Lying Numbers

Officially, the U.S. balance of payments deficit was wiped out last week --and so was any possibility of a surplus. Over the years, Washington evolved several methods of weighing the amount of money going out of the U.S. against the amount coming in, but officials became convinced that none gave a true picture of the American position in transactions with the rest of the world. So last week the Government gave up even trying. The Commerce Department did report on various classes of transactions for the first quarter. Its figures showed a swing in merchandise trade from a $2.2 billion surplus in the fourth quarter to a $1.6 billion deficit, caused by a slight drop in exports, an 11% rise in imports and an increase in capital flowing out of the country. But the department made no attempt to add up the pieces and calculate an overall deficit or surplus.

An Outdated Truth. Statisticians have concluded that the issuance of overall figures only perpetuates the popular belief that deficits are automatically bad and surpluses good. That used to be true in the days of fixed exchange rates for currencies. A U.S. payments deficit then poured abroad dollars that foreign central banks had to buy. The process fanned world inflation by increasing foreign money supplies and built pressure for harrowing currency devaluations or revaluations.

The three-year-old system of floating exchange rates, under which currency values rise or fall according to demand, has changed all that. Now an oversupply of dollars abroad simply drives down the price. This kind of automatic devaluation in turn makes U.S. exports cheaper, increases sales of American products abroad and tends to wipe out any payments deficit. In the long run, officials now think, the health of the U.S. international financial position will best be measured by the dollar's strength abroad.

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