Squeeze-Out

A bell clanged on the Paris Bourse and a trader cried: "Buying dollars for 314." Another trader nodded: "I sell $25,000." With this simple transaction, France last week opened its first free legal money market in dollars in eight years. There were few sellers. The Bank of France, virtually the only buyer, bought a mere $150,000 the first day. By week's end, the dollar had inched down from 314 francs to 304, slightly under the black market price.

After the hue & cry over devaluation (TIME, Feb. 9), the trading was anticlimactic. The British and French governments took pains to keep it so, In the black market, the pound was selling for only 750 francs (little more than $2), compared with the official rate of 864 francs (official dollar price: $4.03). To keep cut-rate pounds from being used to buy British exports, Britain set up a new control system in Paris to make sure only pounds bought at the official rate were used in Anglo-French trade. The Dutch and the Belgians were expected to follow the British lead--in effect, consign France to a monetary isolation ward.

American Eagle. The free market in gold in Paris was also opened last week with little fanfare, though the price of gold was skyhigh. Example: an old U.S. double eagle $20 gold piece was quoted at 18,000 francs, three times the value of a $20 bill. In effect, gold was selling for $60 an ounce.

There was grumbling over the third devaluation measure of Finance Minister Rene Mayer--the calling in of all 5,000-franc notes. One farmer burned his, rather than turn them in and invite questioning. Black-marketeers and others, forced for the first time to disclose their holdings, scurried around selling their excess notes for as little as 200 francs. But honest Frenchmen lined up with their 5,000-franc notes and turned them in.

Those with small sums were paid off at once in smaller bills. Big accounts were frozen; how or when they will be paid off, Mayer has not decided. At week's end, Mayer estimated that all of the 330 billion worth of 5,000-franc notes, one third of all currency outstanding, had been turned in or destroyed, and much water squeezed out of the currency inflation.

American Help. It was still too early to tell whether Mayer's drastic program would boost exports, stop domestic inflation, and bring hoarded gold and dollars out of hiding to bolster the country's monetary system. Said Mayer: he would need about four months before he could tell whether the program would work.

The U.S. gave him some help. Secretary of the Treasury John W. Snyder last week gave in to French demands for a look at bank accounts of Frenchmen in the U.S. U.S. bankers grumbled at this violation of depositors' confidence. This would enable the French government to lay its hands on perhaps $300 to $400 million by forcing the holders to turn them in for francs.

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