158. Memorandum From the President’s Special Assistant (Rostow) to President Johnson 1


  • Gold

The gold loss today ended up at $116 million—heavy, but much less than we feared.

Sterling was also under pressure. The UK put $100 million in the market to support the rate. Curiously enough, the franc had some small difficulties, apparently because of rumors.

Attached is the answer Bill Martin received from his approach to our gold pool partners. They have agreed to go along with us but expect us to bail them out of some of their gold losses. Each would make his own pitch to us if he finds it necessary. The UK is replying separately. Bill did a really impressive job.

We are working on a brief statement to clear with the Europeans and release tomorrow.2 It should put a stop to the rumors and quiet things down a bit.


P.S. See also attached Fowler memo.3 Good deed by Canadians.

W 4


Governor Hubert Ansiaux of Belgium phoned and talked to Mr. Martin at 10 a.m. He was calling from Paris, where Mr. Martin had reached him the evening of Thursday, December 14.

[Page 452]

In reply to the phone call of last night, Governor Ansiaux said:

I am speaking for myself, the Germans, the Italians, the Dutch, and the Swiss. These are our unanimous views.
Of course we are always ready to support you because we believe in the fundamentals of the policy of gold at $35 an ounce.
We wonder if you will find it possible to make your balance of payments program known as soon as possible—before the 10 days you mentioned—even if it is in very general terms.
We approve and strongly support your going to the IMF. Apart from the measures it shows the U.S. is ready to solve the problem.
We very much hope that the program will be really very fundamental and substantial; not just a stop-gap measure; something really affecting the root of the matter.
We wonder if it would not be better to close the London market for awhile until your program is known as it is open to speculators and is completely disorganized. The French cannot even deliver gold. However, we understand you may prefer to keep it open but this is up to the United States to decide; it represents not a condition but a reflection.
Having this in mind, we were strongly of the opinion until yesterday night, when you got in touch with all of us, to recommend that we should stop our intervention in the London market. But taking into account your request, the fact you have a program, the fact that public reaction to withdrawal from the London market would be bad, we are ready to stay in the market. You may say this is a common policy not only of the Fed and the U.S. Treasury but of all the European central banks concerned.
This does not mean that we will not ask for reimbursement in gold of any excessive accumulation of dollars which may be the result of our intervention. We will stay in the pool but on the other hand we cannot face a large depletion of our gold reserves. All of us agree on this in principle but it would be left for each central bank to work it out with the Federal Reserve.
We recommend that you issue a communique over the weekend indicating, if possible, the U.S. intentions on the balance of payments program, reaffirming our intent to maintain the $35 price of gold, and reaffirming no change in operations in the London gold market, and pointing out this is not only an American position but represents the unanimous views of the European central bankers, all of whom endorse [Page 453] this position and are cooperating in the interest of maintaining stability in the international monetary system.6

  1. Source: Johnson Library, National Security File, Subject File, Balance of Payments, Vol. IV, January 1967 [2 of 2], Box 3. Secret; Sensitive. The time is taken from another copy of the memorandum, which bears the typewritten initials “ERF” at the bottom left, indicating that Fried probably drafted it for Rostow’s signature. (Ibid., NSC History, Gold Crises, Nov. ′67–Mar. ′68, Box 54) A handwritten note on the source text reads: “Rec’d 6:16 p.”
  2. See Document 159.
  3. Fowler’s December 15 memorandum to the President and a note from Fowler to the President, both attached, are not printed. The memorandum reported that Canadian Finance Minister Mitchell Sharp had called Fowler that afternoon to say that the Canadians were prepared to transfer $100 million in gold to the United States. The note added that Sharp “is in serious contention for the Prime Ministership of Canada.”
  4. The postscript is handwritten.
  5. Secret; Sensitive.
  6. On December 18, Senator Mansfield telephoned President Johnson, and the two engaged in a wide-ranging conversation on foreign policy matters. Concerning the gold crisis, President Johnson complained of the desire of the French and Soviets “and all of our enemies” to get U.S. gold and bring the dollar down, and added that the U.S. Government was helping them by not having a tax bill and leaving the impression “with all the bankers and all the money people” that it was irresponsible and could not be believed. Mansfield interjected: “How can they blame you? It’s Wilbur’s fault.” The President continued that there probably would be a tax bill now that Wilbur Mills was coming to recognize that “he’s wrecking the damn world;” but gold reserves were down and there was danger that the dollar would be “busted like the pound was busted.” More positively, he remarked that “the Germans will stay with us” as well as the British and Swiss. He said a bill to remove the gold cover was needed, although “everyone” hoped it could be put off until after the election. (Johnson Library, Recordings and Transcripts, Recording of Telephone Conversation between President Johnson and Senator Mansfield, December 18, 1967, 8:55 a.m., Tape F67.15, Side A, PNO 3)