America's Money Machine

More documents

Recommendations

Info

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.
244 PART III/DEBACLE OF AN IDEA -that is, gold not required under the Federal Reserve Act to be held as reserve against note and deposit liabilities outstanding. Meantime, French holdings of dollars had risen to nearly $1 1/2 billion. It was uncomfortably apparent to all that the French were in a position to precipitate a dollar crisis merely by converting these dollars into gold and demanding delivery. That the French leadership was not averse to such tightening of the noose was made evident in 1963 by their refusal, which we have noted above, to accept U. S. Treasury obligations stated in French francs. As the balance of payments deficit deepened and uneasiness spread abroad over the stability of the dollar, the Treasury in 1961 indicated its need for assistance from the International Monetary Fund, but as the Fund's resources were depleted it was necessary to appeal to the principal powers.* Out of this emerged the Committee ofTent which reluctantly agreed to create"special borrowing arrangements" whereby a pool of$6 billion credit would be created (of which the U. S. share would be $2 billion), upon which the United States would have certain drawing privileges. Significantly, however, the restrictions (which were imposed at French insistence) were so severe, requiring for instance a two-thirds majority consent ofthe lenders, that the arrangement became a practical nullity, and the device was adopted, to which we have referred, of bilateral swap arrangements between the Federal Reserve and certain foreign central banks. At the International Monetary Fund's annual meeting in Vienna in 1961, the French finance minister, Wilfred Baumgartner, was caustically critical of U. S. fiscal policies, and foreshadowed a further withdrawal of French cooperation. It was recognized however that a complete break would bring down the house ofDagon upon the French as well, and that some support of the dollar was in order. The mechanism ofcooperation became the Committee ofTen in which the French exercised a decisive voice and which appropriately met in Paris. At the International Monetary Fund's 1963 assembly the U. S. voice was considerably subdued, and Secretary Dillon, who a year before had *The Fund held on December 31,1961, $2.1 billion in gold and $11.5 billion in member currencies, but these currencies were largely of the "soft" variety. Apart from dollars, the Fund held only $1.6 billion in hard (convertible) currencies. (Testimony ofSecretary ofthe Treasury Douglas Dillion before the Senate Foreign Relations Committee, March 30, 1962. Hearings on H.R. 10162) tU. S., United Kingdom, Germany, France, Italy, Belgium, Netherlands, Canada, Sweden, and Japan.
Page 3:
BOOKS BY ELGIN GROSECLOSE Money: Th
Page 6:
For My Beloved Louise with especial
Page 9 and 10:
Vlll CONTENTS 22. The New Thermopyl
Page 11 and 12:
x PREFACE sprawled under the weight
Page 14 and 15:
Preface XIU cash, lawful money, leg
Page 16:
Preface xv tary expansion and a che
Page 19 and 20:
j j j j j j j j j j j j j j j j j j
Page 21 and 22:
4 PART I / THE ROOTS OF REFORM An i
Page 23 and 24:
6 PART I / THE ROOTS OF REFORM ente
