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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: KyrosL who wrote (75164)3/4/2001 9:16:30 AM
From: brightness00  Read Replies (1) of 436258
 
> What happens when somebody decides to convert his gold
> backed currency to physical gold? France did that with
> the dollar and it brought about the demise of the gold
> standard.

That was because the US policy makers failed miserably in managing a sound reserve currency back then. The socialist macroeconomics in the late 60's debased the dollar. Then policy makers in their own pipe dream world though it was possible to make gold irredeemable to the private citizenry but redeemable to other central banks; needless to say, arbitrarge kicked in. The correct policy would have been immediate raising interest rate to defend the dollar instead of refusing private redemption and thereby creating a black market. The politicians in the late 60's and 70's lacked the political will or economic understanding that economic stimulus had to come from tax cuts not run-away money press. The US policies of the 60's was essentially taxation through monetary inflation in order to finance the Vietnam war and the growing socialist programs, with disasterous consequences for the dollar and the economy in general. Of course the French were no dummies. Even the oil producers woke up one and and realized they could no longer buy the same amount of equipment with the dollars they were receiving; hence the oil crisis.

Jim
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