Devaluation: What it means to the U.S.
By John Pierson
WASHINGTON—(UPI)—Analysis: What does devaluation of the pound sterling mean to Americans?
At best, it will mean lower prices. At worst it could mean your job or a war.
Either way itll mean higher interest rates and maybe higher taxes.
That's what devaluation of the British pound from $2.80 to $2.40 means to the average American.
It will mean lower prices on British cars. Scotch whisky, shoes and all the other things that Americans import from Great Britain. For example, a British car priced at 1,000 pounds sterling in Britain used to cost an American $2,800. Now it should cost only $2,400.
Possible reaction
Of course, if the British car-maker should raise his price, it would reduce the saving to the American buyer. It would also defeat the purpose of the devaluation, which was to sell more British goods abroad.
When the British government devalued, it took a number of other steps designed to bolster the pound. For one thing, it raised the Pank of England's discount rate from 0.5 to 8 per cent—a move intended to hold funds in Britain, which might otherwise have gone abroad in search of higher yields.
The discount rate is the rate the central bank charges commercial banks for a loan. Other interest rates are pegged upward from it.
British rates became so high in comparison to rates in the United States that the U.S. Federal Reserve Bank felt obliged to defend this country against a massive outflow of funds to Britain. So the "Fed" raised its discount rate from 4 to 4.5 per cent.
Commercial banks and other lenders promptly followed suit, lifting the interest rates they charge consumers and businessmen.
It already does—or soon will—cost more to borrow money to buy a house, car or anything else.
The devaluation also helped revive President Johnson's tax increase bill, which had been bottled up in the House Ways & Means Committee. Administration officials argued that preventing inflation in the United States is more urgent than ever now that British goods have become cheaper in world markets.
Inflation would just make it twice as hard for U.S businesses to compete, they said.
Further effects possible
The average American can probably live with these results of devaluation. But these are mild compared to the worst that could happen.
Devaluation could fail to get the pound back on its feet. Someon or later, there would have to be another devaluation. Chances are the European countries who have refrained from following the British this time would have to follow the next time.
This would put great pressure on the United States to devalue the dollar. Devaluation of the dollar would plunge the world into financial chaos. Nobody could trust the value of any currency. So they wouldn't be willing to hold any currency long enough to trade.
The result could be a worldwide depression like that of the $193^{\circ}$ s. And the depression of the 19.08 helped bring on World War II.
With any luck, it won't happen again. But it could.
KU
THE UNIVERSITY DAILY kansan
78th Year, No. 47
A student newspaper serving KU
Jayhawk superstar Jo Jo White pops a one-hander from long range as Bruce Sloan breaks for the basket. Delending against the varsity are freshman Richard Essington (on the left) and Pierre Russell (on the right). White shot in 20 points while leading the varsity to an 84-55 victory.
Swift, who helped the Irish free themselves from British abuse by writing satirical pamphlets and articles, is "one of the greatest Irish heroes," Clubb said.
LAWRENCE, KANSAS Tuesday, November 28, 1967
Irish people will celebrate the 300th birthday of British satirist Jonathan Swift by building bonfires. At KU, Swift's birthday party will be a Humanities Lecture at 8 p.m. Thursday in Swarthout Recital Hall.
State Budget Director James Bibb has wielded a preliminary ax to the proposed budget which was recommended by the Kansas Board of Regents last week at a budget hearing in the Capitol Building at Topeka.
Of the total $129,663,386 education and general operating budget
Budgets chopped; Wescoe perturbed
By Gail Habluetzel Kansan Staff Reporter
The University of Kansas and other state schools have received some bitter blows on their budget requests for next year.
A "Peace Pilgrim" has walked 25,000 miles for world understanding. Page 5.
An exhibit of rare editions of Swift's works will open Thursday in Watson Library Special Collections.
Bobby Douglass is named Big Eight Back of the Week. Page 4.
Charles de Gaulle predicts an independent Quebec. Page 6.
--for fiscal year 1969 recommended by the schools, Bibb cut $4,058,142 off, bringing the budget down to $125,605,244. Final approval of this budget, however, will not be until January, when the Kansas Legislature meets again. Gov. Robert Docking will add his recommendations before that time.
