Newspaper article THE JOURNAL RECORD

Electoral Politics Dictates Script of Stable Dollar / Administration Fears Impact of 'Double Devaluation'

Newspaper article THE JOURNAL RECORD

Electoral Politics Dictates Script of Stable Dollar / Administration Fears Impact of 'Double Devaluation'

Article excerpt

For Americans traveling or residing abroad, the shrunken value of the dollar is felt not only as a strain on the pocketbook but as a personal insult. Feeling overcharged, overspent and over there, Americans ask: ``Is this what we're worth now - half what we were a few years ago?''

For the professional economist, the value of the dollar is an abstraction, a function of supply and demand in the foreign exchange market, as affected by a host of factors: the flows of imports and exports, disbursements of interest and dividends, capital movements, the relative level of American and foreign interest rates, events in the securities markets, the intervention of central banks, relative levels of private savings and investment here and abroad, the federal budget deficit, productivity changes and inflation, the growth of U.S. gross national product relative to growth abroad and, as economists now have learned to say, ``expectations.''

For the economist, the falling dollar may seem a very good thing for restoring eqilibrium to the current balance of payments, but for the innocent abroad, the shrunken dollar is felt as a blow to his purse, his ego and his national pride. The depreciation of his currency makes him angry, and he searches for villains - foreigners who are ripping him off or politicians in his own government who are doing the same.

Dollar depreciation is a kind of inflation. It not only erodes the value of money but undermines confidence in its reliability, the most important attribute of money. That makes the individual feel part of a crowd - the crowd of the cheated and humiliated.

As Elias Canetti, winner of the Nobel Prize in Literature in 1981, put it, ``Inflation is a crowd phenomenon in the strictest and most concrete sense of the word.'' It drives those who think they have been cheated together, and unites them against those who they think have cheated them. And, in the case of a runaway inflation, such as Germany experienced after World War I, they never forget it.

Canetti called inflation ``a witches' sabbath of devaluation where men and the units of their money have the strangest effects on each other. The one stands for the other, men feeling themselves as `bad' as their money; and this becomes worse and worse. Together they are all at its mercy and all feel equally worthless.'' They seek vengeance on those who they think did this to them.

Thus, Canetti warned, inflation causes something to happen that is so dangerous that anyone charged with public responsibility who is capable of foreseeing it must fear it: It is a ``double devaluation'' originating in a double identification - the identification of the individual with his money, and the identification of the individual with the crowd of the dispossessed, hostile to those who have dispossessed them. …

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