279. Circular Telegram From the Department of State to All Posts1

71785. Circular Cable for Guidance of U.S. Missions overseas.

British Government has notified IMF of intention to set a new par value for sterling of $2.40. This represents devaluation of 14.3 percent. The IMF approved this action this morning to be announced 2130 GMT.2
U.S. view is that under existing circumstances what British have done is both necessary and desirable. We wish make sure action is effective and that similar action is limited to handful of countries with very special problems and virtual dependence on U.K. and only then through normal IMF procedures. FYI. This means Ireland almost surely and possibly although we hope not New Zealand and Denmark. FYI.
U.S. reaffirms commitment to buy and sell gold to foreign official holders of dollars at $35 an ounce. Similar exchange rate actions by any significant number of important trading countries would put pressure on U.S. dollar. Furthermore, until intentions of major countries are made public uncertainty may lead to speculative pressure.
We are hopeful governments will announce promptly intentions to maintain their present par values. To this end U.S. is initiating series moves to reduce uncertainty and calm foreign exchange markets. We are undertaking series of direct high-level telephone contacts between U.S. officials and Finance Ministers and Central Bank Governors of major countries, approaches by Diplomatic Missions in other areas, announcement of our own intentions.
U.S. will issue public statement which will be transmitted by immediate cable as soon as issued.3
As soon as U.K. action becomes public knowledge Missions are urged to deliver text of U.S. statement to Finance Minister and are free to use foregoing as guidance in discussions with government officials, central bank officials and public. In meantime if Missions approached by monetary authorities who have been informed of U.K. action may feel free to use foregoing information except for FYI.
Supplementary cable4 will be dispatched to advise Missions of direct telephone contacts and to provide supplementary instructions where it is desired that Missions take initiative in early approach to monetary authorities.
  1. Source: National Archives and Records Administration, RG 59, Central Files 1967-69, DEF 1 UK. Secret; Immediate. Drafted in the Treasury Department; cleared in the Departments of State and Treasury, the Council of Economic Advisers, the Federal Reserve Board, and the White House; and approved by Anthony Solomon.
  2. For text of Chancellor of the Exchequer Callaghan’s statement, issued November 18, see American Foreign Policy: Current Documents, 1967, pp. 194-195.
  3. The White House released a statement by President Johnson on November 18; for text, see ibid., pp. 195-196.
  4. Not further identified.