Der Außenwert des Dollars

[Front Matter and Introduction to the External Value of the Dollar]: This segment contains the title page, publication details, and the author's preface. Machlup explains that the text was originally a report from August 1973 for the German Council of Economic Experts, addressing whether the US dollar was undervalued against the Deutsche Mark and the floating block. He emphasizes that the theoretical framework is more important than the specific data, which is quickly outdated in volatile currency markets. [Defining Misvaluation and the Role of Market Expectations]: Machlup discusses the concepts of undervaluation and overvaluation, defining them as criticisms of market participants by 'know-it-alls' (Besserwisser). He distinguishes between the overvaluation of the dollar prior to 1971, caused by central bank interventions, and the perceived undervaluation in 1973, driven by private sector panic and 'flight from the dollar'. He questions how a market price can be considered 'wrong' in a floating system where supply and demand are balanced. [Purchasing Power Parity and the Balance of Payments]: The author critiques the Purchasing Power Parity (PPP) theory, arguing that price indices are often irrelevant to international trade and that the theory ignores capital movements. He introduces the 'Basic Balance' (Grundbilanz), which includes long-term capital flows, as a more comprehensive indicator of a currency's external value. He argues that the exchange rate must reach a level where the current account balance offsets the long-term capital balance. [Capital Flows and the Asset Preference Theory]: Machlup explores the mechanics of international capital flows using the theory of asset preferences and portfolio selection. He argues that the distinction between short-term and long-term capital is often superficial for exchange rate theory. He explains how shifts in preferences for different assets (stocks, bonds, bank deposits) trigger currency supply and demand, and how a drop in the dollar's value is often necessary to induce buyers to absorb excess supply. [The Time Factor in Elasticity and Adjustment Processes]: This section examines why currency adjustments take time. Machlup explains that the elasticities of supply and demand for goods are functions of time; they are low in the short run (due to existing contracts and production lags) but increase in the long run. This leads to a series of temporary equilibrium rates. He notes that the 'final' equilibrium is a theoretical construct because new disturbances constantly interrupt the adjustment process. [Monetary vs. Structural Factors in Balance of Payments]: Machlup reviews the historical debate between monetary and structural explanations for balance of payments problems. While massive inflations are clearly monetary, he argues that differences in real growth rates, marginal import propensities, and productivity also play crucial roles. He critiques the reliance on consumer price indices to predict exchange rates, using the Japanese Yen as a counter-example where high domestic inflation coincided with a strong external value. [Financial Transfers and the Real Transfer Problem]: The author discusses the relationship between financial transfers (capital flows, aid, reparations) and real transfers (goods and services). He posits that capital flows are often the most volatile force on the foreign exchange market. He critiques 'neomercantilist' views that favor exports over imports, explaining that a capital-importing country must necessarily run a trade deficit to receive the real transfer of resources. [Statistical Analysis of US Dollar Supply and Capital Flows (1969-1972)]: Machlup provides a detailed statistical breakdown of the US balance of payments from 1969 to 1972. He highlights the massive increase in the supply of dollars resulting from private capital flight, liquid book-money movements (often related to Euro-banks), and the 'errors and omissions' category. He explains how these financial flows necessitated enormous intervention purchases by foreign central banks to maintain fixed parities before the transition to floating. [Intervention Consequences and the Adjustment of the Trade Balance]: This segment analyzes the impact of central bank interventions on the dollar's value. Machlup argues that without interventions, the dollar would have fallen faster, but the total supply might have been smaller due to reduced hedging/panic. He also explains why the US trade balance did not improve immediately after devaluation, citing the J-curve effect, existing contracts, and the asynchronous business cycles between the US and Europe. [The Future of the Dollar and Final Conclusions]: Machlup concludes by questioning the existence of a single 'correct' or 'stable' equilibrium value for the dollar. He provides a final set of eight theses summarizing his skepticism toward determining external value through statistics alone. He predicts that while the US trade balance will improve due to the dollar's devaluation, the dollar's recovery will be tempered by how foreign central banks manage their massive accumulated reserves. He suggests a likely range for the dollar between 2.40 and 3.00 DM. [Appendix A: Graphical Representation of Exchange Rate Adjustment]: Appendix A provides a technical graphical analysis of the dollar/DM exchange rate. It illustrates how supply and demand curves shift and change slope (elasticity) over short, medium, and long-term horizons. The diagram demonstrates how a sudden capital inflow leads to an initial sharp drop in the exchange rate, followed by a gradual recovery as trade flows adjust to the new price levels. [Appendix B: Causes of Disalignment]: Appendix B (in English) provides a systematic classification of the forces causing currency disalignment. Machlup categorizes these into differences in rates of increase (demand, money supply, GDP, wages, prices) and differences in behavioral functions (marginal propensities to import, save, and consume). This serves as a checklist for analyzing why exchange rates deviate from perceived equilibrium levels. [Classification of Factors Affecting Exchange Rate Alignment (Continued)]: This segment completes the systematic list of factors influencing exchange rate alignment, focusing on changes in supply and demand of goods, comparative cost conditions, trade barriers, and various forms of capital movements and financial transfers. [The Conjuncture of Forces in Exchange-Rate Disalignment]: Machlup analyzes the interplay of various economic forces that lead to exchange rate disalignments. He argues that while inflation is a common cause, it is insufficient to explain cases involving countries with creeping inflation. He highlights how factors like the demand for money, real national product growth, and specifically the marginal propensity to import (noting the high income elasticity of demand for imports in the U.S. versus Japan) play critical roles in creating payments imbalances even when inflation rates are similar among trading partners.