THE DOLLAR GAP

Te Awamutu Courier, Volume 79, Issue 7103, 5 September 1949, Page 5

THE DOLLAR GAP

MAY BE END OF DOLLAR AS A WORLD CURRENCY DEPENDENT ON MEN WITH THE MONEY Sir Stafford Cripps and the British economy are up against a first class crisis in coping with the dollar gap. There is, tco, another crisis of major proportions forming in the world economic sphere and that is the crisis which will be facing the dollar and the United States economy in its relations with the- sterling area during the coming years. During the middle of the 19th century and up to World War II the City of London held the purse strings of the world. The money was with London’s bankers and big business men, and that money was put to use throughout the world. Railways were built, factories were put up and vast plantations were organised in every major producing area of the world. London Took The Risk

Money from London was sunk in these business projects and foreign government bonds for a long term and from that type of risk-taking there flowed to Britain a wealth of interest income and vast markets for British capital goods. To-day Wall Street is in the same position as was the City of London a century ago. However, since a spurt of unsuccessful foreign investment after the 1914-18 War, and the dislocation of the great depression of the 1930’s the Americans have developed a new method of creating overseas markets —a procedure as exemplified by the Marshall Plan; i.e., large United States Government loans to foreign countries.

These loans are, of course, spent in the United States for United States goods. When the money is gone there must be neither loan or the bug-bear of the dollar gap. Thus in time the dollars return to America leaving the foreign country in the position of either selling more goods to United States or going without dollars altogether. It is this being without dollars altogether that has become a feature of the Western World economy. As this position will tend to worsen in the future the world will tend to turn to an alternative international currency, traditionally the pound sterling. The Dollar Opportunity America has, however, an alternative course. The individual American investor badly stung on foreign investments after the 1914-18 War, has still the opportunity of world wide capital investment such as enjoyed by British money up to the 1930’5. The American investor of today, however, insists on a minimum of risk in his overseas affairs and demands of his own, as well as other, government guarantees of a fair return and the right of capital withdrawal at any time. Until the American investor is ready and willing to take the risks of the old fashioned empire builders his overseas markets will have to be continually and artificially built up by dollar loans. As such dollar loans become more and more difficult for foreign governments to accept or acquire so will the world’s economy turn more and more to sterling as an international currency. Thus it may be, in the opinion of many leading City figures, that unless the United States individual investor changes his attitude towards long-term overseas investments, sterling will once again become the world’s most sought after currency.