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44
wage inflation, the International Mone–
tary Fund, and unemployment.
Foreiga Reactions
•
Japan.
The oriental trading colossus
of Japan was most affected by the
dollar "float" and import surcharge pro–
posed by the President. The
yen
and the
dollar were the most undervalued and
overvalued currencies, respectively, in
major world trade markets.
Japan resisted yen revaluation as long
as possible, but the indications at press
time are that Japan will be forced to
revalue. Rumors spread that West
Germany might slap another surcharge
on Japanese goods if they don't "Aoat"
the yen.
The Japanese stock market lost over
500 points (20%) in the first week of
trading. The semi-official Japan Externa!
Trade Organization (JETO) said the
imports surtax is "one step short of a
total suspension of imports on the part
of the U. S." Former American ambas–
sador to Japan, Edwin O. Reischauer,
called the surcharge "almost a declara–
tion of trade war." However it appears
the Japanese will take no immediate re–
taliatory action, although diplomatic re–
lations between the two trading powers
were further strained.
•
Canada. Ouc
neighbor to the north
tried, but failed to secure exemption
from the surcharge. Many disgruntled
Canadian businessmen responded by not
accepting American dollars.
•
Britain.
At the London Hilton hotel
the pound was sold for $2.80- the oid
parity before the 1967 devaluation. One
British paper headlined, "U. S. Gets
Tough at Last" while the British
stock market declined.
•
France.
The French Government, in
tones reminiscent of Charles de Gaulle,
attacked tbe new economic measures as
violations of international accords. It
said the dollar was no longer the proper
basis for the world's dealing in money,
investment and trade.
•
W est Germany.
The deutschmark
had previously floated upward about
B%. Togetber with the 10% succharge
this would make German exports at
least 18% more expensive to American
consumers. The German market did not
open (the Swiss, Dutch, Austrian,
French and Italian markets also stayed
The
PLAIN TRUTH
closed all week, but opened August
23), while German businessmen and
bankers were understandably glum since
Germany was already in the midst of a
recession. The future looked even
bleaker.
•
R.ttSsia.
Pravda declared President
Nixon bad opened a trade war on Japan
and West Germany in order to protect
the dollar. For weeks previously the
Soviet press had a field day attackiog the
dollar as the "reflection of the very
deep crisis of American capitalism."
•
Common Market.
An all-day meeting
(until 2 a.m.) Thursday solidified the
stand of "the Six" for no retaliation
at this time against the 10% surcharge
and floating of the dollar. German and
French leaders were at odds on most
issues, so the Six were stymied.
European Common Market officials,
tbough deeply upset, ruled out the idea
of retaliatory measures against the new
American policies. "There will be no
retaliation" saicl Prof. Ralf Dahrendorf,
commissioner for externa! affairs for the
trade group. "The whoJe idea is just too
dangerous for trade relations between
the United States and the European
Community."
While Germany and France debated
the proper cornbined action for Europe
the dollar floated slowly dowoward in
relation to most of the ten major Euro–
pean currencies. The average drop was
2Y
2
%
by Wednesday, with the average
eventual depreciation expected around
12%. When European markets opened
the following Monday, the dollar
dropped much less than most econo–
mists expected - about
1
percent.
The Future of Gold, The Dollar
and the IMF
More important than the inconven–
iences of tourists in Europe, business–
meo and workers at home, or investors
and exporters abroad,
is
the very future
of
money.
Jobo Allan May of the
Christian
Science Monitor,
feeling the pulse of
the top financia! experts in London,
predicted that a ne'it' monetary era is
going to be ushered in.
New economic plans must be forth–
coming with new exchange cates and
more relevant rules, say most econo–
mists. The Europeans may be forced
September
1971
to forge a common currency for interna!
purposes and for world trade. Gold and
the dollar are no longer sufficient. No
newly mined gold is supporting bur–
geouing world trade while conversely
too many dollars are glutting foreign
markets.
The dollar is no longer sacred, nor
safe. The gold window may be closed
forever or it may open at $40 per
ounce
oc
more.
Newsweek
summacized: "The mighty
greenback, once as good as gold and
welcomed the world over, is now indis–
putably the sick man of international
finance, ancl its disease resembles the
plague."
On the other hand, the U. S. eco–
nomic power is yet gargantuan and
Europe is still handcuffed from taking
any retaliatory action. Serious talk of
trade war has not yet surfaced. The
world still needs the USA. But the
question is: "for how long?"
Needed: Renewed Sacrifice
The future of the dollar - and
America - is largely up to the Arneri–
cans. Whether on tbe inflatioo front,
business front, or international front,
Mr. Nixon made it "perfectly dear"
to the American people that the new
policies would be successful only if
they "reoew the spirit of sacrifice."
"Success," he said August
15,
"caJls for greatness in a great
people." The Administration hopes that
Americans will have the character of
voluntary compliance to abide by the
spirit as well as the letter of the law,
for there is only a small governmental
agency to enforce the wage-price freeze.
Former price freezes have engendered
much illegal "black marketeering" which
must be avoided this time if Americans
siocerely want to conquer their chronic
inflation.
Abroad, foreigners will be watching
carefuJly to see if tbe American popu–
lace can meet the test, both now aod in
the uncertain months after the initial
90-day period ends. Failure to meet it
may well mean
.a
thorougb undermining
of confidence
in
tbe American will as
weJl as a shattered confidence in the
American dollar!
Read an in-depth money crisis report
coming in the October
PtAIN TRUTH. O