Foreign Relations of the United States, 1969–1976, Volume XXXI, Foreign Economic Policy, 1973–1976

81. Memorandum From Edwin Truman of the Federal Reserve System Board of Governors Staff to the Chairman of the Federal Reserve System Board of Governors (Burns)¹

Washington, December 18, 1974.

SUBJECT

• Under Secretary Bennett on the Discussions of Gold in Martinique

At the International Monetary Group meeting on December 17, attended by Governor Wallich, R. Solomon and me, Under Secretary Bennett gave a report on, and an interpretation of, the discussion of gold issues with the French in Martinique.

1. Purpose of the discussions

a. No effort was made to tie down an agreement on gold.

b. Any attempt to reach an agreement was left until January.

2. Valuation of gold holdings

a. The French intend to revalue their gold holdings on January 1, 1975, although they have not told their European colleagues yet. The French will neutralize the profits.

b. The United States does not intend to revalue its gold holdings at this time because Congress would want to spend the profits.

c. In Bennett’s view, the agreement in Martinique on this aspect of gold is consistent with the understandings reached last summer—with respect to gold collateral loans.

3. Other aspects of the gold question

a. The French were reported to be in favor of the elimination from the I.M.F. Articles of the official price for gold.

b. The French were reported to be in favor of the elimination from the I.M.F. Articles of the mandatory provisions concerning gold.

c. The French were reported not to be in favor of the removal from the I.M.F. Articles of all mention of gold.

d. The French continue to oppose the sale on the market of the I.M.F.’s gold, although they might favor a “return of such gold to the shareholders.”

e. The French continue to want to remove all restrictions on gold forthwith. On this point, Bennett reported that the U.S. representatives had agreed with the French view for the long run. During a transitional period, the U.S. representatives said, certain safeguards were necessary:

(1) There should be a limit on how much gold a country could buy net from the market; of course, a country could buy back any gold that it had sold to the market. In other words, the limit would apply to how much countries could add to their present stocks of gold.

(2) There should be no cartel agreement to fix the price of gold.

4. The next steps

a. In Bennett’s view the French indicated that they might be prepared to reach a “full agreement” on gold in January, although the thrust of the agreement would be against their basic philosophy. They are particularly concerned with the problems that would be presented because they would have to go before the legislative committee chaired by M. Couve de Murville.²

b. It was suggested that agreement might be reached in which all (major) countries participated with the exception of France. Such an approach would follow the model of the 1968 Washington Arrangements on gold.³

c. The French view is that if no comprehensive agreement can be reached on gold, then all the options must be left open. Bennett admitted that the French might still cling to the view that gold should be a monetary asset.

d. In Bennett’s view the United States should favor more than the elimination from the I.M.F. Articles of the official price and mandatory provisions concerning gold. He said that the French had indicated that “we can work out transitional arrangements” consistent with the U.S. view on the role of gold in the long run.

Comment

It was not clear at the end of Bennett’s report, whether or not the United States favored pushing toward a “comprehensive agreement” on gold at this time. It was also not clear whether or not the United States would favor a less than comprehensive agreement. Several participants in the International Monetary Group meeting expressed concern about an agreement in which the official gold price and mandatory provisions governing gold were removed from the I.M.F. Articles but which left other options open. For example, if the I.M.F. could still accept gold in exchange for currencies or in payment of quota subscriptions, at what “price” would it accept such gold?

1. Source: Ford Library, Arthur Burns Papers, Federal Reserve Board Subject Files, Box B52, Gold, Sept.–Dec. 1974. No classification marking. Copies were sent to Wallich, Solomon, and Bryant.
2. Maurice Couve de Murville was head of the French National Assembly’s Foreign Affairs Committee.
3. See footnote 5, Document 3.