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

59. Memorandum From the President’s Assistant for International Economic Affairs (Peterson)¹

Washington, March 30, 1971.

MEMORANDUM FOR

• Paul A. Volcker
• Hendrick S. Houthakker
• C. Fred Bergsten
• Arthur B. Laffer
• Robert Solomon

As indicated in CIEP Study Memorandum No. 1 of March 8,² the President has directed a basic review of our policy approaches toward the balance of payments and international monetary problems within the framework of the Council on International Economic Policy. He wants this work to proceed on a high priority basis. I have also discussed with the respective heads of your operations the virtue of keeping the initial work group small and restricted, to those with real expertise in the field.

I am, therefore, creating an Ad Hoc Group on the subject, comprised of the addressees of this memorandum. The President has also indicated that we should bring in the best people from outside Government to participate in our efforts as they develop.³ I am assuming, of course, the “Volcker Group” will continue to coordinate the implementation of U.S. international monetary and balance of payments policy. Everything I’ve heard is that this is one of the best interagency groups in the Government.

As I see it, we first need to lay out an agenda of the policy issues in this area which need to be discussed. I have discussed monetary problems with a number of people both inside and outside of Government during my six weeks here. I’m simply attaching a preliminary list of what some of those areas are that have come up in some of my discussions.

I would hope we could discuss these ideas, and others which you might suggest for our work agenda, at our first meeting on March 31 at 9:00 a.m. in my office.⁴ I would also hope we could discuss some ideas on how to go about the work, and what outside inputs we might use.

Attachment

1. What should be the objective of U.S. balance of payments policy, both in the short term and over the long run? Do we need to adopt a balance of payments target at all? If so, how should such a target be formulated? Should our target relate to our overall balance (on what definition?) or to particular components of the U.S. balance of payments?

2. What policy measure should we adopt in pursuing any balance of payment target we might choose? For example, do we want to encourage foreign investments by U.S. firms? How should we finance deficits?

3. What should be our objectives for the future development of the international monetary system? What is our view about the future role of the dollar in the system? The role of SDRs? The role of gold? What changes do we want in the adjustment process, if any, especially toward increasing the flexibility of exchange rates? How do we go about achieving these objectives?

4. Do we want any new approaches to deal with the large movements of short-term capital which now seem to characterize the system?

5. What should be our policy toward monetary integration in the Common Market? Do we favor it or oppose it? How can we influence its substance and its timing so that it will fit into a satisfactory worldwide monetary framework?

I would hope we could discuss these ideas, and others which you might suggest for our work agenda, at our first meeting on March 31 at 9 AM.

1. Source: Washington National Records Center, Department of the Treasury, Files of Under Secretary Volcker: FRC 56 79 15, CIEP Study Memoranda. No classification marking. Copies were sent to Burns, Connally, Kissinger, and McCracken.
2. Document 55.
3. This directive has not been further identified.
4. No record of a meeting has been found.