Word: franc
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SINCE the easing of last November's European monetary crisis, the calm in world money markets has seemed almost uncanny. The French franc has suffered only minor buffeting on currency exchanges. Last week the British pound rose to a six-month high of more than $2.39, lifted by the news that Britain's perennial trade deficit narrowed to practically nothing in January. The dollar, buoyed by last year's slight surplus in the usually deficit-ridden U.S. balance of payments, is stronger than at any time in recent memory. Yet amid such outward stability, signs of skittishness...
...Frenchman Jean Monnet for a United States of Europe. De Gaulle is by no means Europe's only neo-nationalist leader. Strauss and the West Germans played some of the same tunes of glory recently when they refused to revalue the Deutsche Mark in order to aid the franc...
...crisis could be set off by any substantial deficit in the U.S. payments balance or by a bad British trade report, a weakening of the French franc, or some political event that would fan distrust of paper currencies. Of all the possibilities, bankers worry most about the increasing disparity between the economic strength of West Germany and the weakness of France and Britain...
...more mundane level, France's political malaise has had direct economic consequences. At the moment, France is seized by a giant buying spree. Fearing an eventual devaluation of the franc, Frenchmen are sinking their savings into goods. Two months ago, there were 10,000 color-television sets in all of France; now there are 70,000. Washing machines, record players and other appliances are being snapped up at a similar pace. Peugeot is receiving 500 orders a day for its most expensive ($3,000) model, the new 504, even though it can produce only...
Actually, the French economy is not as sick as many Frenchmen seem to suspect. Owing to tight currency controls, the huge speculative outflow of francs has been stopped. Some $500 million in francs has returned to France in the past month. Furthermore, despite the franc's recent weakness, France still possesses some $3.5 billion in gold and foreign currency reserves plus nearly $4 billion in standby credits from the International Monetary Fund and her Western trading partners. Even so, the nagging worry remains either that the austerity program will bring on a recession or that runaway prices will force...