Dollar Dearth

In a shattered world, the U.S. is like the friend so wealthy that no one knows what to give her for Christmas. The U.S. has everything--and it is exporting its products at the rate of $19.5 billion a year. In return, the U.S. is importing only $7.6 billion a year of the world's products.

This so-called "favorable balance" is unmatched in American history. The great danger is that it is too favorable. The U.S. is draining the rest of the world of dollars so fast that there is already a worldwide shortage. What will become of American exports when its customers run out of money?

For the moment, the world can use loans and relief money from the U.S. to help pay for American exports which cannot be swapped for imports. All told, the loans and relief will swell the $7.6 billion from U.S. imports to nearly $14 billion. Thus, at the present rate, the net export-import deficit of foreign nations which will have to be made up from hoarded savings will be between $4 and $5 billion. That is nearly one-quarter of the $20 billion in gold and U.S. dollars held in the world outside the U.S.

What is worse, much of the cash and gold is not in the hands of those who need it most for trade. The biggest U.S. customers are rapidly exhausting their dollar resources. The $3.75 billion loan to Britain, for example, is being eaten away so much faster than anyone had calculated that it may be spent by early next year.

Frozen Balances. Within six weeks, Britain must meet another financial problem, which will shrink the dollar supply still more. Under the terms of the Anglo-American loan, Britain must make all sterling balances, earned by other nations after July 15, convertible into dollars. More serious by far is the problem of the $13.5 billion in accumulated sterling balances piled up by Britain's creditors. At present, these balances can be spent only in the sterling area. However, the Anglo-American loan agreement provides that any amounts from the accumulated balances which are made available for spending after July 15 must be convertible into dollars.

The biggest sterling balances are held by India, with -L-1.4 billion, and Egypt, with -L-450 million. They want a good share of their balances convertible into dollars to spend in the U.S. But Britain wants India and Egypt to scale down the balances drastically before releasing any sterling for conversion. Until an agreement is reached, Britain will probably release only a small amount.

Melting Exports. Nevertheless, for the world's economy, July 15 will mean a jolt. Enough pounds can be converted into dollars after that date to hasten the currency crisis now dead ahead. If measures are not taken by the U.S. to put dollars back into foreign circulation, U.S. exporters, and the nation, will find themselves in deep trouble. Already, Britain has cut her U.S. imports by $800 million a year. In the last two months, many Latin American countries have sharply curtailed luxury and "nonessential" imports.

Last week a faltering step was taken to ease the shortage. The International Monetary Fund, which was set up to help members meet "temporary disequilibriums" in their international payments, had its first customers. The severe European winter had forced France to import large amounts of U.S. wheat, with a consequent drain on its supply of dollars. France got $25 million by paying francs to the fund. The Netherlands, also short of foreign exchange, put up guilders for $6 million and -L-1,500.

But the really important moves to put dollars into the hands of U.S. customers must come from the U.S. itself. One means is the spending of American tourists abroad. The U.S. could also return some of its ocean trade to foreign bottoms, and pay for the service in dollars. Tariffs could be lowered and U.S. businessmen could send capital abroad in the form of foreign investments. But lower tariffs, loans and shipping in. foreign bottoms are all politically unpopular (see NATIONAL AFFAIRS). In the absence of any overall program, most economists guess that the dollar crisis will arrive by year's end and the present boom in U.S. foreign trade may melt away overnight.

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