In the previous part, we finished our story of how President Nixon actually dismantled the Bretton Woods system. We’ll start this part by going back a few years.
Fight for Europe
The history of Europe is really a story about the rivalry of continental powers. Especially often Germans and French took their heads here. However, it turned out that these two countries were to become the foundation for the construction of the European Union, and thus the emission of the euro. In turn, however …
Although the topic of this cycle is not an analysis of why countries in Europe formed the Union, it is important to discuss this topic before embarking on a further journey.
Let’s start with the fact that the European Union (for the purposes of these considerations we also call its previous incarnations: European Coal and Steel Community and European Economic Community – we hope the reader forgives us for this simplification) was needed by the United States. After the Second World War, the Soviet Union existed on the other side of the continent. This posed a threat to US domination around the globe. Like in chess, the Americans must have had a strong figure in Europe that would prevent the USSR from overly intensive moves in Asia. Thus, European integration was on Washington’s hand. The more that they saw the market for their goods in the Old Continent (by the way it should be considered a paradox and a giggle of history, because the American colonies were originally exploited by Europeans). The situation was cemented by the Bretton Woods system.
The problem arose at a time when the whole situation began to please the Europeans less. Especially the President of France began to plot against the Americans Charles de Gaulle. He needed Germans to play his game, but they were not eager for an alliance.
A surprising proposition
Chancellor Ludwig Erhard, who took office at the end of 1963, did not like de Gaulle to such an extent that he once compared him to … Adolf Hitler himself. Despite this, he was the first capital he decided to visit when he headed the German government (this is the German government – let us remind you that we are talking about a period when Germany was divided into two countries: Germany and the pro-Soviet GDR), he chose Paris. It turned out that the surprises did not end there.
First, Erhard assured the French about “The great friendship that exists between two nations and their leaders.” French politicians repaid the same. Then it was even stranger. Half a year later, de Gaulle sent to Bonn, the capital of Germany, his finance minister, Valery Giscard d’Estaing, who brought with him a proposal to conclude a monetary union between two neighboring countries. Let’s remember that it was in 1964, when the Bretton Woods system was still in force and the dollar was still quite strong.
Of course, the offer was rejected. Besides, apparently the French president himself did not believe that the plan would immediately begin to be implemented. Not only that, de Gaulle himself was critical of the ideas of European integration, because he sensed in this project that was created in Washington. Apparently, he even said once that he would agree to implement it only if the European Union were “Sled”in which Germany is “Horses”, and “driver” his homeland. So why did he come up with the idea of a single currency? Initially, he was just planning to get the Germans into his game and start scaring the USA. Germany did not intend to connect its economy with France so much in any way. Erhard himself also knew that the Frenchman wanted to drive a wedge between Bonn and Washington.
As Janis Warufakis, a Greek economist and finance minister, put it then “The idea of the euro shone in the sky of Europe”, but – as you have to honestly add – it quickly went out.
Let’s replace the dollar with something
De Gaulle was a war hero, he was the head of the French government in exile, when Germany was subordinated to it during World War II. As a politician, he was uncompromising and suspicious. He might not like Americans and Englishmen because he was not allowed to join the Big Three and turn her into Four. At that time, the leaders of Great Britain, the USA and the USSR decided about the fate of the post-war world.
He was not a man who gave up. After World War II, although he could be considered a hero, he was removed from power. However, at the end of the 1950s he became the president of the country. Now he didn’t give up.
On January 4, 1965, he convened a press conference. On it he stated that he intended to restore France’s grandeur, but at the same time attacked the Bretton Woods system and the dollar. He appealed for the creation of a new world currency.
But what was the new currency supposed to be? The answer would have pleased many BTC fans. He wanted to de facto restore the dominance of the metal.
“We therefore consider it necessary to base international exchange (…) on an indisputable monetary base, which, above all, does not bear the characteristics of any particular country. What base is it? (…) Gold, whose nature is not subject to change (…), which has no nationality, which has always and widely been regarded as a carrier of unchanging and fiduciary value in the full sense of the word “
The French president thundered. Probably a well-known metal fan Peter Schiff would not have said it better!
Why did de Gaulle hate the dollar so much? We have already mentioned his personal injury and complex related to the fact that he did not sit at Yalta at one table with Stalin, Winston Churchill and Franklin D. Roosevelt. Only that it is difficult for a politician to suspect of such pettiness. After all, he was cordially ready for the implementation of his policy – certainly fake! – embrace the German Chancellor, who had previously compared him to Hitler.
It was something else. At the end of World War II, when it was clear that Germany would lose, discussions began about what the order would look like after the conflict. Initially, they wanted to repeat the pattern from World War I. Then Germany wanted to break high war contributions, in the mid-1940s the concept was created to make the former Third Reich a country “Agricultural and pastoral”. In other words, they wanted to destroy the industry there. This in turn would be an opportunity for France. This would get rid of the eternal enemy on the continent.
However, the Allies quickly abandoned the original idea. Maybe because Great Britain was afraid of the French power going too far? Or maybe it was decided that a strong Germany would be a better counterweight to the USSR? And probably both. Above all, however, the dollar system with strong Germany was a deadly threat to Paris.
As a patriot and far-reaching politician, de Gaulle knew he had to act. If it was not possible to defeat the Germans with the help of war, maybe it had to be done by dragging them into the economic plant?