Political Implications of US‐EC Economic Conflicts (II): Atlantic Trade: Problems and Prospects

Abstract

THE 1960s APPEAR IN RETROSPECT AS THE BELLE ÉPOQUE of the postwar era. The IMF— a Cinderella while convertibility remained limited to the EPU-area—came into its own, as did the GATT with the Dillon and Kennedy Rounds. There were plenty of storm clouds, however. The monetary system, for one, was built on the shakiest of foundations. The gold/dollar parity had been fixed by an Act of Congress at $35 in 1933, a quarter century before convertibility became a reality. Four years after convertibility, in 1962, the gold pool had to be set up: a massive commodity agreement between the six richest countries, with the Bank of England as the buffer stock manager. That agreement limped on to the mid-1960s by the grace of the Russians, whose bad harvests forced them into substantial gold sales. After that, the combined effects of American arm twisting and the hubris of highly dirigiste central bankers shored up the system, until its final collapse in 1971.