61. Note From the Deputy Assistant Secretary of State for International Finance and Development (Weintraub) to the Under Secretary of the Treasury for Monetary Affairs (Volcker)1
This is a paper which we prepared for Secretary Kissinger giving some of our views on the gold question. We discussed it at a meeting for his background,2 without attempting to reach any conclusions. We would appreciate any reactions you have to the paper. The Secretary said he would most appreciate meeting with you and anybody else you wish to designate in about two weeks to talk out the issue and what might be done, using a revised options paper for this purpose.
One option that is not included in the paper, but which should be for various reasons, is how to deal with thwarting the Europeans if they were to go ahead without us in a way which we felt was inimical to our interests.
- Source: National Archives, RG 56, Office of the Under Secretary of the Treasury, Files of Under Secretary Volcker, 1969–1974, Accession 56–79–15, Box 1, Gold—8/15/71–2/9/72. No classification marking. A stamped notation on the note reads: “Noted by Mr. Volcker.” Another notation, dated March 8, indicates that copies were sent to Bennett and Cross.↩
- The paper was discussed with Kissinger at a Department of State staff meeting on March 6. The summary attached to the front page of the meeting’s minutes notes that Kissinger decided: “That a small State–Treasury group, to include Volcker be assembled to refine the choices in the EB paper and report back in two weeks. The revised paper should include the options of possible unilateral EC action vis-à-vis gold prices and in relation to oil import costs as well as US responses to abort or penalize such action (EB action).” (Ibid., RG 59, Transcripts of Secretary of State Kissinger’s Staff Meetings, 1973–1977, Entry 5177, Box 2, Secretary’s Staff Meeting, March 6, 1974)↩
- If a fixed SDR–gold price were to be maintained, and periodic free-market related adjustments in the official prices of gold were to be made, then the currency value of the world’s primary reserve assets would be tied to a price set on a volatile, unstable market. [Footnote is in the original.]↩
- As can be seen from the table at the end of this memorandum, official gold reserves are now valued at $43 billion at the $42.20 per ounce price. The free market price is almost four times the official price. [Footnote is in the original. The table is attached but not printed.]↩
- The French have stated that they do not consider the IMF Articles as binding under present circumstances (the U.S. having suspended its convertibility obligation). We consider the Articles still binding. Other countries have not yet taken a position. [Footnote is in the original.]↩
- Willy de Clercq was the Belgian Minister of Finance and Deputy Prime Minister.↩
- Under the present IMF Articles of Agreement, a generalized gold price increase (uniform par value change) would require approval of countries representing 85% of the IMF weighted voting power. Thus we have the power to block any legal change. [Footnote is in the original.]↩
- The additional SDRs might be quite acceptable since, for a time at least, they would be “backed” by IMF gold holdings. Some gold “backing” could be maintained until prejudices against paper money waned—in a manner similar to the evolution of domestic monies. [Footnote is in the original.]↩