Conversation 479-004

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I'm glad you put on that circle.

He's gonna stay still.

He's fine.

He works a great actor.

I can tell you can't be so sorry about it.

It's fine.

I know.

Well, it's gonna work.

It's gonna work.

Yeah.

See?

I think it's important, John, to speak very candidly about this in terms of our group.

And our group and I will have to talk about matters that are

Basically, it's not going to be on a room where I do not want to have a crack or a schultz or a collar.

So if you were here, just be like a wall, you understand?

I understand.

And you know what I mean.

It's a question also for Thompson.

He's even known it's not very interesting.

There are times when I go to talk to him alone, which I do, but that was the only thing.

But I think it's important for something to be done.

I think, too, that we do meet in Detroit, and we meet in the Quadriad and so forth and so on.

And I think that our position is that he at times can come in and give a completely independent view, and if he has something to say about me, and frankly, some of the others he can tell me.

He knows that we're good friends, and if he did not do it, then I'll take it with good grace.

So that's why we want to arrange our meetings.

But whenever you feel that he should not say it, you let me know.

He doesn't have to.

And if you want to discuss something completely private, you can say so.

Fair enough.

Sir, John and I are old friends, but I'm not.

When have you taken over through Europe?

Oh, I'm going in September, April 30th.

Yeah.

How long?

We all be back in a month or so.

Take a turn.

The German leader, the opposition, and I'll tell you what it's about.

It's quite important.

The Germans are in terrible trouble now because of this Berlin negotiation.

I think the Kissinger party, which is the opposition to Brennan, which still has more seats than his party has, is very close, you can call this.

They're ready to rip it in terms of the general treaty with the Russians.

They could get some sign of the bird on the ground.

That's why they spent a lot of time with the opposition.

Trying to keep their from buzzing around the table.

And of course around the table.

Because, of course, they're really good liars.

It's not very good, let me put it this way.

I think he's thoroughly reliable in his heart, but he isn't always smart.

Brant gives you the impression of him because he speaks beautiful English.

You know, everybody gets the impression that Brant is very smart, but you know the fact.

We are often misled by foreigners who speak good English, when some of the smartest people may not know our language.

Brant is basically a fellow with a pretty good heart, but he's somewhat emotional.

I think it's somewhat callable, and therefore not too reliable.

On the other hand, we're sort of guiding them along.

We don't want Germany to come apart at the seams, because what will happen if they don't make this deal with the Russians?

Or if they make the wrong kind of deal with the Russians on Berlin?

As this guy says, the Germans decided to pack up and leave, which they might.

Or, if they don't make the deal, they're between two fires.

The great, great problem is that the Germans, sitting there, the most powerful people in Europe, great people, dynamic people in Europe, without any arms,

of your arms, and then this fellow says go to two, one of two.

They could even go to the Nazi right or to the left.

They're like, they're schizophrenic.

The Germans basically are a schizophrenic people, can't even.

Kissinger also said this, and he is a German, but he says that's just exactly the problem with the left.

So what we're trying to do is the left.

It could, except that the left does not have a strong leader.

The stronger leader, basically, the strongest German is probably Strauss.

You know, the partner, the defense master, not Vanessa, not the opposite.

Remember John, the Joker, who was a strong guy.

Whether he would never go out there and go right, I don't know.

I think that it's going to be good.

We want Germany to stay where he is.

Stay out of our hair.

Go ahead.

What's your other thoughts?

Well, let's go.

I don't want to use your name in vain, but this meeting with Senator Wankers, they kind of asked me a lot of questions about Cobb, since he's not too sure it's all right.

I don't know how thoroughly solid Cobb is, not only for their consumption, because I think he is, and I'm delighted with him.

He's a great asset to you.

He's a positive man.

Let me tell you something that I've heard in him.

I'm going to do it for you, my husband.

Stand on his feet.

Make a little speech.

Tell us your point or two.

This is an approach I haven't really shown you so I'm giving you personally such warmth and affection and praise you for your courage in doing this and doing that.

It's nice to talk to you.

That's very important.

I haven't heard any of the cabinet members speak in that vein.

They talk intellectually about what they're doing.

You know, he talks about their programs.

Now, he's awfully smart and awfully useful to you so far as I'm concerned.

Thank you.

I don't know what you can do about that, John.

It's disgusting.

But you're going to call Nan captain and everybody.

It's not a question of loyalty.

No, I mean, I rocked your flair and so forth and all the rest.

But John, there isn't another member of the captain that ever stepped up to the marker on that.

It's because it's...

because we've failed to call it to their attention.

Well, you can't do that.

It's one thing that I cannot do.

I'm not going to tell a captain to speak up.

No, but we have.

Not in a lot of ways, but, you know, as indirectly as possible.

I think sometimes he has, doesn't he?

Volpe does in his own way.

He's not quite Volpe.

That's right.

He's a little... Let me throw you in on a little history, John.

Arthur and I had a long talk.

I don't know whether it was when you left or when you were still in the Fed.

I don't know.

I was with the captain.

He said he needs a stronger man.

Maybe that's why I made the decision in my own mind that I had to go on the trading end.

