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

184. Letter From the President’s Assistant for International Economic Affairs (Peterson) to the Under Secretary of the Treasury for Monetary Affairs (Volcker)¹

Washington, October 25, 1971.

Dear Paul:

As you know from our various discussions, I would think it very desirable if you would use the Volcker Group to start some intense dialogue and work soon on what kind of reformed monetary system we want.

This seems awfully important in two different contexts: First, as we move ahead in our Phase I negotiations, it may well be that where we want to end up in Phase II will affect what we should be willing to do or not do in Phase I. Second, the President and John Connally have repeatedly emphasized their commitment to basic monetary reform and I think it is incumbent upon us to define what we want that system to be. I know that men like Ken Dam and Ezra Solomon have strong views about what the shape of such a system might be. There are certain key issues—like whether it is in the long-term U.S. interests to have any convertibility at all and the related issue of whether a reserve currency status is or is not in the interests of the U.S.—that I hear very different views on, as I listen to various experts.

I asked Dick Cooper, who works with us, if he couldn’t summarize for me what some of the key issues are on this whole area. I’ve attached a copy and sent one to Ken Dam and Ezra Solomon.²

I know how unbelievably busy you are, Paul, but I hope you can get the Volcker Group going on this whole issue of what kind of monetary system we want.³

Sincerely yours,

Pete

1. Source: National Archives, Nixon Presidential Materials, White House Central Files, Federal Government Organizations, Treasury 1/1/71-2/29/72, Box 2. No classification marking. Copies were sent to Shultz, Ezra Solomon, and Dam.
2. Not found.
3. The dominant topic in the Volcker Group papers for 1971, both before and after August 15, was the limited exchange rate flexibility initiative. None of the policy papers on negotiating the international aspects of the New Economic Policy prior to the Smithsonian Agreement on December 18 is part of this record. The dominant topic of the Volcker Group papers in 1972 was developing the terms of reference for the C-20 and drafting the IMF Report on International Monetary Reform paper for the 1972 Annual Meeting. None of the 1972 Contingency Planning papers for the currency crisis should the Smithsonian rates fail is included in the Volcker Group papers. (Washington National Records Center, Department of the Treasury, Volcker Group Masters: FRC 56 86 30)