McCracken Says Harmony Needed
MUNICH, May 27ÛÓThe U.S. government served a warning to its European partners today that it would not automatically raise interest rates to stem the outflow of dollars that has precipitated the recent money market crisis.</br></br>Economic Council Chairman Paul W. McCracken told a press briefing that while ÛÏcoordination or harmonization* 1Ûª of policies was important, ÛÏwe must be sure that the tail doesnÛªt wag the dog.Û</br></br>Tiie dovetailing of policy, in an effort to short-circuit speculative capital movements, McCracken said, ÛÏis a very complex matter. It involves a willingness and capacity to pursue a flexible combination of fiscal and monetary policy.Û Without such a deft touch, he said, ÛÏwe might find overall results that might not be acceptable for domestic economic reasons.Û</br></br>A top aide to Finance and Economics Minister Karl Schiller, meanwhile, said the float of the D-mark provided time for a decision on whether to return to the old monetary system or change it, noting that such changes might even include ÛÏdevaluation of the dollar.Û</br></br>The official, Wilhelm kel, did not advocate course. But he raised the question, as did American economist Edward M. Bernstein at an earlier panel, whether the international monetary system cials fear that higher interest rates, as demanded by Europeans, will return the U.S. to a recession.