‘Everybody Else Is Out Of Step’

In 1971 the dollar rate was at its minimum support points most of the time in relation to several currencies, and the Central Banks of the countries concerned had to buy up hundreds of millions of dollars week after week to prevent its depreciation. The financial assistance which most Western European countries and Japan had received from the United States on an unprecedented generous scale came to be reciprocated by these countries by their willingness to buy virtually inconvertible devaluation-prone dollars and to abstain from insisting on the conversion of their dollars into gold. Even the Bank of France, having converted under the de Gaulle regime most of its dollars into gold, was prepared to hold the dollars obtained through France’s current influx of dollars. Both the Bundesbank and the Bank of Japan accumulated, very much against their wish, very large dollar reserves. This in spite of the certainty that they would suffer eventually a loss on their holdings, either as a result of a depreciation or devaluation of the dollar or as a result of an appreciation or a revaluation of their own currencies. The increase of the Bank of England’s reserve assumed largely the form of dollar holdings.