Back Matter
  • 1 https://isni.org/isni/0000000404811396, International Monetary Fund
  • | 2 https://isni.org/isni/0000000404811396, International Monetary Fund

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  • Janssen, Richard F., “Some Nations Secretly Promise U.S. They Will Avoid Buying Our Gold”, The Wall Street Journal, March 20, 1967.

  • Jay, Peter, “Franco-German Move Brings Liquidity Split”, The Times, (London), September 27, 1967.

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  • Mooney, Richard E., “I.M.F. Aid Accord Will Be Renewed”, The New York Times, May 16, 1965.

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  • Williams, John, 1943, 1969b. Extract fromCurrency Stabilization: The Keynes and White Plains.In Horsefield 1969, pp. 24127.

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Unattributed Newspaper Articles

  • “Post-War Financing for World Proposed by French Economists,” New York Times, Sunday May 9, 1943.

  • “Post-War Financing for World Proposed by French Economists,”, “French Experts Attribute U.S. Gold Losses to Political Uncertainty”, The Journal of Commerce, September 29, 1960.

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  • “Post-War Financing for World Proposed by French Economists,”, “French Bought U.S. Gold for Payoff of Fund Loan”, The Journal of Commerce, November 4, 1960.

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  • “Post-War Financing for World Proposed by French Economists,”, “The New Club”, The Financial Times, December 14, 1961.

  • “Post-War Financing for World Proposed by French Economists,”, “M. Rueff’s Plans to Help French Economy”, The Financial Times, March 6, 1963.

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  • “Post-War Financing for World Proposed by French Economists,”, “France Rejects Change in the World Monetary System”, The Financial Times, May 7, 1963.

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  • “Post-War Financing for World Proposed by French Economists,”, “Les Dix vont faire à Paris le point de leurs premiers travaux”, Le Monde, 15 Décembre 1963.

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  • “Post-War Financing for World Proposed by French Economists,”, “Bank of U.S. and France Agree to $50 Million Currency Swap”, The New York Times, June 11, 1964.

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  • “Post-War Financing for World Proposed by French Economists,”, “Le discours de M. Giscard d’Estaing á la conference de Tokyo”, Agence économique et financière, 10 Septembre 1964.

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  • “Post-War Financing for World Proposed by French Economists,”, “Maudling Assails Stand by France”, The New York Times, September 11, 1964.

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  • “Post-War Financing for World Proposed by French Economists,”, “France Defends Gold Purchases”, The New York Times, January 13, 1965.

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  • “Post-War Financing for World Proposed by French Economists,”, “France Restates Monetary Stand”, April 20, 1966.

  • “Post-War Financing for World Proposed by French Economists,”, “The World’s Money”, The Financial Times, August 11, 1965.

  • “Post-War Financing for World Proposed by French Economists,”, “French Compromise Plan for Liquidity Reform?”, The Financial Times, December 31, 1966.

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  • “Post-War Financing for World Proposed by French Economists,”, “U.S. Proposes CRU System for 1st Time”, The Journal of Commerce, February 1, 1966.

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  • “Post-War Financing for World Proposed by French Economists,”, “La France affirmera son hostilité à tout systeme monétaire qui donne des privilèges au dollar”, Le Monde, 5 Mars 1966.

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  • “Post-War Financing for World Proposed by French Economists,”, “France Restates Monetary Stand”, The New York Times, April 20, 1966.

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  • “Post-War Financing for World Proposed by French Economists,”, “France Gives Way on Monetary Reform”, The Times (London), September 13, 1966.

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  • “Post-War Financing for World Proposed by French Economists,”, “No yielding by M. Debré on liquidity reform”, The Financial Times, September 28, 1966.

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  • “Post-War Financing for World Proposed by French Economists,”, “France Proposes Broad Gold Study”, The New York Times, November 30, 1966.

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  • “Post-War Financing for World Proposed by French Economists,”, “Gold to Stay $35.00, U.S. Tells France”, The New York Times, January 11, 1967.

