Poge Six

THE MICHIGAN DAILY

Tuesday, May I1], 1971

Page Six Ti-fE MICHIGAN DAILY Tuesday, May 11, 1971

TOWARD AN UNDERSTANDING
OF HOMOSEXUALITY
An tnformal seminar open to all interested persons
TONIGHT, 7:30 P.M.
Psychological Considerations
LUTHERAN STUDENT CHAPEL
(lower lounge)
801 S. Forest (at Hill)
Sponsored by: The Office of Religious Affairs
Michigan Union (3rd floor) 764-7442
- .~ ..... .... -- - - - --- -- ~~ . -..-.- -

SINCE WORLD WAR II
U.S. dollar: A history of crisis

*

By The Associated Press
Jeering from foreign financial
circles is nothing new for the
U.S. dollar, which received scat-
tered catcalls at the end of the
1950's, a cascade of criticism in
early 1968 and periodic sniping
ever since.
The decision Sunday by the
West German government to let
the mark float - find its own
level based on the law of sup-
ply and demand - will almost
certainly result in the increase
in value of the mark in relation
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to the dollar. In the first fren-
zied dealings yesterday, the go-
ing price was up 1.5 cents over
the fixed p r i c e of 26.7 U.S.
cents.
Dollar crises .often amount to
a run on gold; other times, such.
as now, speculators start buying
another hard currency.
Regardless of how the dollar
is hit, a basic cause has essen-
tially been unchanged during
post World W a r II currency
crises: So many dollars go
abroad that demand for them
eases and worries begin about
whether the dollar is really
worth what the United States
says it's worth.
International money people
worry about the dollar m o r e
than other currencies because it
is the keystone of the interna-
tional monetary system.
Central. banks of foreign na-
tions keep rates steady by pur-
chasing dollars with their own
currency or selling dollars for
their own currency, depending
on the status of their nation's
balance of payments.
The United States maintains
the international value of its
currency by buying or selling
gold - or, under a new system,
executing transactions in a fi-
nancial device called Special
Drawing Rights, or paper gold.
The price of gold in interna-
tional monetary dealings is set
by the United States and has
remained at $35 an ounce.
In the late 1940s and 1950s,
U.S. dollars flowed abroad to
help the losers and the damaged
victors of World War II rebuild
their economies.

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But concern began to mount
at the end of the 195s as the
United States continued to ex-
perience a balance-of-payments
deficit - more dollars going
abroad than coming back,
The problem with a protract-
ed balance of payments deficit is
that the supply of a nation's
currency abroad keeps increas-
ing and eventually demand for
it declines. Then, like any other
product in surplus, its value may
decline unless action is taken.
In December 1960 the military
began steps to cut some of its
dollar expenditures abroad.
Some actions helped but by
1966-67 the heavy infusion of
U.S. military aid in Southeast
Asia and homefront inflation
that increased demand for for-
eign goods combined to push
the payments deficit up.
Great Britain, which had been
facing mounting economic prob-
lems, devalued its pound from
$2.80 to $2.40 in November 1967.
The move fueled speculation
about the soundness of the dol-
lar.
L e d by Charles de Gaulle's
France, foreign governments
holding large amounts of dollars
in reserves increasingly cashed
them in for gold, exercising the
U.S. government's guarantee
that it would always buy back
its dollars. This guarantee serv-
ed to give the dollar its strength
in the first place.
In 1949, t h e United States
had held $24.6 billion in gold-
more than half the supply in
the non-Communist world. By
the end of the March 1968 gold
crisis,hthe stock had fallen to
less than half of that amount.
In such a gold situation, the
United States simply could nave
raised the price of gold. But the
effect would be devaluation of
the dollar, catching short na-
tions that held them in good
See AMERICAN, Page 9 '
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Beginning Wed., May 12
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T-LAB
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142 1"HilSTRE
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