The misalignment of exchange rates and the consequent accumulation of dollar balances, which quickly exceeded the gold holdings of the United States, led to increased tensions in the monetary system. The dangers were not only recognized in academic circles. When the author arrived at the Fund`s headquarters in early 1969 to begin his new duties and pay tribute to the members of the Council, his visit to Mr. Kafka was interrupted by a telephone call. The British director of Brazil had agreed to give a speech in a few weeks. What would be its subject? “Oh,” Mr. Kafka replied with his usual unwavering humor, “the imminent collapse of the international monetary system, I think. During the year 1969, it was decided to create ten billion DDS during the three-year period 1970-1972. This allocation of SDRs has in principle made the system of access to reserves independent of the gold standard, although the first SDRs are only intended to “supplement existing foreign exchange reserves.” Yet some had argued that the U.S. balance of payments deficit was due to the willingness of other countries to accumulate additional reserves.
Prior to the CSD program, their only way to achieve this goal was to receive dollars from overpayments, which forced the U.S. into deficit. According to these theories, the creation of SDRs would quickly eliminate the US deficit. According to this document, gold is transferred to Tier 1 bank capital at a price of 100% and banks have the option to replace their paper assets (mainly US Treasury bonds) with this metal. According to basel standards, subsidized equity consisted only of cash (which belongs to the category of legal interest rates in all countries) and government bonds (mainly government bonds and US government bonds). Switzerland is supporting a project to introduce a parallel currency in the country in the form of the gold franc. After the United States decided to increase the growth rate of the money supply, the best French response was to implement its strategy of converting its reserves into dollars into gold. The transition to this new equilibrium has opened a new expression in Franco-American international monetary relations.
Even today, there are trends in monetary and financial relations that can be seen as the return of gold to the global monetary system. These trends are also linked to the financial and economic crisis of 2008. It has revealed a number of global problems that have not yet been solved and therefore create all the necessary conditions for the volatility of the world monetary system and the world economy . This may include the maintenance of innovation in the financial market and, in particular, the uncontrolled use of derivative financial instruments; The imperfection of flexible exchange rates and their volatility; the absence of a global regulatory financial system capable of maintaining the role of international financial markets as independent regulators of the global economy; the increase in U.S. public debt due to policies that stimulate public demand, which is likely to abate, creating risks for holders of this value around the world, etc. The problem of maintaining international liquidity was also acute during the crisis. International banks suddenly faced the shortage of dollars. Companies began to accumulate money. In these circumstances, public sector liquidity has replaced private sector liquidity. As a result, the role of gold and foreign exchange reserves has become more important. When France was forced to raise its dollar to convert gold into gold in 1965 as a result of rising money supply growth in the United States, it had converted enough of its reserves into gold, so its threat to push for a rise in the price of gold was credible.
A rise in the price of gold should have led to a significant redistribution in favour of France. Rueff`s interpretation of the failure of the tripartite agreement contrasts sharply with the British point of view and reveals French intentions in the 1960s. Rueff (1963) congratulated Britain on its withdrawal from gold in 1931. France had to renounce its parity in 1936, but “unfortunately without turning the tap of inflation – and thus exposing itself to a gradual devaluation of its currency” (Rueff, 1963, p. 19). The problem for Rueff was that the French were living beyond their means, both in the late 1930s and 1950s. In his 1963 book, Rueff drew parallels between the two periods, highlighting the problems associated with the budget deficit, inflation, and the currency crisis. The report recommended significant cuts to social programs and public subsidies to balance the budget. By achieving an internal equilibrium, the government could uniquely create a new exchange rate parity. In Rueff`s eyes, France achieved in 1958 what it could not achieve in the 1930s. The French believed that an equilibrium in which they systematically converted U.S. dollar reserves into gold would quickly undermine the United States` leading position in international monetary systems by holding back its gold reserves and agreeing to a revision of that system.
The French rules of the international monetary system were compatible with a cooperative system in which the decision to create new liquidity had to be taken jointly by Western Europe and the United States. Any new liquidity should be distributed in fixed units on existing gold reserves. By 1965, the gold reserves of the United States had fallen below those of the Community countries. This has drawn the attention of U.S. officials to a possible crisis of confidence. Gold had this vision at the heart of the global monetary system because it was a neutral medium of exchange for every country. If gold was the basis of the system, its price had to be stable because it was the reference standard that set the price of the currency of each country that would have fixed parities. .