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  • “Post-War Financing for World Proposed by French Economists,”, “Common Market Rejects French Effort to Bring Gold Price Into Talks”, The Wall Street Journal, January 18, 1967.

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  • “Post-War Financing for World Proposed by French Economists,”, “France Proposes Rise in Common Market’s Voting Power in IMF”, The Wall Street Journal, January 20, 1967.

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  • “Post-War Financing for World Proposed by French Economists,”, “Paris Denies Buying Gold During Rush”, The Washington Post, November 26, 1967.

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  • “Post-War Financing for World Proposed by French Economists,”, “Un Janus Monétaire”, Le Monde, 29 Aout 1967.

  • “Post-War Financing for World Proposed by French Economists,”, “A French Faux Pas?”, The Journal of Commerce, November 6, 1967.

  • “Post-War Financing for World Proposed by French Economists,”, “U.S. Gold Drain Slowed Sharply During January”, The Wall Street Journal, February 29, 1968.

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  • “Post-War Financing for World Proposed by French Economists,”Tous les vingt-cinq ans, la définition des monnaies par rapport à l’orpourrait être revisée d’un commun accord, déclare M. Michel Debrédevant la presse économique, Le Monde, 6 Avril 1968.

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1/

Michael D. Bordo is a Professor of Economics at Rutgers University and was a visiting scholar in the Research Department. Dominique Simard is an assistant Professor of Economics and Eugene N. White is Professor of Economics at Rutgers University. For helpful comments and suggestions, we would like to thank Stanley Engerman, Adam Klug, David Llewelyn, Jacques Melitz, Alan Milward, Jacques Polak, Leslie Pressnell, Angela Redish, Hugh Rockoff and Pierre Sicsic. Able research assistance was provided by Jakob Koenes.

2/

For a discussion of the Plans and of the literature on the origins of the Bretton Woods conference see Bordo (1993).

3/

The French accepted but did not applaud the Bretton Woods Plan. In a speech at the Sorbonne in 1944, André Istel hedged whether the plan would achieve its goals of recovery, growth and stability, allowing it to be “a remarkable and constructive effort. In general it is by successive iterations by error and adjustments, that most of humanity’s great tasks are accomplished” (Istel, 1944, p. 6).

4/

During the war, de Gaulle tried to steer clear of conflicts in his camp between socialists and liberals over economic policy. Rather than formulate policy, he stated it would be decided after liberation. (Kuisel, 1981, pp. 160-161)

5/

A similar plan which received considerable attention at the time, but was never seriously considered by the negotiators at Bretton Woods, was John Williams’ Key Currency plan (1936, 1943). Williams would have had the U.S. and Britain follow the experience of the Tripartite Agreement of 1936. In the Williams plan, the monetary authorities of the U.S. and Britain would have set up a joint Exchange Stabilization Fund to stabilize the dollar-pound exchange rate. The two countries would also have co-ordinated their monetary policies to maintain full employment. Other countries would initially be allowed to float until their currencies could be stabilized in terms of the key currencies. Ultimately, the world would evolve into a key currency system with other countries using the key currencies to finance payments imbalances.

6/

Two prior conferences, the Brussels International Financial Conference in 1920 and the Cannes Conference in 1922, had considered, but in less detail the design of a gold-exchange standard.

7/

“IMF statistics show that…in January of 1959 France’s gold reserve stood at $812 million. In September of this year the French gold stock had risen to $1,627 million. French short term dollar assets in the meantime rose from $656 million in the first quarter of 1959 to only $726 million in mid-1960.” (The Journal of Commerce, 11-4-60)

8/

He made two additional points: (1) automatic rigid solutions like the proposed scheme should be avoided, (2) automatic compensation of capital movements might entail a danger of widespread inflation. (The Journal of Commerce, 9-21-61)

