>However, an operation to repatriate its gold holdings began in the 1960s leading up to the US termination of the Bretton Woods system, which effectively stopped foreign governments from exchanging dollars for gold.
French-US monetary history after WWII:
Under the Bretton Woods agreement (1944-1971), the US dollar was the world’s reserve currency, and it was pegged to gold at $35 per ounce. Other countries pegged their currencies to the dollar.
around 1965, De Gaulle initiated a systematic, aggressive policy where they converted USD into physical gold every time French acquired USD from trade, then French Navy picked those gold bullions from NY. By 1971, the US gold reserves had decreased so much that they did not cover the dollars circulating globally and Nixon "closed the gold window,"
You seem to imply that Charles de Gaulle and his policy of converting dollars to gold caused the collapse of the Bretton Woods system. That was a myopic view. The whole Bretton Woods system was doomed from the beginning due to design defects.
The system was conceived with the primary goal of maintaining balance of payments equilibrium for all countries at the expense of economic growth and liquidity. It had become clear that if a country wanted its currency to be the world reserve currency it had to run a balance of payment deficit. And the United States clearly wanted its dollar to be the reserve currency unbridled by any balance of payment constraints.
If the United States had balance of payment surpluses as it had in the early years, the system lost liquidity (other countries wanted to buy U.S. exports but had neither gold nor dollars to do so), reducing the surplus. And if the United States had balance of payment deficits, well, gold would flow out of the United States, and the United States could not meaningfully increase public debt or spending.
Ok, bear with me for a moment - what if the US would use actual physical gold coins instead of dollars? Then your argument of "gold would flow out" would not hold - so the only reason for it to flow out was that the gold standard was fake - the lax money policy of the US was the issue, not the gold standard itself.
Gold is silly as a measure of value. It's just a piece of shiny metal. The amount of value in the world is increasing so you want to exchange medium to grow with it else you're pulling breaks on the actual economy.
Gold is actually really good at transferring and measuring value. Think about what a "good" measure of value would be have. It needs to last over time, not corrode or dissolve to the forces. It needs to be distributable, Divisible.. to be ubiquitous. Hard to create/refine, hard to find, so supply can't easily be inflated. It doesn't matter what the object that is being used for exchange of value or holding value, that's why you can trade and barter random objects. But if you condensate down the properties that make a GOOD money, then gold is more than just a shiny metal. "The amount of value in the world is increasing so you want to exchange medium to grow with it.." we find more gold every day, so there is an easing already happening naturally. And even if there wasn't, imagine having an exchange currency that literally never inflated... that's GOOD. We have been hoodwinked into thinking that we need inflation to keep up with goods and services, literal stockholm syndrome taught by the FED.
Yes, it's just a shiny piece of metal. However, it is a pure element and there is a limited amount of it, unlike pretty much anything else except maybe silver.
Otherwise this happens.
https://fred.stlouisfed.org/series/M2SL
This is the origin of the entire white collar world and all of its odd bedfellows, and it will die in our lifetime. All of our jobs will go with it, unfortunately.
Well it's also soft, bacteriostatic, and conductive.
OMG, we should totally base our economic exchanges on copper instead!
That doesn't make any sense to me. Under Bretton Woods, a "dollar" was a contractual equivalent to a fixed amount of gold. There's no difference. When people are talking about "flow out" they're not talking about literally motion of currency[1], just who owns it.
[1] Which is backwards in your reasoning anyway. If you're a foreign power wanting to hold dollars, and dollars are physical gold coins, then you quite literally need to move them physically out of the country, right?
> Ok, bear with me for a moment - what if the US would use actual physical gold coins instead of dollars?
You'll get a bear economy, leading to the eventual deflation and collapse.
Fun fact: it was not hyperinflation in Weimar Germany that led Hitler to power but _deflation_ because of its insistence on sticking to the gold standard.
> Fun fact: it was not hyperinflation in Weimar Germany that led Hitler to power but _deflation_ because of its insistence on sticking to the gold standard.
Do you have a source for this? AFAIK https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_R...
All the facts are true here, but "design defect" is silly. The entire purpose was to keep a country like the US from exploiting its position, and becoming the "world's reserve currency" which is just a euphemism for running up massive debts to poorer states.
