Conversation 071-001

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Yeah, that's OK. Yeah.

Keep this.

Yeah.

Good boy.

I'll put the lead one when I get done, and the other one I'll handpick.

Oh, the other one I'm going to... You're going to put the lead one over on that one?

No, I'll be using it here, and then putting it over here.

Hmm?

In terms of oversupply, you know, educating people in the wrong fields and oversupply.

All right, now, the game we want to play is I'll hand you this, you put it aside.

All right, you want me to overdo it and be sitting right here and standing up pressing into it, okay?

But you say this one's side, this one's side, okay?

All of these you take here, put over there, and when you say it's getting to the last one here,

Then you put the new ones up.

Then I will take this one and put it up on that side.

I'll end with the two of them.

This one over here and that one over there.

That one and this one.

Do you want these down?

Yeah, not yet.

Not yet, okay.

And when I get done with these, I'll hand them to you.

Now, one problem will be a lot of stuff, unless you mind crossing in front of you when we get down the hall.

I had a little bit of a hard time getting by.

What do you mean?

Well, when you get down toward the end here,

Get those and... No, I think you can just lift them up when they're done.

And bring them over to that... No, this one.

And you're going to take these down on the end, too, and you're going to put them on the right-hand end, too.

You put them on the right-hand end of that arm.

Then you lift that full group up when you're finished using it.

Right.

And then I'll take that other one and put it over here.

You pull this one.

I'm stuck with it.

And the tail end, I've got to figure out some way of reaching the end.

At the risk of falling down, let me go in the ground with this one.

I'm going to hold this one aside, and you're just going to go through these.

No, wait.

I'm just going to go with it.

No, no, right.

That's right.

I hold it against that, and you take all those and put them up here.

Oh, I put all those up on this one, right?

Oh, okay.

And then you're going to put...

This one over there.

And then I will put this one up there.

When I'm through, when I'm ready.

Okay.

Then I'll tail in.

I'll let you in.

So I don't have to carry anything with that piece of wood.

No, no.

I'll hold it in front.

Randy, you better bring this junk in.

Yeah, I'm sure they can do it to safety.

Steady.

Hello, it's Jack, how are you?

I'm carrying out a computer plan.

I'm going to take in a random precise message.

I wasn't able to check this out, but last week, after all, he's a member of the team.

I can't believe the president is here.

Samuel Skinner.

I don't know if any of you want to be able to check it out.

I didn't want anything about it.

I can't get it if he's such a high post member of the team.

Yes.

Thank you very much.

Or I'll tell you what, let's put one in.

I thought we were having lunch with you.

Yeah, we are.

Can you educate me around these things?

Educate me?

We just hadn't had a chance to.

No, I agree with you.

We've been talking about some of the nuances and so on, some of the basics.

I like some of the noise we've made, though.

It's quite a different situation.

You came in at a kind of an interesting end.

Excuse me for being ill.

The agricultural is doing pretty well this year in total.

It's an old yowl.

Interested in strikes.

I'm just looking at the trailer.

I hear you always set a new record every week.

I can't sit myself down.

What if it weren't for you?

There we go.

Show a clip of that shirt over there.

How about the only thing that's doing well?

Well, we're going to be in trouble with this piece.

It's what we're striking.

We're going to be in trouble.

There you are, the only plus, the only plus in the picture.

That's what I've been saying.

Uh, Pete, uh, we're, uh, uh, got a little deal in hand with the Japanese this week.

Now this has to happen very routinely, but we can announce this week.

that they're ready to go on trade.

And this is, I haven't had enough visibility back in Japan, absolutely.

Can you talk to the investor about it?

No, I have not, but I had to go to the president.

I had to go to the president.

I had to write it.

And I just kind of raised this question.

I have a couple of things I have from face to face.

Sure.

No, I agree with you.

That's great.

And then we're going to go to Montana.

We've got four Northwest states, five states.

We've got Montana, Minnesota, Wisconsin, and Illinois, which will get more population than taking a big panel.

And that still keeps it away from the California, Texas, Florida.

That's just where they might get infection.

Where do they come from?

Yes, sir.

I'm Delilah.

Good morning.

How are you?

All right.

Good to see you.

Hello.

How are you?

Well, I'm probably not as good as you are.

I appreciate it.

Good morning.

Good to see you.

You all right?

Good.

Well, uh, you all, uh, you know, folks up on the mission.

Good to see you.

Please.

I don't know, Secretary, what we're going to do.

It's only this important to that one.

Well, I'll tell you, I, I, I, I, all I do is take care of it.

Well, sir, sir, overall, this guy, this guy, this guy, this guy, this guy,

I don't know.

That's all that you supply.

You just start to bring that back by the...

The policy has covered a number of items, but it is particularly important because of the meetings that we're going to be having.

Some of you are going to be having the Japanese ministries back here.

That is the backdrop for some of the discussion that will take place.

All of us are going to be on that.

I'd like to turn it over to Peterson, who will call on various places.

Subjects of a wide range, many of them drawing out of the August 15th speech.

The gentleman at our last meeting, if you recall, we seemed to agree on some new directions

based on a rapidly changing position in the United States and the world.

We agreed to set up some priorities, which we did.

I think Mr. President's mild understatement to say that August 15th changed some of those priorities.

So one of our main purposes here today is, given the fundamental nature of these moves, to take another look at where we want to go and what our next steps ought to be.

I would emphasize that we don't have much time.

And I know that I'll be successful in this request, but I would hope that you could withhold your questions and comments until the end.

It seemed to me that a worthwhile place to start, particularly at the end of the President's New Economic Policy, is to ask ourselves, in a sense, longer term, what do we want and how do we get there?

And it occurred to us that it might be useful to kind of start out with what's been the administration's policy of a liberal trading policy, and ask what some of the premises were of that trading policy.

And ask these questions not so much to change the policy, but to see if, where it isn't operating the way the system is supposed to, we can hopefully change it in some important ways.

It seems to me that the basic premises of a liberal trading system or policy are several.

First, that maximizing the real income of consumers was really each country's primary goal.

I think what we find as we look at the system operating in practice is that the consumers are pretty badly organized in most places in the world, and industries and labor unions and farm organizations are not so well, I mean, are much better organized.

with the result that I think there's a question, at least in some countries, as to whether that's the primary goal or not.

Certainly a second premise has been a free flow of goods, labor, and capital, and no export just for export's sake.

A third very important premise has been the premise of international specializing, where countries focus on the areas where they have the largest advantage.

And in that way, we could maximize the real income of everyone.

Now, it was certainly assumed, I think, in the premises of this system, that this adjustment process would take place smoothly and would be politically palatable.

And I think it is perfectly clear that this problem is a much more difficult one, perhaps, than was assumed, and needs a lot more attention than it's gotten, if liberal trade practice and theory is to move together.

In our long-term policy of liberal trading, there were certainly rules of conduct that I'll briefly mention.

One, that everyone would more or less follow the same rules.

Secondly, that the total system would remain in balance and equilibrium.

Some critics call this the dreamland of equilibrium, because in actual practice, whereas it was assumed that there would be no extra unnecessary building of reserves,

where it was assumed that re-evaluations and de-evaluations would be equally likely.

As we look at the system the way it really operates, we find that this is not really the case.

Let's take this assumption here of no unnecessary building and reserves.

I take this opinion partly because we're going to be meeting with them next week, and also because perhaps they're the most dramatic example.

For instance, it was assumed that people would not build up unnecessary surpluses or reserves.

Let's look at what actually is happening here.

The Japanese this year will have a trade surplus of nearly $6.6 billion.

Their reserves have moved up.

This is pre-August 15, incidentally.

There's obviously been changes there.

We asked the CIA, Mr. President, if they would put together a composite of the various kinds of economic plans that the Japanese have done, both their official agency and some private agencies they use.

Now, without stating explicitly whether this is their country goal or not, it is interesting that as one looks at a composite of those goals going out five years, they were projecting $11 billion trade balance and $20 billion worth of reserves.

Now, the point here is that it is extremely difficult for some countries to have objectives like this and still have equilibrium in the total system.

For example, we're about a third of Japan's exports.

It's very difficult to see how we could have the balances we need to pay for military aid and to be a third of their business almost and to have these kinds of surpluses.

So one of the real problems with the system

is that people do build reserves and surpluses in a way that, theoretically at least, are not too rational.

A second very important premise was that devaluations and devaluations would be equally likely, and that's the mechanism that would be used to balance.

One of the difficulties I think the system is running into is that the IMF does a pretty good job with weak currencies.

But I don't think anyone quite envisioned that you'd have strong currencies that are now present in cases in Japan and Germany.

This is something the Council of Economic Advisers put together.

And I find the way the system works, compared to the way, theoretically, it should work, quite interesting.

For quite a few years, we've had a big deficit, as you know, in our balance of gains.

Theoretically, under those circumstances, the value of the dollar in relation to other currencies would obviously have changed.

They would have revalued vis-a-vis the United States.

Let's take the last 10 years.

In spite of these major deficits,

The dollar has gone up in value about 4% or 5% over that same period of time, which suggests that there is not the same tendency to revalue as to devalue.

And this, in turn, aggravates seriously this disequilibrium situation we find ourselves in.

Now, another very important assumption here in the system was that each country had an obligation to avoid, more or less, policies that exploit the other countries or that stimulate domestic growth at the expense of other so-called bigger, minor policies.

One of the things I think we see in the system is policy.

is that some countries not only export their products, but in a way export their domestic problems also to other societies.

And let's see what's been going on in the last few years.

I suspect when the history books are written, part of the big crunch that the system's had in the last year or two is that the world economy has been in what Fortune calls the stagnation worldwide.

And if you notice here, gentlemen, if you take the last year or two,

there's a definite falling off in the industrial production trends of virtually everywhere in the world, even including the Japanese.

Now, given the export orientation they have, I suspect this is something that's put a great deal of pressure on our own trade balance, and it's certainly one of the major factors.

But much more broadly, I think it's safe to say that it was assumed

that each country would more or less solve its own domestic problems at home rather than exporting them abroad.

Now, let us see what the impact of this is on our economy.

I think John Connolly and Paul Volcker put together some numbers and checked me on this if I'm wrong, Paul.

