MULFORD SAYS G-6 WANTS STABILITY

  Treasury Assistant Secretary David
  Mulford said the Paris agreement among leading industrial
  nations is intended to produce "reasonable stability" in exchange
  markets over the next few months.
      He told a Senate Banking subcommittee the Group of Five
  nations and Canada agreed in Paris to "see if there can't be a
  period of reasonable stability instead of volatility" to give
  time for the committments in Paris to take place.
      Asked by Sen Phil Gramm (R-Tex) whether U.S. intervention
  was not in fact overvaluing the dollar, Mulford replied that
  the administration judged that after economic adjustments,
  current exchange rates reflect underlying economic
  fundamentals.
      In particular, the stability sought by the nations would
  allow West Germany and Japan to stimulate their economies
  domestically and the U.S. to cut its budget deficit, Mulford
  said in his testimony.
      He stressed that a further sharp fall in the dollar would
  hurt the ability of Germany and Japan to boost growth.
      Mulford noted that half of West Germany's economy was
  affected by international developments.
      He also said increased Japanese domestic growth would
  result in more U.S. exports to Japan and would not necessarily
  lead to greater Japanese capital flows to the U.S., as Gramm
  asserted, if Japan reformed its domestic capital market.
      Commenting on the Paris agreement, Mulford said, "I think
  exchange rates ought to be stabilized so (Germany's and
  Japan's) efforts can be carried out.
      Mulford rejected Gramm's argument that faster domestic
  growth in Germany and Japan would result in an even lower
  dollar.
      Mulford said the administration wanted to achieve a pattern
  of higher growth overseas as a way of improving the U.S. trade
  deficit.
      Otherwise, he said, the trade deficit would be resolved
  either through a much lower dollar or a U.S. recession, both
  alternatives he termed unacceptable and undesirable.
  

