233. Letter From President Nixon to Prime Minister Heath1
Dear Mr. Prime Minister:
Thank you very much for your personal messages with respect to your decision on the pound.
I share your conclusion that this latest episode in a series of monetary crises over recent years illustrates the need for fundamental changes in the monetary framework. To the extent this point is generally grasped, the cause of practical reform will have been reinforced—and, I hope, speeded. This can be a highly constructive by-product of otherwise unfortunate turbulence. I particularly welcome your reaction because so much of my own concern in the period since last August 15 has been directed toward establishing the point that we need to go beyond a simple patching up of the Bretton Woods system.[Page 630]
Frankly, we have felt the point has not been generally accepted in the past, even though certain underlying problems—such as the large mass and volatility of short-term money that you mentioned—have become increasingly evident.
I recognize that our effort to focus thinking on underlying problems could be, and has been, interpreted in some public discussion as an attempt to block or delay progress on specific reform proposals, or to promote purely national goals. Yet, I have accepted that risk in the firm belief that the cause of lasting reform—serving the needs of all—will be advanced only by a willingness to face up to the fundamental issues, political as well as economic. Any other course invites failure. It is often said that a crisis is required to focus our minds and energies. I am confident we have within our power the ability to grasp this opportunity.
I am the last to underestimate the difficulties ahead. In a situation permitting different avenues of approach and with success totally dependent upon a sense of shared responsibilities and benefits, we have not felt it useful to press for a specific single “American plan”. Similarly, I trust that European thinking will not become frozen prematurely.
Against the background of recent events I do feel the time is ripe for engaging in open-minded and candid exploration of certain basic alternatives with our close partners. We should no longer be inhibited by the fear that certain approaches can be unthinkingly damned by some as too “radical” a departure from the past.
I know that Secretary Shultz looks forward to discussing these matters with the Chancellor at an early date and hope that our thinking can be tested against yours at all stages.
- Source: Washington National Records Center, Department of the Treasury, Files of Under Secretary Volcker: FRC 56 79 15, UK British Float. Confidential. There is no indication of when or how the letter was sent. It is attached to a July 10 note from Hormats to Volcker indicating that the text had been cleared by Flanigan, Kissinger, and the White House speechwriters but that Kissinger wanted Volcker to have “a final crack at it” before it was transmitted to London. The President was responding to June 24 and 26 messages from Prime Minister Heath; see footnote 2, Document 232. On June 30 Hormats had sent Volcker copies of Heath’s messages and stated his assumption, “as in the case of similar missives in the past,” that Volcker would want to draft the reply. (Washington National Records Center, Department of the Treasury, Files of Under Secretary Volcker: FRC 56 79 15, UK British Float) An earlier draft was transmitted to the President in San Clemente under cover of a July 6 memorandum that proposed an equally forthcoming tone to Heath’s acceptance of the need for radical reform. This draft includes language looking to the IMF Autumn 1973 meeting as a useful target date for an agreement, which was dropped in the final text. The final paragraph of the cover memorandum reads: “In general, the British have been one of our major substantive antagonists, while maintaining a facade of wishing to cooperate closely as a mediator between the Common Market and the U.S.” (Ibid.)↩
- Printed from a copy that bears this typed signature.↩