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88. Memorandum From the Assistant Secretary of State for Economic and Business Affairs (Enders) to the President's Assistant for Economic Affairs (Seidman)1

SUBJECT

  • President's Meeting with Secretary Simon Tomorrow on the Role of Gold
1.
Two points remain to be settled on gold: (a) whether or not there will be a limit in the amount of gold countries can hold in the future, and (b) whether countries will be permitted to trade in gold.
2.
In our view we can sacrifice the first, but must obtain the second.
3.
France will never accept a country limitation on its gold holdings. If we insist on this point, there will be no agreement reached on gold at this time. This is undesirable from several viewpoints.
  • —Without a package agreement on demonetizing gold, the Europeans will be tempted to set up a new gold-based currency bloc. Their scope for doing so will increase in the future as their oil deficits diminish.
  • —Our leverage for obtaining something satisfactory on gold is now at a maximum because we can block a quota increase in the IMF which other countries want much more than we do.
  • —Unless we give in on the country limitation point, we will not get agreement from others to go ahead with the IMF Trust Fund for the least developed countries, which Secretaries Kissinger and Simon proposed last Fall.
4.
The role of gold in the system can be reduced even without a country limitation on gold holdings as long as (a) there is a global limitation and (b) central banks cannot use gold for settlements among themselves except in narrowly defined emergencies.
5.
Germany has joined France in resisting this second condition, not for doctrinal reasons, but for political solidarity.
6.
In order to resolve the issue, we must first swing Germany, thus isolating France. We recommend (a) that Chairman Burns first gain the Bundesbank's support for a compromise; (b) that the President write Schmidt proposing it; and (c) that Chairman Burns follow up with Schmidt this weekend.
Thomas O. Enders
  1. Source: Ford Library, L. William Seidman Papers, Box 69, Economic Policy Board Subject File, Gold. Confidential. Attached to an undated note from Nuel Pazdral, Enders's Special Assistant, to Seidman that reads: "Mr. Enders asked that the attached memo be transmitted to you now, with the note that it has not yet been approved by Secretary Kissinger." Also attached is a June 5 note from Seidman to President Ford that reads: "Attached is a memorandum from Tom Enders on the gold issue which reached my office after the briefing paper was submitted yesterday." The briefing paper to which Seidman referred was his June 4 memorandum to the President summarizing Documents 86 and 87 and requesting a Presidential decision. The President did not indicate his decision on the June 4 memorandum from Seidman. (Ibid., William Simon Papers, Drawer 23, Folder 2, Gold, 1974 (Nov)–1975)