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THE A M E R IC A N D O L L A R R e m a rk s by M on roe K im b re l P resid en t F e d e r a l R e s e r v e Bank o f A tla n ta P r e s e n t e d at R o t a r y Club o f A tla n ta A tla n ta , G e o r g i a O c t o b e r 25, 1971 THE A M E R IC A N D O L L A R The o n c e p r o u d A m e r i c a n d o l l a r h a s b e e n s h a k en f r o m its p l a c e o f e m i n e n c e in w o r l d c u r r e n c i e s . T h e d o l l a r h a s b e e n in t r o u b le and e v e r y u n f a v o r a b le d e v e l o p m e n t h a s s e t o f f a f r e s h s p a s m o f c o n c e r n a r o u n d the w orld* In a s h o r t t e l e c a s t a f e w w e e k s a g o , P r e s i d e n t N ix o n m o v e d the p r o b l e m to c e n t e r s ta g e . P e r h a p s the m o s t f r e q u e n t q u e s t io n i s : this m e s s ? H o w did w e get into What tu rn ed o u r e c o n o m y f r o m its p o s t u r e o f d y n a m ic g r o w t h into a p a t t e r n o f s ta g n a tion , hig h in fla t io n , h ig h u n e m p lo y m e n t , and a w e a k e n e d c u r r e n c y ? T h e a n s w e r is c o m p l i c a t e d . I n te r n a tio n a l t r a d e and f in a n c e in v o lv e t e c h n i c a l i t i e s and c o m p l e x i t i e s u n d e r s t o o d o n ly b y p r o f e s s i o n a l s and not a lw a y s b y t h e m . W ithout e n t e r in g into d e t a ils , w h ich a r e s o m e w h a t m y s t e r i o u s and c o n t r o v e r s i a l , the c a u s e s o f the b a la n c e o f p a y m e n t s p r e d i c a m e n t now -2 - e n g u lfin g the U. S. can be s i m p l y and b r i e f l y s ta ted : 1. We h ave g r o s s l y m i s m a n a g e d o u r b u d g e t and f i s c a l a f f a i r s , in c u r r i n g d e f i c i t s , p ilin g up debt and a llo w in g the d o l l a r to d e c l i n e in d o m e s t i c p u r c h a s i n g p o w e r to l e s s than h a lf its v a lu e 40 y e a r s a g o . 2. We h a v e had e n o r m o u s s e l f - c o n c e i t in fin a n c in g the d e fe n s e o f the d e m o c r a t i c fa ith t h r o u g h o u t the w o r l d . 3. We h a v e b e e n i n d i f f e r e n t to the w id e n in g gap b e t w e e n the c o s t o f la b o r and p r o d u c t i v i t y 0 In c o n s e q u e n c e , we hav e f l o o d e d the w o r l d w ith d o l l a r s and p r i c e d o u r s e l v e s out o f a g o o d p a r t o f the in t e r n a t io n a l t r a d e m a r k e t . The o v e r s u p p l y o f d o l l a r s n a t u r a lly r e s u l t e d in a g r e a t w e a k n e s s o f the d o l l a r in f o r e i g n e x c h a n g e m a r k e t s . -3- B e c a u s e attitudes play s uc h an i m p o r t a n t p a r t in the value o f any c u r r e n c y , the a p p r e h e n s i o n s a m o n g w o r l d f i n a n c i e r s i n t e n s i f i e d the v e r y w e a k n e s s that f r i g h t e n e d t h e m . S p e c u l a t i o n a g a i n s t the d o l l a r m o u n t e d s te a di ly . E a r l y in A u gu s t, g r a t u i t o u s a d v i c e f l o w e d f r e e l y f r o m le a d i n g E u r o p e a n m e r c h a n t banks. war, They included: cut m i l i t a r y c o s t s in E u r o p e , get out o f the V i e t - N a m curb corpora te investment o v e rs e a s , and k e e p i n t e r e s t r at e s high enou gh to a t t r a c t both f o r e i g n i n v e s t m e n t s and hot m o n e y . Increasingly, though, E u r o p e a n f i n a n c i a l m e n a p p e a r e d c o n v i n c e d that the U. S. w o ul d not take enough s u c h ste ps q u i c k l y enough to a v e r t d o l l a r de valu ation. One E u r o p e a n b a n k e r c o m m e n t e d , MC e r t a i n l y it is d i f f i c u l t f o r us to dicta te m o n e t a r y p o l i c y to a nation as s t r o n g as the United Stat