Office of the Historian

145. Memorandum From the Presidentʼs Special Assistant (Komer) to President Johnson1

Washington, May 24, 1966.

Curbing Inflation in Vietnam. Now that Ky has Danang at least temporarily under control, I am pushing for quick GVN action on anti-inflationary measures. The IMF mission, there now, is manfully pushing the GVN toward at least modest devaluation, plus related measures. It is just possible that Ky might bite the bullet in the next week or so.

I have been taking a hard line, because without someone pushing neither Lodge nor Ky will face up to the inflationary threat. We have authorized the use of both carrots and sticks. One carrot would be to tell the GVN that we will increase FY 1967 economic aid enough to help cover any loss to it of foreign exchange from devaluation (estimated at $30 million). This is not a new add-on since we are already programming such increased aid anyway to help flood Vietnam with goods. But we havenʼt told the GVN yet.

The only credible stick we have is to withhold disbursement of economic aid till the GVN acts. This can be done discreetly, I believe, if it becomes necessary.

I am also pushing a set of major reforms in our chief aid instrument, the Commercial Import Program (CIP), to meet the rising tide of criticism over loose administration, windfall profits, corruption and the like. We hope to face down the GVN by simply telling it that from now on our aid will have to be handled according to the new rules. If not, new allocations may somehow get held up till the GVN complies.

R.W. Komer2
  1. Source: Johnson Library, National Security File, Komer Files, Memos to the President, March-June 1966. Secret.↩
  2. To the left of Komerʼs signature the President wrote: “Bob, I applaud you, good. Keep it up & Keep it Hot.” In telegram CAP 66323 to Porter, May 23, Komer stated that the President was “eager to put positive face on our VN effort and balance press horror stories by publicizing progress on civil side. We will probably have to produce some headline-catchers by mid-June.” (Ibid., Back Channel Cables between Porter and Komer, May-July 1966)↩