But the feeling is we need a trade surplus in the short term somewhat in this area.

in order for us to have rough equilibrium.

We have such a trade surplus in 64.

This year, we have this kind of a deficit.

I think it is an interesting question to ask.

What does this trade difference here amount to in jobs in the American economy?

Now, many of us, of course, are accustomed to saying, well, trade is only 4% of our GDP.

It is 13% of our products produced.

Ergo, most of our unemployment problems should be solved in sectors that have nothing to do with international economies.

Of course, that's right.

On the other hand, at the margin, this important shift, we have an estimate here from Commerce, and I think Labor's been involved in this, about 575,000 jobs is occasioned by this difference.

Another estimate is 750,000 jobs.

Now, had the system had been working properly, the only point I'm trying to make is that this would have amounted to about 0.7 to 0.9% of our workforce.

And I can only submit that had our unemployment been 0.7 to 0.9 less, the entire political climate in this country would have certainly been different.

On the monetary side, I'd just like to, I think it's clear to everyone that at the heart of some of these most important problems is that the monetary system is not working the way it was assumed it would.

I'd like to just give you a very brief progress report on the monetary situation.

This is not a forum, I think, for any detailed discussion.

The Treasury and the Volcker Group is leading that effort.

But let's very briefly take a turn on the monetary situation.

The immediate requirement would seem to be to get a sufficiently large exchange rate alignment, which along with improvements in sharing of defense in a marketable trade, would put us in a satisfactory balance of payment situation in the 72 to 74 period.

And this is going to require an improvement of quite a few billions of dollars.

So that's the immediate requirement.

But I think we all agree also that of fundamental importance

is the restructuring of this monetary system so that it works the way the system assumed it would work.

And here again, Treasury and the Voter Group is taking the lead on this.

I'll very briefly go through some of the issues that they're addressing.

Rules and authority, per se, of equitable charities by all and decided by all, because what we see here

In some countries, using an undervalued currency, I think, is part of the national policy.

It is important, I think, to explore whether a new system can be developed where people follow the same rules in the setting of their rates.

This includes the possibility, incidentally, that perhaps we would want to be able to initiate parity changes

Added flexibility to make these changes more continuous, more palatable politically, and smaller.

How do we provide additional liquidity?

In the past, I think our deficit was more of us that provided a lot of liquidity.

How does that system work?

We've had lots of problems with short-term capital flows, as you well know.

There's all this question of the role of the dollar versus the role of gold.

What kind of convertibility?

Paul Volcker later can report to you on the kind of Euro-dollar and dollar overhang we have, but it's a very important problem.

Certainly an issue is what do we do about foreign investment restrictions as part of this package?

And I guess Paul Volcker, in something he's written, refers to the World Central Bank.

The IMF is simply not functioning as a powerful force, and if we're going to restructure the system along one line, at least, the IMF is going to have to play quite a different role.

The Treasury-Volcker Group have come up with three broad options that they're now working on.

One is a basically reform system, liberal trading, multilateral cooperation, and major changes of the type that we're talking about here.

The second one is a more regional kind of block system, and the third is a floating world kind of system, as Paul calls it.

I think, Mr. President, rather than get more into this at this point, we ought to wait and see if we have time, and then John will fall over and answer questions on that.

The second important piece of work that I think the August 15th initiative certainly emphasizes is the importance of taking some important initiatives to them, again, without going into the detail.

We have work going on in Japan.

Canada is becoming an extremely important

a situation to be dealt with in the European community and markets.

That's more or less on the bilateral side.

On the multilateral side, these are the pieces of work going on you know about the OEC trade study group.

I should say that Congress and many others are growing increasingly concerned, I would say, about GAD and its effectiveness and its viability.

And we'll have an important study if you approve it to really take a look at how GAD should function.

Cliff Hardin could like us to spend a meeting, I'm sure, on this important subject, and I think we should at some meetings, but agriculture is a very important problem worldwide.

If we have time later, I'll show you that agriculture is really one of the very few major categories in 71 that's up vis-a-vis the previous year.

We depend very heavily on that positive balance.

But around the world, we see very high subsidies, artificial prices, very little production controls, people exporting their problems, and I think we need a bold approach to this problem.

And finally, we have next steps of the new economic policy, the need for some positive new initiatives.

I think many of us feel, gentlemen,

that the steps we've now taken were absolutely necessary and fundamental, but sometime soon we should probably think in terms of some kind of forthcoming positive initiative so that the moves we've taken do not look too self-centered or protectionist or perhaps even overly nationalist.

The next area which we think commands a great deal of attention is the whole adjustment process.

The thing that's happening here is partly as a result of our overall employment problem, but partly as a result of the fact that the market penetration rate in the United States has certainly accelerated in the last five years.

It's an increasing penetration of key markets.

We have time later.

I can take you through a whole variety of markets.

But the thing that's happening, I think, in the 60s that is qualitatively different is that the rate of penetration of important markets is accelerating in the last four or five years, which certainly aggravates the political as well as the economic problems.

Now, if we're going to have a very old adjustment program, which many of us think is absolutely essential, one of the problems is, what's it worth to us?

And I think most people would say we spend very little money, actually, in this arena.

Well, there are lots of ways you can look at what it's worth.

From a consumer standpoint, here's a study that's been done by the Federal Reserve Board that simply shows that on shoes alone, just to take one product, the difference between having a fixed quota and not having a fixed quota would probably end up costing the consumer nearly $2 billion extra in shoes at a time when we're trying to keep costs down.

reducing the rate of inflation, one of the cost benefits we've got to think about here is the cost of certain crimes.

Now this is simply one crime.

Again, on adjustment assistance, I'll simply cover the headings because we have a lot to go through today.

Most of the people think we need a much better early warning system so that we can get preventive action before we're confronted with a crisis.

For many of our problems, the problem is just politically a crisis by the time we get to it.

What is the relationship to other domestic adjustment problems?

I look at you, you're an unparalleled one,

reminding myself that we've got unemployment compensation, we've got fringe men retraining and regional development.

Any poor competition is really a special case of a broad question of how we help industries adjust.

How should these programs relate to the other programs that you've had?

Jim Watson could speak volumes on this.

We think the principal problem that we have, perhaps the principal psychological problem, is how to get laborers cooperation on it.

I needn't tell anybody as sophisticated as you that if you talk to labor unions about adjustments, what they're thinking about all the time is that each of them runs their little political empires with their members.

And what they're concerned about is how many members they're going to have and what kind of dues they're going to have.

And when you talk about adjustments, you're really talking about less members for them.

And Jim and his people have some interesting thoughts on how we might be able to make their cooperation and adjustment program in their interest.

Role of temporary marketing mechanisms.

Should we have some rules on this?

And I know even posing this kind of question will bother some.

On the other hand,

I'm constantly asked, as I'm sure some of you are, you seem quite willing to make moderating agreements on textiles and shoes and steel and other products.

What are your criteria?

Are you willing to talk about having voluntary or non-voluntary arrangements to moderate growth on other products?

What is your policy, in other words?

What makes electronics different than these other products?

I think this is not just a U.S. problem, it's an international problem.

And certainly the most important problem on adjustment assistance is how do you shift our resources and people into new methods, new fields, where they are economically viable?

I think it's present in many ways.

It's the contrast between welfare and rehabilitation, between burial, which is what adjustment assistance is widely called, and renewal.

And if we're going to put our emphasis on the industries of the future instead of getting locked up in the industries of the past,

Somehow, we think this is where the emphasis belongs.

A third important part of our program, we believe, has to be more emphasis on exports.

And not just for economic reasons, but for political reasons.

I think the political realities are that import industries are much better organized than export industries politically.

Now, here is the kind of rate it rose over the last 10 years.

in exports, and it can be seen here that obviously part of this depends on the base, but if you take this standard period, our growth has been considerably smaller than other countries' growth has been.

Our share of exports, as we've seen earlier, has gone down.

Now, we believe that export promotion should be a very important part of our program, both for economic and political reasons.

These are the various programs that we have, DISC, and there's some other incentives that other countries use, export financing,

It's an antitrust problem.

By and large, President, if I were to look at the Japanese success in exports, one of the several very important reasons is the way they've been able to mobilize through large trading companies to smaller companies to participate in exports.

In the United States, by and large, we have done a very good job.

Very important in this is a kind of a national commitment in the decision as to goals and how we organize.

And we talked in the last meeting, we talked about how stocks are the chairs, export council, gold, buy industries, that sort of thing.

And how high up in our visibility do we wish to raise that issue?

Now there are other issues on exports.

I don't think this is the right forum for them.

I'm sure most of our questions in that area about military exports, particularly certain aircraft, which I appreciate have important considerations other than export.

And another very important issue is the east-west study area.

You may remember that at our last meeting, we showed you the way that trade is growing.

And we'll simply make these very brief points that it's growing extremely rapidly.

that in total now it's about 90 billion each way, and that our share is obviously very small.

You will recall asking us, and Congress chaired a task force to do this, to tell you what the magnitude of that opportunity is, in terms of dollars, and to make it a realistic, conservative goal.

Marty Stans, I think, believes it's too conservative, but

The indications are, and I think almost everybody agrees it can be at least this much, is that if we were lifting restrictions, in four years we could have about a million dollars worth of trade, and Pearsall would break down, and it would add about $400 million to the favorable trade balance.

Obviously, there are many political foreign policy considerations here, but you'll remember asking for the economic side, and I think we've had about that much at the point that you think it's appropriate to move.

You're aware, I'm sure, of the growing business pressure from businesses to loosen up in that area.

A fourth area where a lot of work's going on, and we think

It's a whole policy with regard to investments.

Last time, you recall, we covered the investment picture.

And I'll simply make two or three quick points.

We obviously have an enormous stake in our foreign investments abroad.

This number now, I think, is close to all the perhaps 78 or 80 billion dollars overseas of direct investment.

Second thing is,

On our balance of payments, you may remember that our gross income now from our foreign investments is nearly $9 million.

So without this, we would have probably a much more serious balance of payments situation.

And the final point we would like to make is we have a fair amount of vulnerability, as we know, with that much money involved.

And I still hear how much money others have invested in the United States.