es, but, M he b o a s t e d , " w e c an d i s c o u n t th eir d o l l a r s if we have to take -4- t h e m and the l e s s we like the d o l l a r s the m o r e we c a n d i s c o u n t th e m . ” V a c a t i o n i n g A m e r i c a n s l e a r n e d with a j o l t what this m e a n t by f i r s t hand e x p e r i e n c e s . than was n e c e s s a r y . H ote l c a s h i e r s handed o v e r no m o r e f o r the d o l l a r A m e r i c a n s with t r a v e l e r s c h e c k s paid high p r e m i u m s to get S w i s s f r a n c s , francs. German m arks, Itali an l i r a , and F r e n c h The d o l l a r was t r e a t e d as a s e c o n d - c l a s s c u r r e n c y . A subs tan ti al p a r t o f o u r c u r r e n t p r o b l e m s s t e m s f r o m the lon g i n f l a t i o n a r y bin g e s i n c e 1965. T h r o u g h 1968, the i n f l a t i o n w as g e n e r a t e d by l a r g e budg et d e f i c i t s c o n n e c t e d with the V i e t - N a m w a r w h ic h c r e a t e d e x c e s s i v e d e m a n d p r e s s u r e s in an a l r e a d y f ul ly e m p l o y e d economy. M o re recently, how ever, a kind of i n f l a t i o n ha s e m e r g e d that has not r e s p o n d e d to the c l a s s i c p r e s c r i p t i o n f o r c o n t r o l . It has b e e n d e s c r i b e d as a w a g e - c o s t push, a p r o d u c t of the e x t r a v a g a n t t e r m s -5- of wa ge c o n t r a c t s i m p o s e d by l a b o r l e a d e r s on b u s i n e s s c o n c e r n s u n d e r the t h r e a t o r the i m p a c t o f i n d u s t r y - w i d e s t r i k e s . Both parties ha ve b e e n a w a r e that the high c o s t o f s u c h w ag e d e a l s w o u l d be p a s s e d alon g to c o n s u m e r s in h i g h e r p r i c e s . C e r t a i n l y , the m o r e an ind iv id ua l w o r k e r c an add to p r o d u c t , the b e t t e r sh ould be his pay. In lieu o f i n d iv id ua l m e a s u r e m e n t , output p e r m a n h o u r is u s e d as a y a r d s t i c k f o r p r o d u c t i v i t y gains in the p r i v a t e economy. A w age i n c r e a s e d e t e r m i n e d by p r o d u c t i v i t y gain v/ould not require offsetting p r ice in c r e a s e s . Hence, it w o u l d not be i n f l a t i o n a r y . Wage i n c r e a s e s that equal total i n c r e a s e s in output w o ul d be in e r r o r , however, labor. s i n c e this would im pu te the e n t i r e gai n in p r o d u c t i v i t y to The f a c t is that p r o d u c t i v i t y gains a r e a r e s u l t o f the j o i n t c o n t r i b u t i o n of all p r o d u c t i v e f a c t o r s . -6 - A m o r e equ it ab le d i s t r i b u t i o n w o u l d a l l o w s o m e p a r t o f the p r o d u c t i v i t y gain to the o w n e r s of ca p it al . Go ing a step f u r t h e r , the g e n e r a l w e l l - b e i n g wou ld be e n h a n c e d if s o m e p a r t o f the ga in w e r e s h a r e d by c o n s u m e r s th ro ug h l o w e r p r i c e s . We sho uld have l e a r n e d s e v e r a l l e s s o n s in d e a l i n g with r e c u r r i n g c r i s e s o v e r the l a s t d e c a d e . If t h e s e l e s s o n s a r e i g n o r e d , we c an e x p e c t s o m e of the d i f f i c u l t i e s to l i n g e r o r r e a p p e a r . The p o p u l a r v i e w has b e e n that whe n i n t e r n a t i o n a l p o l i c y n e e d s c o n f l i c t with d o m e s t i c e c o n o m i c g o a l s we c o u l d s o m e h o w m u d d l e t h r o u g h in t e r n a t io n a l p r o b l e m s without a g r e a t de al o f l o s s . In t e r n a t i o n a l t r a n s a c t i o n s m a y not pl ay as l a r g e a r o l e in the U. S. e c o n o m y as the y do in ot h er na ti ons , but th e i r i m p o r t a n c e is n e v e r t h e l e s s s i g n i f i c a n t . F r o m m i d - 1970, a t