26. Conversation Among President Nixon, the President’s Assistant for National Security Affairs (Kissinger), and Secretary of the Treasury Shultz1

[Omitted here is discussion unrelated to international monetary policy.]

Nixon: Now, George, on the monetary thing. The main point that Henry has raised here, which—and, understand, I’m now talking not the substance; I’m talking the politics, international politics. The main point is the Germans, now that they have to an extent, come to us, not to simply put in a position of—be in a position of saying, “Well, we will—we’re taking a hands-off attitude,” and so forth. Now, you get—did that fellow last night—I’m trying to remember who it was, [Page 105] sort of a baldish guy who wanted to talk to me about that [unclear] the dinner.2

Shultz: Will FitzGerald?3

Nixon: Yeah. [unclear exchange]

Shultz: No, but I talked to him. He isn’t—he—

Nixon: I didn’t know what he wanted. I [unclear]—

Shultz: He said this is a time for—

Nixon: He just has come back from talking—that’s what—FitzGerald is his name. He’s from New York. I think he’s a very nice guy.

Shultz: Yeah, he’s a wise fellow. He’s a big supporter of yours.

Nixon: I know.


Hornblower & Weeks is his firm.

Nixon: Yeah.

Hornblower, that’s it! He’s at Hornblower.

Shultz: But he says Europe is in—

Nixon: Turmoil?

Shultz: —a chaotic state of mind, and they’re looking for leadership from the U.S. to come and tell ’em what to do, and this is our chance. And I thought, “Well, what he’s leading up to is massive intervention.” And I said, “Well, what do you think we should do?” He said, “Well, we’ve been working for a more flexible system, and somehow we’ve got to take the leadership on that and—”

Nixon: Um-hmm.

Shultz: “—make that stick.” Well, that’s the—that’s easier said than done. But, that is our basic philosophy.

Nixon: Yeah.

Shultz: To try to work in each one of these crises toward the kind of long-run system that we would like to see emerge and settle down. So, that [unclear]—

Nixon: Well, but that’s—the only other side of that is to deal in Europe, now, with the practical situation of what they think will work, and what responsibility we should undertake. Now, we can’t allow that to control us, but we have to at least reflect our response in that way. For you to go over there, and then for a rash of stuff to come out about—I’m speaking now of political things—to have the Germans [Page 106] and [unclear] says, “Well, the Secretary came over and said, ‘Go to hell,’” in effect, is not a good thing.

Shultz: Right.

Nixon: What I would like for you to do is be forthcoming. You know how I feel about intervention and then the—having the dollar pegged, having us have to get in and always save the international monetary thing; you feel the same way. From a political standpoint, however, this is a time when some leadership move would be very, very helpful to us with the Germans and the Japanese. Does that—does that—

Kissinger: Well—

Nixon: —state our position, Henry, as you talked about—?

Kissinger: Yeah. Well, my feeling is that if, if the common float works, which—then, then it’s all right.

Shultz: What else?

Kissinger: If it doesn’t work, and if the Germans may be drifting towards a national float, then I think we must have shown some willingness to alleviate their situation, or within the German domestic political spectrum we’re going to be stuck with it.

Shultz: I talked with Schmidt this morning on the phone and [laughs] said that I was aware of his conversation with you4 and so on.

Kissinger: Good.

Shultz: And that I was going to meet with you and with the President, and I would like to have breakfast with him Friday5 morning, before all these meetings start.

Nixon: Um-hmm.

