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by u1hcw9nx·4mo ago·view on hn ↗
>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,"

8 comments
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.
> what if the US would use actual physical gold coins instead of dollars?

The problem here is, what if the demand for dollars increases?

In principle the US would get more gold and mint more currency, but gold is a finite resource. "All the gold ever mined" is around 200,000 metric tons, ~32k troy ounces per metric ton is ~6.4B troy ounces.

In 2022 (just before the recent gold rally) the price was ~$2000 per troy ounce, i.e. "all the gold" was worth ~$13T. Meanwhile the M3 money supply in the same year was ~$20T. What happens if you try to buy $20T worth of gold to mint currency when only $13T worth has ever been mined, and not all of that is even on the market? The answer is that you can't, so instead the result is deflation, which is bad.

Or to put it a different way, what do you think the economic effect of the recent gold rally would be for a country whose currency was still pegged to gold? It just got way cheaper to import foreign products than buy domestic ones, and way more expensive for foreign countries to buy your exports, so how's the unemployment rate looking? The amount everyone owes on their mortgage hasn't changed but the nominal value of their houses just got cut in half so now they've lost their jobs and are underwater. What happens when they start to default and foreclosures don't allow the banks to recover the principal?

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.
So as trade increases, and the need for dollars increases, gold and the dollar increase in value together.

That sounds benign until you realize that is: deflation. It incentivizes everyone to hold their dollars instead of spending them, and parasitically gain from gold's increasing utility use as currency by others.

This further decreases dollars available on the market to use in trade, further increasing their value. Which ... yes this can be an economic death spiral. Or at least, a strongly growth conflicted world.

A world in which you can make 5-10% a year by avoiding economic activity or investment is not a healthy world.

(And you can't increase gold supply to counteract this, because gold supply is also always balanced against the cost of extracting gold. Unless everyone else on the planet except the US government is prohibited from mining gold, there is no play there.)

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.

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 Party told you to reject the evidence of your eyes and ears. It was their final, most essential command.
> 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.

https://www.wolframalpha.com/input?i=10tonnes+of+gold

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.
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:

https://www.youtube.com/watch?v=CRt_Ld5vtHI

> 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.

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.

https://archive.ph/ioukS
I can’t open that link. Too bad.
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.

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.

> 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.

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.

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.
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.
Time to make the "De Gaulle was Right about everything" baseball cap.
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...

Excessive debt build up in particular due to the Vietnam war caused the US to cancel the dollar gold convertibility.
De Gaulle of this man.
Underrated comment
From Franceэs perspective, they were just playing by the rules
The whole of international politics is the real rules vs the unwritten rules.
"closed the gold window" is a weird euphemism for "defaulted"
"I am altering the deal. Pray I do not alter it any further."