57. Memorandum From Secretary of the Treasury Shultz to President Nixon1


  • Meeting of Finance Ministers

Arthur Burns, Paul Volcker and I have returned this afternoon from meeting informally with the Finance Ministers of France, Germany and the U.K. in France. The Japanese were represented at the Vice Minister level due to the death of Mr. Aichi.2 We covered a large range of issues on long-term monetary reform, discussed the current monetary situation, and compared notes on the economic repercussions of the oil situation.

Based on discussions with Henry Kissinger before I left, I took the opportunity to remind the Europeans and Japanese of the larger stakes in the Mid-East and our concern over the sense of disarray in the alliance created by recent actions.3 Helmut Schmidt, in particular, pleaded to let bygones be bygones, and urged much more willingness on all sides to consult and work together so that we have a common front against the Arabs’ “economic warfare.” Giscard d’Estaing merely repeated that Europe is a bystander and, in any event, unable to act as a unit. This inability is vigorously emphasized by Schmidt, who fears for the future of the EC if they can’t get together on the crucial oil issue.

On monetary matters, no specific operational decisions or agreements were made. I believe the results were fully in accord with our objectives:

  • a) We have maintained and strengthened a channel for informal and very frank communication on monetary and other issues, both of a long-term and more immediate character.
  • b) We have emphasized our view that, in the light of all the uncertainties, we should go slowly and cautiously on restoring par values and convertibility. We can, however, push ahead on other aspects of monetary reform, for at least possible conclusion next summer.

We did not attempt to bridge the gap between us and the French on the convertibility, floating, and gold issues. There was not, in any case, strong pressure from them to do so in the light of the general desire to maintain the present floating arrangements for the indefinite future in the light of the oil-related uncertainties.

The implication is that only partial agreement can be reached on monetary reform by next summer. This may disappoint some, as it becomes known. However, the common desire to defer a decision to lock the world firmly in a par value-convertibility system seems to me wise. It is in accord with the thinking of most of our advisers and many private observers.

George P. Shultz
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 290, Agency Files, U.S. Treasury, Vol. IV, Sept. 19, 1973–Dec. 1973. Confidential.
  2. Aichi died on November 23.
  3. In a briefing memorandum for the President in preparation for a December 3 meeting with Shultz, Kissinger wrote: “Secretary Shultz recently met with the finance ministers of France, the UK, the FRG and Japan to plan the next formal meeting, in January, on international monetary reform. As a result of our problems with the Europeans on other matters, however, he was under guidance to go slow. Because of our improved monetary position, there is little reason for us to change our basic position in favor of flexible exchange rates and against early restoration of convertibility. Our interest in some rules of the game remains but timing of progress in the negotiations should be subordinated to our overall relations with the Europeans and Japanese.” A notation on the memorandum indicates Nixon saw it. Kissinger’s memorandum is printed in full as Document 201.