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The spending has sent a huge amount of vagabond greenbacks roaming round the world; nobody is certain of the total, but estimates range from $60 billion to $80 billion. An excess of dollars, like an excess of bacon, drives down the price. The more so in this case as many of the people who hold the dollars have lost faith in their value. The dollar holders note that a long series of U.S. moves—taxes on purchases of foreign securities, for example, and controls on bank lending abroad—have failed to put America's international payments back into balance.
Whenever foreign dollar holders get especially nervous, they can force a crisis by shifting their money into some other currency—usually the Japanese yen or German mark—that they think is strong. If the currency rises in value, they can profit by turning their yen or marks back into more dollars than they had before. In financial demonology, they become evil "money speculators" who are attacking the dollar. Some of these speculators are investors who will put their money wherever they get the highest interest rates. They may sell American bonds, buy marks with the dollars that they get, and purchase German bonds with the marks. Some are the chiefs of the increasingly rich and powerful Middle Eastern oil countries. The most potent are the financial officers of multinational corporations, who do not want to tell stockholders that they lost millions by holding onto dollars that fell in value. Volkswagenwerk is said to have saved as much as $60 million by switching some $500 million from dollars into marks in the summer before the Smithsonian agreement. Businessmen can accomplish much "speculation" by the usually praiseworthy expedient of paying their bills promptly and in full. A U.S. executive buying Japanese structural steel may enclose a check with his order rather than wait until the steel is delivered and the dollar's value may have fallen.
When the speculators move en masse, they create a situation in which all of a sudden everyone wants to sell dollars on the foreign exchange markets. In this manner, some $6 billion flooded into Germany and $1.6 billion into Japan in little more than a week just prior to the devaluation. The government banks in those countries had to buy up the dollars because no one else would purchase them at anything close to their official price. By early last week, it was obvious that something had to give. Even the government banks did not have the resources to keep buying indefinitely at that pace.