Devaluation or Revaluations?

The question whether the correction of the dollar’s overvaluation should assume the form of its devaluation or of the revaluation of a number of important currencies was the subject of heated controversy. Official American opinion, backed by the ‘dollar lobby’ and by many American academic economists, was fanatically opposed to a major dollar devaluation, on the ground that since the dollar was the basis of the world’s monetary system its gold value must be considered sacrosanct and it was the duty of every other country to adapt its parities in a sense as to ensure the equilibrium of the dollar. Under the Bretton Woods system a change in the gold parity of the dollar would mean ‘an all-round change of all parities, which would leave the dollar overvalued’. This nonsense, and the refusal to realise that the dollar has ceased to be strong enough to remain the basis of the world monetary system, was and still is the main obstacle to a sensible solution of the dollar problem. Yet from the moment when the United States ceased to convert official holdings of dollars freely — to be exact, when she began to ‘dissuade’ the holder from insisting on conversion — the dollar ceased to play the role allotted to it by the rules of the IMF.