Word: yen
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...rate readjustments are necessary in order to correct the obvious overvaluation of the dollar. "We all know what needs to be done," says The Netherlands' Jelle Zijlstra, chairman of the Bank for International Settlements. Japanese delegates, for instance, are reluctantly prepared to offer an 8% revaluation of the yen, and are resigned to the idea that the yen eventually may have...
...only the indispensable first step toward long-term monetary reform. Economists everywhere are offering plans for more fundamental change-some of them rather fanciful. Japan's Nobutane Kiuchi would risk reviving memories of the Axis by having Japan and Germany agree to a new fixed rate for converting yen into marks, and inviting other countries to tie their currency values to this rate. Britain's Nicholas Kaldor suggests a new international money convertible not into dollars or gold but into a series of commodities, including wheat, butter, sugar and rubber. Even the Italian Communist Party, taking an unexpectedly...
EVERYONE agrees that the once-almighty dollar is overvalued in relation to major European currencies and the Japanese yen. But how can it be cut down to size? European governments insist that the U.S. devalue the dollar by raising the official $35-per-oz. price of gold. The U.S., just as adamant, is opposed to such a move. It demands that the Japanese and Europeans revalue-that is, make their currencies costlier in terms of the dollar...
...difference between a currency realignment accomplished by 1) foreign revaluations alone or 2) U.S. devaluation combined with inevitable foreign revaluations? "Economically, it doesn't matter two hoots," says Yale's Robert Triffin. Either way, the end result would be the same: the dollar would buy fewer yen, marks, guilders and other strong currencies. Theoretically, it is true, U.S. devaluation would also make the dollar worth less in terms of Brazilian cruzeiros, Chilean escudos, Indonesian rupiahs and 100-odd other weak or minor currencies. Most of the weak-currency nations, however, probably would devalue simultaneously or soon after...
...general change in currency values is more a matter of psychology and political prestige than of basic economics. The end result of a currency realignment accomplished either by foreign revaluations alone, or by U.S. devaluation accompanied by foreign revaluations, would be the same: the dollar would buy fewer yen, marks and other major currencies. A small dollar devaluation, however, would constitute an important symbolic recognition by Washington that the dollar's troubles are largely the result of U.S. inflation and balance of payments deficits, rather than somehow the fault of the strong-currency nations. The U.S. could well agree...