Kennedy, I have enormous affection for him.

He's a very highly reliable decent man.

But he wasn't worth a damn as a salesman.

You know, don't you agree?

He was a strong man.

Frankly, the two best men we've got in this whole economic thing are you and Connelly.

Both you, because of your enormous, well, you speak, you've got a clout.

Because of your background and so forth.

And Connelly, he speaks with such assurance, you know, that he must know something we don't.

And I think it's helpful, I don't know, don't you agree?

It makes a damn big difference.

He spoke to the leading businessman in Southern California while we were out in San Clemente, basically the Republican group, and all prepared to dislike him.

One of them was in my office the other last week, and he said, that's the finest man that I've heard speak to a group like that in years.

He said, that man has presidential temper.

He said, he may be a Democrat, but he said, if that man ever runs for president, he said, he's somebody that I'd like to get in the line.

Now, this is a fellow that you would never have thought would ever talk about a Democrat that way.

But he talked about him also in vice presidential terms.

Yeah.

Let me put it in another way, though.

Do you think of any other members of the cabinet as potential candidates for president?

Have you talked about that?

No.

Actually, I recall he said one, not one.

Actually, I wasn't sure that mattered.

No, but the closest, the closest is George Romney long time ago.

No.

Well, he's, he, Romney is fine, except Romney doesn't have as, well,

You know, he zoomed out there in 68 and couldn't make it.

You know, and once you fail in the major leagues, it's all hard to come back again.

I'm not too sure about that.

You can make it if you run.

See, he's coming to know.

Well, I was thinking, probably just isn't too smart.

He talks too much and doesn't listen enough.

That's his problem.

But be that as it may, he's got a very good ball.

He's a good ball player, too.

He'll speak up.

He'll just say, well, if you don't agree, what else can we do?

And then once it's decided, he goes out there and sets the line.

And you've got to do that.

You've got to have a ball player.

He's good.

He plans on completing it.

Tell me about, how was it that you were able, I saw Colin McRae yesterday after he returned from Texas, and he said that they, you know, he had told me a week ago, and you had mentioned it too, that this, you know, they outflowed money from the Germans and all that and so forth, and he said that they had stabilized in the last week.

What happened?

Did something happen?

You just said there was something, you know.

If there was something, the treasurer did something.

Did you and he get together and tell him what it was?

How does this, let me ask you this, and the urban rules happened.

Well, let me ask you this.

Connolly said that he's going to send me a paper on this whole problem.

I don't know who's preparing that, is that Booker?

Well, both of us are preparing it.

Is he not?

We're working on it with him.

Well, let me say this, it seems to me, the main thing is it seems that you and he have got to be together.

If you consult throughout this period, we'll do something.

And there's some differences of opinion.

Well, that's all right.

And there's a fault beyond which, you see.

Drawing contingency plans where I'm not going to fight with my staff.

And I'm not going to fight with the board.

But I would constantly not have an understanding.

Good.

He doesn't go out in a different direction from you or the vice-person, which is good.

No, we have an understanding.

You know, thinking of what may happen in a time of crisis.

I think what we want to do is to extend the crisis of the interest of arriving at the best possible agreement.

I'm not smart enough to arrive

to recognize the best possible.

Oh, that's good.

I want to do it over a weekend.

It's in a crisis, that's good.

And then you can only go on.

I couldn't bring it on.

And Connolly, and Connolly sees the thing the way I do.

He's a naturalist.

Good.

Oh, he's fine.

Well, Mr. President, I'd like to be able to say to the central actors,

that all this talk in the newspapers about benign neglect of the balance of payments is something that you reputed and condemned.

Right.

Also, you were told in this talk in the newspapers that the effect of the administration is strong and powerful.

Right.

You can refute that.

You can say that.

I think you ought to find out in person.

You ought to find out that, look, this president is snacking worms.

He's fighting.

His budget increases.

He has used and will use the veto in the future.

We're trying to get some of the labor people around.

The problem there is we haven't got the Congress with us.

We can't pass any legislation.

But I think it's important that you say that, I think you can go further.

You can say that I have enormous interest now

First, I have a great interest in this problem.

I do not pretend to know anything about it.

Second, that I am kept aware of it on a daily basis whenever there is a crisis and weekly basis when there is none.

And third, that my interest extends to the point that I would love any recommendations or suggestions and so forth as to how we can improve the situation.

And that's what it is.

What do you mean by that?

They think we don't care about them I see

by referring to you personally.

Sure.

Now, central bankers are not in the habit of talking to the press.

But they might.

What are they?

There is less of a but, after all, I don't see.

I talked to some of the colleagues this morning.

It's always a good idea.

All right.

If you and Carly agree, we'll do it.

Now, that's a point of information.

Well, let me explain very briefly how we filed these things down.

We had a strong speculative flurry, and the Treasury moved in.

Sold a million and a half dollars to purchase American banks and pay them a higher interest rate than they would have to pay in this country.

Well, that took some courage on Connolly's part.

It did?

Sure.

Because after he'd imagined what Congress was going to say, why the hell do you want to pay these rich bankers?

Yeah.

