Hints of a Deal

Tall-talking Treasury Secretary John Connally heads to Rome for a meeting of the Group of Ten rich nations this week, and there are hints that the U.S. at last may be willing to make a deal to settle the world money upheaval. Powerful U.S. officials are pressing for a speedier settlement than Connally had envisioned, at possibly a lower price than he had hoped to obtain from foreign nations. Federal Reserve Board Chairman Arthur F. Burns has told President Nixon that an agreement is urgently needed to prevent a world economic slowdown. Foreign Policy Adviser Henry Kissinger has privately warned that Connally's abrasive tactics may invite foreign diplomatic reprisals. Trade Adviser Peter G. Peterson has begun to recognize that the 10% import surcharge, which was his idea, offers less and less bargaining leverage for the U.S. the longer it continues.

A series of quiet diplomatic meetings in the U.S., Europe and Japan last week shaped the faint outlines of a deal. It calls for the U.S. to devalue the dollar by 5% or 7%, by raising either the price of gold or the price of the international Special Drawing Rights. There would be little or no change in the French franc or British pound, but because the dollar would be devalued, French and British goods would tend to be 5% to 7% costlier than U.S. exports.

The Japanese yen would be revalued upward by about 12 1/2%, and the German mark by roughly 7%. Counting in the dollar devaluation, that would make Japanese goods at least 17 1/2% more expensive and German products 12% costlier than American items. Meanwhile, all currencies would have "wider bands," meaning that they could shift up or down by an additional 3% or so from their official parities, depending on supply and demand.

Talks will continue at this week's Rome meeting, but they are unlikely to produce a final deal. That may come after Nixon meets with French President Georges Pompidou, British Prime Minister Edward Heath and West German Chancellor Willy Brandt (see THE NATION). Nixon could then present the package to the nation as a Christmas present--and claim credit for pulling off a gutsy gamble that led to a sensible, equitable solution to the world's money woes.

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