Bretton Woods was sabotaged by the US and the USSR through the single vehicle of https://en.wikipedia.org/wiki/Harry_Dexter_White. Without a Bancor, the entire system simply became a mechanism to exploit the poor.
I agree with you that Bretton Woods was doomed from the beginning, both Keynes and Friedman said so, and this should be a better known POV. Economists are not historians though, and historians write human-driven stories (i.e., it was Nixon who ended Bretton Woods, it's not that it was going to inevitably collapse as an econometric question).
All that said, Bretton Woods matters because people look at the gold standard as a time when wages in the United States rose. Like that's why Bernie Bros on HN care. It's the same reason they oppose globalization: me me me. So it's worth knowing why it was flawed. They don't comprehend that before and after Bretton Woods, hourly wage charts measured a fundamentally different thing.
I think it's better to attack the charts - I mean, you're responding to a Charts Guy, a guy who's like, look at this Gold Denominated Chart guy - because that's what their brains work on. Don't worry about economics. These guys are not economists. They are Charts. The real attack on their worldview is that, well, just because the year in the X axis is an increasing, doesn't mean that you can compare a bigger year to a smaller year. They would really like the world to be ordered that way, but it's not, and taking leadership on convincing them of that is very hard.
Perhaps you could expand on why you're convinced the entirety of neoliberal economic dogma isn't "me me me"?
The gold bugs are almost entirely on the right. The left are far more likely to be MMTers.
> The gold bugs are almost entirely on the right. The left are far more likely to be MMTers.
see, i don't want to generalize about left and right. it's much simpler than that. look at what this thread is actually about: "chart for $/GLD is going up and to the right, therefore, gold good." okay? it's not complicated. it's not left vs right as much as it is, for every 1 person who's like, "things are complicated, economics are interesting, let's talk about it" there are 19 who live day to day in a relentless grind, and get-rich-quick is literally their only apparent salvation. they want the world to be ordered where they are a Green Wojack, where some random bet or gamble makes them a ton of money. that's why we're talking about it, not to figure out economic policy. same reason we talk about cryptocurrencies and startups. to most regular people - and programmers are regular people - it's about, $$$.
it is a totally valid complaint to say, "floating exchange rates do not produce charts that go up and to the right." I mean, that's their problem! They made the wages per hour chart stop going up and to the right! It's not that they are bad policy!
Do people on HN care about joe schmoe hourly worker? No. You can certainly make tons of money trading currencies, but look, these people are not trading. They're gambling. This class of get-rich-quick person likes: real estate, cryptocurrency, gold, startup stock... are you getting it?
You are making it about, "neoliberal dogmas" and "gold bugs" or whatever. Trust me, those people are not the morons. The gamblers are 10x as stupid. They are the antagonists.
The Party told you to reject the evidence of your eyes and ears. It was their final, most essential command.
government policy definitely has the greatest power to create (or destroy) wealth, there are a lot of things wrong with economic policy in this country, but floating currency exchange is not one of those problems.
I would argue that any policy that allows the government to print money freely and inflate the currency is a major thing wrong with a country.
Several of them would have protested if they could have found the right arguments.
the best way to expand your worldview is to consider that time series charts do not tell a whole, or even accurate, story, a lot of the time. for example, looking at a chart of a line going up and to the right for money supply isn't as meaningful as you think it is.
> trade, then French Navy picked those gold bullions from NY
I couldn’t find any clear news source or academic reference to that event. I see a lot of references on gold buying/selling sites mostly. I would imagine a Fench Navy ship docked NY and loading tons of gold would make quite a stir.
Gold is very dense. 10 Tonnes of gold takes up less than a cubic meter of volume.
Moving tonnes of gold doesn’t look like huge pallets of gold with tarps over them like a James Bond movie. It looks like a handful of supply crates.
I imagine that the French Navy visits NY ports of a regular basis. Pretty normal for Navy’s to sail into the ports of allies during peace time. There would be nothing unusual about a French Navy vessel sailing into NY loading up with some supplies and leaving.
For a country like France it would be on the order of hundreds or a thousand tons. So that’s maybe on the order of hundred trips by delivery trucks at most. Yeah I suppose spread out over a few years it wouldn’t be noticed. At least not by the general public. But since the claim is that this triggered the collapse of the Bretton Woods system it would be documented and referenced a lot more, still.
