If the United States does not find some way of stemming the depreciation of the dollar, "it could mean a progressive movement away from this country as the principal trading partner and adviser of the Middle East countries," according to David Rockefeller, president of the Chase Manhattan Bank.
Rockefeller said in an interview that Saudi Arabia and other leading oil producers want to preserve their relationships with the United States and hope for a strengthening of the dollar because such a large percentage of their monetary reserves are held in U.S. currency.
"But if the dollar erodes," Rockefeller asked, "what alternatives would they have?"
Rockefeller, like other key financial figures, is especially concerned by the prospect that lack of confidence in the dollar will persuade many foreign holders of dollars to seek diversification by selling dollars and buying stronger currencies.
"The decline not onlyputs the whole international monetary system in jeopardy," Rockefeller said, "but has political as well as economic consequences." The loss of American influence in the Middle East could be one such development, he said.
The influential New York banker said that in his view, the basic cause of the dollar decline comes from the perception of the international economic community that "we are not taking the basic steps necessary to deal with our own economy. They feel that if we don't know how to deal with our own economy, what kind of advice can we be giving them?"
He was especially critical of the recent role played by G. William Miller, chairman of the Federal Reserve, pointing out that when Miller took the post in the spring, the markets were given a burst of confidence by his strong declarations on the need to control inflation.
But in the two or three months that followed, Rockefeller said, inflation worsened.
Rockefeller bluntly observed that Miller's earlier vote against a discount rate increase - a vote that Miller later called a mistake - "was an indication that he didn't have control."
Rockefeller said that since the basic reason for the dollars weakness is a lack of confidence in the United States and its leadership, a turn-around - at least a lasting one - won't develop until that confidence is restored.
Rockefeller, although greatly distressed by the dollar decline, said someone should be paying attention to the "fundamentals" instead of tossing billions into intervention.
"Perhaps when confidence is turned around," Rockefeller said, "greater intervention may be desirable. But right now, in a period of slipping confidence, it would be throwing good money after bad."