And something like $12 billion has been invested in the United States, whereas a number about six, seven times that large now has been invested abroad.

So we have a lack of symmetry there in our vulnerability.

Now, what are the main issues here?

We think there are several.

Perhaps many of you have read a concept called the mature creditor concept.

The argument runs that

even in the reasonable short term, we should be able to find a trade deficit quite acceptable in view of the rapidly growing investment income.

We think it's very important to nail this one down.

I think I can say that the studies that Lisa Paul and you have done suggest that that's a very optimistic assumption of the rate of growth of investment income.

So we think we should get a government view on this matter.

The other issues I think we're aware of with one possible exception.

What we're going to do about controls on U.S. investments abroad, expropriation, you'll be getting something this week on quite a lot of work that's been done there.

And certainly the multinational corporation, the effect of this corporation on trade, balance of payments, capital movements, and jobs is moving up to the head of the agenda.

Those of you who've seen Labor's legislative program know that essentially it's quotas across the board blocking investments abroad and blocking technology.

And the villain, if I can name one, Jim, it would be probably is the multinational corporation.

The argument is that they're essentially exporting jobs.

And they've used numbers like perhaps as much as 50% of the activity of multinational corporations is aimed at exporting jobs.

We all agree, you know, major work is now underway to get at this problem, that we know much too little about what multinational companies do on this.

I can show you some data that Congress helped us prepare.

There's a lot of work on what we know through 68, but we've got to know it in much greater depth than this.

whereas labor argues that as much as half of the activity of multinational corporations is aimed back at the United States.

In 1968, it would appear that while the number of the amount of the product coming from foreign manufacturing affiliates of U.S. companies is growing, 4%, 7%, 8%, and while the number isn't important, the important point is that over 90%

of what our manufacturing plants do abroad is to attack foreign markets and get a share of those which reflects itself in our investment medium.

But we think it's going to be very important for us to answer this because this is where the labor of emphasis is now being put.

Technology transfer.

at least in my view, is going to be a very important policy issue we're gonna have to deal with with regard to what we do about technology.

And again, labor has got that very high on its list of priorities.

Let me illustrate, remind you of a chart I showed you the last time, just to refresh your memories, of the Japanese case.

You remember our showing

These are Japanese royalty payments abroad.

This is what they pay out in investment income.

These numbers are extraordinarily small if you compare them to other countries.

And these numbers in relation to these are very large.

Now, what's happened, of course, is that Japan has had two kinds of restrictions on high technology products.

One is on investment, and the other is on exports.

And I think many American companies, knowing that they

could not get either into the market in order to make their products or export them in, in the case of computers and high technology products, sold their technology.

And I think we should also say that we were encouraging probably many of these companies to do just that.

I think the policy question we're now presented with is that one of the premises of the liberal trading system is open markets to exports and capital and trade.

what the relationship should be between our willingness to export our technology and that country's willingness to accept our exports and our investments.

And it may well be that we'll need to take a fundamental look at this question of what our policy should be with regard to exporting technology.

This area is, in the eyes of many, an important thing we probably should be doing a much better job on.

I think all I need to do is remind you of the advantages of stimulating more foreign investment in the United States.

It would help us, I think, on our balance of payments problem.

It would certainly help us on the jobs front.

And it would certainly help us on the vulnerability front.

And there's some active programs underway of stimulating other countries to invest more in this country.

On the legislative front, which would obviously come out of all this, I think our views are twofold.

One, that while your new economic policy has certainly taken some of these off very short term,

All of my inputs, at least, say that labor is not, by any stretch of the imagination, going to give up on its three-part program of across-the-board quotas, technology, and investment.

And we need to work on a contingency plan both to fight that and decide how to respond to that.

On the positive side, we can see a program emerging in the next few months, including the following elements.

Export promotion, as we've mentioned.

what to do about impacted industries, the whole adjustment problem, and perhaps some other legislative authority to give you the authority as we propose major initiatives to have the authority to be in fact able to negotiate.

And of course if you decide to go further on the East-West trade, you'll probably need some legislative authority to do that.

The final part of this presentation deals really with the issue of

of our own domestic economy, because I think the more we look at this problem, the more clear it becomes to us that if we

do not have a strong domestic economy that is growing and competitive.

It's going to be very difficult for us to have the kind of open world that we want, and we're seeing the results of that, I think, in the last few years.

Last time, we went to the unit labor costs, as some of you may remember, of various countries.

Here's some data that go back over ten years.

And this covers only manufacturing, and as all of us know, a lot of our productivity problems in the service business, not in the manufacturing business.

But even in the manufacturing area, one of the reasons your new program is so highly relevant to our country's problem is that you can see this distinct flatten in our output here per man hour.

And as I said earlier, if we don't get more productive and grow, I think almost whatever else we do, we're not going to be able to have the kind of foreign economic policy, foreign policy that we all want.

Now, as I read this council's charter, we're supposed to try to help bring Tibet together and coordinate foreign policy domestic issues.

And while in most of these cases, I don't think our council is the place to do this work,

I would hope you would agree that perhaps one of our roles is to identify some of the problems as we see them.

We've already taken some very important steps.

The new attitude of what we might call the Nixon Doctrine of Economics and the competitive spirit of getting back to work is certainly being very well articulated, and I think, from what I can see, well received.

Modernization of U.S. plant equipment.

The reason I use the word modernization, our critics on this investment tax credit keep talking about underutilization as though the only issue was quantity.

I think there are two reasons, several reasons why this is not the case.

In a competitive world, it's the quality and modernity of that equipment that is urgently important, particularly if you're trying to get productivity improvements.

And quoting figures about how a certain percentage is not utilized, I mean, this is the main point.

For example, we were unable as President to get the data we wanted, we hoped we could, that would compare in detail the age of U.S. plant versus the age of other countries' plants.

One fair study has been done in the Japanese case, and it suggests that 77% of their plant equipment is six years old or less.

Now,

I would have no way of proving that the U.S. plant is older than that, but I would be very surprised if it isn't substantially older than that.

So you have the modernization issue.

Another reason we need this capital, of course, is if we're going to provide these 20 million new jobs we talked about.

Peter Drucker, I think, makes a

from an important point in an article he's written on how much capital it takes to buy these new jobs.

He estimates that a lot of these new knowledge and skilled jobs require about $20,000 of capital per job.

Now, where's that money going to come from?

And obviously, profits is one place where it can come.

And sometimes I think, at least I've been inclined to forget what a plateau we've been on, really, in terms of corporate profits.

This is the sector we're talking about here, essentially the manufacturing sector.

And to notice in absolute terms, it's very flat going back about five years.

But of course in relative terms, when you take into account inflation and the growth of the GNP, it's not only down substantially, but these dollars buy less obviously than they did five years ago.

I simply go through this because I think we're in for a lot of criticism on the investment tax credit.

And it's important, I think, that we have some of this background.

The third area that we've talked about in many forms, including our last meeting, is enhancing the US industrial technological position.

It's a very important part of any program of providing growth and competitiveness.

There are many, many ways one can look at what our industrial technological position is.

I don't mean to suggest that this is a comprehensive look.

You really ought to do it by sector of technology.

Commerce has prepared this, and I think it's simply one symptom that seems to jive with what most students say in the field.

That is, if you look at applications to the United States Patent Office and argue that before a guy submits a patent, most of the time he's going to think he has something he thinks is worth patenting.

You can see here that going back ten years and using the U.S. number as the base, it's remained fairly flat.

But if you look at the foreign patent applications, you can see that they've nearly doubled in that period of time.

so that now there are about 45% of the U.S. cap.

So there's lots of similar indications, mainly in our trade balance and other places.

But everything that I see, at least, suggests that this technology program is a high-priority one.

This study is being handled in the domestic council.

There are a lot of inputs to it, commerce,

has got some important ideas, I think, on this subject, and I believe, John, you've given this project to Bill Magruder, who, from my discussions with him, is very much on top of this problem, and I understand you're going to get a presentation on it.

To bring our people up to date, I think, in general, what's being talked about is general stimulation of R&D, in short, letting the private sector, in important ways, decide where it thinks itself it can put money, and then targeted stimulation.

And I think that some of the newer concepts which are present in that program, as I review them, are some way of combining social benefits with economic benefits.

And we've tended to think that if it's social, it doesn't have much to do with the other and vice versa.

But I think Bill McGruder is very well aware of the fact that it's quite possible to take areas that do provide industrial growth, productivity, jobs, trade effects, and at the same time meet some of the social problems that we have.

There are also very important questions of how we get this innovation turned out, including a subject that the President's been interested in, I know, which is this whole subject of how you get quality of invention in government programs, how you get development and demonstration.

I have a tendency as a businessman, I think I can say this, to launch programs before we're at all sure we have a first-class idea.

or for a scout class demonstration, but that what we have is really good.

Most projects that are present in industry, the vast majority go through this invention feasibility stage, and you draw the majority of the projects, because when you finally, you know, look at it in the heart and in the prototype form, it costs too much or doesn't work or it's patented or something of that sort.

And the bill is working hard on how the government should really simulate that.

And certainly, organization and implementation is another where it should be located and so forth.

There are some specific policy issues here in the technology transfer and antitrust areas that are important.

The fourth area that we talked about the last time, a great deal of work has gone on as a whole.

You'll recall our discussion of the whole antitrust area and the relationship that has to competitiveness.

Again, John Ehrlich and his people have done a great deal of work on this.

I think if this Council has any direct contribution to make, as John and I have discussed, it's to see what the particular aspects of our foreign competition are related to this.

There's questions of what kind of vergers for Japan would be made abroad.

Many foreign countries, as you know, prefer joint ventures.

Our joint venture structure, I think you'd agree, John, is a little ambiguous in this country, let alone abroad.

How do we feel about companies diversifying as part of the adjustment process?

See, Mr. President, one of the things businessmen tell me is quite frequently the best adjustment process is to diversify.

If you're a fairly large company, you're having a problem in some important segment of your business, a merger may be the cheapest way of getting your resources spread elsewhere.

And I'm sure you're aware of some of the problems that are involved there in that kind of merger.

multinational companies have some special problems, export trading companies and web bomberies are certainly related to us.

