127. Editorial Note

On May 27, 1969, George Willis circulated a summary of a series of consultations on exchange rates that had been taking place since March 25. The summary was sent to members of the Volcker Group and the Working Group as VG/WG/69-65. (Washington National Records Center, Department of the Treasury, Volcker Group Masters: FRC 56 86 30, VG/WG/69-61-VG/WG/69-77) Technical level consultations were held in London March 25-26. (VG/WG/69-36, April 1) Further consultations were held in Europe in late April, U.K. officials traveled to Washington for a second round of talks on May 13 and 14 (VG/WG/69-73, June 6), and talks were held in Stockholm, Amsterdam, and Rome during the week of April 21. (VG/WG/69-59, May 12) Governor Daane, Willis, and Embassy officers in Paris had consultations with the French on April 24 (VG/WG/69-53, May 7), and Donald C. Templeman of Treasury and Wood had consultations in Zurich and Brussels on April 29 and 30. (VG/WG/69-77, May 22) (All ibid., VG/WG/69-21-VG/WG/69-39; VG/WG/69-40-VG/WG/69-60; and VG/WG/69-61-VG/WG/69-77)

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The May 27 summary of these consultations included the following points:

“Prevailing attitude toward greater exchange-rate flexibility: negative, especially if allowance is made for the veil of courtesy and friendliness which lead many to soften their criticisms and doubts; in the second round with the British they wanted to be sure the U.S. was not misled by their willingness to engage in constructive discussion and made clear their attitude was basically negative.

“Role of the dollar: other side invariably raised and we could see no practical alternative to continuation of the present system, i.e., the dollar pegged to gold at the $35 price, and other currencies ‘flexing’around the dollar.

“Discrete changes: no one disagreed and some insisted that large ‘one time’ parity changes could not be ruled out.

“Discipline: widespread concern that greater exchange-rate flexibility would weaken ‘disciplinary’ pressures on deficit countries.

“Wider margins: no strong support and considerable opposition, especially from EC countries that seemed unanimous in regarding wider margins as posing more of a problem for their agricultural system (CAP) than would a moving-parity system.”

The full report on the limited exchange rate flexibility consultations, including additional ones later in the year, was sent under cover of a letter from Under Secretary Volcker to his European, Canadian, and Japanese counterparts on December 12, and circulated to members of the Volcker Group and the Working Group as VG/WG/69-112 on December 23. (Ibid., VG/WG/69-99-VG/WG/69-112)