69. Editorial Note

On June 4, 1974, President’s Special Assistant Jerry Jones wrote President’s Counselor for Economic Policy Kenneth Rush that his June 4 memorandum on gold “has been reviewed and approval has been given on Secretary [of the Treasury William] Simon’s negotiation proposals.” (National Archives, Nixon Presidential Materials, White House Special Files, Staff Member & Office Files, President’s Office Files, President’s Handwriting, Box 27, June 1974) On June 7, Rush sent Economic Decision Memorandum #2 to President Richard Nixon for his signature. The memorandum was intended to give effect to the President’s decision on gold and it substantially replicates the position contained in the Treasury Department memorandum printed as an attachment to Document 68. The sole difference occurs in the first point of the position, which omits the phrase, “to insure against any inordinate sudden [Page 253] inflationary impact.” The final sentence of the decision memorandum reads: “Secretary Simon is authorized to utilize the elements of this position at the June meeting of the C–20 and in other negotiations.” There is no indication whether President Nixon signed the memorandum. (Ford Library, President’s Handwriting File, Subject File, Box 19, Finance—Gold)

On June 7, West German Chancellor Helmut Schmidt sent a message to Secretary of State Henry Kissinger in which he shared his conclusion, based on a recent trip to Paris, “that President Giscard d’Estaing wants to see further progress made towards European unification.” This development, the Chancellor continued, “improves the prospects of gradually reaching decisions on European policy which lie within the ambit of the basic attitude the Federal Government has always taken. It goes without saying, of course, that this will first require all members to put their economies back on a stable basis. In this connection the balance-of-payment situation continues to be extremely critical for France, as it is for other members. Italy, as we all know, is close to catastrophe. It would be of decisive help to some members if conditions could be established which would permit them to mobilize their gold reserves—primarily as proof of their credit worthiness. A solution of this problem along the lines considered by the Finance Ministers of the Nine is today, therefore, no longer an economic but rather an eminently political question. Boiled down to its basic element, the alternative is: Either the ‘Gold solution’ or developments which will have consequences of unforeseeable magnitude for some West European Nations.” Schmidt recalled that former Secretary of the Treasury George Shultz had told him that the United States “would not refuse to entertain such a solution”; Schmidt then asked Kissinger to help persuade William Simon, the current Secretary of the Treasury, “of the political necessity of such a remedy. The objective should be to have this question settled at the forthcoming meeting of Finance Ministers in Washington. Without your help this will not be possible.” (Library of Congress, Manuscript Division, Kissinger Papers, Box CL 143, Geopolitical File, Germany (Federal Republic of Germany), Chronological File, May–July 1974)

On June 11, the G–10 Finance Ministers and central bankers met in Washington and agreed that a country could borrow against its gold reserves at a price determined by itself and the lending country; in other words, the value of national gold reserves offered as collateral for an international loan could be assessed at a price above the official price of gold, which remained at $42.22 per ounce.

On June 12 and 13, the C–20 met at the Ministerial level in Washington and approved the Outline of Reform of the international monetary system. For the text of the outline, as well as the accompanying [Page 254] final report of the Committee of 20, see de Vries, The International Monetary Fund, 1972–1978, Volume III, pages 165–196. The communiqué issued on June 13 at the conclusion of the C–20 meeting was sent to all diplomatic posts in telegram 127634, June 14. (National Archives, RG 59, Central Foreign Policy Files) At a June 21 Cabinet meeting, Simon reported: “We had a good meeting of the C–20 . We took some meaningful steps toward the outline of a new monetary system—with gold replaced by SDR’s.” (Ford Library, National Security Adviser, Memoranda of Conversation, Box 4)