Great money controversy

              International monetary
matters that affect our lives
are explained by Mr. Edward B.
McEnerney, H&S editorial
consultant and an analyst of
international economic affairs.
It seems that most Americans have
been taking the international mone­tary
system for granted. We've as­sumed
that it will keep on working
well—and that in any case it can't have
much impact on our dollar.
But events of the past few months,
stemming chiefly from Britain's de­valuation
of the pound, suggest that
we had better take a second look at
these assumptions.
We realize now that monetary de­velopments
in faraway places could
ultimately strike at our entire econ­omy.
What happened last November
made this clear. When Britain de­valued
the pound sterling to solve her
monetary crisis, she also raised her in­terest
rates to help suppress her ram­pant
inflation. Our interest rates had to
follow suit, primarily to keep American
capital from rushing to London.
Result? Tougher borrowing in the
U.S., with all the attendant impact on
our domestic economy. And then came
President Johnson's dramatic New
Year's Day report that our 1967 balance
of payments deficit would exceed ex­pectations
and would require new con­trols
over foreign investment, lending,
and travel.
All of these developments served to
focus attention on the entire worldwide
monetary system itself. In particular,
they threw the spotlight on the interna­tional
role of the dollar, now the world's
chief reserve currency, and on the glob­al
effects of our balance of payments
deficits, dollar outflow, and gold drain.
Americans—businessmen and house­wives,
alike — suddenly realized they
had been ignoring these questions too
long. Many a conscientious citizen had
to admit how little he knew about mon­etary
matters—the role of gold, the
function of reserve currencies, and so
on—but at least he now could see their
vital importance.
Fortunately, concern about the
world's monetary apparatus has been
shared for some time by statesmen and
monetary experts. This year will see the
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