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10
whole history
of balance-the-budget
Republican Party economics. In an
attempt to stimulate the sluggish U. S.
economy, the government is deliberately
planning for a budget deficit in the next
fiscal year of
$11,600,000,000.
Prívate
economists, however, sensing a much
slower business upturn, are projecting a
de.ficit of anywhere between
20
and
30
billion dollars!
To cover expenditures beyond
income, another increase in the Federal
debt cei ling was requested in February.
John Connally, U. S. T reasury Secretary,
asked for a hike of
$40,000,000,000,
putting the oew debt limit ( which
never stays a "limit" for very long) at
approximately
$430,000,000,000.
Merely to finance this huge national
debt required
.$19,600,000,000
interest
this fiscal year - nearly
lO%
of the
federal budget. This amounts to"
$39,000
every minute of every day of
the year.
Tide of Red Ink Flows
Across Atlantic
What really shocked America's
foreign-trade partners was the recent
revelation that the U. S. suffered a
balance-of-payments loss of
$10,300,-
000,000
for
1970.
(The balance-of–
payments reflects the sum total
relationship of a nation's trade and
financia! dealings with the rest of the
world).
Despite America's surplus of exports
over imports for the year, more dollars
flowed out of the U. S. than flowed in
because of overseas investments, bank
transactions, tourist expenditures, for–
eign aid and overseas military spending.
This caused a massive dollar
draín.
In
the past, the gap in U. S. exports over
imports was hefty enough to cover these
other expenditures. But inflation and
the subsequent rise in the price of U. S.
goods has aearly wiped out this
advantage.
The
1970
overseas .fiscal hemorrhage
resulted in a
$7,600,000,000
bulge in
the dollar holdings of foreign author–
ities. This dollar "glut'' in Western
Europc is rapidly approaching unten-
The
PLAIN TRUTH
able and unmanageable proportions.
More dollars are simply unwanted
abroad. Through the dollar glut, the
U. S. exports inflation to the rest of the
world . Excess "Eurodollars," moreover,
have helped finance the American busi–
ness invasion in Europe - a highly
controversia! topic on the Continent,
much publicized in the book
The Amer–
ican
Chatienge.
The International Monetary Fund
calls this made-in-U.S.A. inflationary
phenomenon the world's "most urgent
remaining international payments
problem."
And this is the concern of the Coro–
moa Market. West Germany alone
nearly tripled
its official holding of dol–
lars during the last six months of
1970.
With
S7,500,000,000
in its official
reserves, the Federal Republic has risen
from the world's fourth largest holder
of dollars to
fírst.
Unwilling to wreck the entire intcr–
national econornic system, the German
Brmdesba11k
has of late converted little
of its enormous dollar holdings into
gold. Rather, as per Washington's
reguest (or threat), it has been either
sguatting on the dollars or investing in
U. S. government securities. At least
this way, the unsolicited dollars earn
interest - unfortunately, however, in
more dollars.
This does not mean there was no
gold drain during
1970,
however. Dur–
ing
1970
the United States lost
$2,500,·
000,000
in gold and other reserve
assets. The U. S. now has only
$11,000,000,000
in gold to offset
Official Settlement claims of
$18,100,-
000,000 -
and total claims of over
$44,000,000,000.
The picture is not pretty. It cannot
continue indefinitely. Yet practically
evcry month America continues to live
beyond its means.
Many Europeans - especially the
Germans - have a morbid fear of eco–
nomic instability and rampant inflation.
The steps the Common Market nations
are now taking to ensurc theír economic
security reftect this fear.
U.
S.
Ignores Europe's
Warnings
Failure of the
U.
S. to check thc dol–
lar drain risks a "calamity," warns ltal-
May 1971
ian Central banker Rinaldo Ossola. He
fears Wash ington might either be
forced to devalue the dollar or "worse
yet" to sever the dollar's last link to
gold. Foreign nations would be left
holding a bundle of totally unredeem–
able greenbacks.
Urgent pleas and warnings from top
European economists, bankers, and
industrialists
fill
the pages of myriad
bank newsletters and prívate investors'
bulletins.
But the warnings, seemingly, are
going unheeded.
A
new attitude has risen in sorne
influential economic and political circles
in the United States. This attitude is,
simply stated: "Ignore the chronic bal–
ance-of-payments losses. The Europeans
11'0tddn't
dare
bring clown the whole
international economic house of cards.
They're probably only bluffing anyway."
This is a very serious assumption on
which to base the economy of the
world's dominant power.
Yet, remarkably, the new we-don't·
care attitude is shared by numerous lib–
eral and conservative U.
S.
economists.
The
W
alt
St1·eet
J
ottmal
reports that an
cconomist at the liberal Brooking's
lnstitution reccntly urged a "passive
approach" toward the payments balance
problem in order to concentrate on a
better performance of the domestic
economy.
Shortly afterward, an official of a
conservative-style economics instítutc
issued a near-identical
cal!
for "benign
neglect'' of the balance-of-payments
deficit.
This is tantamount to the aver–
age debt-ridden American decidiog to
"benignly neglect" paying his bills at
the local furniture store in order to con–
centrate on his "domestic cconomy,"
whether it be new dothes, a vacation
trip, or a new color television.
What must knowledgeable Europeans
be thinking as they read thcse finan–
cially irresponsible utterances?
lnternational Poker Game
If
the Unitcd States wcre a mini–
republic, such a profligate attitude
would have virtually no effcct on the
world's economy. But the U. S. is not a
tiny Costa Rica or El Salvador. America