203. Editorial Note

On November 23 and 24, 1971, the President had several meetings with his economic advisers. He was scheduled to travel to San Clemente on the evening of November 24, and this was his last opportunity to take up international economic policy with his advisers before Connally and Volcker traveled to Rome for the G-10 Deputies and Ministerial meetings November 29-December 1.

According to a tape recording of their meeting on November 23, Connally told the President he would have a bilateral meeting with the Italians before the G-10 Ministerial and would seek bilaterals with the Japanese and Canadians as well. Connally said the international matter could be settled and it was only a question of how much to give. He repeated what he had told the President on October 28 (see Document 187), that currency realignment alone would not be too meaningful to the average American. Connally wanted agreement on trade issues as well, which would be politically important to the President. He nonetheless agreed with the President’s recap of his position that a monetary deal would have to be concluded before a trade deal, which would take a long time, particularly because of European difficulties in negotiating on agriculture, which Connally had discussed with Ossola earlier that morning.

The President asked for Connally’s views on gold before Shultz and Burns came in (they never arrived at this meeting). Connally said, “gold is a crucial point. The French have a phobia on gold.” Connally gave the President a lengthy explanation of issues and possible magnitudes of changes in exchange rates between the dollar and other currencies, and among the other major currencies, and summarized Ossola’s presentation that morning that if the United States changed the price of gold and removed the surcharge, the Community would be willing to discuss trade. Connally said, and the President agreed, “the real money is in the realignment, but the politics are in the trade issue.” Connally thought the United States was in an excellent negotiating [Page 565]position and said he would hate to bargain away both gold and the surcharge for an inadequate realignment package. He considered the possibility of having Volcker, prior to the G-10 Ministerial, perhaps in a press conference or during a Deputies meeting, indicate that the United States was prepared to submit to Congress a bill to increase the price of gold in return for a 17 percent revaluation of the yen, etc., and would remove half the surcharge now and the remainder once a package of trade concessions had been agreed upon. Connally did not believe gold was important domestically, but advised the President against giving in to Pompidou without getting something in return. The President agreed, and thought the gold issue might be held in reserve for the Summits.

Following Kissinger’s arrival at 11:12 a.m., Connally, Kissinger, and the President agreed that a forthcoming Peterson trip should be scrubbed, that there was no reason for him to be meeting with European Prime Ministers or even Economic Ministers at that time. The President did not want any of his economic advisers, Peterson, McCracken, Stein, or Stans, traveling at this stage in the negotiations. The three agreed that they, along with Shultz and Burns, should meet the next day; that Peterson should not be included; and that Connally’s proposal should not go beyond their limited group. The President was inclined to reserve on gold at the G-10 Ministerial, and instead take it up with Pompidou. Kissinger expressed the opinion that Connally should stand fast on gold and work it out with Pompidou who would need something from the Summit. Connally outlined his approach to the Rome meetings: “All we have to do is make progress. We can both make proposals the others cannot accept. The fact of the meetings will maintain the momentum.” (National Archives, Nixon Presidential Materials, White House Tapes, Recording of a Conversation Among President Nixon, Connally, and Kissinger, November 23, 1971, 10:01-11:40 a.m., Oval Office, Conversation 623-3)

On November 24 the President met with Connally and Burns on international monetary and trade matters from 11:45 a.m. to 12:27 p.m., and, after a meeting with Secretary Rogers, lunched with Connally, Burns, Shultz, and Kissinger in the Executive Office Building from 1:13 to 2:35 p.m. The tape of the luncheon conversation is almost inaudible, and no reliable policy conclusions can be extracted from it. (Ibid., Recording of a Conversation Among President Nixon, Connally, and others, November 24, 1971, 1:13-2:35 p.m., Old Executive Office Building, Conversation 305-1) The tape of the earlier conversation with Connally and Burns, however, is good, and the President was clearly told there would have to be some change in the price of gold. All three also agreed there had to be some progress in Rome.

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During the conversation the President reported on the announcement that morning of the schedule of Summits, including the Azores Summit with President Pompidou “to wrap up this whole thing.” Concerning the gold price and convertibility, the President told Burns, “you, John and I should get the tactic together for the luncheon.”

Connally told the President that he and Burns had discussed the international economic issues at breakfast that morning. Connally said he suggested trading the surcharge for a 17 percent revaluation of the yen, etc., but that Burns had “wisely” advised against giving specific percentages for particular currencies, which would reveal the U.S. bargaining position. Instead, once the others in the G-10 make an inadequate offer Connally would counter with a proposal for an average realignment of perhaps 11 or 12 percent. Pursuant to the President’s sentiments, they agreed that at that stage they could not touch gold, but in view of the French position on gold they eventually would have to give something on the gold price. Burns said he was “convinced” they could not get a settlement without giving something on the gold price.

The President returned to the question of convertibility. Burns and Connally, at some length, explained why, for technical reasons, the United States would have to agree to provide limited amounts of reserve assets from time to time—gold, SDRs, or something else—but that would not be restoring convertibility in the traditional sense. During their explanation of the technical reasons, Connally revisited the gold price question and said that if the United States were to increase the price of gold, it should be “our deliberate decision,” unrelated to procedures in the IMF, and the administration should submit it to Congress for its action. Connally said convertibility would come up in the G-10 meeting, but the important issue was the realignment and, politically, all that could be achieved on trade. He dismissed the other matters as “nickels and dimes stuff.” The President said he would like to get something on offset as well, but in the end would rather get something from Germany on trade. If press questions about their luncheon arose later that day, the agreed line was that the President thought it important to have progress in Rome. Principles would be agreed on there for consideration by higher authorities. (Ibid., Recording of Conversation Among President Nixon, Connally, and Burns, November 24, 1971, 11:46 a.m.-12:27 p.m., Oval Office, Conversation 624-20)

The November 25 edition of The New York Times carried an article entitled “Nixon Is Hopeful on Money Talks” (page 61). The Times reported that in a brief statement following a meeting with the President, Burns said that “President Nixon ‘expects definite progress’ to be made at the meeting in Rome next week of the Group of 10.” The same Times story reported that during an informal news conference Volcker said the world should not expect a “settlement” but that he [Page 567]hoped for “real progress.” Volcker also reportedly said the U.S. delegation in Rome would have “expertise” in the fields of trade and agriculture despite the fact that the G-10 normally dealt only with monetary matters.