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F
OR
40
YEARS,
(1931 to 1971) the
American dollar reigned supremc
in world tradc and finance. From
1945 to 1958, the dollar was considered
better
than gold to most developing
economies.
But by 1958 it was becoming evident
that thc dollar was weakening. The
United States, a war-time haven for
three fourths of the world's gold, began
changing the earmarks of the gold
buried in the Federal Reserve Bank in
New York
City,
and
in
Fort Knox,
Kentucky, from "USA" to "France,"
"Germany" and other nations.
Ten years later, in 1968, daims on
U. S. gold were running into the mil–
lions of dollars per
day.
More than $12
billion (half) of the U. S. gold was
drained betweeo 1958 and 1968, and
much of that carne in the last hectic
months before March 1968, when the
U. S. temporarily closed the gold
window.
The "balance of payments" deficit,
the net amount of dollars "exported" as
claims against our gold, was virtually
doubling each year from: $3 billion per
year before 1968;
$6
billion in 1969;
$11 billion in 1970; and a $25 billion
annual cate so far in 1971.
The U. S. was forced to act. On Au–
gust 15, 1971, President Nixon revealed
his new econornic plan. One part of the
strategy was to cut loose the dollar from
gold, in effect letting it "float" in for–
eign transactions until natural market
pressure would decide its best value.
The dollar had been overvalued for 10
The inside story
of
why the richest nation
on earth is suffering
financia/ woes.
by
Gary Alexander
years, and the action to devalue was
about 3 years late, according to many
economists.
WHY
the
"D ollar Glut"?
The "balance of paymcnts de.ficit" is
a term like "unfavorable balance of
trade." Everybody assumes it is bad, but
they don't know
WHY -
much less
what it entails.
What, for example, is the leading
factor, or factors, which create a sick
currency?
One merely needs to look around at
the world he lives in to find the chief
culprit causíng sick economies. Most
economic problems spring from
war.
The "dollar crisis" is no exception. The
total balance of paymcnts deficit, 1950-
1971, of over
$50
billion, can be
accounted for entirely by military aid
and foreign aid. The United States has
spent over $100 billion since World
War II rebuilding the world through
foreign aid - much of it to bolster
" friends" agaínst the real or imagined
spectre of communism.
In a totally separate action, the U. S.
has
spent well over $100 billion in
waging the Vietnam War, and many
tens of billions have been expended in
other actions of the interminable "Cold
War."
These ostensibly benevolent endea–
vors have done much to endow us with
our dollar crisis. Our merchandise trade
account has been in the
black
for 78
years. There was no trade deficit in any
year of this century - until 1971.
Another payments category, our foreign
business investments, still contributes to
a balance of payments
surplm,
for the
time being.
BuT, our military and redevelopment
aid to other nations has double-hand–
edly wiped out those trade and invest–
ment surpluses, and saddled the U. S.
with a balance of payments deficit (that
is,
dollars abroad)
of over
$50
billion.
The exact amount is difficult to tally,
since it has increased about $2 billion
per month this year!
Why is the world upset with an
apparently benevolent nation that gives
away billions of dollars per year to
needy nations, at the expense of interoal
scardty and inflation? The United States
cortld
have been insular and protectio–
nistic in 1945 - but it wasn't. The
United States
cortld
have given Generals
Patton and MacArthur
full
sway to sub–
due the world in 1945, but instead it