Shultz: So, he’s coming to my hotel for breakfast. Now, he told me that he is working on the idea if we can’t have a common float of Germany, Benelux, Switzerland, and maybe Denmark, which would bring in the other Scandinavian countries—and, in other words, he’s thinking about letting go of France. And he’s worried about that. But, anyway, he’s moved in that direction; to associate some others with him in a—in some linked or moderated float. I said that I was coming over under instructions from the President to work in a cooperative way with him, personally, and with Germany in every way we could. That one of the things that we ought to think about is if there is a sort of float, how would you manage that float? In other words, are there some conditions that would be helpful, and that we could work out together and understand and operate with together? And I think that there are [Page 107] some constructive things to be done in defining the rules of the game in a flexible system; that our—coming at our plan from a different direction. He—I asked him, well, what did he think about that. He said, “Well, that was interesting,” and he would like to talk to me about it. Now, Arthur, by contrast, is—last night, is—said he’s got the idea that will solve all the problems. I said, “What’s that, Arthur?” He said, “Get the Japanese to re-peg the yen and then get all these other currencies re-pegged, and then, we’ll defend; the world will announce that it’s going to defend these currencies.” Well, I think that’s a formula for disaster, myself. We have displayed through all the discussion of the common floating and the joint float and the—

Nixon: Um-hmm?

Shultz: —national floats, and so forth, the fact that the governments involved are very uncertain about their ability to defend any rates, whether they’re right or wrong.

Nixon: Yeah.

Shultz: And you just put up a target for speculation—

Nixon: We may not be ready for that kind of thing. We may be—maybe at some later time—

Shultz: Right.

Nixon: —when we all get together, we are. But for us, now, to patch it up quickly over a weekend is what we’ve been doing too often. So, I agree on that point. On the other hand, George, we’ve got to find a way before coming to terms. And one other thing, Henry, I want to be sure—I don’t want anything to come out of George’s trip that could in any way affect the French elections.

Kissinger: Yes, that is important—

Nixon: That’s very important. We—the Gaullists have got to win there. If the socialists win, it’s a disaster for [unclear]—

Kissinger: I’ve analyzed the figures now. The Gaullists are not in a bad position. They have this—they have a chance of getting a narrow majority all by themselves, which then, together with the center, would give them a good majority. They have a very good chance of getting a majority together with the center, because the way the vote fell, they got more percentage-wise, and they—

Nixon: There better be a good majority. I noticed Allende got, it’s said, 43 percent of the vote in Chile,6 and the papers called it a “stunning” victory. [laughs]

Kissinger: Well, they—they’ve gerrymandered France in such a way that the left has to get nearly 55 percent of the vote to get control—

[Page 108]

Nixon: Good.

Kissinger: —and they’ve only had about 41.

Nixon: Good.

Shultz: Of course, what the French want is a—an intervention system. And that’s what Giscard will be putting the pressure on for—

Nixon: Yeah. I’m sure. Yeah. Do anything you can, though, if—what I mean is I don’t—you will not see Pompidou, of course. Or will you?

Shultz: No. It’s not programmed at any rate—

Nixon: No. No—well, if you have any question at all about anything that could—that could be just as—in any statement be very, very forthcoming on the French. I know—but with regards to what we do, I know we can’t take their position. They, they [unclear] spades, except they do it all in gold. But, but we don’t want to hurt the French, ’cause we don’t—we cannot hurt the Gaullists in this election. [unclear]—

Shultz: Is there any particular thing that I should say, or [unclear]—Nixon: What could he say, Henry, that could be—?

Shultz: —should say nothing?

Nixon: Well, you can say nothing; that’d be bad.

Kissinger: Well, if you can say something, that you will take them—first of all, let me call the French Ambassador and say that if Pompidou would like to see you, you’d be happy to see him—

Nixon: Yeah. Why don’t you just, why don’t you say this: that, “Frankly, we’re aware of the fact that there are some differences on this thing, but the President feels very strongly about it, that we—that the United States should play a constructive role. That’s why you’re here. Second, the President feels—has a very ‘high respect’ for President Pompidou, not only as a political figure, but as an economic expert of the first rank. And, therefore—and, and that—”

Kissinger: That we would—will be—will weigh very heavily with him.

Nixon: “A very high respect. And he wants to be sure that President Pompidou’s views are thoroughly explored and considered in developing whatever plans we have.” How’s that sound to you?

Kissinger: I think that’s very important.

Nixon: And, in fact, if you’re ever asked, I think you could say that publicly.

