A top economic adviser to Republican presidential contender George W. Bush said on Thursday he backed a strong dollar as he signaled a hands-off approach to government intervention in currency markets.
"We believe in a strong dollar, and the right way to have a strong dollar is to run a national policy that produces a strong national economy," Lawrence Lindsey said in his most detailed comments yet on the subject.
He also offered very limited scenarios when intervention to shore up a currency was appropriate.
Lindsey, who has been touted as a possible Treasury Secretary in a Bush administration, was speaking in Washington amid continued confusion over whether Bush or Democratic rival Al Gore would take the White House.
His comments came after Treasury Secretary Lawrence Summers earlier on Thursday reiterated the current administration's belief in a strong greenback, which Summers said had helped to keep a lid on U.S. inflation and interest rates.
Lindsey declined to comment directly on the recent weakness in the European single currency, which on Thursday prompted another round of unilateral intervention by the European Central Bank designed to shore up the ailing euro's value.
"The fundamental way of affecting the dollar is to have a consistent and stable economic policy," Lindsey said.
That would require policies to raise the national savings rate through reforms in the Social Security and tax systems as well as "sound and sensible" regulatory policies, which were central planks of Bush's campaign proposals, he said.
He added that Bush's specific policy plans, which include large tax cuts, should not be seen as overly stimulative for the already robust economy. The prospect of large tax cuts has worried some investors in the inflation-sensitive bond market.
"I think the fears in the bond market are unwarranted," Lindsey said. "I'm not one who would ever advocate a program that would overstimulate the economy."
Nor did Lindsey see a Bush administration having any problem working with Federal Reserve Chairman Alan Greenspan. "He (Bush) supported him (Greenspan) all along and I just don't expect any conflict," he said.
NO HELPING HAND FOR EURO
Lindsey, who in the past has dubbed efforts to bolster the euro through central bank intervention as "inappropriate", signaled he had not given up on those views.
Asked in which circumstances foreign exchange intervention was appropriate, he told reporters: "When markets are clearly disrupted by some event that is temporarily destabilizing, that might be one, or if there is an issue of liquidity."
When he was prompted to say whether the current decline in the euro met those criteria, he replied: "I think you know the answer to that." Lindsey declined to be more specific.
The former Federal Reserve governor also declined to say whether he had discussed taking the top job at Treasury in a possible Bush administration. "We have had no conversation about this subject," he said.
Lindsey was a policy adviser to Bush's father, former President George Bush, who appointed him to the Fed. He is a former Harvard professor who served on the staff of the White House Council of Economic Advisers.
In his remarks to reporters, Lindsey said a Bush administration would not make any significant changes in international economic policy. "Changes would be of nuance rather than of substance," he said.
The United States, as the dominant shareholder in the International Monetary Fund and the World Bank, played a key role in arranging multi-billion dollar rescue packages for emerging economies during the world financial crisis of 1997-99. Bush advisers have in the past signaled they would be less inclined to use U.S. funds to bail out other economies.
Lindsey's comments came against the backdrop of mounting uncertainty over the outcome of the presidential election.
Democrat Al Gore vowed on Thursday to fight the results of Tuesday's election. Without waiting for the result of a recount of the contested vote in Florida due later on Thursday, Gore campaign manager William Daley said his camp would not accept its outcome or concede the race to Bush. Instead, he backed a legal challenge to the Florida vote and called for a recount by hand of ballots in four Florida counties.
Financial markets reacted nervously to the latest twist in the election drama, and U.S. stocks sold off sharply.
"I can understand the market's reaction to Mr. Daley's comments," Lindsey said. "I think the Florida election board will declare a winner and that will mean that the election is decided, and that Mr. Gore, as he said, would respect that result."