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Regarding the American dollar, nothing seems to help it, not even the
qualified success of the U.S. President at Camp David. Today (Sept
ember 26) it plunged to a new all-time low (everyday produces a new
all-time low) against the Swiss franc. In one three-hour trading
session the dollar lost 2% of its SFr value! The dollar will now buy
only 1.47 Swiss franc. A one-to-one ratio is seen by some. The
dollar will also fetch only 1.93 West German marks. Only once in
history was it ever that low.
The run on the dollar has entered a panicky, almost irrational syndrome.
Every tidbit of bad news concerning the U.S. economy sends it down
agai�, whether the reaction is truly warranted or not. Said one
European banker: "The dollar is no longer a currency. It's an animal
that waves with every political announcement."
There are over 600 billion dollars in circulation outside of the U.S.
in banks, central banks, and in the portfolios of the money managers
of the huge multinational corporations. Just a slight jiggle of bad
news -- and millions of dollars are nervously dumped! And with the
plunge of the dollar the price of gold has reached around $220 an ounce.
The dollar crisis is making the European nations more determined than
ever to establish the European Monetary Union they have discussed over
the past several months.
For a while it looked like the EMU plan -- approved in principle at
the July Common Market summit in Bremen, West Germany -- was in for
some trouble, due to differences between France and West Germany, as
well as reservations by some other EEC members. Now however, a
compromise appears to have been made for implementing the first stages
of a monetary union early next year.
Each downward dip of the dollar makes European currency stability that
much more imperative. Belgian Premier Leo Tindemans said in Tokyo on
September 21 that Europe must establish a unified currency system to
protect itself from the effects of the rapidly-weakening dollar.
Tindemans, in Tokyo for the first official visit by a Belgian premier,
said he briefed Japanese Prime Minister Takeo Fuduka on the importance
of a unified European currency unit (ECU).
"There is $600 billion floating around,'' Tindemans said of the Euro
dollar market, the pool of dollars held outside the United States or
on the books of the U.S. banks' foreign branches. "Should one country
be asked to take all those dollars, that country's currency would rise,
wreaking havoc on the economy," he said.
At the annual International Monetary Fund (IMF) meeting currently
underway in Washington, the sick dollar and the chaos of floating
exchange rates is a hot topic of debate.
French Finance Minister Rene Monory told the IMF that it is not
surprising more and more countries are opting for a return to some
kind of fixed parities, such as the proposed European monetary union.
--Gene H. Hogberg, News Bureau