9/

“The stability of (the international monetary system) is giving rise to two problems different in nature and chronologically distinct. The first concerns the pressure brought to bear of late on certain currencies, especially those whose traditional role is to make international reserves. The second is that of ascertaining whether there exists a satisfactory relationship between international liquid assets and the quantity of transactions they allow. It is obvious that the terms of these problems are different. It is no less clear that the first is a source of present concern whereas the other pertains to the future. As far as recent differences are concerned, they seem to proceed less from the concept of the international monetary system than from problems peculiar to certain currencies. Their solution must be sought in the practical rather than the theoretical field. To my mind, international monetary equilibrium results from the sum of balanced individual currencies as does any equilibrium. Individual balances have to be strengthened. If anything is beyond imagination, it is to alter the concrete terms of a problem. No expedient or aid or compensatory device can dispense with the initial need to balance a currency for any length of time.” (Giscard D’Estaing, 9/18/62)

10/

“monsieur Giscard d’Estaing a declaré à l’Assemblée Nationale à propos de l’étalon-or:” II n’y a pas de régime plus dur politiquement, économiquement et socialement, car il signifie la suppression de tout credit.” (Jeune, Novembre 1963)

11/

Under the Bernstein Plan, each member of the G-10 (plus Switzerland) would subscribe an amount of its own currency to a pool and receive in exchange a corresponding amount of CRU’s, which could then be used as equivalent to gold. Each country would hold reserve units totalling at least one half of its gold reserves. (Bernstein, 1963, pp. 1-8)

13/

“I find it difficult to believe that President de Gaulle has really reversed the position of France in this respect, and has now rallied to the views of Jacques Rueff, … one of the most prominent proponents of a return to a pure gold standard. Such views were well known by de Gaulle six months or a year ago as they are now, and he has completely rejected them at the time. His speech of February 4 specifically refers not only to gold, but also to the studies and negotiations now under way in the IMF and the Group of Ten to organize, on a more solid and appropriate basis, the international credit system necessary to complement gold metal in the renovated gold standard which he envisages as a substitute for the present gold exchange standard.” (Triffin 1965)

14/

“The (Bretton Woods international monetary) system has gradually changed in nature and has become a system characterized by the holding of very large amounts of a single currency. We therefore found ourselves placed again (as in the aftermath of the international monetary system designed at the Genoa conference), without anyone probably realizing it clearly, on a sort of de facto gold-exchange standard, consisting in holding substantial amounts of the currency of a single State.” (Valéry Giscard d’Estaing (1965))

15/

“The most simple way (of collective reserves creation envisaged by us), and one which would enable the device to be gauged forthwith, would be the deposit solution. These cross-deposits would guarantee the operation to begin with and illustrate the reference to gold in the scheme. This reference would re-emerge in the distribution of these reserve units when carried out in proportion to the holdings in gold. These units would replace gold to some extent in all uses between member countries. Everything would be enacted as though central-bank settlements were affected in equal amounts by collective reserve units and gold. This would lead back to the inspiration of Genoa by a roundabout way. What the Genoa conference sought to do and wisely so was to economize on the use of gold. Its efforts were unsuccessful and it would be needless for me to hold yet another postmortem. They were unsuccessful because the idea of economizing on gold was distorted into a substitution for gold in its monetary uses of currency which did not hold out the same conditions of stability and creation.” (Giscard d’Estaing, 1965)

16/

In particular, the report focused on the four main political problems which had to be solved before any reform of the monetary system could be brought about: (1) Should there be a link between a new reserve asset and gold, and how close should it be? (2) Should a new reserve asset be confined to a limited group of industrialized countries, like the Group of Ten or extended to all IMF members? (3) Should the new reserve asset be created through the IMF or independently? (4) Should decision-making on the use and distribution of the new asset be based on unanimity or some form off majority voting? (The Financial Times, 8-11-65).

17/

However the French Finance Minister, Michael Debré said “he couldn’t accept the agreement’s implied hypotheses that money creating machinery should be established before the United States payments had been in balance for a lengthy period of time, (The Washington Post, 07-27-66).

