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chose to leave Communism alone, and
engage it in a Cold War.
For the supposedly benevolent mili–
tary pcotection and financia! redevelop–
ment of Europe, Japan, and Soutbeast
Asia, America has inherited a weak dol–
lar and hatred abroad. Is a wodd reac–
tion of disbelief, contempt or hatred at
President Nixon's new economic plan
fair?
In a way, yes. America has often pro–
tected her own interests by providing
aid to others.
In another way, world reaction is
not
fair. Much foreign aid has been truly
benevolent, with no expectation of
receiving anything in return. America of
the late 1940's had a "do-good" mis–
sionary zeal for spreading American
prosperity to other developing lands, as
much as was feasible. America, with its
nuclear power, could have literally
ruled the world. But America chose not
to fully exert her power.
The "dollar crisis," then, stems from
good intentions, but intentions blunted
by mistakes, blunders, and poor "public
relations" with the world.
Why a Lagging Economy?
Both inflation and stagnation in the
early 1970's find their basis in war -
Vietnam in particular. Price stability
and boomiog business reigned in the
U. S. from 1961 until the height of the
Vietnam War. Labor did
not
"push" in–
fiation upward. Wage increases did
not
rise above productivity increases. But
government deficit spending for the
Vietnam War
DlD
begin the inflation of
the late 1960's which creeped up one
percentage point each year from 1965
onward, until inflation reached
6
per–
cent in 1969.
AftP.r government deficits spurred a
"demand pull" inflation (too many dol–
lars "chasing" too few domestic
goods), tben the wage-price spiral
began to take effect. Labor saw the pur–
chasing power of the dollar eroding,
then they demanded more money for
workers - beyond productivity in–
creases. Although labor did not start
the current siege of inflation, tbey are
now the main moving force behind it.
Following the widespread social
crises of 1968, and the "silent majority"
also turning against the Vietnam War,
The
PLAIN TRUTH
a change in priorities of spending, more
than anythiog else, forced the business
recession. A pullback from war hurt ar–
maments aod airplane manufacturers; a
pullback from space hurt the aerospace
industry. Anti-pollution campaigns hurt
the image of all manufacturing in
the public eye (although pollution
continued).
Spinoff from these major priority
shifts were felt in numerous secondary
industries, as the U. S. entered its fifth
postwar "recession" in November 1969.
(A "recession" is generally defined as
a half-year of
declining
"real" G.N.P.
- that is the actual
amormt
of goods
and services declioiog).
So war and social revolution are once
more the ultimate culprit for economic
crises - this time stagnation and infla–
tion. And U. S. inflation is one of the
main causes of our weak trade balance
and "overvalued" dollar. Intlation boosts
prices of our exports, thus making them
less competitive.
The Future of tbe Dollar ...
1t
may be many months - well be–
yond the International Monetary Fund
meetings in Washington D.C., ending
October 1 - before the future of the
dollar, gold, and international finance is
settled. But sorne indications are dear.
The dollar may well be finished as
the sole kingpin of international ex–
change.
It
is no longer sacred, strong,
safe, or sufficient to finance world trade.
Strong currencies such as the German
mark, Japanese yen, and Swiss franc
may become alternate exchange cur–
rencies. Europe is in the process of
developing a common currency.
If
supra-national currencies are not
chosen as international monies, then the
I.M.F. may act to use SDR's (Special
Drawing Rights, or "paper gold") , or
the I.M.F. may double or triple tbe
price of
gold
so that the yellow metal
can finance world trade once again, or
they may create a brand new inter–
national currency.
Whatever tbe new revolution in
currencies may bring, it is virtually
certain the dollar will be just one of
many
key currencies, not the leader.
The 40-year "dollar era" has ended,
as the "pound sterling era," the Span–
ish "peso era" and the Roman
de-
Octobec 1971
narii
era ended. The European Common
Currency appears to be the most likely
successor to the dollar in this long line
of monetary dynasties. Europe is the
only continent with sufficient gold back–
ing. The yen, though stroog, has pre–
cious little gold behiod it (less than one
billion; only eight percent of Japan's
reserves).
... and What About Gold?
The gold standard is not sacred.
It
is
only about 100 years old in tbe history
of man, a product of evolution as much
as any social institution. But in a world
of sovereign powers, there must be sorne
standard to finance international trade
and domestic currency. Gold has the
confi:dence of more people than any
other standard, especially in Europe. lt
is the monetary
idée fixe
of France,
even after De Gaulle. The Swiss
currency is backed by about
double
the
amount of gold as compared to
currency. (America's ratio is over 20
dollar bilis to one dollar of gold.)
But gold, if it is to be used as a mod–
ero standard, must be modernized. Only
one billion dollars' worth of gold is
mined eacb year, and virtually
al/
of it
goes for jewelry, industrial use, and
speculative hoarding. No new gold is
being used to finance international
trade, which is its main monetary
purpose. Many European economists ad–
vocate a tripling of gold value to $100
per ounce, coupled witb a stricter super–
vision of its distribution in central
banks.
This "gold revaluation" must take
place or gold must be abandoned as a
standard. The world trades $300
billion
worth of goods per year. The rate of
trade increases about 10% aonually. But
the gold in
ALL
central banks is less
than
$40
billioo, and it
is
not growing.
The world has beeo "half way" on tbe
gold standard since 1931, and it must
decide soon whether gold should be all
or nothing.
The
best
world monetary system
would be a one-world government, with
one national treasury, one currency, and
one monetary system. In this con–
figuration, nations would trade like
U.
S. states do now. There is no balance
of payments or trade deficit betweeo Il-
(Contimted on page 45)