Basic HTML Version
October 1971
AMERICA FACES
IIThe
Do/la
Crisisll
{Contin11ed from page 4)
linois and Michigan, for instance,
be–
cause the states use the same systems for
everything, with one central bank. In
such a nation-state system, the questions
of gold, currency exchange, and bal–
ances ( overvalued, undervalued or
"fioating'') would
be
largely irrelevant.
A worldwide system of the future
could be this simple and logical. But
proposing such a one-world government
today is regrettably out of the question,
although it's worth shooting for.
The Future of Europe ...
The dollar crisis will undoubtedly
speed action toward the attainment of
one unüied European currency. Without
a fixed European currency as a common
unit of account, Europe is handicapped
financially.
To understand this, imagine you were
a French farmer or a German business–
roan. Ten times in the last four years,
currency ratios have changed, and most
of these changes took place in Europe.
Tbe French farmer doesn't know from
year to year whether the German tractor
will cost more, or less, due to currency
switches (besides the vagaries of infla–
tion, which are also different in each
country).
The German businessman doesn't
know whether he can sell the tractors,
or buy the French farmer's food, if the
currencies are constantly switching each
year officially, and each day unofficially,
as the case of the presently "Aoat.ing"
German mark and Dutch guilder
illustrate.
For economic stability on the conti–
nent,
if
for no other reason, the Europe–
ans need a common currency - soon.
Europe planned to take ten years to
achieve a common currency. But present
and future crises may basten the day of
a common Euro-money.
To achieve a one currency system, the
Europeans will be
forced
to forget their
present differences. Presently the French
are trading the dollar in two tiers, like
gold, official and unofficial. The Ger–
mans are continuing to float the mark,
while the British have set limits for
"fioating," a term they dislike. In the
The
PLAIN TRUTH
Common Market meetings of August
19, the Six (with Britain) largely
agreed to
differ.
No concerted plan of
action was taken.
Conditions
will bave to force change,
since national sovereignty is still
cherished. Tbose conditions are already
here, however. Germany is on the brink
of a recession. ltaly is erupting with
political-social problems again. Infla–
tion and unemployment reign in Great
Britain. France is in the best economic
condition of any European nation, but
agricultura! problems and uncertainty
may force changes.
Trade is the lifeblood of Europe. A
strong currency and stable international
trade, without tariffs, is necessary for
European survival. Already, the six
E.E.C. nations alone ship out twice the
exports the U. S. does (although many
of these exports are with other E.E.C.
nations, not just with
orttside
nations).
Tbe expanded E.E.C. also leads the
United States in automobile output,
merchant fieet tonnage, and steel out–
put, three bulwark indicators of inter–
national trade.
According to GATT (General
Agreement on Trades and Tariffs)
rules and the latest Kennedy Round tar–
iff reductions, the Common Market tar–
iffs reacbed the same low leve! of U. S.
taríffs, about 8.3% on the average, this
A dramatic $23 billion dallar drain for 1971
(based on an annuol rote computation) forced
Presiden! Nixon lo rescind further gold poy–
menls for dollars on August 15, 1971. The
cumulative balance of poymenh deficlt –
computed on lhe "liquidity bosis" of total
dollars held by All foreigners, not jusi
by foreign central banks - is now al
$60 bill ion dollars.
(Note: Exact number of dollors obrood
is probobly less than $60 billion, since
lhe U. S. has "brought back" obout
15 of those billions by moking gold
poyments. Meonwhile European
bankers hove odded back obaul
$10 billion by a complicated pro–
cess of money "creotion" lhrough
high inlerest roles. Most
likely total of oll
foreign dollors held
abrood as I.O.U.'s
against U. S. re–
serves is
around
$55
billion.)
1971
$60 Billion
(First Six Months)
U.S.
O OLLAR
O RAIN
1950-1971
(In Billions of Dollars)
$21.5 Billion
Balance of Paymen1
~
Deficit
30
25
20
5
10
l
r-'
1950
51
52 53 54 SS 56 57 58
59196061
62 63 64