4. Memorandum From Secretary of the Treasury Dillon to President Johnson1


  • Your Meeting with the Cabinet Committee on Balance of Payments, May 4, 1964


To receive the latest report of the Cabinet Committee and discuss its recommendations and related developments.


This will be your first formal meeting with the Cabinet Committee on Balance of Payments. The Committee meets from time to time to consider broad policy questions and serves to coordinate our Government efforts in the balance of payments field necessary “to the defense of the strength and stability of the dollar”. It has in the past reported to the President at about this time of the year—when final results for the previous year have become available—and has recommended any new policies that the circumstances required. In December, I informed the members of the Committee of your wish for it to continue as in the past.

The Cabinet Committee’s Report to you is attached.2 The Report has been substantially agreed to by all members of the Committee, although some may wish to comment on matters of emphasis. The principal elements of our present program, together with recommendations for the future, are contained in the summary at the beginning.

We hope to obtain your approval for continuing with the over-all program and of the recommendations for new action—subject to whatever modifications you may find desirable.

Members of the Cabinet Committee, in addition to myself as Chairman, are the Secretary of Defense; the Secretary of Commerce; Under Secretary of State Ball; the Administrator of AIDM; the Director of the Bureau of the Budget; the Special Representative for Trade Negotiations; the Chairman of the Council of Economic Advisers; and Special Assist-ant Bundy. Governor Herter will be out of the country.

Suggested Procedure

The meeting could be informal. You might call on me, as Chairman of the Committee, to lead off with a summary of the latest developments [Page 7] in our balance of payments and gold and with the highlights of the Report. You may also wish to call on others to comment on particular aspects of our program.

It would be most helpful if you would reaffirm to the group the need for continued vigorous action to carry out the balance of payments program, pointing out particularly that we cannot relax our efforts now just because of the unusually favorable results during the first quarter. We should not count on the first quarter’s improvement to continue—in fact, developments in April show that our substantial favorable balance in March was largely fictitious and has already been offset. A more accurate assessment of first quarter results, in the context of expected results for the year as a whole, is a deficit on the order of $1–$1–1/4 billion at annual rates. This clearly shows the difficult road we have ahead if we are to continue progress towards elimination of the deficit and achievement of sustainable equilibrium. Furthermore, any signs of relaxation by us could shake European confidence and thereby affect their willingness to hold dollars rather than demand gold.

Douglas Dillon 3
  1. Source: Johnson Library, National Security File, Balance of Payments, Vol. 1, November 27, 1963 thru October 31, 1964, Box 1. Limited Official Use.
  2. Not attached; see Document 5.
  3. Printed from a copy that indicates Dillon signed the original.