Foreign Relations of the United States, 1958–1960, Foreign Economic Policy, Volume IV

56. Memorandum for the Record by the President’s Assistant (Persons)⁰

October 25, 1960.

SUBJECT

• Meeting with the President, Regarding Recent Developments in the London Gold Market, 2:30 p.m., Tuesday, October 25, 1960

PRESENT

• Honorable Robert B. Anderson, Secretary of the Treasury
• Honorable William McC. Martin, Chairman, Federal Reserve Board
• Honorable Julian B. Baird, Under Secretary of the Treasury
• Honorable Wilton B. Persons, the Assistant to the President
• Mr. Alfred H. Von Klemperer, Assistant to the Secretary of the Treasury

Secretary Anderson told the President that the purpose of his visit was to inform him about the recent developments in the London gold market. Prices had reached a peak of about $40.60 per ounce on October 20th, but had receded to a somewhat lower level during the following days. At the time of the visit the quotation was $37.25–$37.75. Secretary Anderson indicated that one important reason for this development had been the continued weakness of the U.S. balance of payments which had induced foreigners to purchase gold both for investment and as a speculation on a possible devaluation of the dollar. A Director of the Bank of England and a representative of the Chancellor of the Exchequer had conferred with Messrs. Anderson and Martin and others on October 25th and there was full agreement with them on the interpretation of the recent events and on the manner in which this situation should be handled in the future. The British representatives understand that the operation of the London gold market was their responsibility, although events in that market are a matter of common interest to all Western Nations because of the psychological effects. British representatives understand that there is and will be no criticism on the part of U.S. officials if they feel that they have to undertake sales of their own gold in order to maintain an orderly market. They will keep U.S. officials closely advised of their actions and there will be future opportunities for mutual exchanges of information.

The President questioned as to whether the Germans, who were obligated to the United States because of past help, should not be asked to go into the London market to bring the price down to $35 per ounce.

Secretary Anderson stressed that as the result of the events in the London gold market we may have to pay out gold for practically all of our balance of payments deficit. He underlined that the basic situation required a strengthening of our balance of payments situation and the need to have this in mind in connection with the U.S. procurement policies of our foreign aid and our foreign military expenditures, especially in Germany where we spend annually over $600 million for military expenses. Mention was made in this connection of the forthcoming visit to Chancellor Adenauer by Messrs. Anderson and Dillon,¹ which the President said should occur as soon as possible and should involve a strong effort on our part. The President feels that these discussions with the Germans, and possibly other Europeans, should be pressed as much as possible while he is in office because of the relationship he has established with the British, French and General DeGaulle on the basis of mutual integrity and trust. He indicated that Prime Minister Macmillan wanted him to come to Europe in December to address NATO and he wondered whether such a meeting, if it did take place, should be used to further our above mentioned objectives.

The President mentioned a newspaper article by Sylvia Porter which had indicated that higher expenditures by the U.S. and a lower budgetary surplus would be beneficial to the country. Messrs. Anderson and Martin discussed this point with the President at some length and, among others, pointed out the unfavorable effect of such policies on the balance of payments.

Wilton B. Persons

0. Source: Eisenhower Library, Whitman File, DDE Diaries. Confidential.
1. The President had proposed sending Anderson and Dillon to Bonn in a letter to Adenauer dated October 7, which called attention to the consistent German balance-of-payments surplus and urged increased German financing for development in the less-developed areas, assumption of some of the cost of U.S. defense forces in Germany, and a larger market in Germany for goods from the United States and the developing countries. Adenauer agreed to a visit by Anderson and Dillon in his reply, dated October 20. Both letters are scheduled for publication in volume IX.