t e m p ts to s t i m u l a t e g r o w t h in output and e m p l o y m e n t with a still high rate o f in fl at io n w a s u n d o u b t e d l y f r u s t r a t e d ~7~ in p a r t by a high rate of i m p o r t s . Yet t h e s e i m p o r t s w e r e a s y m p t o m , o f a m u c h m o r e f u n d am e nt al c a u s e ; that i s , the c u m u l a t i v e e f f e c t s of a high rate o f in f l a t i on during the la t t e r p a r t of the 1 9 6 0 ! s that had m a d e U. S. p r o d u c e r s i n c r e a s i n g l y l e s s c o m p e t i t i v e with f o r e i g n producers. R e d u c i n g i m p o r t s th r ou gh qu ot as o r o t h e r m e a n s without r e s t o r i n g U. S. c o m p e t i t i v e n e s s w ou ld o n l y hav e d ea lt with s y m p t o m s wh ile a g g r a v a t i n g i n f l a t i o n a r y p r e s s u r e s . The A u g u s t 15 a c t i o n s in the i n t e r n a t i o n a l a r e a and the r e s p o n s e s of f o r e i g n g o v e r n m e n t s w i l l hav e w i d e s p r e a d e f f e c t s up o n A m e r i c a n c o n s u m e r s and b u s i n e s s m e n . T h e s e a c t i o n s do not a u t o m a t i c a l l y s o l v e ou r i n t e r n a t i o n a l d i f f i c u l t i e s . R a t h e r , they put the r e s t o f the w o r l d on n o t i c e that we w e r e no l o n g e r w i l l i n g to a t t e m p t the r e s o l u t i o n o f o u r d i f f i c u l t i e s un d e r what had b e c o m e an i n c r e a s i n g l y l e s s w o r k a b l e in t e r n a t io n a l p a y m e n t s s y s t e m . -8- Meanwhile, our o f f i c i a l s ha ve e x p r e s s e d a d e s i r e and a w i l l i n g n e s s to n e g ot i a te a new s y s t e m , a s y s t e m that w o u l d be m o r e eq ui ta b le in s h a r i n g the b u r d e n s of i n t e r n a t i o n a l e c o n o m i c a d j u s t m e n t s and h o p e f u l l y in the long run w ould b e n e f i t all na t io ns . A m e r i c a n c o n s u m e r s m u s t n o w pay h i g h e r p r i c e s f o r the variety of foreig n goods, s uc h as c a r s and t e l e v i s i o n s that we i m p o r t . T h e s e h i g h e r p r i c e s m a y hav e the e f f e c t o f m a r g i n a l l y r e d u c i n g the r e a l s tan dar d of li vi n g of m a n y A m e r i c a n s . In c o n t r a s t , a n u m b e r of A m e r i c a n b u s i n e s s e s c o m p e t i n g with f o r e i g n i m p o r t s w il l gain s o m e t e m p o r a r y a d v a n t a g e s , s i n c e the p r i c e c o m p e t i t i o n f r o m f o r e i g n p r o d u c e r s w i l l be l e s s s e v e r e . t h es e c o m p a n i e s i n c r e a s e p r o d u c t i v i t y , dissipated. But u n l e s s s uc h a d v a n t a g e s s o o n m a y be Othe r A m e r i c a n , b u s i n e s s e s m a y find t h e i r c o s t s r i s i n g as a r e s u l t o f the h i g h e r p r i c e s they m u s t pa y f o r i m p o r t e d f o r e i g n components. -9- M an y l a r g e A m e r i c a n c o r p o r a t i o n s and b a n k s with e x t e n s i v e o v e r s e a s o p e r a t i o n s a r e a l r e a d y finding that the wide a r r a y o f f o r e i g n e x c h a n g e c o n t r o l s a r e h a m p e r i n g th ei r o p e r a t i o n s . Consequently, t h es e c o n t r o l s m a y r e d u c e f o r e i g n e a r n i n g s of t h e s e c o r p o r a t i o n s and ban ks, as w e l l as e a r n i n g s of p r i v a t e A m e r i c a n s who h a v e i n v e s t e d in f o r e i g n s t o c k s and o t h e r f o r e i g n s e c u r i t i e s . We should have l e a r n e d that no nation c a n d e a l with its i n t e r national d i f f i c u l t i e s alon e. No a c t i o n s take n b y this c o u n t r y to d e a l with its b a l a n c e o f p a y m e n t s d e f i c i t c a n s u c c e e d if o t h e r nat io ns p u r s u