Word: france
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...price of gold in Paris last week shot to well over $46 per oz., the highest in two decades. That upsurge reflected, more than anything, smoldering fears about the future of the franc. The spark that started the rise, however, was President Nixon's call two weeks ago for "new approaches" to international monetary problems. It was only an offhand remark, but French speculators misinterpreted it as a sign that Nixon might favor a rise in the price of gold or some basic revamping of currency values. When the President discusses money matters in Europe this week, he will...
Tight Corset. As Robert Ball, TIME'S European economic correspondent, reports: "The root of last fall's crisis, the fundamental imbalance between the robust West German mark and the weak French franc, has not been lastingly removed. The tight corset of exchange controls is all that is holding the franc up. Though the controls have impeded any further outflow of francs from France, Paris has failed to lure back the bulk of hot money that it had previously lost. In Europe, the skepticism about France's chances of avoiding devaluation is widespread...
There is little evidence that the disparity between the mark and the franc will end soon. The continuing West German economic surge, which underpins the mark's strength, goes against classic economic theory. Rapid economic growth should almost inevitably produce much higher export prices and the demand for more imports, both of which are damaging to a country's trade position. Yet Bonn has managed to keep its economy expanding with little inflation. West German Economics Minister Karl Schiller said in his annual report that the country's production grew by almost 9% in 1968 and should...
...French economic picture is the reverse image of that in West Germany. In the first two weeks of February, France's reserves declined $29 million, while Germany's rose more than $121 million. France's ability to compete has been severely hampered by inflation; domestic prices are increasing by an alarming annual rate of 5.5%. One consequence is that French trade deficits have lately been running at more than $200 million a month. Psychology could cause even more havoc than economics. Frenchmen traditionally mistrust their own currency, and they have been spending francs rather than holding them...
Charles de Gaulle has staked his political prestige on maintaining the franc's parity at 20 U.S. cents, but devaluation may be difficult to avoid if, as is likely, French unions demand inflationary wage increases next month. One danger is that De Gaulle, if forced to devalue, might not stop at a reasonable 10% change in parity but insist capriciously on 20% or more. That would give France an enormous trading advantage, and force a competitive devaluation of other currencies. As David Rockefeller, president of the Chase Manhattan Bank, said in London last week, the franc...