Kissinger: Yeah.

Nixon: You can say—

Shultz: And I’d like to say that doesn’t sound—

Nixon: No.

Shultz: —like interfering with any—

[Page 109]

Nixon: No, no, no, no, no. No, just—you’re [unclear]—

Kissinger: Let’s check with—let me check with the French—

Nixon: Ask the French Ambassador at any rate. But all the Secretary says is, “The President—the President recalls his meeting with President Pompidou, previous meetings, meetings with him—”

Kissinger: Yeah.

Nixon: “—and President Pompidou is [unclear] is obviously a—” And you could—you always say, “We,” you know, “we, of course, have no intention to—” Well, they’re going to throw him out as President, anyway.

Kissinger: No, he’s not up for re—

Nixon: [unclear] He isn’t up for election; it’s his party. “But—but, the President of France is—he was—he thinks that the—of the European statesman, he is the man who has had the most experience in this field.”

Kissinger: Yeah.

Nixon: I’d just put it that way—which is true. Pompidou is an expert. [unclear]

Kissinger: That I wouldn’t say.

Shultz: [laughs] The—when management endorses one of the union leaders up for election, it generally kills him.

Nixon: I know. Find out from the French if it’ll help. I—I don’t know [unclear]—

Kissinger: Let me check with the French Ambassador. Let me offer him that you’d be glad to call on Pompidou.

Nixon: That’s right.

Kissinger: And, secondly, that you’d be prepared to make some sort of a statement either emerging from [unclear] any other way.

Nixon: Yeah.

Kissinger: [unclear]—

Nixon: But this is bland. It’s a bland sort of a statement: “That the

President was very interested in getting his views, because he has high respect for his understanding in this field,” you know, “where he has experience that most world statesmen do not have.” Fair enough?

Kissinger: Yeah. That would be good.

Shultz: Yeah.

Kissinger: The reason why George should be forthcoming, as I’ve told George, Schmidt called me on Monday.7

[Page 110]

Shultz: Yeah.

Kissinger: And, as you know, Schmidt is on the right wing of the socialist party—

Nixon: Yeah.

Kissinger: He’s probably the only—

Nixon: One of the good guys.

Kissinger: One of the few good guys. He—and a possible successor to Brandt. He said that, he said—he had told me when he became Finance Minister that in great emergencies he might call me if there were a political content. And he just wanted me to know—

Nixon: I know what this is.

Kissinger: —that the time had come where we should exercise political judgment. Now, I take him quite seriously. Now, what that means, in technical detail, George will have to figure out, but we don’t want Schmidt to be in a domestic position at home where he turned to the Americans, got totally kicked in the teeth, because that would shift the whole pattern within Germany, too. And if they are finally forced to go to a national float, if none of this works, we don’t want them to be able to say that we drove them to it. I mean, we—it ought to result from our having tried something that they then decided not to go with.

Nixon: Hmm.

Shultz: There are—there are a lot of kind of technical things that we can probably do that would be helpful, and we’ll try to get up a list and do those things. I would get from this that we shouldn’t agree to any effort at massive intervention—

Nixon: Not yet.

Shultz: And—

Nixon: On the other hand—

Shultz: If it gets very strong, I would want to—

Nixon: Yeah.

Shultz: —call you, and—

Nixon: Yeah. On the other hand—on the other hand, I would leave it, I would, without totally misleading them, I’d leave the impression we want to be very constructive, but that we just feel massive intervention is the wrong step. But, we ought to look down the road as to what—you know what I mean? The idea that if everybody—if we want to build a new system, then we’ll build a new system—

Kissinger: Well, how about—?

Nixon: This is not the time to do it—

Shultz: [unclear] That’s what I put to Schmidt, and he sort of seemed to like it—over the phone anyway—that, rather than say you’re [Page 111] floating, say that, “We think”—and we will support this—“we think the relationship between the mark and the dollar is about right,” and that you are maintaining that par value, but you’re going to remove the bands temporarily, which is the same thing as floating. That is, you’re going to remove the upper limit; you’re not going to intervene.