e p o l i c i e s d e s i g n e d to m a i n t a i n la s t in g s u r p l u s e s . One s u c h m a t t e r i s the q u e s t i o n o f e qu i t ab l e s h a r i n g of d e f e n s e and e c o n o m i c aid e x p e n s e s . If o t h e r c o u n t r i e s a r e p r e p a r e d to p e r m i t a c u r r e n c y r e a l i g n m e n t that c o u l d r e s t o r e a s i g n i f i c a n t l y l a r g e sur plu s. in the U. S. b a l a n c e of m e r c h a n d i s e t r a d e and s e r v i c e s , then o f f s h o r e -10- dollar defense expenditures and d o l l a r aid o u t l ay s m i g h t con ti nue to be c a r r i e d by this c o u n t r y without i n c u r r i n g co n t i n u e d l a r g e U. S. b a l a n c e of p a y m e n t s d e fi c i t . Everything considered, how ever, it m i g h t be p o l i t i c a l l y l e s s o n e r o u s f o r o u r t r a d i n g p a r t n e r s to a c c e p t a l a r g e r s h a r e o f the d e f e n s e and aid c o s t r a t h e r than i m p o s e up on th ei r own i n d u s t r i e s the c o m p e t i t i v e d i s a d v a n t a g e s that would be i m p l i e d by a l a r g e U. S. m e r c h a n d i s e t r a d e surplus. A l l that one ca n be s u r e o f is that it w i l l be v i r t u a l l y i m p o s s i b l e f o r e q u i l i b r i u m to be r e s t o r e d to the U. S. b a l a n c e o f p a y m e n t s u n l e s s e i t h e r a l a r g e U. S. tr ad e s u r p l u s o r a m o r e eq u i t a b l e d e f e n s e and e c o n o m i c aid s h a r i n g is a g r e e d upon. On the o t h e r hand, if we e x p e c t the c o o p e r a t i o n o f o t h e r nations , we m u s t e x e r c i s e r e s p o n s i b i l i t y in r e s t r a i n i n g i nf la t io n in s uc h a way -li as to m i n i m i z e any a d v e r s e i m p a c t o f our ow n e c o n o m y u p o n o t h e r nati ons . Our do m in an t s i z e in the w o r l d e c o n o m y and c o r r e s p o n d i n g l y m a s s i v e in f l u e n c e on the e c o n o m i e s o f o t h e r na ti on s m a k e r e s p o n s i b i l i t y p a r t i c u l a r l y ac ut e. To put it in o t h e r w o r d s , this we c an n ot p u r s u e a p o l i c y of " b e n i g n n e g l e c t ” t o w a r d the r e s t of the w o r l d . The d i f f i c u l t l e s s o n we ha v e l e a r n e d is that t h e s e i n t e r n a t i o n a l p r o b l e m s canno t be s o l v e d s o l e l y b y f i n a n c i a l p o l i c i e s . time, A t the s a m e t hr oug h g r o w i n g and f r e q u e n t c e n t r a l bank c o n s u l t a t i o n , the us e of c e n t r a l bank swap n e t w o r k s , and o t h e r d e v e l o p m e n t s , the c r e a t i o n o f s p e c i a l d r a w i n g r i g h t s , we ha v e m a d e s i g n i f i c a n t a d v a n c e s in d e a l i n g with m a n y i n t e r n a t i o n a l m o n e t a r y p r o b l e m s . T h e r e has b e e n a t e n d e n c y to r e l y f a r to o h e a v i l y u p o n m o n e t a r y p o l i c y to a c h i e v e both d o m e s t i c g o a l s and i n t e r n a t i o n a l e q u i l i b r i u m while ap pl yin g in t e r n a t i on a l tax, t r a d e , and i n v e s t m e n t p o l i c i e s in a -12- p i e c e m e a l and o f te n h a p h a z a r d f a s h i o n . In f ac t, p a s t p o l i c i e s m a y ha ve s i g n i f i c a n t l y d e l a y e d n e e d e d in t e r n a t i o n a l a d j u s t m e n t s by d i s t o r t i n g s u c h f l o w s . C o n s e q u e n t l y , the i n t e r n a t i o n a l a d j u s t m e n t s that m u s t be m a d e n o w a r e l i k e l y to be m o r e d i ff ic u lt and painful. The u n i l a t e r a l m o v e by the A d m i n i s t r a t i o n to c l o s e the go ld w in d o w and ap pl y a 10 p e r c e n t i m p o r t s u r t a x is f ra u g h t with r i s k . One d a n g e