24. Transcript of a Telephone Conversation Between Secretary of the Treasury Shultz and the President’s Assistant for National Security Affairs (Kissinger)1

S: I called you sort of in this continuing discussion about Europe and monetary abandonments (?).

K: I think it’s coming pretty well.

S: It is. I think the message had a real impact.2

K: Yeah.

S: At the same time, I think in many respects they are at a sort of a moment of truth and they know it. And the ability to put together some sort of a joint float is quite testing and I don’t really think they can do it. Schmidt and Barber both told me that they rate the chances as less than 50–50. Now I was very much impressed Saturday3 with the additional perspective on the problem that came from our discussion with the President and with you.4 That is, to say, they need to put the whole thing in the setting of European problems generally and not regard it simply as a problem in working out an international monetary system. And I mentioned that to the President last night, when I reported to him on the outcome of the Ministers’ meeting and so on, and he suggested that I discuss this with you and that perhaps we might discuss it with him tomorrow.5 So I’m really calling to see if perhaps mid-afternoon or so you might have some time. I don’t know quite how to start with this but I do have the feeling that there is a fairly decisive set of events taking place and I’ll be going now to Paris rather than to Rome on Friday for the meeting and I want to be in a position to understand and represent our views well.6

K: Okay.

S: And I have to go back to—I’ve been testifying all morning and I have to go back again at 2:00 but I hope I won’t be there all afternoon.

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K: Well, I have to see a Russian group at 5:00. How about meeting at 6:00 or is that too late for you?

S: 6:00 or so would be fine.

K: Let’s do it at 6:00.

S: Okay. I have my monetary group meeting at 4:30 so when we get through, I’ll call you.

K: I’ll be here—Do you want to come over here or should I come there?

S: Anything. I’ll come over there. Why don’t I come over there? K: Okay.

S: All right.

K: Be a great honor.

S: I’m sure. And as I say, I don’t know where I’m going here except that as I—

K: Well, as I think this thing through, I lean more and more towards the float and against intervention if it can be arranged. And if we intervene, to do it only as a result of it.

S: Yeah. It may develop that the Germans wind up with a national float and Schmidt said that publicly.

K: Well, Schmidt has a call in to me.

S: I called him this morning and we talked and I asked him was that published report accurate or not. He said it was accurate; that it was their last choice, not their first choice, but they would do it. That’s the first time he has been willing to mention those words.

K: Schmidt has a call in to me and I’ll—you know, he’s an old friend—and I’ll report to you immediately after we’ve talked.

S: I suggested to him—He said what did we think and I said well, there is a line of opinion here that we have to allow some period for the market to sort things out; that we felt that the relationship between the mark and the dollar was basically all right and that he might want to, if it’s of any use to him, describe a float as being—as not that way but just say that the par value remains as they see it and they have eliminated the bands around it for the time being—that’s the same thing—to let the situation settle out. I think by this time, with all the talk of not only a joint float but an individual float, it would be almost impossible to intervene successfully because you have the principal government that would have to put up the money, namely Germany, has demonstrated a lack of conviction on the subject and the speculators would just murder the situation.

K: Yeah, yeah.

S: At any rate, if we can develop a cooperative relationship with the Germans and cement that relationship in on economic grounds and [Page 101]also with the British, the French election seems to be going badly for Gaullists from—

K: Well, it’s too early to tell because you can’t tell what these voters will do in the second round when their choice is between communists and Gaullists.

S: Right.

K: But it will certainly go less well.

S: Well, anyway, this is the sort of thing I’d like to try to sort out a little bit.

K: Good. Now, in any event, I think now that we shouldn’t go for intervention unless the Germans ask us for it.

S: That is the only condition under which we ought to consider it and then I think—

K: I’m not sure we should do it then.

S: I believe there should—We ought to be willing to think through with them a set of events where this isn’t a set—a float for a period of time so we let the marketplace settle out and then settle on something which we would agree to defend.

K: Yeah.

S: We can have that kind of an outline, although even that I think is a question. But at any rate, these are things.

[Omitted here is discussion unrelated to foreign economic policy.]

  1. Source: National Archives, Nixon Presidential Materials, Kissinger Telephone Conversations, Box 19. No classification marking.
  2. Apparently a reference to Document 18.
  3. March 3.
  4. See Documents 16 and 17.
  5. Shultz spoke on the telephone with President Nixon, who was at Camp David, from 9:19 to 9:28 p.m. on March 4. (National Archives, Nixon Presidential Materials, White House Central Files, President’s Daily Diary)
  6. Shultz went to Paris on March 9 to attend the G–10 meeting (see footnote 4, Document 32).