136. Editorial Note

France devalued the franc by 11.1 percent on August 8, 1969. German Chancellor Kiesinger was in Washington at the time, and Henry Kissinger sent President Nixon a brief memorandum on August 8 asking him to discuss the devaluation with the Chancellor before he left Washington. (National Archives, Nixon Presidential Materials, NSC Files, Country Files—Europe, Box 675, France, Volume III Jan 69-10/31/69) No record of any discussion with Kiesinger on the franc devaluation and his plans for the mark was found.

Policymakers considered the impact of the franc devaluation on other currencies, including the dollar. In his August 9 weekly report on international finance to the President, Council of Economic Advisers Chairman Paul McCracken thought the dollar would be unaffected, doubted the mark would be appreciated, mused on how much support the United States should give the pound, and wondered how the devaluation would affect planning for Secretary Kennedy’s speech on monetary reform, including improvement in the exchange rate system. (Ibid., Box 215, Council of Economic Advisers) (Regarding Kennedy’s speech, which was given on September 30 at the annual meeting of the IMF and IBRD in Washington, see footnote 7, Document 139.) The opinion that the mark would not be revalued until after the German elections in September proved correct. Following heavy speculative flows on September 22 and 23, Chancellor Kiesinger on September 24 called for a closing of German foreign exchange markets through the election on September 28, and the mark was allowed to float on September 30.

According to a September 3 memorandum from Secretary Kennedy to the President, foreign exchange market issues had been discussed during a Quadriad meeting on August 28 in San Clemente. For the President’s information, Kennedy attached an undated Contingency Planning paper to his September 3 memorandum, which, inter alia, recommended providing up to $500 million in support for the pound. The paper also indicated that contingency plans were being developed to suspend the dollar’s convertibility to gold, and recommended that the United States should be prepared for prompt action, but that the gold price should not be increased. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 289, Treasury, Volume I) A copy of the Contingency Planning paper, with the handwritten date of May 1969, is also in the Washington National Records Center, Department of the Treasury, Deputy to the Assistant Secretary for International Affairs: FRC 56 83 26, Contingency Planning 1965-1973. Kennedy’s September 3 memorandum went forward to the President attached to Kissinger’s September 24 memorandum on policy options, Document 139.

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Kissinger concluded a September 6 memorandum to President Nixon transmitting another weekly international finance report from Chairman McCracken to the President with a paragraph explaining that the Treasury Department had backgrounded key financial writers on Secretary Kennedy’s forthcoming speech on international study of greater exchange rate flexibility. He referred to a New York Times front-page story of that day that noted the President’s personal involvement in the initiative. He concluded: “we are now fairly clearly on the record as seeking a negotiated solution to one of the key problems of the system.” (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 215, Council of Economic Advisers)

A draft of Kissinger’s September 6 memorandum to the President was sent telegraphically to Alexander Haig in San Clemente on September 4 with a reference to a memorandum discussing unilateral actions, presumably an undated and unsigned memorandum from Kissinger to the President entitled “The Imminent International Monetary Crisis.” The memorandum discussed scenarios for suspending the convertibility of the dollar to gold; there is no indication that it went forward to the President. (Both ibid.)