There seems to be no end in sight to the plunging value of both the American and Canadian currencies. Regarding the latter, the Canadian dollar has dipped below 85 U.S. cents for the first time since the 1930s Great Depression. An 80-cent dollar appears around the corner. Sluggish economic growth, an inflation rate in excess of 9 percent and the continued uncertainty over Quebec's break-away threat are prime factors. Prime Minister Trudeau hopes to spur an improvement in the economy before national elections next spring. If he can't pull it off, his political future is seriously in doubt.

Regarding the American dollar, nothing seems to help it, not even the qualified success of the U.S. President at Camp David. Today (September 26) it plunged to a new all-time low (everyday produces a new all-time low) against the Swiss franc. In one three-hour trading session the dollar lost 2% of its SFr value! The dollar will now buy only 1.47 Swiss franc. A one-to-one ratio is seen by some. The dollar will also fetch only 1.93 West German marks. Only once in history was it ever that low.

The run on the dollar has entered a panicky, almost irrational syndrome. Every tidbit of bad news concerning the U.S. economy sends it down again, whether the reaction is truly warranted or not. Said one European banker: "The dollar is no longer a currency. It's an animal that waves with every political announcement."

There are over 600 billion dollars in circulation outside of the U.S. in banks, central banks, and in the portfolios of the money managers of the huge multinational corporations. Just a slight jiggle of bad news — and millions of dollars are nervously dumped! And with the plunge of the dollar the price of gold has reached around $220 an ounce.

The dollar crisis is making the European nations more determined than ever to establish the European Monetary Union they have discussed over the past several months.

For a while it looked like the EMU plan — approved in principle at the July Common Market summit in Bremen, West Germany — was in for some trouble, due to differences between France and West Germany, as well as reservations by some other EEC members. Now however, a compromise appears to have been made for implementing the first stages of a monetary union early next year.

Each downward dip of the dollar makes European currency stability that much more imperative. Belgian Premier Leo Tindemans said in Tokyo on September 21 that Europe must establish a unified currency system to protect itself from the effects of the rapidly weakening dollar.

Tindemans, in Tokyo for the first official visit by a Belgian premier said he briefed Japanese Prime Minister Takeo Fuduka on the importance of a unified European currency unit (ECU).

"There is $600 billion floating around," Tindemans said of the Eurodollar market, the pool of dollars held outside the United States or on the books of the U.S. banks' foreign branches. "Should one country be asked to take all those dollars, that country's currency would rise, wreaking havoc on the economy," he said.

At the annual International Monetary Fund (IMF) meeting currently underway in Washington, the sick dollar and the chaos of floating exchange rates is a hot topic of debate.

French Finance Minister Rene Monory told the IMF that it is not surprising more and more countries are opting for a return to some kind of fixed parities, such as the proposed European monetary union.

— Gene H. Hogberg, News Bureau

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Pastor General's ReportSeptember 25, 1978Vol 2 No. 38