324. Memorandum from Rostow to Rusk, May 151

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  • Military Cut-Backs and Balance of Payments

In the course of our work we have become aware of the plans to effect a substantial gold saving via troop withdrawals, pursuant to the Cabinet Committee meeting of April 18.

We are conscious, of course, of the extraordinary effort and staff work which has gone into the balance of payments problem. And I do not intend now to add to that vast literature.

I would, however, make one simple point. Thus far our negotiations on this matter have been with Central bankers. Having come to what the Treasury believes is the limit of such negotiations, we now contemplate unilateral actions which will have profound effects not only on our international position but on the position of the prime ministers and foreign ministers of governments allied to us. Only actions of this order of magnitude are likely to effect a net dollar paying of $400 million.

I believe we owe it to our allies (as well as to ourselves) to explore all alternative routes for easing our balance of payments situation before deciding that troop withdrawals are the only means open to us.

I find it hard to believe that, if they are made to perceive the hard choices we must face, they would not cooperate in measures to ease our position or to buy time for our balance of payments position to right itself.

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But I am sure we owe it to them to be placed before a responsible political choice, so that, at the worst, if the cuts take place they are part of an alliance scenario not a unilateral U.S. action.

A final word as an economist: history will judge us very queer folk indeed if, at a moment when troop withdrawals on the scale contemplated would hearten our adversaries and shake our basic alliance arrangements, we were unwilling to contemplate other cushioning measures and proceeded with such feckless propositions as Chrysler’s purchase of Simon for $400 million.

  1. “Military Cut-Backs and Balance of Payments.” Secret. 2 pp. Kennedy Library, National Security Files, Subjects Series, Balance of Payments and Gold, 4/63–7/63, Box 291.