UP, UP... AND AWAY
WHAT'S INSIDE
English professor Murrel D. Clubb will discuss Swift's life and works in his lecture entitled "Incitement to Bonfres."
Best known for his political satire "Gulliver's Travels," Swift used humor and exaggeration to attack British courts, statesmen and parties.
A new computer which can receive, send and compute by remote control. Page 7.
Clubb has been an English professor at KU since 1925. He edited an Old English poem, "Christ and Satan," in 1225 and has published essays on language and early literature.
Lecture will honor Swift
Docking can change it
Docking can change it
It was with the idea in mind that Docking still can make recommendations that Chancellor W. Clarke Wescoe and leaders of the state schools faced Gov. Docking last week asking him to reinstate the entire $4,658,142 that Bibb cut; off the budget.
Wescoe told Docking that there was a "quality deficit in the state institutions of higher learning because of inadequate financing." Wescoe said in 1964 Kansas stood fourth in per capita contributions in support of higher education but has dropped to 21st because of this year's appropriation. He said in the last two years increases have averaged 44 per cent
in support of higher education in other states while Kansas has increased only 21.5 per cent. This has left Kansas in 48th place out of 50 states in total support of higher education.
Because of the increased enrollment this year and the expected enrollment next year in the state schools, the schools requested a 12.9 per cent increase over this year's $111,806,878 budget. KU has requested a 12.6 per cent increase over this year's $30,318,319 to $34,119,905. This request was slashed to $33,221,474.
Argues for 'necessities'
Wescoe argued for what he called necessities at KU. Included in this list was: salary increases for faculty and classified personnel; repairs and maintenance; Space Technology Building funds; the Geological Survey; and other smaller projects.
The faculty salary increases have been cut from 6 per cent to 5.1 per cent and the classified personnel from 8.1 per cent to 7.5 per cent. Wescoe said that the
Knowledgeable sources, reporting this Monday night, said no official announcement of any change at the Pentagon was expected soon, nor did the secretary's departure from the post he has held longer than any other man appear likely "in the immediate future."
WASHINGTON —(UPI)— Defense Secretary Robert S. McNamara is preparing to step down as administrator of the mightiest military establishment the world has ever seen, probably to take the presidency of the World Bank.
See Budgets, page 3
This is a particularly critical time of the year for the Defense Department since it is in the process of making major decisions on its proposed fiscal 1.69 budget, which President Johnson must present to Congress in January. These decisions involve long-range questions of strategy and resources and it was not likely the secretary would leave before they are thrashed out.
Desires Change
McNamara preparing to resign defense job
The 51-year-old former Ford Motor Co. executive has borne the exhausting burdens of administering America's globe-girdling defenses for almost seven years and apparently feels the time is near when he would like to step down.
Congressional and other sources raised the possibility that McNamara would replace the retiring George D. Woods as the president of the World Bank, more formally known as the International Bank for Reconstruction and Development.
Bank Directors Meet
The president of the World Bank is selected by the bank's 20 executive directors, who are scheduled to meet Wednesday.
In September, Woods, a New York banker, announced he wanted to retire at the end of this year. But he later agreed to serve another one-year team "until a successor is selected and becomes available."
Theoretically, then, if McNamara were to be named to the World Bank post he would not have to leave the Cabinet until after the November 1968, presidential election.
As for his successor at defense, among those figuring in speculation here were Gov. John B. Connally of Texas, a longtime Johnson intimate who served as Navy secretary in 1961; Deputy Defense Secretary Paul H. Nitze; former Deputy Secretary Cyrus R. Vance, who left the Pentagon earlier this year but has since been called back twice by the President for special jobs, the latest an attempt to mediate the Cyprus crisis; and Air Force Secretary Harold Brown, a Ph.D. in physics and one of the bright young "whiz kids" McNarama brought into the Pentagon in January 1961.
See McNamara, page 12
WEATHER
The U.S. Weather Bureau predicts partly cloudy tonight and Wednesday. The low tonight should be near 25 with a high tomorrow of 48. Precipitation probabilities for tonight are 30 per cent and Wednesday 40 per cent.
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