Office of the Historian

189. Memorandum From the President’s Special Assistant (Rostow) to President Johnson1

Washington, March 14, 1968.

SUBJECT

  • Gold

Your senior advisers are agreed:

(1)
We can’t go on as is, hoping that something will turn up.
(2)
We need a meeting of the gold pool countries this weekend in Washington.
(3)
We want to negotiate the following package:
  • —Interim rules on gold.
  • —Measures to keep order in the financial markets.
  • —Acceleration of the SDR’s.
(4)
With the right kind of interim package, we could maintain our gold commitment to official holders.
(5)
If we can’t get this package, we would have to suspend gold convertibility for official dollar holders, at least temporarily, and call for an immediate emergency conference.
(6)
This probably would mean a period of chaos in world financial markets, but it may be the only way to push the others into a sensible long-run arrangement which avoids a rise in the official price of gold. We are unanimously agreed that a rise in the price of gold is the worst outcome.

[Page 537]

The decision you must make now is whether the London gold market should be closed at once.2

(a)
Arguments for closing:
  • —Avoid losing perhaps $1 billion in gold tomorrow (we lost $372 million today).
  • —Such a gold loss would further shake the confidence of central banks and trigger their coming to us for gold.
  • —Makes it easier to arrange an emergency meeting of the gold pool countries this weekend.
  • —Evidence of U.S. decisiveness.
(b)
Arguments against closing:
  • —Involves U.S. taking the lead in throwing in the towel.
  • —Closing the market will strengthen the hand of those who believe the official price of gold will be increased.
  • —May reduce the U.S. bargaining position with the Europeans.
  • —Gives us another fling at the Gold Certificate proposal.
Walt
  1. Source: Johnson Library, White House Central Files, Confidential File, FI 9, Monetary Systems. Secret; Sensitive.↩
  2. President Johnson agreed to the temporary closing of the London gold market on March 14. A statement by Secretary Fowler and Chairman Martin on the closing, March 14, affirmed the U.S. Government’s commitment to continue to buy and sell gold in official transactions at $35 per ounce and indicated that they had “invited the central bank governors to consult with us on coordinated measures to ensure orderly conditions in the exchange markets and to support the present pattern of exchange rates based on the fixed price of $35 per ounce of gold.” For text, see Annual Report of the Secretary of the Treasury … , 1968, p. 370.↩