Evening star., 1949-09-20
Dollar Is High in Value
Only in Relation 10
Weak Currencies
May Be Due for Decline
IF U. S. Fails to Balance
Budget Year After Year
Bv David Laurence

Budget Year After Year
By David Laurence
The average man in America.
who doesn't ordinarily engage in
any transactions whereby the dol
lar is exchanged for the pound,
doesn't know whether to be
sorry or glad that the pound
has been devalued-in fact he
doesn't know whether the action
Is sign of distress or progress
in the world.
The long view and the broad
view Of any devaluation Of cur
rency Is that it represents an ap-
proach to reality-an attempt to
fix the official rate at what the
true market or unofficial rate has
been for some time.
To the extent that a devaluation
Of currencies opens up the mar
kets Of the world to trade, it is
a constructive move-a mark of
progress and a cause for satisfac-
ton, because 1t tends to bring the
goal of stabilized currencies nearer
to realization.
With currencies and price levels
lopsided so that goods do not
move across international bound
ary lines, a stagnation in trade oc-
ours. Europe cannot find con-
sumer's market for goods only
within her own countries. There
must be exporting of goods to
other parts of the world. Unfor-
tunately for Europe, the dollar is
the most constant currency in the
world. It is the yardstick by
which other currencies are meas
ured. Although the United States
does not permit its people to
change paper dollars into gold
coin. the American dollar is the
nearest thing there is to a stable
currency in the world. All other
currencies, therefore, are measured
in terms of how many dollars are
offered in exchange for them.
High in Relative Sense.
To say that the pound is de-
valued is to express how it looks
from the British standpoint. But
1t is also proper to say that the
American dollar has been re-
valued. 1t is worth more in world
markets than it was a few days
ago. It will bring more pounds
and more francs and more of the
other currencies of the world in
exchange than it did last week.
There are some monetary ex-
perts who think that the dollar
was valued at the wrong figure in
prewar days and that the tinker
ing with the gold content left the
American dollar at q level that
was not realistic. Whatever be
the merit to such views, the fact
remains that, while the American
dollar isn't as valuable as it was
in 1882. for instance, it is worth
far more now in relation to the
franc or the pound than it brought
in prewar days.
The American dollar may be
considered the strongest currency
in the world and yet possess char
acteristics of weakness. It is only
in relative sense that the Amer
lean dollar is high in value-only
in relation to the weak currencies
of other countries.
Over a long period Of time the
American dollar may be due for |
a steady decline in value If the
other currencies of the world
should grow stronger. The failure
of the United States to balance its
budget year after year would
mean that the $252 900 900 900
debt is not being reduced and that
a limit has been reached In the
power Of the Government to raise
enough money by taxation. When
nation fails to balance its budget
or to provide the retirement Of its
debt, its monetary unit begins to
undergo attack in the markets Of
the world.
Question Of Confidence.
II the traders Of the world
make up their minds that the
American fiscal situation will not
show improvement and that the
national debt is not going to be
reduced, there will be q tendency
to lose confidence in the American
dollar and to offer fewer francs
or fewer monetary units Of other
countries In exchange.
This. however, is not an i'm
mediate problem or crisis. For
the moment, the American dollar
is strong and the other currencies
are weak. The devaluation Of the
pound as the leading currency in
the largest trading areas of the
world outside of the United States
means merely that a trade read
justment has become imperative.
Britain's government has simply
recognized the facts of interna-
tional economic life. The hem
ming and having, the predicting
and the denying which has gone
on for several months with ref
erence to devaluation Of the
pound is not unnatural where
transactions ere very much in
the open and where secrecy can
not be easily maintained. Sudden
devaluation is the only answer
that democracies have been able
to find to the problem Of specula-
ton which surrounds such moves.
In the long run, devaluation
Of the pound will help toward eco
nomic stability in the world. It's
4, a painful process politically in
side the nation that does the de-
: -valuing, for it means an increase
in the cost of living there. But
1t is none the less necessary, and
hence governments which toke