Jacobsson Details Optimistic View Of Monetary Outlook for West

Per Jacobsson, Managing Director of the International Monetary Fund, yesterday painted a rosy picture of the monetary future of the Western World for an overflow audience in Littauer Auditorium.

Delivering the 1960 Gustav Pollak Lecture, Jacobsson not only predicted that long-term "equilibrating forces" would correct the current United States balance of payments difficulties, but also fore-saw little possibility of inflation in this country in the immediate future.

The current U.S. exports surplus, running at a rate of $4 billion a year, and this country's annual income from investments abroad, about $2 billion annually, are sufficient to cover all U.S. foreign aid and military expenditures abroad, Jacobsson pointed out.

Thus, this country's deficit is due largely to the outflow of short-term funds, attracted by Europe's high interest rates, and to private U.S. investment abroad, he reasoned.

Jacobsson predicted this capital movements deficit would eventually be corrected by both the end of the European construction boom and the predicted low rate of population increase in Europe, which would leave Europeans with a capital surplus for investment abroad.

The Swedish economist saw little possibility of imminent U.S. inflation, in part because prices in this country must be tied to the currently declining world price level. The next President "would soon be up against very obstinate problems" If he tried to ignore the foreign market, Jacobsson warnet.

He also noted the absence of three factors he viewed as having permitted the "wage-push" price rise of the 1957 recession. These were: a lack of foreign competition, a belief among businessmen that prices would keep rising, and a monetary policy favoring large-scale expansion of credit.

He praised the post-1953 economic policies of the Administration as having eliminated the inflationary bias from the U.S. economy.