1. Editorial Note

As 1973 began, President Richard Nixon’s advisers were divided over the urgency of the need for progress in the negotiations to reform the international monetary system. In July 1972, the International Monetary Fund Board of Governors had established a Committee on Reform of the International Monetary System. The C–20, as the committee came to be called, had held its inaugural Ministerial meeting in September and met at the Deputies’ level in September and November. Also in September, at the annual meeting of the IMF and World Bank Boards of Governors, Secretary of the Treasury George Shultz had unveiled a proposal to reform the international monetary system. For the text of Shultz’s speech, see The New York Times, September 27, 1972, page 70. See also Foreign Relations, 1969–1976, volume III, Foreign Economic Policy, 1969–1972; International Monetary Policy, 1969–1972, Documents 242 and 243.

A February 1–2, 1973, visit to the United States by British Prime Minister Edward Heath prompted administration officials to set down their thoughts on the status of the monetary negotiations. Neither Shultz nor National Security Council staff member Robert Hormats stressed the need for quick progress in the briefing materials they prepared for the visit. Peter Flanigan, President Nixon’s Assistant for International Economic Affairs, and Arthur Burns, Chairman of the Federal Reserve Board, argued the importance of quicker progress. In a January 26 memorandum, Hormats noted this division to Henry Kissinger, the President’s Assistant for National Security Affairs: “Shultz’ memorandum to you does not share Burns’ stress on the urgency of moving ahead on monetary reform. It concentrates more on the substance of our position and reflects some optimism that it is being more fully understood and appreciated. Burns in the past has proved to be a fairly keen observer of the European climate on monetary [Page 2] affairs, and his views should be taken seriously. However, notwithstanding this, there is validity in the position that we should not be rushed into merely patching up the system, but should achieve a major and sustainable reform.” (National Archives, Nixon Presidential Materials, NSC Files, Box 942, VIP Visits, UK (Prime Minister Heath) Visits to the US, February 1–2, 1973 [1 of 3])

Similarly, in another January 26 memorandum to Kissinger, Hormats wrote: “Burns, in a suggested set of talkers, wants the President to convey a sense of urgency about the slow pace of progress and press Heath to get the Europeans to move faster. He believes that, given the weakness of the US balance of payments, the system is crisis prone. If a crisis were to develop the environment for reform negotiations would deteriorate. Shultz conveys no sense of urgency and places more stress on obtaining our substantive objectives.” (Ibid., Box 290, Agency Files, U.S. Treasury, Vol. III, Jan. 1972–Sept. 18, 1973) Burns’s suggested talking points are attached to a January 24 letter to Kissinger. (Ibid., Box 942, VIP Visits, UK (Prime Minister Heath) Visits to the US, February 1–2, 1973 [1 of 3]) Flanigan’s and Shultz’s briefing materials are in the President’s briefing book. (Ibid.) The detailed talking points on monetary reform appended to a January 31 memorandum from Kissinger to the President concerning the Heath visit are more in keeping with Shultz’s position than Burns’s. (Ibid.)