Scars after monetary crisis

Press, Volume CXIII, Issue 33155, 20 February 1973, Page 13

Scars after monetary crisis

( By

ARTHUR GAVSHON.

, of the Associated Press through N.Z.P.A.)

] LONDON, Feb. 18. | The world's major trading nations have begun anxiously treating ] the political scars left !by the money crisis they settled temporarily i last week. ( It was a crisis that left ! non-Communist nations in a state of political disarray. 1 And prospects for any: quick healing process seem; ..dim, because complex and! ;! basic international problems ; • have yet to be resolved. j :]' These problems are most; I! evident in American relations] with Japan and Europe, where! > the recent troubles seem to • have set back the Common : Market goal of total monetary and economic union by 1980. After the monetary up- ■ heaval in which the United i! States dollar was devalued ■I by 10 per cent, senior political and diplomatic authorities i pinpointed some political consequences.

| Some Japanese are tending to regard their country as the target for a sort of conspiracy by Americans and Europeans because they have been pressed to arrange for the greatest single revaluation of a national currency since World War 11. This, coupled 'with the manner in which! President Nixon initiated a new relationship with China, is providing impetus for the: movement toward a JapaneseI Russian line-up. Worried Chinese leaders; ; already have set out to head I off this trend with offers of; ! oil, steel, and other special > (trading arrangements with 'Japan. China fears, more | than a lot of things, the idea I I of a Soviet-Japanese political' and military alliance. From a European point of view, perhaps the most important short-term effect was! that the crisis found the nine nations of the enlarged Common Market in almost total disunity. West Germany refused point-blank to revalue i its strong mark in isolation;

; France wanted its partners to ; adopt its own pet two-tier money system; Britain would not abandon its policy of' floating the pound; Italy; broke Common Market rules by floating the lira. And so ; it went. Equally serious was thatI smaller member nations of the Common Market were furious that fundamental policy decisions were taken by France, West Germany, and Britain in their absence.' .making nonsense of vaunted j unity and displaying that at i the first sign of trouble each; ; partner was ready to go its, ' own way in its own national interest. , Few authorities in London, I now Europe’s main money] centre, think that the world’s! currency troubles are over. “These crises are becoming almost an annual event.” one British Cabinet Minister remarked privately. “But each, one becomes a little more dangerous in political, as well as economic terms.” He noted that the troubles had been followed by now familiar calls for action'

. against speculators, for con-! • trols over the activities of] I the huge multinational companies, for monetary reforms,: and more liberal trade. ; “The more these argui ments and warnings archeard, the more boring they • seem to become.” he added. ■ “Yet if the latest alarm has . shown us anything it is the existence of a mood of intense protectionism in America, which President (Nixon may find impossible to j manage.” In deference to that mood, the Administration has !; served notice of several !;measure which, if fulfilled,iwould in the European view; put Americans in a position’ ; to dominate the economies oL Europe and Japan, and, in-! ' deed, the world. The measures are: A new money system providing changes in currency ; values as countries move into surplus or deficit As foreign trade forms only about onetwentieth of the American balance of payments ■ situation, this would

| leave the United States j in an unassailable position either to expand or to speculate or both. A new trade system providing for easier American access to the protected markets of Japan and the European Community and providing the President also with powers to reimpose surcharges on imports. A new set of rules that would free American capital to flow in and out of the country and thus regulate the money markets of the world. world’s post-war trading and monetary systems dominated by, the Americans are breaking up,” the British informant observed. “But if we were to replace them with new systems, leaving the Americans still in virtual control, we should quickly find that some European and Asian countries would begin looking around for new allies and trading partners.’’