And finally, if you were to decide as a matter of your program that you wanted to take certain large schemes where you wanted to concentrate government and business resources and technology, I'm sure, John, there are going to be some very interesting antitrust questions that are raised in that kind of an activity.

We've been inclined to do rather little of this in this country.

The next area that affects our competitiveness is the energy and raw materials situation.

I think we decided as a result of our last meeting that some of the other things were higher priority, but I think we're now at a stage where I would recommend this move up our priority.

Just to give you an idea here, if you remember our reviewing with you, the very strong trend has started having to import a good deal more of our raw materials as you look to the end of the century.

We've been doing about this much.

It now looks like in the next 25 to 30 years, we'll have to be importing this much of our product.

Now, in law materials, there's a great deal to do with our competitiveness in the world economy.

Aside from vulnerability, there's the question of competitiveness on cost.

To show the Japanese case at the moment, they have been doing a great deal of 20 and 25 year purchasing of raw materials at very favorable costs.

Many experts would say at costs that are better than the costs we are now getting.

But there's no question raw materials is an important part of competitiveness.

Certainly there's a vulnerability issue here.

Balance of painless effects.

We're now having some studies made of what growing raw materials does to our balance of painless.

They're far from having a clear view.

There are different views on it.

But as you know, we're going to have to import large incremental amounts of oil in the future.

And we have to see what the effects of this might be on our balance of things.

what the government's role should be.

As you probably know, there's a recent commission on materials policy, a national commission on materials policy.

I guess part of what we have to decide is how much priority we put on it.

I think I would urge us to put a rather high priority on this problem.

And very important, I think, a policy decision is needed on what role research should play in your priority of technology products in developing substitute materials.

We all recall during the war the major effort that was put on synthetic rubber and nitrogen and synthetic power, in a sense nuclear power.

I think as John goes through his projects, to what extent we want to develop our own substitute materials will become an important policy question.

Having suggested that jobs is a very important part of foreign economic policy, at least as I live in the real world here,

It seems to me that another very important question is this question of providing 100 million US jobs by 1980 and what kind of manpower policies and planning we want to get involved in in order to achieve those objectives.

So we can position 20 million new jobs in this decade.

I am told by experts that that number is about 40% higher annually than the last 10 years.

This is due, of course, to demographics, the ages of children that were born 20 years ago, essentially, when we had that sudden increase there.

Now, I guess one of the questions is, are we having an emerging problem of jobs in a way that perhaps we can't quite understand why the problem is just as intractable as it is?

We see certain pockets of very real problems

In a 16 to 25 age group, we talk a great deal about blacks and the problem we have there.

But as we know, even in the whites, the average unemployment rate is about three times the average in the United States.

And I take it quite a few of these students have a pretty good education.

We see certain areas of major oversupply.

One of the most dramatic, I guess, is the appeal of education.

where we turned out to many more teachers than we apparently need.

And some would say by a factor of perhaps four or five or six times more than we need.

Some say we have many too many college graduates.

I'm not saying I know the answer to this, but I am assuming, suggesting that we may be running into some serious structural problems here.

We know about the aerospace problem.

And yet at the very same time that we see this oversupply, we have great shortages in other areas.

Some experts tell me that we're only training about 35, 40% of our requirements in health and various technologies, laboratory technologies, mental assistance, computer technicians, and so forth.

Another group tell us that as you look ahead to the way the world's changing toward more skills and more training,

One expert says we probably should, in our high schools, be training about eight out of ten in some kind of skill training, some kind of training that enables them to relate to the new jobs in the 70s.

And yet less than one out of four are getting this kind of training, and much of it, I think, is oriented past rather than the future.

I might tell you a personal anecdote from my previous company.

The fastest growing part of the entire company is in the field of skill training.

And what we've discovered is that the public sector is very slow to respond to the new requirements of computer technicians and electronic technologists and so forth.

And that I suspect that this whole question of what kind of training and what kind of jobs are going to be available is going to move up on the agenda with my guests.

And it's related to this issue here of jobs.

Jim Hodgson tells me that at the adult level, that much of what is now done is at the entry level, as I understand it, Jim, and we do rather little in the upgrade level.

Now, as you talk about new technologies and new companies and new industries, you have the problem of what these people are going to do as these new industries emerge.

The issues, I think, involved in this are fairly obvious.

How high a priority should be put on the unadmitted job goal?

And what do you believe the level of government responsibility should be for achieving that goal?

And then what kind of policies achieve it?

To what extent does one rely on overall growth, overall level of economic activity?

And to what extent does one get more deeply involved in trying to predict what the jobs are and getting the people ready for those jobs?

I guess all of you know that Sid Marlin, the new commissioner of education, has some very strong views about what he calls career education.

He thinks that our education structure needs to be fundamentally altered to provide more training that really prepares people for the new kinds of jobs.

And, of course, in Jim Hodgson's area, I guess there's a question of what kinds of new government programs are required, or government private programs.

The seventh area, I think, is the area of projections you should develop in the United States and the role of goals and projections and plans.

And I know this is not an uncontroversial subject, but I think as one looks around the world, he's at least entitled to ask,

whether the kind of projections that other countries are doing do have relevance to our particular country.

Not that we can't, but what are the lessons that we might learn?

The Japanese case, which I would certainly not think is appropriate in the United States,

is a system that does do a great deal of defining the future and defining the goals.

I mentioned earlier the spread of the raw material arena.

If you look carefully into their plans as a country, you will see that they have some very specific ideas about where the raw materials are coming from, where they're going, how they're going to get them, and they have some fairly specific targets of industries they're going to emphasize and how they're going to get from here to there.

Finally, having said that, I don't think that kind of system is appropriate for this country.

It still leaves the question as to what kind of projections and goals that you're planning, if any, make sense for the United States, given the market system, the private sector system we have.

How should that be organized?

Where does it belong to the United States government?

The President has approved a low-profile bipartisan group that will be co-chaired by Roy Ash and Ben Hynan, who will very quietly start this month looking at this important question of what kind of projections make sense in this country at this time in its history.

As one important example of a piece of work that I think is very important,

is to look ahead to the middle and wider part of this decade and ask ourselves, what kind of an industrial manufacturing and employment base is the U.S. likely to have, at least in terms of its basic industrial set?

Aircraft, steel, automobiles, or trams?

Are the concerns over our becoming a service economy justified?

We hear this frequently.

Obviously, the changes in the monetary system won't have quite an impact on them.

And what kind of an industrial manufacturing base do we want and what kind of a price are we going to pay to get it?

It seems to us that even before this work is done, it's important and I suspect this council, this might be a place where this council should play an active role, is to look ahead and answer questions like this.

Productivity and competitiveness comparison in major industrial sectors of our country versus others.

What are the investment plans of American companies?

Many people believe, labor in particular, that the United States companies are planning rapid expansions of their manufacturing abroad as they learn how to work with foreign plants.

Another question that's part of this is what are the likely effects of new combinations of capital technology and low labor costs in selected, less developed countries?

I think most of us, when we were taking our course, our early courses in economics, used to think that low labor costs and low capital and low technology went together.

But in this new world, what we're seeing is that capital, technology, and management have become very mobile, and that companies are now learning how to export their management and capital and combine it with low labor, which in a sense is a rather new ballgame and has some

The important question is, how far is this likely to go?

To illustrate this, we've worked with commerce in trying to get the kinds of plans that various companies have.

And I don't, for the moment, suggest that we know how significant this is.

But it's simply put up here to suggest that the image we used to have of less developed countries making textiles and shoes

sandals and bags and that sort of thing is likely to change, and perhaps significantly, in the 70s.

This is Hong Kong, Korea, Taiwan.

This is the list of companies across there.

And here are specific products that we either know are currently being made in significant quantities or .

I think, Mr. President, as you go down that list, you will see

But some reasonably sophisticated products now are beginning to be made in these less developed countries.

Computer arena.

Quite a few computer people are now exporting memory grounds, for example, integrated circuits, devices, and that kind of stuff, with their management, with their know-how, to these countries.

So we think as part of this study of where our manufacturing base is going, without getting alarmed by this, we should simply try to make a reasonable three to eight year projection to just see where this manufacturing thing is going.

But I'd like to sum up now, I think, telling you what I think we have tried to say today.

I think what we've tried to suggest is that this liberal trading system needs to

has many advantages.

Instead of discarding it, we ought to try to make it work the way it's supposed to work.

This certainly means that in this monetary area, there's an enormously important piece of work to be done.

In this whole adjustment process, we think there's a great deal of work to be done.

And if we're going to preserve our worldwide station, shift position, leadership position, we think we have to take some initiatives where we might set out some challenges to the world, for example, the kind of thing we might visualize when we get this monetary thing settled, for you to challenge the world to certain kinds of major liberalization by the second 10-year period.

But we might say that if these changes are made, we stand ready to eliminate certain kinds of barriers.

But we think it is important that we put ourselves on the record there if the other countries do in fact make the adjustments that we think are appropriate.

Aside from the international economic system, I think what we've tried to say today is that a strong foreign economic policy begins at home and a strong domestic economy.

And that if we want a liberal trading policy,

we can have the best international economic system in the world.

But if there are questions about whether we can provide jobs and grow and compete, in a sense, that's the necessary requirement of an open world.

Essentially, our starting today, we welcome your questions, your comments, or if you have directions you think we're overlooking.

You'll notice, Mr. President, you told us to look at priorities pretty carefully.

We've heard very little discussion of foreign aid.

I think our view is that over the next few months at least, given the kind of problems we have, this is not a sci-fi problem we're going to be taking care of.

If you do have questions about the monetary situation, we have two experts here.

So now I'll try to answer your questions.

I think it would be well to focus pretty much on the problem with regard to Japanese troops here.

Would you like to start on that, Bill, on that?

It's a better accomplishment than John.

You might have something you'd like to say.

Well, Mr. President, I think this probably is the most important meeting of its kind we've had as a band in World War II.

I think we're

pretty well prepared on how it should be handled.

Treasury and State Department, I think, are in accord, and we've sent a recommendation to you about it.

The reason it's going to be particularly difficult, I think, is that they are very weak politically at home.

Their own government is split up in their factions, and they're disagreeing on everything.