Kissinger: How—?

Shultz: And let the market clear the air a little bit, and then we’ll come in and we’ll have some understandings with them about the—

Kissinger: But—

Shultz: —pattern of operation.

Kissinger: I was going to say that—how about the point that we were discussing the other evening? That, have some understanding with him that if the mark floats too far, we will help to stabilize it, because their big worry is, not so much its relationship to the dollar, but its relationship to the franc. And if they float, and the French don’t, it’s going to hurt their farmers, and they’re going to have a massive—

Nixon: Um-hmm.

Kissinger: —domestic problem with which we don’t want to be stuck, particularly when they’ve made a direct appeal to us by a right-wing [unclear]—

Nixon: Let me just say that I think you’ve got to be [unclear]—

Kissinger: This is—

Nixon: —more forthcoming than you’re—than—

Shultz: Than you know I feel like being.

Nixon: That’s right; than your judgment. But, basically, putting the

French in political peril—Shultz: [unclear]—

Nixon: —and I’d do it, and I think the Germans have got to know that, look, we’re aware of their problem. And I think we simply say that we don’t feel—think it’s a good idea at this point, but on the other hand, we are acutely aware of their problems, and we want to be as cooperative as we can to see that they are not [unclear]. Now, tell us frankly what you think’s going to happen. Then, draw them as far as you can away from inter—massive intervention, of course, because that we don’t want.

Shultz: Well, massive intervention implies the yen, franc, mark—

Nixon: I know. [unclear]—

Shultz: —so on, and so on.

Nixon: It implies setting up a whole new system now. Do you want to do that, Henry?

Kissinger: No.

[Page 112]

Shultz: It implies going back to the old system. That’s really what’s wrong with—

Kissinger: No. No, that—

Nixon: To hell with that.

Kissinger: That we shouldn’t do—

Nixon: Well, let’s be—

Kissinger: —certainly not at this time.

Nixon: Although we should have a new system. I mean, I wouldn’t mind, if we could have it at the right time. What do you think?

Kissinger: I think—

Nixon: We want flexibility in it.

Kissinger: I think Schmidt, first of all, is an intelligent guy and a good guy—

Nixon: Hmm?

Kissinger: —who will listen to reasonable argument. I mean, he isn’t going to come there in a combative spirit—

Nixon: Right.

Kissinger: —with George. He has a massive domestic problem, in that two weeks ago, they got a lot of credit domestically for not having floated—

Nixon: Um-hmm. [unclear]—

Kissinger: —on a national basis. So, he’s got to be given some way of maneuvering off that spot. And he wouldn’t have called me, knowing my lack of competence in the field, and the certainty of my talking to you, unless he felt it was a major political problem to him. So, it’s partly a psychological thing. Of—if we could keep him moving in the right direction, but giving him enough cushion so that he can feel he got something from us—

Nixon: Um-hmm.

Kissinger: —and that we were sensitive to him.

Nixon: That’s right.

Kissinger: And that, also, in the long term, I think will help you move towards your system, because that gives him the maneuvering room to separate from the French. If we kick him completely, they’ll have to eventually move back to the French.

[Omitted here is discussion unrelated to international monetary policy.]

  1. Source: National Archives, Nixon Presidential Materials, White House Tapes, Oval Office, Conversation 871–5. No classification marking. According to the President’s Daily Diary, Nixon met with Kissinger and Shultz from 10:54 to 11:41 a.m. (Ibid., White House Central Files) The editor transcribed the portion of the conversation printed here specifically for this volume.
  2. On March 6, the President hosted a dinner at which were present administration officials (including Shultz), businessmen, and community leaders. (Ibid.)
  3. William G.H. FitzGerald attended the March 6 dinner hosted by the President. (Ibid.)
  4. See Document 25.
  5. March 9.
  6. A Congressional election was held in Chile on March 4.
  7. March 5. See Document 25.