A Glimmer of Good News Abroad

The shakier the U.S. economy looks at home, the stronger it suddenly appears overseas--or so it seemed last week. Domestically, the news was all of upward-spiraling inflation and fears of recession. But internationally, the U.S. began to shake off its image of a pitiful, helpless economic giant.

The Commerce Department reported that the nation in the second quarter actually took in $463 million more from foreigners than it disbursed overseas, a startling swing from a $10.5 billion balance of payments deficit in the previous three months. For complex technical reasons, these figures are considered to be less significant than they once were. But the U.S. also ran a surplus of $706 million on international exchange of goods and services compared with a mere $1,000,000 the quarter before--a more meaningful improvement.

The long-anemic dollar last week rose in price against the German mark, the French franc and other currencies. By week's end it had gained an average 5.4% from recent lows, recouping two months of losses on world money markets. Gold, the traditional investment refuge of dollar doubters, dipped briefly below $ 100 an ounce for the first time in three months.

In part, the improvement constitutes a painful paradox: some of the same factors that are causing economic anguish within the U.S. are easing the aches abroad. The dollar devaluations have caused prices of imports to climb, but they have made U.S. products more competitive in world markets. Worldwide bidding for scarce commodities is shooting up prices, aggravating inflation in the U.S. and elsewhere, but also spurring exports and thus American income from foreign sales. Soaring U.S. interest rates are wounding borrowers inside the country, but also bringing home dollars that formerly fled overseas seeking higher investment yields. This repatriation of American money has partially renewed international money traders' faith in the dollar.

Other causes for brightening international prospects for the U.S. are less painful. The outlook for meaningful reform of the tattered international monetary system improved sharply last month when French Finance Minister

Valery Giscard d'Estaing offered a plan to penalize nations that run consistent surpluses in their balance of payments and prod them to restore an equilibrium that would benefit deficit countries like the U.S. American officials, who are ac customed to finding themselves at log gerheads with the French in interna tional financial conferences, promptly approved the idea. In an interview with TIME Correspondents Henry Muller and George Taber, Giscard remarked:

"For the first time that I can remember, the French, British, German and American finance ministers are calling each other by their first names."

In the long run, strength for the U.S.

economy overseas should translate itself into strength at home. Higher prices for the dollar should discourage speculative foreign bidding for American agriculture commodities, thus somewhat re straining the food-price spiral. A stronger dollar would also mean that American consumers would have to put up fewer greenbacks for imports like Japanese cars and French wines, and U.S. manufacturers would have to pay less for high-priced, short-supply items from abroad like Ghanaian cocoa and Australian wool, thereby relieving domestic inflationary pressure.

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