r is that f o r e i g n g o v e r n m e n t s m a y r e s p o n d s o m e w h a t e m o t i o n a l l y , p e r h a p s e r e c t i n g t r a d e b a r r i e r s to U. S. p r o d u c t s in r e t a l i a t i o n f o r our actions. M o s t U. S. o f f i c i a l s and b u s i n e s s m e n a r e c o n v i n c e d that h o w e v e r guilty this c o u n t r y m i g h t be in the m a i n t e n a n c e o f s u c h t r a d e b a r r i e r s , m o s t ot h er d e v e l o p e d c o u n t r i e s a r e m u c h m o r e guilty. case, If this is the U. S. m e r c h a n d i s e t r a d e p e r f o r m a n c e is b e i n g a d v e r s e l y a f f e c t e d -13- b y a r t i f i c i a l r e s t r a i n t s in ad di ti on to the b u r d e n of o u r p a s t i n f l a t i o n a r y excesses. In the i n t e r e s t of bu il d in g a b e t t e r i n t e r n a t i o n a l e c o n o m i c s y s t e m f o r the future, h o w e v e r , the p r e s e n t ne e d f o r s w e e p i n g r e a l i g n m e n t s in c u r r e n c y va l u e s m a y a l s o p r o v i d e a unique o p p o r t u n i t y f o r p r o g r e s s in r e d u c i n g no n t a r i f f b a r r i e r s to t r a d e and b a r r i e r s to f r e e investm ent flows. In the p r e s e n t w o r l d o f r ap id change, s o m e d i f f i c u l t i e s hav e s t e m m e d f r o m our f a i l u r e to d e v e l o p new p o l i c i e s to k e e p a b r e a s t of these changes. The E u r o d o l l a r m a r k e t is a p r i m e i l l u s t r a t i o n . D ur in g the 1 9 6 0 fs, this m a r k e t g r e w m u c h m o r e r a p i d l y than the c a p a c i t y o f p o l i c y m a k e r s and e c o n o m i s t s to f ul ly u n d e r s t a n d it, and this f a i l u r e to u n d e r s t a n d p a r t i a l l y c o n t r i b u t e d to the a g g r a v a t i o n o f in t e r n a t i o n a l m o n e t a r y p r o b l e m s e a r l i e r this y e a r . -14- Whil e p l a c i n g r e s t r i c t i o n s on i n t e r n a t i o n a l t r a d e and i n v e s t m e n t , p o l i c y m a k e r s m a y not have g i v e n s u f f i c i e n t c o n s i d e r a t i o n to the b e n e f i t s r e c e i v e d f r o m the i n c r e a s i n g e c o n o m i c i n t e g r a t i o n b r o u g h t about b y i n t e r n a t i o n a l tr ade and i n v e s t m e n t f l o w s . Shifts in i n v e s t m e n t p a t t e r n s by m u l t i n a t i o n a l c o r p o r a t i o n s s e a r c h i n g f o r p r o d u c t i o n at l o w e s t - c o s t s i te s i m p r o v e the e f f i c i e n c y of their operations. C o u n t r i e s r e c e i v i n g s uc h i n v e s t m e n t e n j o y a s ti m u l u s to e c o n o m i c g r o w t h while A m e r i c a n s h a r e h o l d e r s in t h e s e c o m p a n i e s benefit f r o m in crea s ed profits. If nati ons a r e to a c h i e v e a sound and w o r k a b l e i n t e r n a t i o n a l payments system , our h o r i z o n s m u s t be b r o a d e n e d and, i d e a l l y , the e c o n o m i c and f i n a n c i a l p o l i c i e s o f ind iv id ua l nati ons d e v e l o p e d j o i n t l y . A t the s a m e t i m e , t h e s e p o l i c i e s should be f l e x i b l e eno ug h to p e r m i t the m a x i m u m b e n e f i t s f r o m f r e e e n t e r p r i s e o p e r a t i n g on an -15- in t e r n a t io n a l s c a l e j u s t as we d e r i v e b e n e f i t s f r o m f r e e e n t e r p r i s e o p e r a t i n g within o u r i nd ivi dua l c o u n t r i e s . T h e s e b e n e f i t s in c l u d e a g r e a t e r v a r i e t y , b e t t e r quality and l o w e r p r i c e s on g o o d s a v a i l a b l e to A m e r i c a n s and, at the s a m e t i m e , m a x i m u m r e t u r n s on i n v e s t m e n t s o f both A m e r i c a n c i t i z e n s and b u s i n e s s e s . r e s t r i c