America's Money Machine

The End ofa Dream 243
InJune, 1958, conditions in France had reached the state ofrevolutionary
crisis that brought General Charles de Gaulle to power with the
authority ofa dictator and a mandate to draft a new Constitution. As with
Bismarck, with Napoleon, with Constantine the Great, almost his first
step in the reform of the state was the restoration of a sound currency.
On December 29, under the guidance of the French economist Jacques
Rueff, the franc was again revalued, from 420 to the dollar to 493.706 to
the dollar, and at this point thefranc was abolished in favor ofa new franc
equivalent to 100 of the former. The restoration of stable currency, the
resolution ofthe Algerian war, and the firmness ofthe de Gaulle rule now
produced a remarkable economic resurgence. Within five years France
regained its historic position as the political and economic leader of
Europe.
The French revival occurred along with the deterioration of the U. S.
international position, which we have already charted, and was accompanied
by a foreign policy of independence from, if not veiled hostility
toward, the United States. From the days ofthe French Occupation, when
de Gaulle was a young leader of the Free French forces, the proud and
lofty Frenchman had never forgotten the cavalier treatment he had received
from Churchill and Roosevelt; he continually referred to the "Anglo-Saxons"
as an earlier age referred to the Mongols; he spoke frankly
of the necessity of resisting "Anglo-Saxon imperialism" in Europe. He
was the cause of rejection of the British from the European Com.mon
Market-an economic and quasi-political association of France, Germany,
Italy, the Netherlands, Belgium and Luxembourg, that had been
created in 1957 with American sponsorship and blessing.* He reduced
French support for the grand alliance forged by U. S. diplomacy, the
North Atlantic Treaty Organization (NATO); and later offended U. S.
sensibilities by entering into treaty relations with Red China, which was
then abhorrent to American policy makers.
What permitted de Gaulle to indulge his independence and veiled
hostility toward theD. S. and enfeeble any diplomatic counter-reaction
was, paradoxically, the French power to dictate U. S. monetary policy, the
result in turn of the strengthening of the French monetary position at
U. S. expense and the corresponding weakness of the U. S. monetary
position.
The Federal Reserve System heldnow less than $2.4 billion in free gold
*Actually, an outgrowth of the Organization for European Economic Cooperation set up
in 1948 to implement the Marshall Plan.