Most delivery trucks (like a box truck) have capacities more like 10 or 20 tons. A heavy freight truck, like used to load ships? Even more.
You don’t generally just throw gold in a box truck… it typically moves by armored freight.
The gold would be moved by cash-in-transit trucks which have relatively modest payload capacities of 5000-9000lbs today, a bit less in the 60s. 3 tons per truck is probably on the high end.
Was that the case in the 60s as well? I know trucks of that era had much lower capacity than today, even when comparing across class like "half-ton" trucks.
A half-ton truck is a consumer pick-up truck, not a commercial shipping vehicle. Much much smaller.
Yup that's what I had in mind, a 60s city delivery truck, not a semi, so googled that and came up to about 10t.
The Federal-Aid Highway Act of 1956 set the gross vehicle weight limit for trucks at 73,280lbs. I imagine trucks of the day probably at least came close to that limit?
https://en.wikipedia.org/wiki/History_of_the_trucking_indust...
I seem to be having more luck with French language sources, mostly the Bank of France records. From what I can tell the shipping was done mostly commercially with some later by air[1]. Reportedly De Gaulle was frustrated with the speed of change wanted to use the Colbert warship but was dissuaded by the minister of finance.[2]
[1]https://archives-historiques.banque-france.fr/ark:/56433/115...
[2]https://www.lesechos.fr/finance-marches/banque-assurances/st...
Gold is routinely transported across the Atlantic (and the world) by air today:
> I couldn’t find any clear news source or academic reference to that event.
It happened though. Here are the sources for it:
- https://en.wikipedia.org/wiki/Nixon_shock#Criticism_and_decl...
- https://www.thegoldobserver.com/p/how-france-secretly-repatr...
- https://www.elibrary.imf.org/view/journals/001/1994/128/arti...
What happened is the gold got repatriated. I was looking for a source that a French warship docked and started loading thousands of tons of gold.
Your source confirms it as well:
> Involving the French Navy was considered, but that would have blown the operation’s cover. Instead, BdF used ocean liners from the Compagnie Générale Transatlantique
So it was multiple trips and in commercial liners.
It's something that sounds like a plot point for a heist movie.
Check what happened to the Spanish gold before the end of the Spanish civil war. I think it would be even more dramatic movie: https://en.wikipedia.org/wiki/Moscow_Gold_(Spain)
Which almost might have been one of the arguments the Minister of Finance used to dissuade CDG
You should look into how often nuclear weapons are moved by truck.
You've probably driven past more than a few.
Historically, if a ship carrying gold sinks, whoever salvages the gold/loot gets ownership of it. However, if the ship is a warship, the loot belongs - FOREVER - as the property of the nation-state (or their descendants). This has led to some legal battles over nautical salvage in the Atlantic (were those "Spanish Galleons" military or non-military? Hundreds of millions of dollars depends on that answer during some lawsuits in the 1990s) or nautical salvage in South East Asia where artifacts from long gone kingdoms (that didn't reflect borders created centuries after they collapsed) end up in court over what country gets to show them in museums.
So yes, if you need to move national quantities of gold/silver across the ocean, then for legal reasons, it is best to ship it via your navy.
As a French speaker, I looked up French sources and found https://www.lesechos.fr/finance-marches/banque-assurances/st... - here is a snippet translated to English below. But many more references can be found by googling "opération vide-gousset".
1963: Operation Empty-the-purse ("vide-gousset")
It was also by warship that De Gaulle planned to conduct "Operation Empty-the-purse" in 1963, the code name for the repatriation of French gold deposited at Fort Knox in the United States (1). More than 1,150 tons—the result of converting French dollars into gold, a decision made by De Gaulle in response to the lax monetary policy of the United States—were being used to finance a growing trade deficit through the printing of money.
