8. Notes of a Telephone Conversation Between Secretary of the Treasury Shultz and the Under Secretary of the Treasury for Monetary Affairs (Volcker)1

Brandt regards our proposal as serious and deserves to be weighed seriously, but he is unwilling to say he will back it until he had talked with EC partners. He was in touch with them yesterday.
Schmidt and Volcker agreed to Brandt’s doing so, giving Volcker enough time to get to London first.
Volcker going on to London, then Paris.

Volcker suggests President to Brandt message:

[Page 42]

I am aware of the course of the conversation between Minister Schmidt and Mr. Volcker. I know none of the alternatives are free of problems for you or for us. But I firmly believe a constructive solution can be found in the interests of an open world economy with the Federal Republic playing a leading role.

Note danger of Pompidou reaction on Gold.
Volcker to emphasize usefulness of dropping our capital controls—in terms of doubtful effect and possible impact on inflows.
Volcker thinks something in neighborhood of 9% is doable in Europe—could mean some alteration of 50–50 with Japan, since they are unlikely to go below 260.
  1. 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, 1973 Devaluation. No classification marking. Shultz, who was in Washington, drafted these notes on his conversation with Volcker, who was in Bonn.