So they will want to have some assurances from us of a general nature, certainly.

They're suspicious about us, they don't quite believe us.

They don't say that, but they say it to other people.

There's major comments and so forth.

There's a sort of suspicion about whether we're telling exactly the truth.

And this applies to the representation question in the UN.

It applies to the levels of our forces in the , et cetera.

Generally, they've been sort of shocked by what's happened.

They had it coming, obviously.

They know they had it coming, and that makes it worse.

We're not going to be in a position to give them very much by way of specifics, except to tell them what we want them to do in a general way.

And we have a list of a...

we're going to talk to them about it, tell them they have to take some action, et cetera.

They, on the other hand, are going to press us, we'll apply, if we do these things, what are you prepared to do?

At that point, we're just not going to be prepared at this time to answer.

We're going to be able to point out that we won't know until after the monetary meeting, 10, probably until much later than that.

So it's going to be a very difficult exercise.

to give them the assurance that they need that the relationship between our two countries and the rest of the Pacific area doesn't matter.

I'm going to continue to make them do or force them to do the things that they must do to help us with our problems.

taking into account that they do have very, very sub-political situation at home, plus a depression of their own.

They have a difficult economic situation.

So that our ability to answer their questions is going to be quite limited.

They're going to be able to develop what's wrong with them and what we think they should do.

They're going to press very,

uh, very far out of what we, what we're prepared to do.

I guess, I mean, it takes a little bit to, you know, Mr. President, to test the delegation.

He is, uh, a very strong supporter of the United States and, you know, appeared at least, uh, you know, through a while back to be the successor to Sato.

We're not sure whether he holds that position now or not.

He's lost ground.

First, he has a health problem.

He's on a trail.

And secondly, he is under attack by opponents in the cabinet itself, particularly in the Bureau.

And so he is going to be very shaken himself.

He's going to want to get as much support and attention from you and the USO as he can.

So it's going to be a difficult exercise now.

It seems to me our position is stated this way.

So we should be firm and tough in our private discussions to make it clear that they've got to face up to these matters.

They should have faced up to them a long time ago.

At the same time, we've got to

be quite aware of their sensitivities, in public comments particularly.

Because whether they are as guilty as many of us think they have been in the past or not, the fact is that whether they are the linchpin, as you said, the linchpin of peace and

and our whole policy revolves around it.

And I was interested in people doing this exercise, and I, incidentally, think it's an excellent exercise because it points out how many unanswered questions we have in our own government.

We have a lot of them, and those unanswered questions, we've got to compare them as we talk to our friends and so on.

It's interesting to notice that the areas where we expect danger and difficulty in the future

involve our very best friends in the world, Brazil and Latin America.

Brazil and Mexico, there are two best friends that we count on the most, the stabilizing influences in Latin America.

In the Pacific, you have mentioned

Taiwan, Korea, and Indonesia.

We've been doing everything we could to colorize Indonesia.

We're going to do the same thing, of course, as we do here.

So the difficulties that we're going to have in this field in the future are going to point directly to our friends in the world and the ones that we've colored.

And I think in the case of Japan, I just made one other comment.

We have to keep in mind that most of the things that they have done, or at least many of the things that they have done, which I'm not criticizing this country, they did at our request.

And that's one of the best aspects of it.

They point out that we tend to be quite critical of them and say, why don't you do more by way of defense expenditures?

They point out,

Well, we want to, but we've done exactly what you asked us to do.

You were the ones that provided in our Constitution, made us do it in our Constitutional tradition that we could not have forces.

So when we, let's say when we talk to others in our area of the world, we're not sure they want us to build on heavy armed forces.

Now, in the trading area, we've taught them a lot of these things, as you say.

We encourage licensing as you can.

Now, it's come back upon us, but we must keep in mind that, as far as the Japanese are concerned, they're very sensitive to these.

I think the meeting will go well.

I think we're well prepared, Mr. President.

I don't think there's anything we have to decide.

One other thing that deserves comment is that every nation that we've dealt with, without exception, starts off by saying that what you did was sound, necessary, bold, comprehensive, and they admire you for doing it.

So in our dealings with all of these countries, we start out

I don't think that I'm sure that I've recently been over there and visited with all the ministers that are going to be here.

The same thing.

But in my visits before with the Japanese as a legislator and not in the cabinet, I do not believe that there is, that they use the excuse of their constitution to fulfill their role in the defense of the Pacific area and their own self defense.

But I really think they are ready to move in this direction, and much more so than we give them credit.

The public opinion polls in Japan now are shifting.

Although two years ago, if the Defense Secretary of the United States had visited Japan, he would have had demonstrations.

There are no demonstrations.

You can talk to student leaders.

You can talk to other people.

You can talk to the press.

There's not that kind of a feeling in Japan today.

I think that somehow or other we should be aware there is a change in Japan.

Our department right now is spending $500 million a year in Japan.

The Japanese military is purchasing military weapons from us to about $90 million.

This should be higher.

It's gone from 120 down to 90 in the last 12 month period.

In all of these areas, whether you talk to

some of the most, some of the opposition leaders or the members of the majority party right now.

I think there is a movement and there is an awareness as part of the Japanese to assume a greater responsibility in the defense arrangements

If they understand that that's part of it, we're not backing away from anything.

But we've also expected to play a role in this area.

I think that we can get acceptability for it, not only in Japan, but here in the United States too.

One of the main proposals .

But they will try to use the Constitution in their discussions, but they know better than that.

Their five-year defense plan only gives nine-tenths of 1% of the gross national product of national security affairs.

It's really, they've got free rights and all of that.

It's quite interesting to note that the Chinese,

which of course is

and looking toward the future of the Chinese nation, who is their number one potential threat, rather than the Russians.

The Russians are second, and the Americans are third.

Now, they do that because they see the Japanese economic complex as the, potentially, one that could be number two, or who knows, by the end of the century, it could be better.

We don't think so,

That's why it's good to have on our side.

The other side of that is, too, is that as we push them on, on the fence, this motion down the road is a very, very significant foreign policy problem, because the Japanese leading the Chinese on it.

We now are feared by the Filipinos, by the Thais, by every one of the other nations of any particular region, because that's where they occupy them.

And they're dead and able.

And we can't assume that.

And these nations can't assume that they're just going to continue to be willing to be fast economically and thin militarily.

And they're worried about it.

So this is the problem we have with foreign policy standing.

What we want to do is to do, they've got to do more.

And yet we have that very delicate balance in many things.

We don't let the genie out of the bottle.

We want to do enough to keep the, and it's very much to our interest, we're speaking, of course, not all of us very much in this room, it's very much to our interest, never use the terms play one against the other, but if you're going to have a peaceful Mississippi, or for that matter, a peaceful world,

is much more to our interest to have Japan be not only economically strong, but it's not a military punch, then they balance the Chinese.

And for that matter, they're a little bit of leverage against the Russians.

And having them with us is terribly important.

Now, having said all that, having them with us is absolutely indispensable.

So as many of these arguments he denies, we have to realize that we build them up militarily, and the rest of it, we've got to be very tough with them, because they're going to be tough with everybody.

As Dave Kennedy knows, you think the Lebanese are hard to deal with, trying to deal with the Chattanoogs.

They're harder.

For the events of the mills, the Flint mills,

We should understand that all those nations in the area are suspicious.

If you go to Korea, Indonesia, Thailand, Taiwan, and ask whether we should stimulate a large build-up of Japanese military strength, they'll all say, take it easy.

They say fine, they should spend more money, but don't do it too quickly or too massively, frankly.

And also, don't do it leading out of Asia.

There's the other one.

That's where we're talking about today.

Just an extra doctrine, as soon as we get out, that we draw down Korea, and of course out of Okinawa, Taiwan, and down in Taiwan, and down in the Philippines, and the rest.

And you'll get that back, you know.

Who's going to fill it?

Well, naturally, the Chinese are going to fill it at a proper time.

and these other nations know very well that none of them can sell them, and so does the Japanese.

So these are the political sides of it.

Now having said all that, the immediate economic problem

Because there may turn out to be a military balance in any event.

Regardless of the Japanese, there's going to be some sort of balance.

And the whole thing has changed.

That's what the China war is all about.

The game has changed.

There's players in the game.

And nobody can predict what it will be.

But economically, we are somewhat uncertain about what the political side is going to be.

We know that the Japanese

are potentially our number one competitor.

And also extremely tough and highly controlled.

It's very, you know, Pete's comments about their planning.

Now, of course, that happens to be, and that happens to be, I don't want to see them, I don't want to see us go that far.

Most of us don't, except for George Shultz.

Nevertheless, on the other hand,

On the other hand, anybody who's been to Japan, stays as some of the rest of you have been there, and you sit down with those trading company people.

We talk about the Japanese government, the fights within the government and so forth.

Hell, that's not the government.

The Japanese government and the Japanese businesses are one.

And they like it.

I mean, it's good.

At one time, it's vicious in the head role.

At some time, it's been silly, and now there's a third goodness.

But the trading companies and so on, the Japanese business and other communities, they sit down and they're used to being in the houses and now they're going to bars and so forth and work everything out.

Very pleasant way to do business.

But nevertheless, we now come to how we deal on the economic side and so forth.

John?

Well, first of all, I don't have much to say except that when all this occurred, I think the Japanese reflected their traditional attitude.

They were by far the most aggressive, the most alert.

people of any nation in the world, all over the world.

They had their people analyzing what was happening, product by product, country by country, how those products in that country would be affected.

I just got these products.

They were analyzing Germany's situation.

They had people with a 24-hour and every day world capital.

All the questions about it, they had them in Germany.

and every world capital.

They had them interviewing every former assistant secretary and undersecretary of the treasury.

They had them interviewing economists for all the banks, all the major American business enterprises.

They had them all over the world doing the same thing.

I agree with Bill that we ought to have a very

I don't think we can give them any answers because when we tell them, generally speaking, and that's all we can do is talk in very gentle terms, what we have to have.

They don't throw a shoe like everybody else does.

They just say, well, we can't politically do that.

But I think we have to recognize that they're a lot tougher than we are.

In many ways, they're smarter than we are.

They're more selfish than we are.

and so on, keeping ourselves better organized.