Valéry Giscard d'Estaing, then Minister of Finance, recounts (2): "De Gaulle was getting impatient and asked me at every meeting: 'So, has that gold finally come back?' One day, he told me: 'We need to move much faster: we're going to send the navy cruiser 'Colbert' which will bring back all the gold that's still there.'" “I told him that if we did that, we would alienate American public opinion forever.” Ultimately, De Gaulle abandoned the Colbert plan, and French gold returned from the United States in small quantities. Not for very long, it's true. The events of May 1968 and the ensuing monetary crisis depleted the reserves, which fell from 4,650 tons to 3,150 – 1,500 tons had crossed the Atlantic again to defend the franc, which De Gaulle refused to devalue.
Thank you, this helps and clears up my confusion. I just couldn't imagine this kind of an event, a warship loading this much gold, not triggering some media commentary, even mockery or criticism to defend the US establishment.
> Ultimately, De Gaulle abandoned the Colbert plan, and French gold returned from the United States in small quantities.
So I think the story about the warship got twisted from a plan or threat to "it actually happened". Doing it in small quantities over a few years was the right way, indeed. Looking back it seems like it didn't make many waves in the news at the time, so Giscard was absolutely right.
https://scholarship.law.columbia.edu/cgi/viewcontent.cgi?art...
Whether the exact ship was a battleship or a destroyer might make the search result.
I can’t open that link. Too bad.
Cloudflare DNS?
I think I munged the link. Anyway, the answer is in a search result, with some discussion about whether it was a battleship or destroyer.
One armored car can carry a ton of gold. If they left and drove to the closest US Navy port, where the French ship would dock. it wouldn't raise eyebrows.
It’s just that they repatriated close to 3000 tons. That’s one long convoy of armored cars, all going to a French warship docked in New York.
Based on some sibling discussion it seems it just never happened. It was multiple shipments, over many years, going over commercial liners. It may have well been armored trucks but they just didn’t all do it at once. It worked well that it didn’t create much of a media uproar.
Excessive debt build up in particular due to the Vietnam war caused the US to cancel the dollar gold convertibility.
> De Gaulle initiated a systematic, aggressive policy where they converted USD into physical gold
The dude was a visionary for many things, but I didn't know about this. Borderline prescient. What a guy.
Just like the majority of the classical economists and policymakers, you would call him a blithering idiot and overzealous nationalist two decades ago. It was thought that this kind of behavior caused world-wars. I mean it did cause them. It is just we're speed running the next one that changed the narrative.
This behavior is economically inefficient, that's why it's criticized. And it's undeniable
But the point is that "economical efficiency" is not the only metric that matters, stability and power do not come cheap.
I think many academics are often specialized in one area of their expertise and overfit in that dimension. Journalists pick this up and promote those views a bit too much. This results in non-optimal decisions due to skewed public perceptions.
We need to promote holistic thinking considering multiple dimensions and not just one where academics are proficient in.
> many academics are often specialized in one area of their expertise and overfit in that dimension
An economist saying a national-security measure costs this much is fine. Where it goes off the rails is in turning costs into damnation without accounting for what one gets in return. In an attention-driven media environment, that sells.
The problem is that there isn't simply an efficient solution for everything. At one point every problem has solutions with pros and cons
France could do it as it is a rich and big country but smaller countries do not have a viable choice. This reasoning could have been applied to France too in another universe.
It's a balance impossible to totally tilt one way or another.
So no amount of extra information could help when it's matter of opinion at the end of the day
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De Gaulle was not an overzealous nationalist. He actually ended French colonialism and started an alliance with Germany.
He was a patriot and very pragmatic. He knew France had been diminished. He had no time for delusional ideas.
From Franceэs perspective, they were just playing by the rules
The whole of international politics is the real rules vs the unwritten rules.
Goes for local politics as well.
Sounds like corporate politics too!
De Gaulle was ahead of his time. He was very skeptical of the control that the US had over Europe through NATO. He left the alliance to build an independent French nuclear program which is paying dividends today amid the current leadership situation in the US.
Nitpick, but France never left NATO proper, only the integrated command, and reintegrated it in 2008 under Sarkozy.
Sarkozy, who renamed what descended from De Gaulle's party into "Les Républicains" because of his obsession for the US. Who also got sponsored by Gaddafi, and invited him to pitch his tent in the Elysée's garden. And who ten years ago was still spewing climate change denial crap. He probably still would, but he's too busy talking about how his 10 days in prison was the most atrocious experience a human being had to endure.
Funny how much his pathetic 5 years in office keep on giving.