18/

The distinction between a CRU arrangement whereby the reserve unit could be issued in proportion to a member’s gold holdings and a special drawing right whose value could be defined as a specific weight in gold was not made.

19/

According to Solomon (1982, pp. 128-129) the U.S. CRU plan was part of a ‘dual approach’ to reserve creation by the Dillon Committee of the U.S. Government. The other strand emphasized the creation of a new reserve asset in the form of increased automatic drawing rights at the IMF.

20/

On February 5, 1966, it was reported in The Washington Post that French negotiators had been instructed to press as hard as possible for the most conservative solution. On March 5, 1966, it was reported in Le Monde that de Gaulle had met the previous Friday at the Elysée Palace with Pompidou (premier), Couve de Murville (minister of international relations), Debré and Jacques Brunet, governor of the Bank of France. The President declared that the CRU project had to be abandoned, at least temporarily. On March 8, 1966, during a meeting of the G-10 in Paris, French officials took the position that the only aspect of international finance that could be fruitfully discussed at the present time was the U.S. balance of payments situation. On April 20, 1966, in an article of The American Banker, Debré restated France’s monetary stand. After repeating the usual French criticisms of the dollar-exchange standard, brushing an historical portrait of France’s recovery and reminding the world of the colossal amount of reserves accumulated by France, he asserted the following: “To the French Government balance of payments deficits and surpluses should be settled in £old, the only reserve instrument that has a universally recognized and unquestioned objective value.” (reported in The New York Times, April 20, 1966)

21/

On September 27, 1966, the salient points of Debre’s speech were the following: (1) No monetary system could be based on anything but gold, (2) The U.S. dollar was seeking to replace gold and should be stopped from doing so, (3) There was an overall excess of international liquidity which threatened inflation on a global scale. In addition, he said that the gold exchange standard system had been seriously perverted because an attempt was being made to bring it systematically to the level of a world-wide rule to the benefit of a single currency. He claimed that the gold exchange standard seemed to be dangerous since there was no corrective mechanism to offset the deficit of certain reserve currencies. He concluded his expose by saying that, in short, the incessant issue of reserve dollars provoked an unlimited outflow of capital and that this situation caused a world wide inflationary trend which casted a growing shadow on the future. The cure was a respect for fundamental equilibria and the acknowledgement of gold as an international currency (The Financial Times, September 28, 1966).

22/

Mr. Pérousse said the reform of the international monetary system demanded that “different means should be explored” and added that the problems of gold had not been the subject of sufficiently deep studies. Pérousse also said that the creation of new reserves would be justified only in the case of a real need for extra reserves and “if it was not possible to meet the requirements by other means. As well, he added that “Even if we now base our reasoning on a theory of the maintenance of the price of gold unchanged for a generation, which has seen changes in all other prices, it seems adventurous to imagine in what circumstances such a need may crop up in the future.” Pérousse also called for the following: multilateral surveillance in new fields such as: (1) condition of issue and (2) holding and circulation of reserve currencies. This was interpreted by observers as centering on the interest paid on dollars, one of the reasons why central banks maintained dollar reserves as opposed to gold. He also urged that in Washington, negotiators agreed to French demands to put gold on the agenda (The New York Times, November 30, 1966).

23/

The market of Napoléons—favorite coin among the Frenchmen who hoard gold—rose that day to a fifteen year high of 50.4 francs (almost $10.24) (The New York Times, January 10, 1967).