And much better organized and controlled.

Sure.

And they constantly lead and spring.

I think we have to realize that from an economic standpoint,

The Japanese, and this is something that some of our unsophisticated American business people may not understand until they go over there and try to deal with them or get an investment.

Just try to get over 50% control in the Japanese even today.

that the Japanese are as totally controlled in their foreign economic policies as the Soviet Union.

As totally controlled.

That doesn't mean that you go to the government to get it done.

Go to the trading company.

That trading company can do one damn thing unless it fits into that pattern.

That's the point that we have to realize with these people.

Would you agree, Josh?

They're a totally controlled economy.

Now within the country, they have, of course,

And this is where they have the enormous advantage over their totalitarian friends.

In the country, they have incentives, and competition, and all the rest, and therefore are quite productive.

But in their posture toward the world is controlled posture.

Now, the question there, John, which I know you do not talk about this, but the question there is whether the United States can deal with

and looking at the world and the future.

The Japanese, apart from their internal situation, looking outward with a totally controlled attitude.

Of course, the Soviet Union had a totally controlled attitude.

The Chinese, 15 years from now, they're off to something with a totally controlled attitude.

maybe Western Europe, not totally controlled, but more controlled than it is.

Now, how can the United States then play this game?

This game where my trust department, the justices and representatives, you know, well, my trust department has to make

Look at it from one standpoint, another standpoint over in commerce, another standpoint over here in Russia.

And it may be we can play the game that way against these totally drunken cops.

We could at a time when the only potential competitor down the road 25 years ago was the Soviet Union.

We could beat the hell out of them.

Now we have to realize that these big guys in the game

that we must not make the mistake of looking at their internal economic policy and say, well, gee, they're like us.

We're in enterprise and all that.

Sure, it's free enterprise.

That's not in their foreign policy.

Their foreign policy, subsidy, lost leaders,

If you scratch my back, I'll scratch yours.

So the poor American businessman goes around and says, well, can you do the hell about it?

Can you come do one bad thing?

Well, Mr. President, to the investment side for a moment, to Mel's point,

We don't have to build them up militarily.

We spend, the bill says $500 million, my memory of the figures, roughly over $600 million a year for facilities in Japan.

They don't have to build up their military machine to help us.

They just pay for those facilities.

They're building an aircraft industry.

They don't have to build an aircraft industry.

We've got three commercial aircraft out there over here that need work.

They can buy iron.

They don't have to build it, but they want to be self-sufficient.

Now, beat the devil with that for the moment.

It's not anything Japan has in the long run that we need.

On the contrary, he's a competitor.

And she's the only competitor in the Far East for everything that we want.

She's a small, tightly controlled, industrialized nation that has nothing to give us except cheap products.

Now if you want to take this boomerized NBA, she can give us lots of things.

She can do everything, as a matter of fact.

But in the long run, she's going to be competing with the United States for raw materials, for influence, for military strength.

We look on her now as a great ally.

That's fine.

But who the hell causes trouble in the last 25 years?

Only she can.

We can make common cause with Indonesia or Korea or even China.

China won't.

That didn't cause us the trouble that Japan did 25 years ago, and I don't know what the next 25 years will bring.

But I think we first have to approach it from the standpoint of economic strength and economic self-sufficiency, both domestically and internationally.

Now, if we don't do that, I think we ought to set out on a long-range plan duty, you know, get away from being Japanian.

Sure, we have to have her as an ally, and she ought to be an ally.

If she is an ally, we ought to have every ally in the world we can get, Japan and everybody else, but to...

I'm afraid that we have to deal with it at all costs.

I think it's great to say that I just, I don't think, I would suggest by any standards that we even hit it slow and immediate over here, so I'm getting off track somewhat.

But I think both in the immediate and the intermediate range, we ought to start fencing off Japan.

We ought to start diluting their influence.

Because she'll turn on us.

I think she's a complete and selfish nation.

She's done it before.

She's done it many, many times in the past.

And I don't mind if we rely on her as our principal ally in the Far East.

I wouldn't do it for a minute.

But that's another study.

Pardon me for taking so long.

I think we have a good meeting with the Japanese here.

And I think we have to just say something.

As Bill has pointed out, we've got some problems that are critical of us.

You're part of the problem.

And they want us to give them answers?

That's not the, I read the text, and being received in grades, I'd like them to come forward with something.

They've got a pretty substantial awareness of what they could and what they ought to do, and they know what the problems are.

And we just, if Paul Volcker's been trained to the countries in Europe, we'd have to have a swing of about $13 billion in our trade bonds to make up for a lot of these things.

that we're spending money for.

And they all shrugged and said, well, politically we can't do that.

And I thought the giant engine was like, politically we can't do that.

But politically somebody has to do something.

And I think we just have to hold their feet to the fire and be as nice to them as they are to us.

Just bow a little bit lower than they bow and smile a little bit broader than they smile and just still hold that nice to them.

Just as one aside, I don't know if there's a thing that's worth mentioning about this situation.

It is still a possibility.

It's peculiar from those that have known us and I have known it better than most.

He's one of the most decent troops, which is very, very precise.

He's a former finance minister.

He's much more precise than Sato.

And I think to the extent that any Japanese would be, shall we say, pro-American,

And I would not even, I would not trust that either.

It was a long haul.

I think we would like to get him as, without putting our arm around him, and give him as much good as we can.

It would be good to talk to him too, but I would not see him.

Let's try that.

I'm going down to Williamsburg tomorrow for a session with him, and I'm going to put him in an octagon separately, but he'll have a couple of hours for the session.

Can I make a couple of comments about John, sir, if I don't?

I agree with you a lot.

But you asked, why do you rely on East Japan?

We rely on Japan because it's the only nation in the area we can rely on.

Our whole foreign policy since World War II has been based on that premise.

All of our treaty commitments are based on that premise.

We felt that China was the enemy.

And that's why we entered into the CETO treaty.

That's why we have the security treaty with Japan.

That's why we've gone to such lengths to be sure that it could be extended without a national debate in Japan.

That's the basis of our position in Korea.

So that we, if recognizing there are two nations in the area with great potential, one is Japan and the other is communist China,

How do we manage?

Up to this point, our position has been to stand.

As the President said, there's always been a peace.

Everything is revolved around that.

We've tried to improve the strength.

We've tried to provide.

Also, one of the reasons we've had troops in Japan, we've had troops in Okinawa, is to slowly permit them to build up their military strength in a way that does not cause the other nations in the area to become alarmed.

And now we are gradually flowing out.

We produced our troops, as you know, in Korea, Japan, Taiwan, and Thailand.

And our policy is that we will gradually have Japan build up its military strength, so hopefully on the basis that we can trust them.

Now, we don't trust them.

We shouldn't trust them anymore.

We don't trust anybody else, Germany or communist China or Russia or anybody else.

But the fact of the matter is you have to have friends and allies in the world, and our whole security position in that part of the world is based on it.

So I would hope that we would not even, you know, as much as we condemn some of the things we've done, I would hope that we have a basic trust in the country.

So our alliances are going to continue to work.

They don't show any indication of trying to build up military strength.

One of the reasons they don't is because they know we suspect them.

That's why they've got such a concern about nuclear power.

We have been trying to get them to sign the Amplification Treaty.

A lot of the leaders want to.

Others say you can't trust the United States.

We may need nuclear powers.

So it's, like most things in the world, it isn't totally one-sided.

And I think our policy in the Pacific is a sound policy.

And I think the fact that the President is taking the step he's taken to improve our relations with Canada is trying to come to the right time.

But we mustn't do it, I think, in the spirit of how we get even.

It shows our whole foreign policy went down the drain.

discussed completely if we approach it that way.

Well, the other thing I think we've got to keep in mind, Johnny, if this government goes down the drain, what will happen is the communists will gain.

I mean, China's point is that there's nothing they can't weaken the government.

Because there's a good deal of communist support in China.

And we've all been quite concerned about that, that Japan might become communist.

And the present government is certainly not communist.

But if, as a result of our actions, the present government should be thrown out, and the communists play great games, it will have a serious political impact in this country, just as we were accused of losing China back

After the war, we'll be accused of losing Japan.

It should go that way, so we certainly don't want that result.

Well, no, we don't expect that to happen, do we, Bill?

I think the motto is under pressure, but the party's...

Well, I think that the party is very strong.

The possibility or chance of the party being affected.

Oh, yes.

Well, when you say be affected, we think there's a good possibility that the left-wingers may make political gains.

We don't think there's any control of the government at all.

Well, even...

I think we have to realize that

First, there's a lot of nonsense that we've got to get out of our heads.

I'm working on a speech that I may make later this week.

I don't know which department he got it from, but we'll assume because I knocked it out that he was out of his own head.

But anyway, he had one phrase in there that we favor competition with other countries because good competitors make good neighbors.

Well, that's just luck.

The point is that if you look at the great wars of Europe, they were fought between people of the same religion, people that were competing, people who were showing arms to each other.

And they were fought over and through the years.

I'm not suggesting they were going to fight the Canadians and they were going to fight the...

Mexicans, and it isn't good that Canada's building up and Mexico's building up.

I know all they are, because we all know that Mexico's not one of our best customers.

Canada's one of our best customers.

So Erdo, it's a good thing that we build them up, so therefore we get better customers, and therefore we get better neighbors.

But, we also realize that in dealing with people like the Japanese,

And there's a line over which you can't go and deal with people like the Japanese.

They expect to play, and on their part they will play, a very hard economic game to their hard economic competitors.

And then, of course, they will look to their political ties and alignments and so forth and play it that way, too.

We, well, let's take our trade contracts and play them hard in the common market.

They're apparently not very easy with regard to things that we want from them.

And that's the way it will be.

I think with the Japanese, what really has changed is this, and I think all of you agree with this, what has changed is that as of 25 years ago, 15 years ago, even 10 years ago, the United States felt it was to our interest, of course, to have a strong Japan, strong economically, and strong enough economically and with enough stability that they would resist it.

the Socialists, and particularly the Communist wing of the Socialist Party, which was dead and strong ten years ago, and they came pretty close, and so forth.

So we've done as much to our interest to do this, and so much to our interest that

that we opened up our markets.

