89. Letter From President Ford to West German Chancellor Schmidt1
Dear Mr. Chancellor:
The Ministerial Meeting of the IMF Interim Committee next week presents an important opportunity to move the international monetary [Page 297] system forward. At the same time it is an opportunity for a responsible reaction to the current needs of a number of seriously affected less developed countries. It is my understanding that our Ministers of Finance may be close to agreement on a comprehensive package achieving these ends, but I am informed that disagreement on one aspect of future rules concerning gold could stand in the way of such an agreement.
For our part we have tried very hard to modify our position so as to facilitate an agreement. In recognition of possible political concerns of the French government we have this week reluctantly indicated that we will withdraw our previous insistence that no individual government in the future should increase its holdings of gold if that concession will suffice to reach an over-all agreement. On the other hand, we—and I believe a number of other countries—do feel strongly that some safeguards are necessary to ensure that a tendency does not develop to place gold back in the center of the system. We must ensure that there is no opportunity for governments to begin active trading in gold among themselves with the purpose of creating a gold bloc or reinstating reliance on gold as the principal international monetary medium. In view of the world-wide inflation problem, we must also guard against any further large increase of international liquidity. If governments were entirely free to trade with one another at market-related prices, we would add to our own common inflation problem.
Of course, we must ensure at the same time that gold is not immobilized. Any government faced with an extreme financial need must be able to sell its gold to another government. We propose, therefore, that the 10 major countries agree that no one of them will purchase gold from another government unless the selling government is faced with needs arising from an extreme financial position. In my judgment that rule would give ample flexibility for all legitimate future trading of gold, while giving a reasonable protection against abuse of the newly established freedom for governments to buy gold.
I would urge you to give this important matter your personal attention in the hope that your representative at these meetings could be in a position to agree to arrangements along this line. If you are available to meet with Secretary Simon on Monday morning, June 9, I would be glad to have him visit you and Minister Apel at that time for further discussion of the matter. If you would like to have President Klasen present, Chairman Burns would also be prepared to fly up from Basle to join the meeting. They would, however, have to leave Bonn in time to reach the scheduled meeting of the G 5 Ministers in Paris at 1:00 p.m. Secretary Simon would, of course, be delighted to have Minister [Page 298] Apel, President Klasen and other members of the German Delegation join him for the flight to Paris.2
Sincerely,
- Source: Ford Library, National Security Adviser, Kissinger–Scowcroft West Wing Office Files, Box 36, West Germany—Egon Bahr Correspondence, Unindexed (5) (4/28/75–7/3/75). No classification marking. Attached to a June 5 memorandum from Seidman to the President that reads: “The attached letter represents the agreed upon position of the Federal Reserve Board, the Treasury Department and the State Department with respect to the gold position presented to you yesterday. It is their recommendation along with that of Alan Greenspan that it be signed and sent out today.” A meeting on gold took place in the Cabinet Room on June 5 from 12:42 to 1:30 p.m. In attendance were President Ford, Simon, Kissinger, Seidman, Burns, Scowcroft, Hormats, Porter, Lynn, Director of the Presidential Personnel Office Douglas Bennett, and Counselor John O. Marsh, Jr. (Ibid., President’s Daily Diary) No other record of this meeting has been found.↩
- On June 6 at 5:51 p.m., Kissinger spoke to Enders on the telephone and criticized him for having “cooked up a letter to Schmidt without telling me.” Enders took responsibility for sending the message without Kissinger’s approval, saying that he had “assumed it was alright after that memo I sent you last week.” Kissinger told Enders that while he approved of the letter’s content, he did not approve of its tactics: in particular, Kissinger said that he “would never send Simon for serious negotiations with Schmidt.” “You do not understand what I want Schmidt to do with Simon,” Kissinger told Enders, “It is not to conduct serious negotiations.” When Enders told Kissinger that Schmidt had not yet replied, Kissinger noted, “The fact that it is a Presidential letter makes it high power.” Enders responded, “Well, we have a fair size interest in preventing a gold bloc. It is a question of which Europeans could coalesce three or four years from now.” Kissinger retorted, “Three or four years from now is a long time. Well it is done now.” (http://foia.state.gov/documents/kissinger/0000CF5A.pdf)↩