All Americans are alarmed at the shrinking value of the dollar in their neighborhood supermarkets - by close to one-half in the last ten years. With the President's announcement in early November ordering a series of dramatic actions to shore up the value of the dollar abroad, more and more Americans have also become conscious of the dollar's declining value in terms of major foreign currencies over the same period - by more than one-half against the West German mark and the Japanese yen, and by nearly two-thirds vis-à-vis the Swiss franc. But I suspect that no more than one American out of 10,000 realizes that these - and other - developments are rapidly undermining what President de Gaulle used to call our "exorbitant privilege" of being able to settle with our own dollar IOUs the growing excess of our expenditures abroad over our receipts from abroad (on capital as well as on current account). Such excess has been to the tune of $300 billion over the last ten years (see line I of Table I).
The Bremen summit meeting of July 6 and 7, 1978, of the West European heads of state and government should finally bring home to us the full dimensions of the international dollar crisis. It should awaken us both to the increased dangers of further procrastination in the shaping of sensible and comprehensive U.S. policy responses to this crisis, and to the new opportunities for two-way cooperation with the emerging "European Monetary System" outlined at Bremen. Such cooperation is essential in order to avoid a further disastrous collapse of the dollar, and of a world monetary system precariously anchored to it. The Bremen initiative to set up a European Monetary System reflects, at bottom, a desperate desire of the leaders of the Community to make their countries less dependent on the unpredictable vagaries of a shrinking U.S. dollar.
The present dollar crisis and the foreign reactions to it cannot be understood without a brief reminder of at
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