We didn't bitch too much about their closing down to our investment, and we didn't push them too much on defense and all the rest.

This was in our interest at that time, because they were very weak.

It's just hard to realize how they could have done it to figure that Japan, 20 years ago, produced 5 million tons of steel, and this year produced 100 billion.

It's all changed.

Now they are strong, they're vigorous, they're very, very good competitors.

And I think the key thing here, the key thing is privately dealing one way and publicly discussing it another way.

Privately, it's terribly important to the Japanese because of their concern about the base.

And we've got a hell of a lot of concern about the base too.

We don't like to admit it, but we do.

Privately.

They understand, and it's always done with great politeness, that they understand a talk, say, look, we've got a hell of a problem, you've got a problem, but let's get along with it.

But believe me, don't sign any deals until you get what we need.

On the public's standpoint, we want to come out of these meetings, and that's why I'm going up to see the emperor and all the rest of the idea that, sure, the United States has great competitors, but we're great allies, we're going to be great allies, sort of like that.

and that we're going to find ways to solve these problems and so forth.

But the way I make the deals, it's now that they're big boys, able to handle themselves, and we've got to make the deals that are effective as we can without conflict.

That's what it gets out to.

Mr. President, if I could try to bridge what I think I heard Bill Rogers and John Connolly saying, it seems to me the essence of a good partnership is to have compatible goals.

And I think if there's one message we should all try to get through,

is that we've got to have trade and economic and balance attainment goals that are worked out together, rather than them having goals that the only way they can attain them is at an unacceptable price to the United States.

And I think, from everything I've seen, the kind of projections they've made will be unacceptable to us.

So I think we can further the partnership idea.

If we say, here are our goals, what are your goals, how can we now make these compatible?

When do you have it?

That's ready for presentation now.

Mr. President, we're trying to get it on your calendar as soon as you have it open.

And it would take a matter of an hour and a half, I would guess, to make a presentation to you.

And then there's the whole series, but it is getting that raciness.

the appropriation for the National Science Museum.

It's a long line of feet out of line, Guthrie.

It's a long line of feet out of line, but here.

And I've addressed this subject of how we mobilize and better use all this money that we're appropriating now.

Marketing our ideas.

Every time we put up research on that.

Every time we have a college president

and say, ah, and that helps us raise the level of, you know, for our associates, investors, and all the rest of their instructor system.

I don't mind that, but we've done nothing.

No, no.

But as I advance, all of you will know, what we're zeroing on here is a totally different concept.

That is, the amount of research that we can, through tax and other devices and so forth and so on, get into...

There's now no strategy.

There's no national strategy for the employment of all of our treasure that we're putting into research and development.

And the idea here is to think through first what our strategy should be.

What markets do we want to penetrate?

What job goals do we have?

And these kinds of strategic goals.

And then how do we as the government bring about the direction of all this money?

to cause research and development to be done to achieve that strategy, to carry it forward.

And it's a very broad, obviously very broad setting, but there are a number of very specific things that we think we can do on a short-range basis to begin to move in a much more satisfactory direction.

Where, for example, they're attacking the problem, we're going to ask them for that sort of thing.

which is a very exciting proposition.

Could I ask John if you and Paul, so that we all know what the situation is on the International Monetary Fund.

Because I understand that we are keeping our powder dry and not moving until we get ready to move

Mr. President, let me ask Paul Volcker to give you a report on his visit to London and Rome and Paris, I guess, as well, where he's just been attending a meeting with the deputies of the Group of Ten.

And I think that will give you the flavor of what's happening.

But I think in one sense, Mr. President, I found them more relaxed than they were two weeks ago.

They've had two weeks to accommodate to this situation, and I found that disaster has struck.

They don't seem quite so eager and feel it quite so important to settle with them tomorrow, which was the kind of atmosphere they had initially after hearing you.

I think they're also more aware of the difficulty of the problem, the compatibility of our goals that Pete just mentioned.

I gave them this $13 billion figure, which would be a shift from where we would otherwise be in 1972 and 1973, not a shift from last year.

and this begins to penetrate them.

So we seek them to accommodate to, and they have some very real problems, obviously, accommodating to it.

So in one sense, I think they are a little more relaxed in the short-term timing, more appreciation of the difficulty of the problem.

At the same time, I have the feeling, and this is the other side of it, that they want a little more time themselves to think out what their strategy should be.

And they've got some ideas, I suspect, beginning to germinate in our heads, or in that at all, on our side of these things.

When you say they, let me ask this.

Are they going to move as a unit, or are they not?

Who are the wheels?

Who are the people that really matter?

Well, they very much want to move as a unit, obviously, and they haven't been able to get together.

Mainly they can't get together at the moment because of the French.

Nobody can quite figure out what the French are up to.

I think the French haven't resolved what direction they want to go.

They certainly have an urge to move together, and I think none of them are strong enough, so none of them can take the lead and impose a kind of idea on the others, and particularly there's a conflict between the Germans and the French on this point, and that kind of silences it.

But I think I would not discount the possibility of them moving together in the fairly near-term future.

And I think there are probably some ideas beginning to move around in their heads.

Let's look at the British, for example.

The British attitude, I think it's a good British attitude.

Don't smutty the waters.

Don't get in the way of what the bonds in the common market say as close to them as possible.

And they're moving clearly further from us.

They're moving away from us.

They don't want to get it done.

Every one of these countries is looking after some interest.

Uh, sure.

They're all looking after their own interests.

They're still trying to figure out how they can combine those interests and possibly get us up.

Now, in the straight economic terms, what they'd like to think is that they can

and do as much of this adjustment as possible on the capital side of the accounts and as little as possible on the trade side.

And so there's obviously a conflict of interest which is always there building up on capital controls and other devices for reducing American capital penetration in Europe and on the other side bringing as little trade adjustment as they possibly can get by with.

Now, there's one other, I think, broadly political factor in the situation, which is evident more in meeting the papers and talking to them outside of a meeting.

The officials that I talk to are understanding of the program.

They're understanding of the problem.

I think I'm kind of set in these terms.

But this whole program is a convenient excuse for some of them to blame their internal problems on us or on the monetary system in general.

And some of them spoke to me very frankly in those terms.

It's a wonderful excuse for them to blame their internal problems on the monetary system or on the dollar or on the United States.

and they're going to have a considerable problem controlling that situation internally.

And I think, quite honestly and straightforwardly, a number of them would like to see it resolved as soon as possible so they can maintain control over these internal political pressures.

Any words of the French position on this issue?

Yes, because that's one way of getting around who figures it.

In fact, I was told I think everybody in the common market would be inclined to line up this way.

Some of them think it's very difficult, probably except the Germans at this point.

And whether the Germans can be brought along as part of the compromise, I don't know.

Proposals I'm sure are percolating as they'll form a little gold block of their own.

Maybe change the price of gold as part of holding their rates together.

If they would like to hold their rates together, and then maybe close against the dollar as a group, that's one.

possible strand of thought in the trance of the bloc, and that's because they don't want to float at all, whether it's a group or individually or separately.

So there's a lot of discord.

There's a lot of ferment in Europe right now, an awful lot of traveling between these ministers every day, one of them's off in another capital, and they're all trying to line up some kind of a position for us next week.

I don't think it was roughly that quickly, but...

They're beginning to take it much longer in terms now, clearly, than they were two weeks ago when they were just in a state of shock.

And one of them had to open up their exchange markets and this kind of thing.

And that's got its good aspects.

It's also got its bad aspects because the more they can think about it, the more they'll think of this scheme.

It's not going to take it, sir.

I don't think we're under strong media pressure given the tendency for fragmentation to happen.

I think there's about four essential points out of all this.

As far as it's related to me, first, I think we ought to re-exercise to travel this courage.

The Italians wanted to come to Rome and went just to placate their feelings a little bit.

While they were there, Hillary was in Rome.

And it's still just tracking all over.

They're all moving back and forth.

No question about they're trying to put something together and present a common front against us.

They have already reached a fairly common front with respect to certain things.

Number one, to the government of their own countries.

are blaming the United States, blaming the dollar, blaming the monetary crisis for all of their domestic bills.

They're usually getting some political whipping for it.

Consequently, the United States is getting an extremely bad press.

So this makes it politically more difficult for them to do anything.

They all say that, well, yes, we know you've got a problem.

We know that.

We just

But politically, we can't do anything about it.

And they all are, they've reached the common front.

The next point is they've reached the common front.

But they really can't do anything about this now.

The United States has to be back.

It's got to be in the United States now.

Politically, it's unacceptable for them to re-value.

They just can't do it.

Now, this is what she gained.

Now, little things creep up in all of them.

It's also got its bad aspects, because the more they can think about it, the more they'll think of the scheme.

It's not in our head either.

Until the period of gestation soon, I don't think we're under...

Strong media pressure given there.

Tendencies for fragmentation.

We have quite a few.

I know we have some.

This, uh, the Spurge, I, I think there's about four essential points out of all this.

I think we ought to re-exercise to travel these currents.

The Italians wanted to come to Rome and went just to take heed to their feelings a little bit.

While they were there, Hillary was in Rome.

and uh still just tracking all over they're all moving back and forth no question what they're trying to put something together and present a common front against us they have already reached a fairly common front with respect to certain things number one in their own countries

are blaming the United States, blaming the dollar, blaming the monetary crisis for all of their domestic bills.

They're using it as a political whipping boy, a consequence that the United States is getting an extremely bad press.

So this makes it politically more difficult for them to do anything.

They all say that, well, yes, we know you've got a problem.

We know that.

We just

But politically, we can't do anything about it.

And they all are confident that they've reached the common front.

The next point is they've reached the common front.

But they really can't do anything about this now.

The United States has to be back.

It's got to be in the United States actually.

Politically, it's unacceptable for them to revalue.

They just can't do it.

Now, this is what she gained.

Now, little things creep up and fall up.

Didn't get this direct, we got an indirect.

One of the Italians is crazy.

Well, maybe because of the great interest the United States had that probably the United States did not share.

It's like they're treasuries.

They did not share the group of 10 that probably all of a sudden continued.

Well, under the normal rules of the game, why meeting the International Monetary Fund of the United States would succeed Canada in terms of the Group of Ten, which means I would carry it.

