POLICY: Nixon's Other Crisis: The Shrinking Dollar

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inflation makes the dollar look weaker than ever to foreigners, and they mark its price down against their own currencies. The dollar's slide then worsens the American inflation by increasing the price of imported goods and materials —for instance oil from the Arab states of the Middle East. The fewer Saudi Arabian riyals an American dollar equals, the higher the price of Arab oil in the U.S. Prices of American stocks slip because of worries about inflation and the declining dollar—the latter one of the prime sources of Wall Street's recent frets. The stock market slide makes foreigners still more suspicious of the American economy and more prone than ever to sell dollars. And so it goes.

In any attempt to break through this cycle, Nixon faced trouble within his own Administration. New Republican John Connally has been bitterly announcing to friends that he is ready to leave his job as a White House consultant after only about a month and go back to Texas. As Secretary of the Treasury in 1971, Connally helped mightily to sell Nixon on the original wage-price freeze, and seemed on the verge of persuading him to move once again. But his vaulting ambition has been disappointed by the fact that he has not been given a more impressive Administration title, easy access to the President and a staff of his own. Oddly, his chief opponent, Free Marketeer Shultz, was also said to be looking around for a graceful way to exit. Besides the potential professional humiliation of having his beloved Phase III repudiated, Shultz has been almost as distressed as Connally by the President's lack of attention to economic affairs. Connally's political chores would probably be taken over by Melvin Laird, who became well grounded on economic policy in the House. Shultz, who has served as a top Nixon aide ever since the President took office, would be much harder to replace. Conceivably, he might be succeeded by his Deputy at the Treasury, William E.

Simon, who has become an increasingly forceful personality in the department.

Almost no one who followed Shultz, however, would quickly acquire his clout as the Administration's chief economic spokesman.

Making News. The very interrelatedness of Nixon's economic problems presented the President with an unparalleled opportunity. Any bold action that he might take against inflation would give the stock market a further lift, and almost surely firm up the dollar as well. Foreign moneymen evinced an almost pathetically eager desire to see the U.S. do something, anything, to combat inflation.

Moreover, Nixon can hardly fail to realize that a sudden new initiative on any front—especially inflation, his and the nation's most pressing worry —would be guaranteed to make news and give the nation the feeling that he is once more coping with the country's problems rather than his own. In his April 30 TV speech, the President expressed an impatience to leave the Watergate mess behind and get on with the "larger duties of this office." Last week there was no more monumental decision facing him than how to deal with the sapping of economic strength caused by the inflation fever.

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