Tipped Scales

A rumor went through Wall Street last week that Canada and Great Britain would soon revalue their currency upwards. Reason: the trade position of Canada and the sterling area countries has greatly improved in the last year. As a result, the Canadian dollar, selling for 90-c- of the U.S. dollar, would be placed on a par with it; the value of the pound would be increased to around $3 from the current $2.80. The British government denied the rumor; the Canadians were mum.

But there were plenty of solid financial reasons why both countries may revalue their currencies in coming months. Biggest reason: there has been a drastic change in the U.S. trade position with the rest of the world. Gold, which had flowed into the U.S. until it piled up a hoard of $24.6 billion, is now flowing out at a fast clip. This year the U.S. may well lose $2 billion worth or more.

The change meant that Canada, Australia and some other sterling nations had achieved a favorable balance of trade with the U.S. This came about because of:

1) higher dollar prices for many of their raw materials (e.g., rubber, tin, wool);

2) reduced purchases of U.S. goods; 3) bigger exports to the U.S., due in part to currency devaluations that were made last year (TIME, Sept. 26, 1949 et seq.). Some nations were using part of the surplus dollars they were earning to buy gold from the U.S., thus shore up confidence in their currencies.

Commerce Department figures still showed that the U.S. had a slim balance of exports over imports. In July, said Commerce, the U.S.'s favorable balance of trade tipped the scales at a mere $63 million, the lowest level in nine years. Actually, if such unpaid-for exports as Marshall Plan goods were deducted from the total, the U.S. has had an unfavorable balance of trade totaling more than $1 billion since the first of the year. In short, the U.S. was finally reaching the point where trade was becoming something like a two-way street again--a healthy thing for the world.

This file is automatically generated by a robot program, so reader's discretion is required.