Business review; Pressure on the dollar
From the national educational radio network here is a Business Review ASSOCIATE PROFESSOR ROSS Wilhelm of the University of Michigan Graduate School of Business Administration presents his views in the commons of business and economic activity in recent months the American balance of payments problems have been less pressing and the dollar has been under little pressure during the recent recent crisis over the franc there was little pressure on the dollar and the situation has been car. The pressure on the dollar lessened noticeably after the passage of the 10 percent surtax surcharge last summer and after it became clear to the rest of the world that our government and monetary authorities were serious in their desire and attempts to hold our inflationary spiral. We should not be misled however into believing that our balance of payments problems have disappeared. Actually the dollar is still in a weak and vulnerable position and we should take action now while the pressure is off to make fundamental adjustments in the value of the dollar. Only by taking action now can we prevent the future crises which are inevitable. We have far more freedom of action now to take
decisive action to correct this chronic problem. Then we will have of we wait until another crisis arises and we have to take action at the same time we're trying to persuade other nations and specifically West Germany to help us defend the dollar. The most sensible action we can take is to move to a free floating exchange rate by the United States Treasury simply stopping buying or selling gold. The weakness of our balance of payments position is seen most clearly in the fact that our trade surplus exports over our imports fell to the lowest level in 1068 in 30 years. Our trade surplus in the merchandise we sell abroad and buy overseas declined to seven hundred twenty six million dollars. This is the smallest trade surplus since 1037. Over our history we've usually sold between 3 and 5 billion dollars more goods than we have bought from foreigners. The reason our trade surplus deplaned last year was because we had a dramatic increase of our imports of 23 percent while our exports only increase 9 percent. The increase in the imports is a phenomenon which occurs during inflation because foreign goods are relatively cheaper than the goods we produce at home due to the inflation.
A very high proportion of our increase in imports last year was in consumer goods. We had a noticeable rise in our imports of automobile and automobile parts from Canada Japan and Europe. Now the basic reason why Great Britain France and the United States face chronic balance of payments problems over the past 10 years has been because each of these nations has employed inflationary means for stabilizing their economies while West Germany has maintained a relatively stable price low. Each of these nations along with the rest of the nations of the world have sought to maintain fixed exchange rates between their currencies such as for deutschmarks per dollar five francs to a dollar and a pound equal to two dollars and forty cents. Now the exchange rate between currency should reflect the relative purchasing power of each performer should be able to buy in West Germany about the same amount of things that you can buy in the United States for a dollar or in France for five francs. But if prices are rising at different rates in each country it's obvious that the fixed exchange rates between the various currencies will not reflect the real purchasing power of the currencies. For instance
as our prices rise a dollar will buy less and less. But if prices are stable in West Germany for marks continue to be able to command the same quantity of goods. After a prolonged period of inflation it becomes obvious to everyone that some of the currencies are overvalued such as the dollar the pound and the franc. While other currencies are undervalued Such is the mark. Thus those persons who can or want to buy the most that they can for their money will try and get rid of the overvalued currencies and to acquire the undervalued ones. It's these efforts which cause the periodic exchange crises because such efforts threaten to upset the fixed exchange rates and the threaten governments must go into the market and buy up the surplus dollars francs or pounds with gold. The obvious fallacy in our present balance of payment system is the attempt to maintain fixed exchange rates in a world where nations are experiencing different rates of inflation. The obvious means of correcting the problem is for governments to abandon their efforts to maintain fixed exchange rates. If this were done the value of the overvalued currencies would decline while the value of the undervalued ones would rise A dollar might be only
- Business review
- Pressure on the dollar
- Producing Organization
- University of Michigan
- National Association of Educational Broadcasters
- Contributing Organization
- University of Maryland (College Park, Maryland)
- AAPB ID
- Episode Description
- In program number 400, Ross Wilhelm talks about pressure on the American dollar.
- Other Description
- This series, hosted by Ross Wilhelm, focuses on current news stories that relate to business and economic activity.
- Broadcast Date
- Media type
Producing Organization: University of Michigan
Producing Organization: National Association of Educational Broadcasters
Speaker: Wilhelm, Ross, 1920-1983
- AAPB Contributor Holdings
University of Maryland
Identifier: 61-35c-400 (National Association of Educational Broadcasters)
Format: 1/4 inch audio tape
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- Chicago: “Business review; Pressure on the dollar,” 1969-02-17, University of Maryland, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC, accessed August 9, 2022, http://americanarchive.org/catalog/cpb-aacip-500-sb3wz507.
- MLA: “Business review; Pressure on the dollar.” 1969-02-17. University of Maryland, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC. Web. August 9, 2022. <http://americanarchive.org/catalog/cpb-aacip-500-sb3wz507>.
- APA: Business review; Pressure on the dollar. Boston, MA: University of Maryland, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC. Retrieved from http://americanarchive.org/catalog/cpb-aacip-500-sb3wz507