Dollar Skeptics

Like a dental patient who worries that one shot of Novocain will not get him through the drilling, international moneymen last week warily eyed the second dollar devaluation in 14 months, skeptical about how long its crisis-numbing effects would last. At week's end the signs were discouraging.

In Washington, Federal Reserve Board Chairman Arthur Burns announced bravely, "As far as I'm concerned, this is the last devaluation." Many speculators clearly did not believe him. Bursts of late selling drove the dollar's price down against the Swiss franc, Dutch guilder and Italian lira. Through Wednesday, the West German Bundesbank found enough buyers of dollars to unload some $950 million of the $6 billion in unwanted greenbacks that it had been forced to buy just before the devaluation, but on Friday it had to buy dollars again to support the price.

The free-market price of gold in London touched a historic high of $94 an ounce and closed at $85, up 24% just since the devaluation and 119% in the past two years. That price has economic impact only on miners, jewelers and industrial users of the metal, since the value of the dollar is no longer tied to gold. But as a barometer of speculative sentiment the gold market was clearly registering a landslide vote of no confidence in the dollar. The only major exchange market that was quiet throughout the week was Tokyo, where bids and offers for dollars were readily available at a fairly stable price of 265.5 yen.

New York's Morgan Guaranty Trust Co. calculates that the latest devaluation has shaved an average 6.5% off the price of the greenback relative to the money of 14 major U.S. trading partners. Taking into account the December 1971 devaluation as well, the dollar is now worth an average 17.1% less against these currencies. The question is whether that decline will make U.S. exports cheap enough for foreign buyers, and imports expensive enough for American consumers, to bring U.S. international trade closer to balance --and whether the still nervous exchange markets will give the devaluation the necessary time to begin to work.

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