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by changes either in internal prices or exchange rates. Instead, direct governmental controls or interferences with trade could be used to reduce attempted U.S. expenditures of dollars and expand U.S. receipts. Tariffs could be raised to choke off imports, subsidies could be given to stimulate exports, import quotas could be imposed on a variety of goods, capital investment abroad by U.S. citizens or firms could be controlled, and so on and on up to the whole paraphernalia of exchange controls. In this category must be included not only controls over private activities but also changes in governmental programs for balance of payments purposes. Recipients of foreign aid may be required to spend the aid in the U.S.; the military may procure goods in the United States at greater expense instead of abroad in order to save "dollars"in the self-contradictory terminology usedand so on in bewildering array. |
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The important thing to note is that one or another of these four ways will and must be used. Double entry books must balance. Payments must equal receipts. The only question is how. |
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Our announced national policy has been and continues to be that we shall do none of these things. In a speech in December 1961, to the National Association of Manufacturers, President Kennedy stated "This administration, therefore, during its term of officeand I repeat this and make it as a flat statementhas no intention of imposing exchange controls, devaluing the dollar, raising trade barriers or choking off our economic recovery." As a matter of logic, this leaves only two possibilities: getting other countries to take the relevant measures, which is hardly a recourse that we can be sure of, or drawing down reserves, which the President and other officials repeatedly stated must not be permitted to continue. Yet Time magazine reports that the President's "promise drew a burst of applause" from the assembled businessmen. So far as our announced policy is concerned, we are in the position of a man living beyond his income who insists that he cannot possibly earn more, or spend less, or borrow, or finance the excess out of his assets! |
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Because we have been unwilling to adopt any one coherent policy, we and our trading partnerswho make the same ostrich-like pronouncements as we dohave perforce been |
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