The American Share in the Stream of International Payments

The United States position in the world economy has been changing fundamentally over recent years. The traditional large surplus accumulated through foreign trade disappeared in 1968. Gross capital inflows became as large as the proceeds of exports in that year. And the dollar declined in use as a reserve currency among central banks while its use expanded in private transactions outside the United States. Although the extreme shifts evident in 1968 may exaggerate the more lasting pattern of change, they do point to the need for a basic realignment of United States policies. In balance-of-payments adjustment, emphasis may have to be placed as heavily upon capital transactions as has been customary for trade transactions. The dollar may serve less as a reserve currency and more as an international-transactions currency. The Special Drawing Rights (SDR's) in the International Monetary Fund (IMF) should provide most needed future additions to official reserves. Changes in exchange rates should be expected to occur more frequently, but also in smaller size, to reflect the divergent paths of advance among rapidly expanding countries. United States foreign policies will have to be tailored to the relative shrinkage in the United States economic position within the world economy.