t i o n s on i n t e r n a t i o n a l t r a d e , This m e a n s keeping p a y m e n t s , and i n v e s t m e n t s to a m inimum. The d i s a r r a y in i n t e r n a t i o n a l f i n a n c i a l m a r k e t s r e s u l t i n g f r o m the new U. S. i n i t i a t i v e s and f r o m the e v e n ts of r e c e n t m o n t h s that m a d e t h o s e i n i t i a t i v e s n e c e s s a r y c r e a t e s both p r o m i s i n g and t h r e a t e n i n g possibilities. If the p a r t i e s to the n e g o t i a t i o n s lir e p r e p a r e d to be f l e x i b l e in h a m m e r i n g out ne w a r r a n g e m e n t s with an e y e to the l o n g - t e r m n e e d s of the i n t e r n a t i o n a l e c o n o m i c s y s t e m , we h a v e a o n c e - i n - a - -16- g e n e r a t i o n o p p o r t u n i ty to m a k e c h a n g e s that w i l l b e n e f i t e v e r y o n e . On the o t h e r hand, if the n e g o t i a t i o n s a r e s t y m i e d b y ad am an t i n s i s t e n c e upon s h o r t - r u n nationa l i n t e r e s t s so that the talks d r a g on in an a t m o s p h e r e of g r o w i n g f r u s t r a t i o n and a c r i m o n y , then the p r o g r e s s of the p a s t 25 y e a r s t o w a r d f r e e r m o v e m e n t o f g o o d s , c o u l d be undoneo ca p i t a l , and p e o p l e One m a y c o n f i d e n t l y t r u s t that all i n v o l v e d a r e a w a r e o f the a l t e r n a t i v e s and w il l m o v e r e s p o n s i b l y . In s u m m a r y , t h e r e is an e x c e s s su p p l y o f d o l l a r s h e l d by f o r e i g n e r s a b o v e what they r e q u i r e to pa y f o r p u r c h a s e s f r o m us. A m o d e r a t e d e v a l u a t i o n w ou ld t e m p o r a r i l y f a v o r e x p o r t s o v e r i m p o r t s . But it is not a p e r m a n e n t solu ti on. C o r r e c t i o n o f o u r a d v e r s e tr ad e b a l a n c e and p r e s e r v a t i o n of the d o l l a r as an i m p o r t a n t c u r r e n c y in w o r l d t r a d e m u s t be done b y o u r s e l v e s , not b y o t h e r s . C o m p e t i t i v e n e s s in -17- w o r l d m a r k e t s de p e nd s: 1. On b r i n g i n g l a b o r c o s t s into line with p r o d u c t i v i t y ; 2. I n c r e a s i n g the rate of p r o d u c t i v i t y gain b y u p g r a d i n g the labor fo rc e ; 3. P r o v i d i n g it with m o r e and b e t t e r c a p i t a l e q u i p m e n t ; and 4. R e d e d i c a t i n g o u r s e l v e s to the t as k o f r e s t r a i n i n g inf lation. A s this ha p p e n s , the s u r p l u s d o l l a r s h e l d a b r o a d w i l l b e sent h o m e in p u r c h a s e o f o ur e x p o r t s . If we f a i l to p u r s u e p o l i c i e s c a l c u l a t e d to b r i n g about e q u i l i b r i u m in o u r e c o n o m i c r e l a t i o n s h i p s with the r e s t o f the w o r l d , f o r w a r d to a r a t h e r b l e a k set of a l t e r n a t i v e s . we c a n l o o k We c a n e x p e c t to s e e the w o r l d e c o n o m y b r o k e n up into c u r r e n c y and t r a d i n g b l o c k s with i n c r e a s i n g r e s t r i c t i o n s p l a c e d on i n t e r n a t i o n a l tr ad e and i n v e s t m e n t . Such a b r e a k d o w n c a n be e x p e c t e d to g e n e r a t e i n c r e a s i n g e c o n o m i c i n e f f i c i e n c y -18- f o r all na ti ons . Th is i n e f f i c i e n c y w il l be r e f l e c t e d in s l o w e r e c o n o m i c gr o w th , l o w e r p r o f i t s , l o w e r r e t u r n s on i n v e s t m e n t , and i n c r e a s i n g in f l a t i o n a r y p r e s s u r e s . T h e s e a r e a l t e r n a t i v e s w e , in c o o p e r a t i o n with o t h e r na ti ons , m u s t s t r i v e to av o id . O c t o b e r 25, 1971
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