Page 25 and 26:
8 PART I / THE ROOTS OF REFORM them
Page 27 and 28:
T HE 2. The First Shock Wave SIGNIF
Page 29 and 30:
12 PART I / THE ROOTS OF REFORM son
Page 31 and 32:
14 PART I / THE ROOTS OF REFORM ene
Page 33 and 34:
T HE 3. The Lapping at the Dikes YE
Page 36 and 37:
The Lapping at the Dikes 19 On Mond
Page 39 and 40:
4. The Rich Man's Panic T HE STOCK
Page 42:
The Rich Man s Panic 25 bocker Trus
Page 45 and 46:
PART I / THE ROOTS OF REFORM The cr
Page 47 and 48:
30 PART I / THE ROOTS OF REFORM Win
Page 49 and 50:
32 PART I / THE ROOTS OF REFORM vie
Page 51 and 52:
34 PART I / THE ROOTS OF REFORM sur
Page 53 and 54:
36 PART I / THE ROOTS OF REFORM dis
Page 55:
38 PART I / THE ROOTS OF REFORM def
Page 59 and 60:
42 PART I / THE ROOTS OF REFORM whi
Page 61 and 62:
44 PART I / THE ROOTS OF REFORM con
Page 63:
A FTER 7. An Interlude for Debate T
Page 67 and 68:
50 PART I / THE ROOTS OF REFORM mer
Page 69:
52 PART I I THE ROOTS OF REFORM dar
Page 73 and 74:
56 PART I / THE ROOTS OF REFORM Suc
Page 75 and 76:
PART I / THE ROOTS OF REFORM all pr
Page 77 and 78:
60 PART I / THE ROOTS OF REFORM mig
Page 79 and 80:
PART I / THE ROOTS OF REFORM propos
Page 81 and 82:
PART I / THE ,ROOTS OF REFORM The P
Page 83 and 84:
66 PART I / THE ROOTS OF REFORM fro
Page 85 and 86:
68 PART I / THE ROOTS OF REFORM ple
Page 87 and 88:
70 PART I / THE ROOTS OF REFORM sug
Page 89 and 90:
72 PART I / THE ROOTS OF REFORM wit
Page 91 and 92:
74 PART I / THE ROOTS OF REFORM Hou
Page 93 and 94:
PART I / THE ROOTS OF REFORM of New
Page 96:
PART II The Great Reversal
Page 99 and 100:
PART II / THE GREAT REVERSAL then a
Page 101 and 102:
84 PART II / THE GREAT REVERSAL Wha
Page 104 and 105:
I T 12. The First Inundation WAS A
Page 106 and 107:
The First Inundation 89 $43 million
Page 108 and 109:
The First Inundation 91 and at a ti
Page 110 and 111:
13. Collapse of a Theory THE SPLEND
Page 112 and 113:
Collapse ofa Theory 95 should be re
Page 114 and 115:
Collapse of a Theory 97 such paper
Page 116 and 117:
Collapse ofa Theory 99 plete contro
Page 118 and 119:
The Path of Retreat 101 Under Warbu
Page 120:
The Path of Retreat 103 Along with
Page 123 and 124:
106 PART II / THE GREAT REVERSAL of
Page 125 and 126:
15. When to Reef Sail DURING THE FI
Page 127 and 128:
110 PART II / THE GREAT REVERSAL Wa
Page 129:
112 PART II / THE GREAT REVERSAL In
Page 132 and 133:
Rediscount rate Date New York Feder
Page 134:
When to Reef Sail 1 17 You have the
Page 137 and 138:
120 PART II / THE GREAT REVERSAL ab
Page 139 and 140:
122 PART II / THE GREAT REVERSAL of
Page 141 and 142:
124 PART II / THE GREAT REVERSAL Th
Page 143 and 144:
126 PART II / THE GREAT REVERSAL Ne
Page 145 and 146:
128 PART II / THE GREAT REVERSAL to
Page 147 and 148:
130 PART II / THE GREAT REVERSAL Ge
Page 149 and 150:
132 PART II / THE GREAT REVERSAL Ba
Page 151 and 152:
134 PART II / THE GREAT REVERSAL by
Page 153 and 154:
136 PART II / THE GREAT REVERSAL cr
Page 155 and 156:
PART II / THE GREAT REVERSAL that a
Page 157 and 158:
140 PART II / THE GREAT REVERSAL sh
Page 159 and 160:
142 PART II / THE GREAT REVERSAL it
Page 161 and 162:
144 PART II / THE GREAT REVERSAL th
Page 163 and 164:
PART II / THE GREAT REVERSAL 15 per
Page 165 and 166:
