1946–51: Reconstruction at the Expense of the Currency

  • Jean Pierre Patat
  • Michel Lutfalla


The years 1945 to 1951, often called the period of reconstruction, were obviously very difficult. The French economy had to add the handicaps which it knew before the war, industrial decay and malthusianism, to those which the ordeals of the conflict had brought. But the ‘muted sadness at the bottom of the national consciousness’1 acted as a spur; and those in charge of the economy were not going to commit the errors which their predecessors had made in the aftermath of the First World War. From the beginning there was no question of seeking a rapid return to the mechanisms of liberalism; this would be criticised ex post by economists analysing the facts in isolation 30 years later, but it avoided wide conjunctural fluctuations; moreover, priority was given to capital equipment rather than to consumption. The planners imposed an orientation in this direction which was not obvious at the time.


Monetary Policy Discount Rate Foreign Exchange Budget Deficit Treasury Bill 
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  1. 1.
    de Gaulle (1954–59, vol. 3).Google Scholar
  2. 2.
    Moreover, the fiduciary circulation was no longer limited by a legal ceiling, this concept having disappeared as we have seen with the nationalisation of the Banque de France.Google Scholar
  3. 3.
    The banks had to keep a portfolio of government securities (Treasury bills and Crédit National acceptances) equal to at least 95 per cent of its value on 30 September 1948, plus 20 per cent of the variation in their monetary liabilities to the public (sight deposits, quasi-money, miscellaneous creditors).Google Scholar
  4. 4.
    Order of the General Council of the Banque de France, 11 May 1944, by which the Institut d’Emission accepted into its portfolio loans with a term of five years, whereas its original statutes limited to three months the maximum term for the credits which it could hold.Google Scholar
  5. 5.
    Two rates were then instituted, the minimum rate (for export credits, cereal stock credits and Treasury bills) and the maximum (for financial credits and medium-term refinanceable credits). This system was abolished in September 1948.Google Scholar
  6. 6.
    The facilities for lending by the Banque de France were, however, substantially increased:Google Scholar
  7. 7.
    Two credits of $650 million, at 15 and 20 years, agreed on 4 December 1945 and 16 July 1946 by the Export-Import Bank; a credit of $235 million, at 20 years, agreed by the Canadian government on 9 April 1946; $125 million from the IMF in 1947; and in the same year $250 million from the IBRD without specific allocation, which was not in accordance with the regulations of that institution. A certain number of bilateral agreements were also concluded with France’s European partners.Google Scholar
  8. 8.
    A measure which was not welcomed by the representatives of French employers, who thus became entirely responsible for future rises.Google Scholar
  9. 9.
    However, this rate increased by 1 per cent per month.Google Scholar
  10. 10.
    The derestriction of industrial prices had allowed the restoration of the margins and of the profitability of the sectors which were the driving forces of industry; the ‘scissors’ between agricultural prices, which up to then had been very high, and the particularly low industrial prices had been partly closed.Google Scholar
  11. 11.
    The option was that of either paying a tax on profits or on a percentage of turnover, or of subscribing to a loan.Google Scholar
  12. 12.
    Since June 1949, when a reform of the methods of operation of the Fonds de Stabilisation des Changes (FSC) was introduced, the movements of gold and foreign exchange have effectively exerted, according to their direction, a fully expansionary or contractionary impact on the money stock; the balance sheet diagrams below summarise the effect of the two methods of managing the Fund.Google Scholar
  13. 13.
    When the banks created FFrlOO of money, they suffered a ‘leak’ of banknotes of FFr57; before the war this ‘leak’ was less than FFr40 (except after the Munich crisis).Google Scholar
  14. 14.
    The individual ceilings thus determined were originally fixed at a total of FFr175 billion, that is, about 30 per cent of bank credits. Bills for medium-term discountable credits were considered as outside the ceiling.Google Scholar
  15. 15.
    In addition the maximum term for export credits which refinanced claims arising from deliveries made to customers abroad was raised from two to five years; the rapid expansion of this type of credit was thereby considerably strengthened.Google Scholar
  16. 16.
    They continued to increase during the early months of 1951; in view of these results and the conversion of dollars into gold which the government was effecting (thus well before General de Gaulle!), the American government was wondering about the appropriateness of continuing with Marshall Aid.Google Scholar

Copyright information

© David Cobham and Patrick Martindale 1990

Authors and Affiliations

  • Jean Pierre Patat
  • Michel Lutfalla

There are no affiliations available

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