetary system of fixed exchange rates, with the dollar at the center.
Each nation's currency was pegged in value to the dollar, which in turn was convertible into gold at $35 an ounce. The dollar, in short, was ''good as gold.''
In the 1960s the US began to run persistent balance-of-payments deficits, causing speculators to cash in billions of dollars for gold. The official US gold hoard shrank from $25 billion to less than $11 billion.
In August 1971 then-President Richard M. Nixon ''closed the gold window,'' ending convertibility of the dollar. The dollar was allowed to float in value according to supply and demand in the marketplace.
In March 1973 major industrial nations stopped tying their currencies to the dollar, initiating the new regime of floating exchange rates.
Since that time, the amount of money in circulation has greatly increased. Speculation against this or that currency widens exchange-rate gaps.
For all these reasons, US experts - and many banking and financial officials in Japan and Western Europe - see little hope of returning to the simpler days of Bretton Woods.