54. Editorial Note

At the 439th meeting of the National Security Council on April 1, the subject of the balance of payments arose during Director of Central Intelligence Allen Dulles’ briefing of the Council on significant world developments. The relevant portion of the memorandum of discussion by Deputy NSC Executive Secretary Marion W. Boggs, dated April 2, reads as follows:

“Secretary Anderson reported that the West Germans were embarrassed by their large holdings of foreign exchange. Consequently they have sent $600 million to the U.S. as an advance payment on their mutual security obligations. This sum has been invested in short-term U.S. Government securities. By contrast, the U.K. is becoming sensitive to its losses of foreign exchange. The U.K. Government was considering inserting a statement in the next Budget Message that the U.K. held $800 million to a billion dollars worth of U.S. industrial securities. It had not yet been decided to make such a statement because of its possible effect on the stock market and because the Laborites might say to the Government ‘Why were not these securities sold last October when their value was greater than at present?’ The President wondered whether it was not to our advantage to have funds such as those sent here by West Germany invested in our securities. Secretary Anderson said these funds would be invested in our securities even if held by the Germans until payments were due. In response to a question from Mr. McCone, Mr. Dillon said that the German reserves of foreign exchange amounted to $5 billion. Secretary Anderson said the Germans were shying away from foreign assistance programs because a large proportion of any sum which they provided in assistance to underdeveloped countries would be spent in West Germany. Germany preferred to lend money to underdeveloped countries if the money would be spent elsewhere than in West Germany. Secretary Anderson said the advance payment by West Germany on its mutual security obligations had raised the question in his mind whether we should suggest that various other European countries take similar action. The President thought it might be desirable to make such a suggestion. Mr. Stans said advance payments by European countries on their mutual security obligations before June 30 would be very helpful. Secretary Herter asked when these mutual security payments were actually due. Secretary Anderson replied that the payments were due when Defense delivers the equipment. Mr. Dillon said various countries were buying military equipment from us for cash; the West Germans had simply put up the cash in advance of receiving the equipment. Secretary Anderson said that as a matter of bookkeeping, the West Germans could show their advance payment as a payment made, but we could not show it as a payment received until we made the necessary deliveries of military equipment.” (Eisenhower Library, Whitman File, NSC Records)