Can the Problem Be Corrected?
CAN the deficits in the United States balance of payments be corrected? What does the future hold for the world’s monetary systems?
To correct the deficit, America would have to make fundamental changes in her way of living. That would have to include sharp cutbacks in military spending. This would mean reducing troop concentrations throughout the world, or at least getting other countries to pay for them. But both are difficult to do.
A suggestion, in May 1971, that America’s more than 300,000 troops and 200,000 dependents in Europe be cut to save money aroused sharp outbursts by the administration. Political considerations won out. In spite of the large drain in dollars, the troops and dependents would stay for the present.
One area where cutbacks are being made is in Asia and the Pacific. Troops are being withdrawn from many areas there, including Vietnam.
In addition to greater military cutbacks, the United States would have to cut down inflation so prices would not keep rising. Lower prices would make her products more competitive in world trade.
But to do that, a slowdown in business often results, with higher unemployment. That is what happened in 1970 when an attempt was made to reduce spiraling inflation. Interest rates were raised to make money harder to get. Some spending by government and business was cut back. All this helped to bring about a recession and high unemployment. No political party in power wants that.
Hence, the United States is in a dilemma. To reduce the outflow of dollars and cut the deficit, it must correct inflation within the country. But that slows down the economy and makes millions of Americans angry. That is why a recession is regarded as a greater evil, politically, than having other countries angered. Those countries do not vote in American elections.
On the other hand, stimulating American business to avoid or correct a recession usually stirs up inflation. Interest rates are lowered so more money is borrowed and used. Spending by government and business is increased. With money easier to get, people will spend more. So demand for more goods is created, requiring more production, which in turn means more jobs. But then prices tend to rise, making American products more costly, less competitive in world trade.
With greater prosperity, people usually spend more money on everything, including foreign products. And they are more likely to take foreign vacations. All of this worsens the balance of payments. This dilemma is why Federal Reserve Chairman Arthur Burns remarked that the United States financial situation is so fragile that he doubted it could survive another business boom right now.
What are the prospects that something will be done to stop the deficits? Some government officials tend to be optimistic.
However, many private economists are not. Dr. Roy Reierson, chief economist of Bankers Trust, states: “The United States must reduce its balance of payments deficit so that the supply of dollars comes close to matching the demand for dollars by foreign private and official holders. This, the United States has not been doing, and there is little prospect that it will do so.”
One economist noted that in the past, successive secretaries of the treasury have promised to end the deficits in a few years, but have never kept their promises. Instead, the deficits have grown swiftly. So the basic problem of achieving a working balance among Western nations and the United States remains unsolved at the present time.
Because of this, Myers’ Finance Review of Canada warns: “The world is approaching a monetary crisis that will engulf every currency in existence.” And a European banker says: “We might end up with the worst monetary disorder since the ’30s.”
Indeed, respected French economist Jacques Rueff, while sympathetic to the problems of the United States dollar, stated: “I fear that the problem has gotten out of hand, and that the balance of payments will be restored only by a forced consolidation—that is, bankruptcy—as in 1931.”
Even if temporary improvement is made, what about long-term prospects? Could a monetary disorder like the Great Depression of the 1930’s again overtake the world?
Actually, a far greater disorder is a certainty! Any system founded on selfish interests sows the seeds of its own destruction. If given enough time, the present world economic system, based on selfish national and individual interests, would collapse, as history shows so many others have.
However, the end of the present economic systems will not come simply because of their greed. Their end will come due to divine intervention! Of our time, Bible prophecy states: “In the days of those kings the God of heaven will set up a kingdom that will never be brought to ruin. And the kingdom itself will not be passed on to any other people. It will crush and put an end to all these kingdoms, and it itself will stand to times indefinite.”—Dan. 2:44.
All present governments, together with their economic systems, are thus to be crushed out of existence shortly by God’s power. Thus, man’s affairs will no longer be controlled by selfish political and financial interests. They will be controlled by a righteous administration, a heavenly government of God, that will seek the lasting benefit of mankind in all areas, including the economic. God has promised to establish such an administration for the lasting blessing of all who love righteousness.—Eph. 1:8-10.
Will you benefit from that administration? That depends to a large extent on what you do now to learn about it and to bring your life into line with the requirements of God, its Creator.