To the black-market money exchanges in Rome's Piazza Colonna, the news came as a profound shock. But to Italian exporters, U.S. importers and world traders everywhere, the news was the best out of Italy in months. Last week, the Italian government abandoned the fictitious value it had set on the lira. It devalued the lira from 350 to the U.S. dollar to what it considered its true worth—the last month's average black-market price of 589 to the dollar.

By this financial stroke, Italy hoped to 1) wipe out the domestic black market...

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