Evening star. [volume] (Washington, D.C.) 1854-1972, 1963-10-23
BY LEE NJ. COIN
star staff writer

49, RN@AA WAAANA
Ths need to defend the dol
lar will compel the Kennedy
administration TO reduce for
eign aid and trim overseas
military spending. top-ranking
officials at the Federal Reserve
Board predicted today.
New actions in these areas
win be needed because the Job
is too big for the Federal Re-
serve to handle through tight
money" policies aimed at fore
ing interest rates up. the Off
Gals said.
They said the Federal Reserve
does not intend to push inter-
ct rates significantly above
current levels through "artifi-
cial" manipulation Of credit
and monetary policies.
Wants o. S. to Handle Job
William McChesney Martin,
jr. Federal Reserve chairman,
has told associates he wants
the administration to handle
the main part Of the Job Of
defending the dollar.
He hopes the administration
VIII not rely heavily on the
Federal Reserves influence on
interest rates to solve the dol
lars international problems
Mr.. Martin is confident that
President Kennedy will do
whatever IS necessary, even II
this means substantial cuts in
foreign aid and overseas mill
tary OUTLAWS.
The President demonstrated
his willingness to act when he
took several steps last ,-uly to
bolster the dollar, Mr.. Martin
has told associates.
Mr.. Kennedy moved them to
head off a crisis in the balance
Of payments. The United States
has payments deficits because
the Government, private citi-
zens and businesses spend. lend.
invest and give away more
money abroad than they re-
ceive from foreign sources.
Continued big deficits can
lead to losses Of gold from Gov
eminent stocks and undermine
International confidence in the
dollar.
Acted Jointly In July
The administration and the |
semi independent Federal Re-
serve got the word last June
and July that the payments
deficit had increased sharply |
IN the April-June quarter.
Before the figures were made
public. the administration and
the Federal Reserve took CO.
actions to reverse the |
deterioration Of the payments
situation, and so to reasSure
foreign creditors.
The Federal Reserve raised |
the discount rate from 3 to 3.5 |
per cent. The discount rate is
the interest charged by Federal
Reserve Banks for loans to
commercial banks belonging to
the Federal Reserve System.
BY raising the discount rate.
the Federal Reserve forced
short-term interest rates gen.
orally TO rise. The purpose Of
raising Short term rates was to
discourage investment Of Amer
lean funds abroad. Such invest
ments count as debts on the
payments ledger.
The Emergency Program
The administrations part Of
The emergency program In
Volved:
/. The Presidents proposal
% Congress Of q special tax
aimed at curtailing overseas in
'estment of American long
erm capital.
2. Negotiation Of a standby
arrangement to borrow $500
million from the International
Monetary Fund, to curb losses
u gold.
8. Intensified efforts by the
administration to reduce over
YEAS spending for foreign aid
md defense.
This assortment of measures
apparently has paid off.
The payments deficit in
from $2.2 billion In
1852 to annual rates Of $3.4 bill
ion in the January-March
quarter Of 1868 and IS billion
n the April June quarter. At
ssV 4ha JIiIv antinI1a tha d.