24/

On January 10, 1967, the U.S. Treasury issued the following statement. “The price of gold is determined by its relationship to the U.S. dollar. This relationship has been fixed at $ 35.00 per ounce since 1934 and will remain there. Any suggestion that the price of gold be raised—either to meet the needs of international liquidity or for any other reason—is completely unacceptable to the United States. Further international monetary arrangements must be based on this fact. This has been made clear to French financial authorities.” (The New York Times, January 11, 1967)

25/

Consider the following excerpts from his speech: “Le dollar et la livre sterling ne devraient avoir un rôle à jouer que dans la mesure oú ces monnaies servent de complément à l’or. Il est normal que le dollar et la livre sterling aient un rôle à jouer…. La base du système est en fait le respect de l’étalon-or, comme d’ailleurs au lendemain de la deuxieme guerre mondiale, les experts réunis à Bretton Woods l’ont affirmé…. Il est possible (mais je dis seulement il est possible) que le retour a un système, considérant que l’or est la monnaie de base des échanges internationaux, la monnaie élémentaire pour les réserves des banques centrales, fasse qu’on aboutisse à reconsiderer le prix de l’or”…”Ce que nous souhaitons, c’est qu’on établisse les rapports monétaires entre les nations sur une monnaies distincte, tout à fait distincte, des politiques nationales de chacun.”…”…on établit un equilibre économique entre les nations et leurs coopération politique dans le respect de leur souveraineté.” (Revue de la chambre de commerce française au Canada, février 1967)

26/

“One influential school of thought inside the French government is sympathetic to Mr. Rueff’s plan for doubling the price of gold and would like this to be used as a bargaining counter with the British on the Common Market issue. But another, more orthodox, group—strongly entrenched in the Finance Ministry and the Central Bank—are, like their colleagues in other countries, deeply opposed to any radical international monetary upheaval. Members of this group would probably like to see the French government use its bargaining position to extract better terms in the discussions now going on in the Group of Ten on the creation of a new paper international reserve unit.” (Brittan, January 2, 1967)

27/

Voting inside the IMF required then a 80 percent majority. As the U.S. had 22.29 percent of voting rights, the 5 Common Market nations currently had a total of 16.84 percent of voting rights. France’s suggestion was to increase this to over 20 percent, so that the Common Market nations, as long as they took a common line, would also have had veto powers. They could thus block Anglo-American proposals for the creation of a new reserve unit to supplement gold, dollars and pounds. (The Wall Street Journal, January 20, 1967)

28/

On April 16, 1967, an apparent softening of the French position was reported. The French proposed that: when the U.S. would balance its international balance of payments and if a shortage of world liquidity developed thereafter, there should be an increase in borrowing rights at the IMF and a portion of these rights could be exercised automatically. The detail of the new French position was approved on the previous Thursday by de Gaulle in a top level strategy session at the Elysée Palace, in anticipation of the Munich meeting of the common market countries on April 17, 1967. (The New York Times, April 17, 1967)

29/

The meeting of the G-10 countries in Paris revolved around the problem of controlling a new reserve asset, which the Common Market countries wanted to take the from of additional drawing rights on the IMF. To make it of any value at all the new unit had to be available for settling international debts, though the French were anxious to prevent it from being used to finance persistent balance of payments deficits. In addition, the French, favoring some kind of repayment obligation, demanded that the new unit be considered more like credit than money. (The Financial Times, May 22, 1967)

30/

This decision was officially announced by the French Information Minister Georges Gorse on November 25, 1967. He said that “the decision taken by the Bank of France not to give new contributions to the gold pool “had been decided (in) June and then communicated to the other central banks. The Bank of France estimated that it was appropriate to limit its contributions to a ceiling fixed by common agreement on that date and should not commit itself beyond that.” (The Washington Post, November 26, 1967)

31/

In actual fact, the French were not successful in making the elimination of the U.S. deficit a condition, but the procedures were so designed as to give the European Economic Community a veto over the timing and amount of any SDR allocation. (Dam 1982, pp. 165-66)

32/

“Mr. Fowler said that if the proposals for the reform of the Fund put to the Executive Directors were controversial and involved a change in voting rights, it was certain that they could not be expected to put forward specific proposals next year. (The resolution under debate calls for proposals by the end of next March.)” (Fisher, September 27, 1967)

