"Spehro Pefhany" wrote in message
...
On Mon, 25 Apr 2011 17:12:19 -0400, the renowned "Ed Huntress"
wrote:


"Spehro Pefhany" wrote in message
. ..
On Mon, 25 Apr 2011 16:37:03 -0400, "Ed Huntress"
wrote:


"Spehro Pefhany" wrote in message
m...
On Mon, 25 Apr 2011 13:22:57 -0400, "Ed Huntress"
wrote:

The thing that really ****ed us off was when they took a run at our
gold
reserves in 1971. I still haven't forgiven them for that.

Have they forgiven the US for claiming that the dollars they held were
each worth 1/35 of an oz of gold? ;-)

They were, but they could have taken a damaging bite out of Fort Knox if
they cashed in.

What could be so damaging about exchanging one thing for something
else of equal value?

Spehro, if you want to get into this subject, either tell me what you
really
know or find out for yourself. I'm sorry, but this is a long one, and I'm
short of time for getting into it.

My point is that the arrangement was already full of cracks and the
pillars were collapsing - the US was running huge deficits, in part to
finance the wars in Asia- with no political will to contain
expenditures.. and the dollar was no longer nearly as good as gold. In
fact, parallel private markets valued it quite a bit lower at the
time. The Frenchies (and Swiss etc.) were aiming to be first out the
door.. the gold standard has seldom survived a significant war.

It's true that the US monetary position was very weak because of the cost of
Vietnam and the Great Society, without commensurate tax increases (sound
familiar?). Germany started buying US gold. Then we talked to them and
pointed out that it might be in their short-term benefit, but they were
doing damage to the whole Bretton Woods system and international currency
stabilities by doing so. So they agreed to hold dollars and stopped buying
gold.

The French didn't care. Rather, they felt that they knew better how to run
the world's currency. This was kind of ironic because the true exchange
rates of the franc had been bouncing all over, and, under Bretton Woods,
they had been forced to abandon export subsidies and other self-centered
policies.

But they were out only for themselves. What the French were trying to do was
to take advantage of the pegged gold price to buy US gold, and then to turn
around and sell it on the private market, where prices were not pegged and
were floating up.

They didn't want to hold gold. They wanted to weaken the US's political and
economic position in the world.

One thing I learned from my study of comparative politics, which I studied
in French Switzerland in 1968, was this: Never attribute responsibility to
any action by the French government, that can be explained simply by their
desire to assert their superiority by putting someone else down. As a
student in Europe at the time, I have my own opinions about French attitudes
toward the US during the Vietnam war, and they aren't pretty. They had been
humiliated that we had to take over their anti-communist insurgency after
they were defeated. By aligning themselves against us in the '60s and '70s,
they assuaged their humiliation and simultaneously promoted themselves as
the great moralists. That was *after* Algeria. Sheesh.


The froggies were trying to pull a DeGaulle-type power play, trying to
knock
the US out of its role of running the world's reserve currency. They were
still resentful about having lost their pre-eminence in the world and they
were pretty miserable about it. They had their own ideas about how the
Bretton Woods regime was supposed to work, and they didn't see themselves
filling a secondary role.

That may be, but we've almost come full circle.

Well, we're back in the same place, and some of the same forces brought us
here.

--
Ed Huntress