European Stars And Stripes (Newspaper) - June 12, 1988, Darmstadt, Hesse                                Page 13 the stars and stripes sunday june 12,1988 business news Buck stabilizes while waiting for Trade figures the Dollar traded in a narrow Range against major currencies throughout the week As the Market positioned itself for the tuesday release of . Trade figures for april. The seasonally adjusted current account bal Ance for March which was released thursday by the Commerce department put the . Trade deficit at is 1.9 billion up More than is billion from the j9.75 billion deficit originally reported. Bui the Market looking Forward to the april figures discounted the revised amounts and Paul Cozby held steady to the Buck s new trading rang above 1.70 West German Marks. At the same time traders suspected that the Heads of Central Banks had been making intentionally vague statements about the future of the Dollar to keep the Greenback stable by keeping the Market confused. The result it s been a pretty Dull week London trader said. Traders were looking for an increase in tire .Trade deficit Tor april into the it3 billion Range. Should that occur the Dollar should dip rebound ing by week s end a Frankfurt trader said. A belter showing on . Trade figures below 110 billion would support the Dollar but traders did not expect any such improvement. Al the heart of the Dollar s stability in the past week has been Market confusion As to he intentions of the Central Banks. In a Eccl weeks the . Currency had moved out of the trading Range of .63 to 1.68 Marks to inc Dollar to sustain  around 1.71 Marks. The Exchange Rale for the . Military Community through the weekend was 1.71 Marks to inc Dollar. Traders had been watching for Central Bank intervention should the Dollar begin to push a new resistance level estimated at 1,7350 Marks by a trader with a . Bank in Frankfurt. But Wilc West Germany s Bundesbank sold be tween $3 billion and $4 billion last week Bundesbank officials said the Sale was aimed at Low ering Dollar reserves and not at affecting the Exchange rate. Then Karl Otto Pohl. The Bundesbank presi Dent said wednesday that the Trade imbalance would not be aided by a further decline in the Dollar. Later the same Day he said he did no want to Sec a lower Mark. The apparent contradiction in Pohl statements left the Market stable but it was an uneasy stability for those people who like to make Money with foreign Exchange Ait Ameri can banker in Frankfurt said. Ahead for the Dollar is a Long hot summer waning for the end of the . Election season. No one wants instability in an election year the banker said. If after the elections the Central Banks Loose the rein the Dollar still must Battle with the . Trade and Federal deficits. And adding to the Long term difficulties on inc Trade deficit Side of the equation is the problem . Industry faces with aging plants and  the Short term traders in Germany can count on Long weekends and Hope for Good weather. At least Here in Frankfurt traders Are Al ready going out to the wine tests a German trader said Early Friday afternoon. In the United kingdom where inc Pound took a beating two weeks ago against the Mark Sterling fell to si.79, but was trading above $1.82 by Friday. Mirroring the situation across the Channel the Market was watching and waiting for the april Trade figures from the United Stales. And until tuesday As the London Irader put it stability is the name of the  Good economic figures make Bush shoo in his advisers say  news service Washington slacking up the latest economic indicators before the presidential election Campaign this fall. Republicans Are in an upbeat mood. Based on the politics of Prosperity they say George Bush i looking Good. Judging from those key economic numbers no re cession is in sight in a period of moderate growth inflation is homing at a manageable rate and unemployment in t threatening to arouse the anger of Vot ers before november. All of these signs the vice president s adviser claim Point to a Victory Over gov. Michael Dukakis of Massachusetts the Likely democratic nominee. Not to be overconfident but the economic num. Bars look very Good for us right now said Bob Teeter Bush s pollster and strategist. The democrats of course Don t Sec it that Way. The budget and Trade deficits their economists argue Are twin disasters that threaten recovery. The positive eco nomic numbers they contend mask the pockets of despair in the country s rust Bell the Oil Patch and i Rural America and Don l take into account the Poten tial of some unpredictable event before nov. 8 there s a tremendous amount of uncertainty and anxiety about the future of the Economy Sai Christopher Delcy Dukakis issues director people arc running harder and harder just to stand Stilt and a lot of them have been forced to take lower paying  in this country is very  the pock Lbook issues strategists in both Parlie agreed could swing this year s election a contest those same Stalc girls figure will be a close one with Bot sides scrambling for an advantage on the economic front. In fact. Bush and Dukakis Are already trading blasts on the Economy Over who could manage in Belt Rover the nent four or eight years. Based on the latest statistics the republicans have More to cheer about at least on the surface. In the first Quarter of 1988, according to the Commerce depart ment real economic growth increased at an annual Rale of 2.3 percent As the Economy continued on it longest recovery in peacetime. Inflation another election barometer is running at an annual Rale of a percent and the Reagan administration figures to pull out All stops 10 contain it for the rest of the year. If unemployment continues close Lothe 5.6 percent figure of March it is figured As a plus