And $31 Billion Down

The nation is also struggling with a huge deficit in its dealings with the rest of the world. As reported by Manhattan's Morgan Guaranty Trust Co. last week, the U.S. balance of payments deficit probably hit a staggering $31 billion last year--nearly three times greater than the 1970 deficit and far more than anyone had anticipated. The payments gap in the fourth quarter alone was $6.7 billion on an official settlement basis. That was below the $12 billion imbalance in the previous three months but higher than first-half averages.

Biggest contributors to the record high deficit were banks, which repaid many of their debts to foreign creditors, and multinational companies, which bought foreign money with U.S. currency as a hedge against dollar devaluation. Morgan Guaranty estimates that these short-term capital outflows came to $20 billion. Investments abroad by U.S. firms, and other long-term capital outflows, added to the deficit. Payments were also unbalanced by the first U.S. trade deficit in this century--almost $2.5 billion v. a surplus of $2.1 billion in 1970.

The bank forecasts a moderate improvement in the overall payments balance in 1972 but does not expect the nation's export-import picture to be much brighter. One reason: the U.S. economy is expanding and will demand more imports, but Europe and Japan are slowing down and will hold back on buying from the U.S.

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