294. Telegram From Prime Minister Wilson to President Johnson 1

As you will guess, I have been personally following every move in the discussion in Washington this weekend and I share what I know will be your satisfaction that we have all been able to reach an agreed solution.2 As you know, from the outset the British delegation joined with yours in rejecting any solution based on a change in the price of gold. We support you completely in this matter, and this has never been in doubt.

I believe that the agreement announced tonight is the best that could be achieved in present circumstances. We must hope that it will carry sufficient conviction in the world financial arena to stop the nonsense which has been going on in these past weeks. It is impossible to be certain, because we are dealing with a degree of irrationality which I have today described as Gadarene Dementia. In addition there have been the signs of a hidden hand in operation against the dollar and the pound—and not all that hidden either.3

In a rational world this clear evidence of determination should be decisive. But we must, even at this stage, reckon with the possibility that the irrational elements with which we have to deal may take charge. If this is so, the attack will switch more directly from the gold markets to the foreign exchange markets and will be directed against the two reserve currencies. Our continental colleagues have responded well to the dangers which we all face and I welcome the special consideration given to the position of sterling. Sterling has been, and still is, in the front line, but in a very real sense we all stand together. This stood out from the message you sent me on Thursday night.4

That was in response to the message in which I said that, if we had to protect ourselves, we should be forced to take action which could have a grave effect on all other currencies.5 Since I sent you my Thursday message, this has been reiterated by my colleagues and our determination is absolute.

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Let us hope that what is happening in Washington means that the attack will now spend itself. But if it does not, we must urgently consult together to agree what further collective action can be taken in order to avert the danger that we may be driven apart. Should we reach this point, we shall not propose a change in the gold price, but there are other policies that might have to be urgently considered between us. It is too early to canvass the various arguments, though we should prefer an arrangement providing for an embargo on the buying and selling of gold to anything which gave the enemy the prize for which they are contending, namely an increase in the gold price. We must keep in close touch if necessary on a day-to-day basis this week, though again, I hope that what has been achieved in response to your lead on Thursday night may exorcise once and for all the danger we have been facing together.

  1. Source: Johnson Library, National Security File, Head of State Correspondence, UK. Top Secret.
  2. Reference is to the March 16-17 meeting of governors of the central banks of the seven “gold pool” nations. For text of communiquéissued at the conclusion of their meeting, see Department of State Bulletin, April 8, 1968, p. 464.
  3. Reference is to President de Gaulle.
  4. A copy of Johnson’s March 15 message is in the Johnson Library, National Security File, Head of State Correspondence, UK, Vol. 7.
  5. A copy of Wilson’s March 14 message is ibid.