116. Talking Paper Prepared in the Department of the Treasury1



February-March 1969


International Monetary System


Conversations on monetary reform with the French pose special dangers:

The basic French attitude towards the international monetary system is fundamentally different from ours. Their persistent underlying objective has been (a) a substantial increase in the price of gold, large amounts of which are in French hoards, and (b) the imposition of very stern discipline on the U.S. through severe limitations on the future of the dollar as a reserve currency. Recent hints to U.S. officials of French views on reform maintain these two elements.
Certain elements in the French regime especially eager to see a rise in the official price of gold will deliberately stir speculation to their advantage. Great care must be taken in any allusions to monetary “reform”, as the French will tend to associate “reform” with an increase in the official gold price. If at all possible, attempts may be made to imply your endorsement of such an approach in any Communique. Leaks to the French press designed to promote this objective following your talks are likely unless the U.S. team is alert with denials.
We believe there is some danger that the French might undertake at some time in the future, possibly this year, a large unilateral devaluation [Page 306]of the franc aimed at disruption of the monetary system and achieving a higher price of gold. They may hint at the desirability of some package deal with the United States to avoid such disruptive action on their part. Any such proposal should be approached very cautiously, even though some elements might be acceptable.
In general, it is important to refer details for future discussion, while preserving our subsequent bargaining position by maintaining a firm position on gold price.

Talking Paper

First Alternative Approach (assuming that President De Gaulle invites you to speak first on the international monetary system)

1. We are both interested in improving the international monetary system.

2. In this context, it is essential to bring inflation under control in the United States. This is a major goal of my Administration.

3. We have been looking in a preliminary way at a number of proposals to see whether there are responsible improvements that can be made in the system. On most of these we have no final view. I would be glad to hear what is in your mind.

4. We have decided that an early and substantial activation of the Special Drawing Rights would be extremely useful. We hope that France will look again at this instrument, and become a participant.2

5. But there is a second problem that concerns us. The process of international adjustment of balances of payments has become too dependent upon selective controls and restraints. We would like to stop the drift in this direction and search for other methods of reducing excessive and persistent deficits and surpluses.

6. We owe it to ourselves to explore every possible new proposal for improving the system, including those under discussion in academic circles. We must be careful to do so without upsetting confidence.3

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7. Whatever changes we might encourage in the monetary system, none will avoid periodic crises affecting individual currencies. As a result, we will continue to need intensive financial cooperation. Drastic unilateral action by any country with major financial responsibilities poses grave dangers for all.

8. I share the view that, unless we have reached a closer meeting of minds, it would be dangerous to undertake a formal international monetary conference.

9. Finally, you should know that I am not going to seek an answer to these problems through a change in the monetary price of gold. I do not see the need or reason for such action. I am well aware that this has been a difference of view between our two countries. But I am convinced that this would be disruptive and wrong.

Final Note

10. If any interest is expressed by General De Gaulle in pursuing bilateral discussions with the United States, you might say that Secretary Kennedy would be glad to meet with his representative in Washington.

Second Alternative (if General de Gaulle takes the initiative to spell out the French view on international monetary reform)

11. We are quite willing to discuss with the French, as with other countries, responsible improvements in the international monetary system. (If it appears appropriate to do so, you may wish to say that Secretary Kennedy would be glad to see Minister Ortoli if he wishes to come to Washington.)

12. You could then draw on the material set forth under the first alternative above to the extent that seems appropriate. Several points at least should be made clear to the General:

It is important that General De Gaulle understand our position with respect to the monetary price of gold.
Any discussions of international monetary reform ought to be carried on in a quiet manner to avoid stirring up exchange speculation.
If the General drops a hint or issues a warning concerning the possibility of a unilateral decision to devalue the franc, it might be helpful to indicate that we should all try to avoid drastic unilateral actions that would be disruptive to the monetary system.

  1. Source: Washington National Records Center, Department of the Treasury, Volcker Group Masters: FRC 56 86 30, VG/LIM/1-VG/LIM/30. Confidential; Limdis. Presidents Nixon and De Gaulle met in Paris on February 28, March 1, and March 2. International monetary issues reportedly were discussed in an expanded meeting on March 1, but no record of that meeting was found. Regarding their final meeting on March 2, see Document 7.
  2. Telegram 27105 to posts in franc zone countries, February 20, notified the Embassies that the IMF had been informed that, at a forthcoming Yaounde meeting, France would tell franc zone Finance Ministers that ratification of SDRs would be considered an unfriendly act. Without revealing knowledge of this information, the Embassies were requested to report any information they could develop about French actions and host country reactions. (National Archives, RG 59, Central Files 1967-69, FN 10 IMF)
  3. On February 19 Willis circulated to members of the Volcker Group VG/LIM/69-20, which contained revised language for this paragraph because of concerns the French press might take the original out of context and conclude the United States was prepared to explore proposals for a change in the price of monetary gold. The suggested, “safer” version reads as follows: “6. We owe it to ourselves to explore a variety of new proposals for improving the system, including those under discussion in academic circles. We must be careful to do so without upsetting confidence, or casting any doubts on the monetary price of gold.” (Washington National Records Center, Department of the Treasury, Volcker Group Masters:FRC 56 86 30, VG/LIM/1-VG/LIM/30)