for the republicans. An economic downturn before election Day is considered unlikely by most analysts. Even some democratic economists agreed that the Economy could be a Tough sell for them in the fall because voters Are nol fixed on the Long term consequences of the Trade and budget deficit. Barry Bosworth of the Brooking institution who served As head of the Council on wage and Price stability in the Carter administration said a common attitude among voters is what s the problem?1 of course we be been living Way beyond our Means and we be been on a consumption Binge for some Lime. But people Don t seem to be nervous about it another democratic economist who requested anonymity said Bush May be Lucky on the numbers because All the negatives probably Archt going to catch up with the country until Afler the  Bush meanwhile has vowed that he will nol in crease taxes and has called for a reduction in the Capi Tal gains tax to is percent. Earlier this week he provided a look Al his Campaign theme by accusing Dukakis of going around talking about Pink slips despair and pessimism. While i m out there talking about Hope and Opportunity and  Kirk o Donne i who Heads the Center for National policy a democratic think tank said the party can t talk doom and gloom but can attack Bush by focusing on the future and Hilling the Reagan Bush administration on such issues As the Vela of the Trade Bill. O Don Nell added that persistent Trade deficits under the republicans have raised questions about where the country it  despite All the economic indicators going Bush s Way right now there might be a Sleeper statistic work ing against him real disposable income. Edward Tuple a political science professor at Yale who has written about the relationship Between eco nomic growth and presidential elections said the incumbent party usually wins when the real disposable income of americans increases at an annual Rale of 3percent or More in presidential election years. When in increases less than 3 percent incumbent panics lose. The latest report revealed that real disposable in come increased m the first Quarter at an annual rate of 3.2 percent. However the number was skewed by Sev eral one time events said Jay Levy a new York economist. There was a lax reduction at the beginning of in year which gave a one Lime boost to disposable in come. Then to March wage income was boosted by profit sharing payments in he Auto Industry which won t happen every Quarter. And there was also an increase in social Security payments which also will not happen every Quarter said Levy. By november most economists believe the Rale of real disposable income will be in the 2 percent Range. Since 1940, incumbent parties have loss five of six presidential elections in which real disposable income increased by less than 3 percent. Some Price hikes May be boons  business analyst new York discovering a Price increase of any son in today s nervous economic environment is Akin 10 spotting a Wisp of smoke in a crowded theater. The warning alarms go Oft and everyone gels excited. But not everything that looks like smoke signifies a conflagration and not every Price increase Means inflation. Most economists know this but a goodly num Ber of them seem to have forgotten for the moment some Price increases Are reasonable and maybe eve desirable says professor William c. Dunkelberg who measure prices and other indicators As part of a quarterly economic Survey for the National federation of Independent business. In the us Cal Survey Dunkelberg did indeed find evidence of growing Price pressures based on detailed reports from 1,936 Small and medium site companies belonging to the  federation. Although not Large there is a Clear upward Drift in the percent of firms planning to raise prices he re ported this month Dunkelberg attributes much of this to relatively higher import prices after the Dollar s decline to the Opportunity this gave Domestic competitors to follow suit and to the lightening of labor markets. But then be issued a caveat thai has been ignored by some of his fellow economists not All Price increases arc inflationary. It must be remembered he said that general inflation is really a monetary phenomenon meaning in this instance that i the Federal Reserve flooded the nation with dollars it would provide the support to keep those prices higher. But without increases in the Money Supply som Price increases have a different meaning a meaning thai is As Basic As any Tenet of economics. That is Price increases Are a reaction to Supply and demand. If the Money Supply remains fairly constant rising prices in growing sectors will be offset by declines else where As demand weakens in less popular sectors Hes tales adding this pertinent explanation the role of prices is to signal resource reallocation. Where demand grows pc and profits Rise to Gener ate the needed investment and increase in capacity Anglo attract labor. Where demand Falls acid profits fade prices will fall encouraging resources to leave for Greener  such Price changes he says can be confused Wil general monetary inflation. And these Are Days in which that confusion May be pervasive. It is a situation he says thai presents an immediate Challenge for monetary authorities a Challenge whose outcome is potentially As critical As any other Factor in steering the Economy on a healthy path. That Challenge he says is this to determine the extent to which the Price chaises that Are occurring arc reasonable and desirable before acting to snuff out an inflation that May not in fact be  there is a lesson a it for the general population an also a reminder for those nervous forgetful economists not every Price increase or decrease needs to reviewed in the context of inflation. Prices serve other purposes too