Foreign Relations of the United States, 1969–1976, Volume III, Foreign Economic Policy; International Monetary Policy, 1969–1972

134. Telegram From the Embassy in France to the Department of State ¹

Paris, July 24, 1969, 1850Z.

11272. Subj: July 23 call on Pompidou: international economic and monetary situation.

1. Pompidou said at our July 23 meeting that the most urgent problem facing the West at this point was the international economic and monetary situation, and in that general picture the strength and position of the dollar was crucial. He alluded specifically to the so-called French war against the dollar and smilingly he said that the possibilities of any such war at this time were non-existent; that the franc was in no position to challenge the dollar; and that, in fact, the economic strength of the US and our determination to prevent inflation and protect the status of the dollar was crucial to all the Western countries. [Omitted here is a discussion of the Euro-dollar market and domestic economic policy in the United States.]

3. I asked Pompidou whether the French would be of a mind to facilitate international monetary equilibrium by participating in the Special Drawing Rights. Pompidou responded that there were two aspects to this question: one was the principle involved, and the second was the quantity. With regard to the principle, he pointed out that France has consistently emphasized the usefulness of gold as an instrument which enforces discipline. He himself was not a devote of the extreme theories on gold: i.e., he was not a doctrinaire supporter of Jacques Rueff’s ideas, but that in lieu of gold, self-disciplinary actions had to be taken. In this connection, of course, he reemphasized the necessity for US to do something because the whole of the Western world’s economic and monetary situation depended upon US and not upon actions taken by anybody else. In response I repeated my personal conviction that the US had already taken a number of significant actions to stem inflation and that our country was preparing to take even more. And in this connection I pointed out that Under Secretary Volcker would be meeting with Finance Minister Giscard d’Estaing today² and that I was sure Volcker had ample authority to provide the French Government with all of the current details as well as the philosophical foundations of our policy.

4. On this subject Pompidou appeared to me like a man who wants us to succeed in our own struggle for economic stability and as a person who would react favorably to the SDRs if and when he saw sufficient disciplinary actions on our part to overcome any doubts his own theorists might have stemming from their preoccupation with gold. He gave me the impression that we were dealing more with a Rothschild banker than with a Sorbonne professor of economics. In other words, I gained the impression from Pompidou’s rather jocular manner in referring to the gold theorists in France, but not from any explicit statement he made, that Pompidou is searching for practical answers to the practical monetary problems, and that he is not going to insist on a change of the price of gold in the doctrinaire way in which De Gaulle and Jacques Rueff did.

Shriver

1. Source: National Archives, RG 59, Central Files 1967-69, FN 17. Confidential; Priority. Repeated to Bonn, Brussels, The Hague, London, Rome, and USEC.
2. During his July 24 meeting with Volcker, Giscard d’Estaing “asked how, in a world beset with inflation, it was possible to justify the creation of liquidity in additional large amounts through the SDR method.” He continued nonetheless to say that when he attended the annual meeting of the IMF and the IBRD at the end of September in Washington he planned “to state a French position in favor of SDRs, and he would prefer doing so first in the less formal atmosphere of the Group of Ten.” (Memorandum of conversation; Washington National Records Center, Department of the Treasury, Files of Under Secretary Volcker: FRC 56 79 15, France) On June 26 an April 28 research paper prepared in the Federal Reserve Bank of New York was circulated as VG/WG 11/69-14 to Members of the Volcker Group and Working Group II. (Ibid., Volcker Group Masters: FRC 56 86 30, VG/WG 11/69-14-VG/WG II/69-35) The research paper contained an analysis of an article by Giscard in the March 1969 edition of L’Expansion in which Giscard compared his 1964-1965 proposal for a collective reserve unit (CRU) with the SDR and strongly supported SDRs and opposed any change in the price of gold. In a July 2 letter to Ambassador Shriver, Samuels called Giscard “the father of the present SDR arrangement,” because the CRU, although different from the SDR, “envisaged liquidity creation to be a matter of international agreement.” (National Archives, RG 59, Central Files 1967-69, FN 10 IMF)