POLICY: Nixon's Other Crisis: The Shrinking Dollar

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Unhappily, such fears have been at least partly justified, or were until the past few days. The President's economic advisers have held an inordinate number of meetings with Nixon lately, and even early last week some were depressed by a feeling that they could not get his attention. One recently complained that the President seemed "obviously weary" and too "preoccupied" to pay much heed. Even at week's end, though Nixon seemed to have realized the need for action, there remained a question of whether he would back any new policy with the personal push required to give it credibility.

Pondering his course over a weekend at Key Biscayne, the President had no lack of unwelcome, even frightening developments to consider. The Government had just announced that wholesale prices in May rose a staggering 2.1%, the second time this year they have rocketed upward in a single month at a rate of more than 25% when projected over the course of a whole year. The biggest increases were in farm prices for grains and meat; the index for farm products, processed foods and feed rose at an unbelievable annual rate of more than 62%. But food was not the only villain: prices of industrial commodities shot up at an annual rate of 15.4%. In the past, Administration officials have contended that such huge leaps in a single month were likely to prove one-shot affairs, but that argument is no longer even faintly comforting. Since January, the Wholesale Price Index has risen 22.8%. The entire bulge has not yet shown up in supermarkets or other retail stores, but it soon will.

On foreign money exchanges, the price of the dollar early in the week fell to postwar lows against some other currencies, including the German mark, Swiss franc and Japanese yen. Just since the start of the year, the dollar has lost a stunning 15% of its value or even more in terms of some major foreign currencies (see chart above ). Although much of this decline was caused by the second formal devaluation in February, enough has occurred in recent weeks of free trading to lead French President Georges Pompidou to describe that drop, accurately, as constituting in effect "a third devaluation of the dollar." Though money trading is actually a ruthlessly non-nationalistic affair, it seemed that everyone from oil sheiks to Swiss bankers to Japanese businessmen had agreed to gang up on the dollar and hack away at its value. On Wall Street, the barometric Dow Jones industrial average sank on Monday to 886, down 16% from its historic high five months ago.

Foretaste. Both the dollar and the Dow rallied at midweek; in fact, the stock average rose 34 points by week's end and closed at 920. But the recoveries intensified rather than relieved the pressure on Nixon because both reflected the rumor/hope/belief that he would at last do something. Indeed, the mere fact that the Administration had made no announcement by week's end sent the dollar on another downhill slide Friday. John Philipsborn, vice president of Chase Manhattan's European headquarters, promptly remarked that the apparent decision to hold off action after hinting that it was imminent seemed "more harmful than if the Government had done nothing at all." That was an ominous foretaste of the emotions that Nixon will stir if this week he dashes the hopes for action that he has aroused.

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