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In France people, scared by the Belgian experiment, feared that the De Gaulle Government might try the same deflationary trick. Last week they scrambled frantically to buy U.S. dollars, British pounds and gold in the black market. Result: the franc, pegged at 2¢, sank until a dollar was bringing 315 francs. The franc did not rise till Andre Istel, French delegate at the Bretton Woods conference, announced that France had no intention of following Belgium's plan. The Allies helped by recognizing De Gaulle. This implied releasing to his Government over $1 billion of French gold to put a solider floor under the franc. Actually, most French financiers know that it is now too late for France to do what Belgium did. Black markets have already dissipated much of the currency of war profiteers.
The measure of inflation in France is the difference between the official value of the dollar, 50 francs, and the black-market value. So far the De Gaulle Government has hesitated to take drastic deflationary measures. It could too clearly see what was happening in Belgium.
Too Dangerous. All European nations know that somehow they must stabilize their currency. If Belgium succeeded by the deflationary route, she would have performed this difficult operation in one shocking amputation. Few European countries are likely to follow her example. The hardheaded Dutch next door will have none of it. Said one top Dutch moneyman: "The plan is psychologically dangerous; because you can't force people into virtue. It's technically too difficult to administer." Dr. Johan Beyen, Dutch delegate to Bretton Woods, said Holland plans an orthodox savings drive to sop up inflationary cash, stringent wage & price controls and a retroactive 100% excess-profits tax to grab wartime profits. But most of all Holland stresses what other Governments have ignored—heavy taxes, to bring its budget under control, the step which all European countries must take sooner or later to stabilize their currency. Buying power would thus be brought more in line with available goods for sale.
Above all, the nations must get their industries back into production, step up output by backbreaking work.