This article is from WeChat public account: Chi Society (ID: zhibenshe0-1) , author: SD president , title map from: Oriental IC

In 1981, Reagan entered the US White House. Then, after he and Volcker joined hands to produce the inflationary “tiger” and the unemployed “old demon” that have plagued the United States for more than a decade, the Japanese and German have taken advantage of the situation and have a tendency to rise. At this time, the United States is cooperating with Japan and West Germany, the international protagonists of the Reagan Circle.

On September 21, 1985, Japanese Finance Minister Takeshita went straight to the airport after a sneak shot at the golf course near Narita Airport in Tokyo.Wearing a golf suit and heading straight to New York.

The next day, Takeshita and US Treasury Secretary Baker, West German Finance Minister Stodborn, French Finance Minister Berger, British Finance Minister Lawson, and the central bank governors of these five countries at the New York Plaza Hotel A meeting was held to reach an agreement on the joint intervention of the five governments in the foreign exchange market. This is the famous “Plaza Agreement.”

The agreement stipulates that the currencies of Japan, West Germany, France, and the United Kingdom collectively appreciate against the US dollar, and the yen appreciates 5% against the US dollar each year.

When the meeting ended, the Becker gave the Fed Chairman Volcker a head in front and constantly released the signal: Volcker contributed to the talk, hoping the dollar exchange rate fell. This makes Volcker very uncomfortable.

In the past five years, Volcker has taken over the Fed and adopted a highly austerity policy to suppress the inflationary “tiger” that has ravaged the decade and become a hero in the hearts of Americans.

However, the policy of continued high levels of austerity has also led to a high dollar exchange rate. From the end of 1979 to the end of 1984, the exchange rate of the US dollar rose by nearly 60%. The exchange rate of the US dollar against major industrial countries exceeded the level reached before the Bretton Woods system collapsed. This broke the balance of payments and the stability of the foreign exchange market.

Not only did Japan, Germany, and Britain and France fail, but the Reagan administration also had a headache. The strong dollar dominated by Volcker hit the US manufacturing and export economy, resulting in a rapid increase in the US trade deficit. By 1984, the US current account deficit reached a record $100 billion.

At the same time, the Reagan administration’s fiscal deficit has also been recorded. At this time, the Senate is discussing the Gramm-Radman-Hollins Reduction Deficit Act (also known as the Balanced Budget and Emergency Deficit Control Act of 1985) ) The bill seeks to cut the federal deficit across the board and avoid catastrophic risks to the fiscal deficit.

The anxious President Reagan repeatedly passed the Baker Finance Minister to convey Volcker’s request to lower interest rates to promote domestic exports and ease the fiscal deficit.

Volcker believes that interest rates have been lowered several times in the past year. In order to avoid inflation, he has repeatedly refused Reagan’s request.

However, Reagan adopted the “curve to save the country” approach. He asked Baker to organize a beautiful financial diplomacy, and Volcker became the “Liu Bang” of the banquet. Reagan’s abacus is that, through the diplomatic means of the Plaza Accord, Volcker is forced to lower interest rates.