But now they're already trying to be sure that we don't occupy a position of great leadership even in the Group of Ten.

So it gets us kind of firm in, and there's no point in kidding ourselves, but they're all moving to form this bloc, and I think they will, frankly.

I think they're going to try to move against us, and I think they're going to try to formulate a system within the common market and have a different policy completely with respect to the United States of America.

I think that they could feel more strongly on that point.

I know there are

and so forth and so on is our obligation.

because we are the strongest in our power to make leadership and setting up the monetary system.

The part that I make there is, first, having taken the risks, and as we all know from our campaign, we realize there are very potentially great risks, and moving off our previous policy, and having taken those risks and driven through

We're not about now to hack up, to temporize, in attempting to do a whole thing together again.

I just think it's very important for us not to do that.

I think before we move, we ought to be relatively sure, as sure as we can be, that it's such a complicated area that we're moving to a new system that is one we can live with over a long period of time.

There should be no, I'd just rather let it go off right now and fool around all they want.

We'll be an island and let them be theirs.

As a matter of fact, as those charts showed, our interest in having a stable system are not nearly as great as theirs.

We're a hell of a lot bigger market than they are.

Our economy is a lot stronger than the dollar is.

the dollar isn't as weak as the American economy is.

But the second thing is that I believe that it's an opportunity, an opportunity for us when we do leave, especially when we do leave, to build a system which is more compatible

that the world really is.

My first two things have changed.

The thing that we mentioned 25 years ago, Bretton Woods and the rest of the United States and economic giant and everybody else was taking these.

We had to take the lead that went out, right?

And we did.

And ever since then, whether it's the FDRs or all the rest of the United States have been, and we've been the great big states and the international states in the world, we've done the right thing.

And we should have.

Now, there are lots of giants.

We're still the biggest, but there are a few others that are pretty big.

If you look at Europe, if you compare the United States, if you look at Japan, if you just take those two, that's enough.

That's quite a business.

So here we are in an entirely different situation.

We also have a situation where our friendly competitors abroad do move,

that are able to move in a much more controlled way than we do.

Whether it's monetary policy, trading policy, quotas, restrictions, they can do move.

in a very precise way, the Japanese more so than the others, but the Europeans are looking to do that.

So with looking down the road that that will be the pattern of the future, it's very important, it seems to me, that we, and I'm not thinking about the monetary sector, that we support a system

in which we, with our great strengths and potential weaknesses, will be able to have a fair debate at the table.

And I just don't think, and this is the thing, out of your eyes, I don't think that going back and patching up what we had previously or being, or, man, I can't do this without you,

without a predestined subject, because it may be exactly right.

I know our grand strong humans are predestined to be tied down by some arbitrary, er, uh, uh, uh, uh, uh, tied as gold or what have you, uh,

It seems to me, looking at the worlds it's going to be, and also looking at its uncertainties, that isn't very much in our interest.

Now, where we go, I have the slightest idea.

But I think your idea, John, of keeping loose at this time, sitting tight, keeping loose is exactly right.

I don't think we know at this time.

We don't.

But I don't think I'm...

I would walk you in too fast.

To prove your point, although there's less urgency reflected by Paul and his meeting over there now than there was two weeks ago, because at that point they had their markets closed, at least both of them, and they would have died, and so the sense of urgency has gone, dissipated to some extent.

But nevertheless, they all still want to talk about reassessing.

the exchange rates, to take the exchange rates.

Our position has been, no, we need to talk about that.

We don't want to talk about that.

Unless and until we talk about commitments and payment for them, until we talk about trade rates and tariff barriers and non-tariff barriers, all those things.

Then we perhaps can talk about exchange rates.

They don't want to do that at all.

They say, oh, we don't even know what forum we can use to discuss those matters.

But you can't use the group of 10, you know, or you can't use the W3, you can't use anything else.

They don't want to talk about those things.

What they want to do, I think it's fair to say, they want to get back to a 50-10 grade, get us back to the old system and then start putting on all of the barriers again that penetrated otherwise.

And we will be right back to the same place we got ourselves out of.

And I just don't think we ought to move until we get it.

It's other non-monetary matters that are, and this is the trade matters, and who's gonna pay for defense, and whether or not Japan is, and whether or not Germany is, and whether or not the Perus are gonna buy French airplanes or American airplanes.

What is the situation on Japan for the late 50s?

Which side are they playing with?

Are they close to the British?

No, the Japanese, I think, will play here.

Of course, the tendency on the European side is that they're more willing to talk about these other things than they ever have been, although they're still not very eager, but they're fine to say, well, so much of that problem is Japan.

Go talk to Japan about it.

Of course, they're too.

Now, Japan has lined up, everybody has lined up on this gold thing, in the sense to say, politically, you must take the sacrifice of changing the gold price.

And Japan, you might have thought, was the least likely to take that point of view.

because they hold very little gold and they've never been interested in changing the gold price.

But even they have lined up on that issue.

But the Japanese know that they're going to be the subject of special attention, so when you're in a general meeting, they lie pretty low.

The others are fine to say we agree to have all these problems, but the impression is that 90% of them is which it is.

That's where I try with all of us to stand.

That's not the

to even discuss that, it's impossible.

So don't waste any time on that.

They've discussed it among themselves.

They've all agreed to take a common line on it against this.

I tried precisely not to take any of these meetings.

As soon as they introduced it on the agenda, I made my little speech just laying.

You suggest it, but they went on and talked about it anyway.

Today, is that your view?

Yes.

Cut it off right away.

Otherwise, you know, it's probably nothing.

Well, gentlemen, we go on, but we...

Let's see, on the D.C. left, let's take the, uh, the, uh, getting John a chance to wind up, uh, I'm not going to ask him just to give you a little report on my way up to the R.A. and I'll, uh,

Where did you say we were getting the bad press that you were hoping to go to?

In Europe.

But not on our economic program.

The best press is because the governments over there uniformly are blaming whatever domestic problems they have, and they differ in the various touches, but they're blaming it on the dollar or your actions.

or in our trade or something.

But we're the looking boys now.

I don't think it's always the governments, Mr. Secretary, who's responsible.

It tends to be the opposition and the popular press and some of the governments, but it depends upon which government.

Well, in the United States, the government's first.

through your program in the United States.

You captured the imagination of the American people.

The American people felt something could be done.

They're happy that it has been done.

Paul McCracken and the

He was exactly, his policy committee of the council has done an exceptional job.

And he's been carrying the council while I've been gone the last 10 days.

And I just, outside of one or two little uncertainties, there really isn't one on which to just play at it.

That's about all.

It's just better.

Debt ends have been an unusual, unbelievable exception to the program throughout the country.

It's reflected in every way, in every walk of life, in every economic strata.

I personally talked to people in all walks of life.

I went to the yards, the commission yards.

I talked to the commissioners.

I talked to the ranchers.

I talked to the cattle buyers.

I talked to the ranchers, rich and poor.

I talked to the bulldozer operators, the clerks at the drugstore.

I talked to business leaders.

And I couldn't find any place

is human threat, economic threat, where they didn't think it was a good thing.

Now, I must say, they're all so uniform, without exception, they're unanimous up to this point, that we have to have a strong follow-on program.

I've not heard one single person that takes the contrary position.

they think you cannot turn it loose, that you have to have a fairly strong middle detail.

Not in general terms, the people I've talked to, because they don't know that much about it, they just don't think you can turn it loose at the expiration of 90 days, which of course everybody, I think, fairly well knows anyway.

In the political circles,

He's been like a boss, you know, of course.

He's a Democratic, he's a Republican.

And as the consulate said, he just gets a few more candidates for president, they say.

Max Hartke now looks like he's gonna run against Birch Bayh, Indiana, where he needs to.

I'm glad to challenge him.

And Bill Anderson from Tennessee now, besides, he wants to

under the ice cap, and he's gonna enter the primaries of the period.

So just that one area, and then the point where it's coming, across an area, it's coming loose.

What was his $6 billion program?

He said it's a $100 tax credit.

Yeah, he wants to give everybody in the country $100 to set those power automobiles.

So that's about the net.

But they're all, frankly, they're all gradually trying to respond and try to develop some kind of a program.

None of them have been able to come up with anything at this point.

We'll have, I'm sure, because of this, we'll have some tough days in the Congress.

But I think as much as possible, and I think there's only one really important thing that we have to do.

Remember, Ms. Bryant, we've established a high degree

of you have responsibility and credibility now, and recognizing what your problems are.

And you admit them, you came out in the open with them, you took some drastic action to try to correct them, and from here on, regardless of what it is, I think we just have to admit that maybe we made a mistake, or we miscalculated, or whatever.

It just comes down to that.

Let's not ever take a position now that would indicate that we're trying to cover up,

We're trying to hide something.

We're not being completely honest and candid with the American people, because I frankly think they're the frame of mind to take whatever sacrifices are necessary, to do whatever's necessary, provided they feel like the leadership of this country is level with them on what has to be done.

We will have, certainly, we haven't set the date, a cabinet meeting.

I would like to have a further report on this.

Paul and John, George, various people, I think we're also going to have a cabinet meeting.

Yeah.

Another purpose of that is to mobilize our own troops or throughout the cabinet.

And this, of course, is key to that.

Or the activities that you engage in connection with your leads to support a public relations standpoint in these programs.

always when such programs announced their immediate reaction, because it was a stunning shock of support.

Everything apologizes.

And of course, that counter reaction after the shock when people started to come up with their own ideas and what we have to do is keep the offensive.

It's important to hear everybody be in on this offensive, the state defense and so forth, as well as to the extent that you can, as well as the people that are on the cabinet committee on economic policy and across the council and so forth and so on.

That meeting will be announced.

Without, Mr. President, without any sense of contribution at all that's made,

It's appropriate that I point out here, I think Arnie Weber has done an incredible job.

And I think General Lincoln has.

I must say, he's not the most articulate fellow in the world, but if you're trying to show him, I think he's a hell of an organizer.

He's just done an excellent job.

And I think those two men carried an unusual burden and done it exceptionally well.

Well, they deserve all the high marks.

In fact, they've done a better job than myself at talking.

I say that all the time.