33/

In fact, France had no intentions of devaluing its currency. On November 22, Debré appeared on national television to reassure the French of their government’s intentions after the devaluation of the sterling. He declared that there was no need for a devaluation of the Franc because only one tenth of France’s trade was with Britain and that, furthermore: (1) the devaluation of the sterling was moderate, (2) France was strong, (3) the Common Market excluded the possibility for member countries to devaluate their currencies. (Tanner, November 23, 1967)

34/

“Dealers at the Paris Bourse made a rush on the gold market today as a safeguard against a possible devaluation of sterling. They bought 12,270,000 francs ($2,454,000) almost three times the amount traded yesterday. Buyers of gold were holders of sterling and of other European currencies that would have to follow suit if the pound was devalued.” (Tanner, November 18, 1967)

35/

In London, “The current buying of gold as an apparent hedge against dollar devaluation soared on Tuesday, reached a record yesterday and intensified further today. Demand was said to have been in excess of that either during the Cuban missile crisis of 1962 or the Middle East was last June” (Lee, November 24, 1967). Meanwhile, the volume of trading on the Paris gold market represented about ten times more activity than during a normal trading session. (Farnsworth, November 24, 1967)

36/

At the end of January 1968, as reported by the Federal Reserve Board, the total U.S. gold stock was at $12,003,000,000 down about $1,200,000,000 from a year before and at the lowest level since 1936. (The Wall Street Journal, February 29, 1968)

37/

Our emphasis.

38/

This was a clever way of pressuring the remaining common market countries since they would lose their veto power with the IMF at the time of implementation of the new liquidity scheme if the French opted out of the implementation of the new liquidity plan. (Fabra, February 29, 1968)

39/

Despite the fact that France was no longer a participant to the gold pool, its importance on financial markets should have dictated its presence at these meetings. It was said that France was excluded from these Washington meetings due to its pattern of consistently leaking news to Le Monde (Heinemann, March 19, 1968). Indeed, “On the crucial Monday following the devaluation of the pound, Paul Fabra, one of the financial editors of Le Monde printed the highly confidential figures of the loss suffered during the previous months by the gold pool. Since then, he has had exclusive stories, many of them correct, often at precise moments when they hurt American and British policies. But high officials of the French foreign and finance ministries staunchly deny that Mr Fabra’s “leaks” came from any French source. They countercharge that the information must have come from other European sources.” (Tanner, March 24, 1968)

40/

As usual, that strategy was effective. The reply of Secretary Fowler to Debré’s speech “was taken to imply that the American delegation would be willing to drop its opposition to European demands for more stringent voting rules on major IMF decisions, so as to give the Common Market countries a blocking vote-provided the French made corresponding concessions on their side.” (Davidson, March 30, 1968)

41/

“La France a donc décidé de ne pas entériner les propositions faites à Stockholm bien que sur plusieurs points la thèse française ait été entendue.” (Le Monde April 6, 1968)

42/

“Au total, le système monétaire que M. Debré esquisse ainsi n’est pas tellement différent de celui qui a été mis en place à Bretton Woods. Il ressemble en tout cas beaucoup plus au Gold Exchange Standard-correctement joué- qu’à l’étalon-or cher à M. Rueff. Et si le ministre de l’économie rejoint 1’académicien dans son nouveau refus d’une démonétisation de l’or comme d’une monnaie-marchandise Internationale, il s’en éloigne sérieusement en ce qui concerne la réévaluation de l’or envisagée.” (Mathieu, April 6, 1968)

43/

Under the gold-dollar standard, as long as the U.S. government was willing to intervene in the gold market to stabilize the price of gold at $35.00 per ounce, speculation against the value of the dollar was a onesided bet where there were potential gains (should the United States stop pegging the value of the dollar in gold) and virtually no losses.

44/

The dollar standard regime collapsed in 1971 as a result of the highly inflationary monetary policies pursued by the United States from 1968 until 1971.

France and the Breakdown of the Bretton Woods International Monetary System
Author: Ms. Dominique Simard, Michael D. Bordo, and Mr. Eugene Nelson White