148 PART II / THE GREAT REVERSAL Th
Page 167 and 168:
150 PART II / THE GREAT REVERSAL ad
Page 169 and 170:
152 PART II / THE GREAT REVERSAL Yo
Page 171 and 172:
154 PART II / THE GREAT REVERSAL vi
Page 173 and 174:
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Page 175 and 176:
158 PART III/DEBACLE OF AN IDEA tio
Page 178 and 179:
The Crumbling of the Dikes 161 day
Page 180:
T HE 22. The New Thermopylae EFFORT
Page 183 and 184:
166 PART III / DEBACLE OF AN IDEA S
Page 185 and 186:
168 PART III/DEBACLE OF AN IDEA in
Page 187 and 188:
23. The Keynesian Influence JOHN MA
Page 189 and 190:
172 PART III / DEBACLE OF AN IDEA a
Page 191 and 192:
174 PART III / DEBACLE OF AN IDEA o
Page 193:
176 PART III/DEBACLE OF AN IDEA tie
Page 196:
T HE 24. The Not So New New Deal AF
Page 199 and 200:
PART III / DEBACLE OF AN IDEA ties
Page 201 and 202:
184 PART III / DEBACLE OF AN IDEA c
Page 203 and 204:
186 PART III / DEBACLE OF AN IDEA c
Page 205 and 206:
188 PART III/DEBACLE OF AN IDEA For
Page 207 and 208:
190 PART III/DEBACLE OF AN IDEA Sen
Page 209 and 210: 192 PART III / DEBACLE OF AN IDEA J
Page 211 and 212: 194 PART III/DEBACLE OF AN IDEA abu
Page 213 and 214: 196 PART III/DEBACLE OF AN IDEA nor
Page 215 and 216: Ig8 PART III / DEBACLE OF AN IDEA R
Page 217 and 218: 200 PART III/DEBACLE OF AN IDEA who
Page 219 and 220: 202 PART III / DEBACLE OF AN IDEA o
Page 221: 204 PART III / DEBACLE OF AN IDEA s
Page 224 and 225: Where Two Tides Meet 207 billion. I
Page 226 and 227: Where Two Tides Meet 209 The conser
Page 228 and 229: Where Two Tides Meet 211 creating a
Page 230 and 231: The Reversals of War 2 13 the world
Page 232 and 233: The Reversals of War 2 15 per cent
Page 234 and 235: The Reversals of War 217 three-mont
Page 236 and 237: 29. Doubtful Victory No HEAD of the
Page 238 and 239: Doubtful Victory 221 sury and the F
Page 240 and 241: Doubtful Victory 223 at a cost of 1
Page 242 and 243: Doubtful Victory 225 sleeping on hi
Page 244 and 245: 3 o. The Role of Atlas THE FIFTH DE
Page 246 and 247: The Role ofAlIas 229 dollar deposit
Page 249 and 250: 232 PART III/DEBACLE OF AN IDEA amo
Page 251 and 252: 234 PART III / DEBACLE OF AN IDEA T
Page 253 and 254: 236 PART III / DEBACLE OF AN IDEA f
Page 255 and 256: PART III / DEBACLE OF AN IDEA becau
Page 257 and 258: T OWARD 32. The End of a Dream THE
Page 259: 242 PART III/DEBACLE OF AN IDEA Des
Page 263 and 264: 246 PART III/DEBACLE OF AN IDEA Fol
Page 265: 248 PART III/DEBACLE OF AN IDEA The
Page 268 and 269: The Chute fluctuating in value agai
Page 270 and 271: Into the Pit 253 As the relative ma
Page 272: Into the Pit 255 That bankruptcy wa
Page 275: 258 PART III/DEBACLE OF AN IDEA ind
Page 278 and 279: Out of the Pit 261 A fourth misconc
Page 280 and 281: Out of the Pit 263 WarII the ratio
Page 282: Out of the Pit 265 The Federal Rese
Page 285 and 286: 268 NOTES Chapter 4. 1. New York Ti
Page 288: Notes Chapter 19. 1. Federal Reserv
Page 291 and 292: 274 NOTES Chapter 31. 1. See the au
Page 293 and 294: SELECTED BIBLIOGRAPHY Harding, Will
Page 296 and 297: About the Author ELGIN GROSECLOSE f
Page 298: Achesont Deant 19 1-g2 t 196 t 198
show all

America's Money Machine

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?