DOLLAR BRINKSMANSHIP

THE REAGAN ADMINISTRATION likes to talk about relying on market forces. But it isn't adverse to giving the market an assist when it feels the market hasn't gotten the word. Thus, the story leaked to the New York Times that Washington wants the dollar to move downward further.

The story is believable, especially after the record $19.2 billion trade deficit for November and the disillusioning revelation that what had been thought to be a steady three-month decline was, after the numbers were revised, not one at all but a high level plateau. Also after the refusal of the two principal creditor nations, Japan and Germany, to stimulate their economies as Washington had sought to right the lopsided trade balance.In the way such things are done in Washington, the Treasury denied any hand in the leak. The report, it said, did not come from "authoritative sources." And White House spokesman Larry Speakes felt called upon to say the story was "unauthorized." The market refused to believe the denials. In active trading, the dollar Wednesday plunged 2.1 percent against the German mark and 1.8 percent against the Japanese yen. This touched off a slump in the bond market and rallies in gold and other commodities. It also caused the Japanese to dispatch a high level negotiator to Washington to see if it couldn't repair the rift.

The Japanese emphasized that the agreement in late October between U.S. Treasury Secretary James A. Baker III and Japanese Finance Minister Kichi Miyazawa to stabilize the yen-dollar rate, foresaw a rate somewhere around 160. By late Wednesday it had dropped to 152. A decline to 150 or below would prove devastating to Japanese exports, a Japanese Finance Ministry official said. "Just how far down does the Reagan administration want the currency to drop anyway?"

Far enough, we might venture, to get their attention. And far enough to remind them that, for what undoubtedly are justifiable reasons of their own - domestic political reasons - they haven't lived up fully to the cooperation pledged first at the Plaza Hotel in New York and then at the Tokyo summit.

The United States is engaging in brinksmanship pure and simple. And it's always dangerous, as Federal Reserve Chairman Paul Volcker keeps reminding us, to talk down the dollar. A free fall is not beyond the realm of possibility. On the other hand, cooperation cannot be a one-way street. That wouldn't be so hard to argue if the United States itself weren't guilty of a mammoth moral lapse, its unwillingness to do something meaningful to bring down the huge budget deficit.

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