> to build an independent French nuclear program
For which France was helped by the UK, so it certainly would make sense if France helped the europe and uk to build its own nuclear deterrence.
That was a cooperation, both sides benefitted. So there's no debt to repay.
He also called Brexit before the UK had even joined.
IIRC, De Gaulle & Churchill proposed a UK-FR union at one point (1940?) but it didn't get sufficient support within the French government. Interesting to ponder what the war and later EU trajectories might have looked like if that had happened.
That union was a last ditch effort to try and keep France in the war. If they had implemented it, it would have been undone once the nazis were beaten you can be sure.
It was suggested again in 1956 in the context of the Suez crisis:
That was also a last-ditch effort to maintain pre-WW2 geopolitical structures rather than a bipolar US-sphere vs Soviet-sphere world. Note that this was basically the nail in the coffin that led to their full-fledged decolonization in the following years. At the time the UK still held very significant military and political sway over the middle east, east africa, and asia
https://en.wikipedia.org/wiki/British_Empire#/media/File:Bri...
From my recollection, the plan was to grant French citizenship to every British citizen and vice versa, in effect "forcing" the governments to defend their citizens to the end. This was very ambitious, hence why it probably did not happen. But if it had happen, I have a hard time seeing how it could be undone, stripping people of their citizenship, even if they have a second one is no trivial matter.
I think that is the part that the parent is referring to.
France is currently contacting selected partners to build a collective nuclear weapon coalition, probably focusing on Norway due to their location and recent oil wealth. Given recent events, reasonable people may disagree strongly on the directions that is leading.
Certainly debatable.
De Gaulle started this 'policy' in 1965 and it's mainly the current leadership situation that's been a problem—60 years later. So to a certain extent the policy in question was 'wrong' for decades. How "right" can you really consider them when it was a problem year after year, decade after decade:
* https://en.wikipedia.org/wiki/Henny_Penny
It reminds me of the folks that keep saying there will be a major crash on Wall Street year after year after year… and then it just happens to be occur.
* https://awealthofcommonsense.com/2023/12/rich-author-poor-re...
In what sense was the policy wrong? Emphasizing independence when it comes to security doesn't strike me as self-evidently wrong. Curious to hear your arguments. "They were very happy about it 60 years later" alone isn't evidence of it being wrong.
I disagree. It was a right policy in the sense that it bought France an insurance policy that essentially no other Western country has. Like all insurance policies, you hope to be wrong, but when the time comes, you are protected from some of the worse case scenarios.
Yes, this is the debatable part: the policy is "wrong" for 60 years and extracted a cost to France over those years (at least when it came to nuclear weapons?).
There just happened to be a whacko that got into the White House, but if ~70k (out of >100M) had gone the other way in 2016, Hillary Clinton would have won and the world would be a different place. (See also ~500 votes in Bush versus Gore.)
I'd be curious to know the 'insurance premium' that was paid by France every year and the total.
> There just happened to be a whacko that got into the White House
My counter to this is that such an occurrence was increasingly likely starting around the time the massive US Evangelical base was essentially fully captured by (and became a wing of) the Republican party. It was more and more obvious over a period of at least 40 of those 60 years you mention.
If you prepare for a crash to happen on September 23rd, you're a fool. You can't point to a crash that happens a year later and say you got it right.
But if you prepare for a crash to happen at some point, that's just good sense. Only a fool would think that there would never be a crash. If you arrange your finances to withstand a crash, and there's eventually a crash, then that was the right thing to do even if it took a long time.
Ensuring the independence of your nation is more of the second kind. And it pays off even when there isn't an outright crisis. The policy wasn't "wrong" for decades. It was fine the whole time.
Time to make the "De Gaulle was Right about everything" baseball cap.
Let’s not get carried away. He was also wrong about many things. He was a good strategist, which was useful during WWII and helped France massively in the post-war years. His domestic policies were very much a mixed bag. He was not exactly authoritarian, but built himself a strong presidential political system. Which would have been fine if he had been right all the time, but he was not.
- [deleted]
Or a "De Gaulle Apology Form":
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"closed the gold window" is a weird euphemism for "defaulted"
"I am altering the deal. Pray I do not alter it any further."
De Gaulle of this man.
Underrated comment
