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France's right to convert its dollars is, of course, incontrovertible. The French keep relatively less gold on hand than many other countries; they aim to keep it at 76% of reserves, but that is now down to 73% . Britain, Switzerland and Belgium keep 90% of their reserves in gold, only 10% in dollars and other currencies. On the other hand, the U.S. has persuaded West Germany to hold only 55% in gold and Japan only 15% —leading French officials to sniff that "dollars are for defeated countries." Last week's decision to cash in that extra $300 million—which may only be a starter—will raise the total of U.S. gold flow to France this year to at least $700 million.
It was the timing of De Gaulle's thrust that upset global money markets and affronted the U.S. Coming just when rumors abounded that Britain might have to devalue the pound because its reserves are so low—and that the U.S. would then inevitably have to devalue the dollar to remain competitive on world markets—the French action seemed to be an attempt to bother both currencies. De Gaulle clearly felt that by throwing his weight into world money markets, he could increase the franc's value against dollars and sterling, dramatize the shortcomings of the international monetary system, which France has long criticized, and show the U.S. that it will have to cut farther into its gold supply to finance the continuing takeovers of French firms by U.S. companies.
Genuine Scare. A few weeks ago, De Gaulle instructed Finance Minister Valery Giscard d'Estaing to strike the U.S. on its soft, golden underbelly. Giscard undertook the task with some pleasure: he was still smarting from his rebuff by U.S. and British moneymen at last fall's meeting of the International Monetary Fund in Tokyo, where he tried to get the IMF to adopt a new international currency based on gold that would favor the French. During last month's British money crisis he also got a genuine scare that both the pound and the dollar might be devalued, leaving France holding a billion-dollar bag of cheap currency.
In launching his latest economic offensive, De Gaulle at first wanted to change as many dollars as possible into gold. Some influential supporters egged him on, and he was likely influenced by the ideas of French Economist Jacques Rueff, who has long lobbied for a worldwide return to the gold standard, and of Foreign Minister Couve de Murville, who can always use another weapon to supplement France's increasingly independent foreign policy. But more moderate minds persuaded De Gaulle against such drastic action, and what started out as a reported $1 billion conversion, in rumors leaked to the press by the foreign ministry, wound up as a $300 million operation—with perhaps more to come.