And I read an interesting painting on the reading of small bankers.

I see what you did.

Well, this was to intercept the flow of dollars to European central banks.

And it was a very smart thing to do.

We had this contingency fund with us long ago.

Now we had to tighten up a bit.

All of you didn't like doing it, but we did it.

And I want you to know, not only for international reasons,

They wanted to get me in the central banks to reduce their interest rates.

You see, the overflow of dollars has been caused by vertical interest rates here on short-term loans.

On paper, my interest rates have grown.

So I reached an understanding whereby they would go down a good deal and we would go up a little.

That was very reassuring to markets, you see, when the profit involved in moving funds was sharply reduced.

And also it indicated, that provided the Treasury action a willingness on the part to do something constructive to a project.

Now, Max, I would have done the same thing, I believe, and not been able to get back on campus when I showed up on it.

But speaking for a few reasons, you know we've talked about 5% or 6% of the rate of growth of device supply.

Yeah, in year seven, I know.

We have known it when we had our jet at the end of February 14.0, March 10.5.

You don't want to set the hood up as far as you're starting to blow now, you know.

Well, you see, this is a tight one.

It's a real tight one.

I know.

Now, uh... That's it.

You see, the...

Come on.

We don't want the rate of growth in the money supply to be too fast.

It's as fast now.

You wouldn't go below that, would you?

You see, if you go to law, it's going to look like you're killing off this, uh, well, the retail salesman that came up with it.

I may go with lower justice.

I've gone above what I'm wanting to.

This is out of the question of appearance.

It cannot be because of a plan or policy.

And I'm going to try to stay just on this target path.

Now, I don't want interest rates to rise either, but a little bit at the short end.

Now, can I pull it up?

I don't know.

Look at the objectives.

They're partly contradictory.

See, I want interest rates to rise just a little at the short end.

I want them to come down at the long end.

Bond yields and mortgage yields to come down.

I want to keep the...

All right, now number three, and I'll leave you with the...

I want to leave a thought with you on the steel problem.

Yeah.

It's serious.

Oh, God.

It's terrible.

Now, uh, I think, I think this government can do personally what I believe to be a decision.

Something more to let nature take its course.

Yeah.

But let's not let nature take its course, you see, because we neglect the matter.

Let's do that deliberately.

Let that be a deliberate decision unless the way

And if I don't want to go, there may be good reasons you won't.

But even then, I'll tell you what I think.

A lot of people, including myself, have urged a wage and price review or an argument.

You have good reasons for hesitating, which I recognize.

Good reason is that you probably think of such a board realistically.

and then you put on, you know, all right, we'll try it.

I've been through this exercise, and I don't mind.

Tripartite war comes to mind immediately, and that isn't any good.

The public members end up by being mediators.

The other two groups catch on, and we can make extreme demands.

in very unsatisfying settings in that kind of an environment.

Therefore, you want public members.

Well, we can identify the public members.

among lawyers, among jurists, among economists.

Be careful.

When you talk to the economists, be careful.

When you talk to the lawyers, it's not easy to find.

Public members will be thoroughly sound in this very difficult area, because it's part of economics and part of politics, and it is very difficult territory.

I have a suggestion to you.

You've done this for mentality now in the Cabinet Committee on Economic Policy.

It has served, on and off, the occasion of this wage price review.

You can use it like an accordion, experiment with it.

With greater authority or lesser authority.

Depending on conditions as they do well, perhaps, to the price index, the pressures, political pressures, whether it's doing well or doing badly, if you pointed away to prices a few more and diverged, you'd say, there is a real risk that the thing will be a flop by early 1972 and will be recognized as such.

Well, the Cabinet Committee on Economic Policy, you see, you can expand its authority, you can contract it easily.

Now, here's what I have in mind more specifically.

You might issue a directive to Cabinet Committee on Economic Policy to...

or you can do something else.

You can say you can issue a directive to the cabinet committee to concern itself with key inflationary situations as they may develop over the next few months.

I think you've got a little authority to focus on one.

But you may want to extend it, you see, later on.

I wish you'd think about that.

Well, I haven't got anything like one.

I heard you say how you'd kick that open.

You could leave it open.

It's open-ended.

For it to move.

And he issued such a directive that would satisfy many people who talked to him.

Well, no, you've got the cabinet.

Well, I'll set it up as a separate committee.

I see your point that the use of the cabinet is more controllable.

Well, you'd have to call, you'd have to have stands, you'd have to have labor.

I wouldn't have a hell of a lot of time.

Well, in Congress later,

I mean, Congress, Laker, Frazier.

Well, then you get down to, you get housing, HUD, transportation, you get down to a, they have too many.

How many do you want on it?

How many do you think you have?

I think I would take the present cabinet committee because then you can say that you've already had, have had a wage impression, you've already involved yourself in the lumber situation, in the yard situation,

Let me take a look at it.

Let me take a look at Steele then.

It's a real problem.

I went through with 59.

I know those people.

I mean, Staple's trying to make points.

He's a very partisan Democrat.

He's going to be just like that fellow on General Motors.

He's going to try to embarrass us.

And just at the time...

I'll give you my own assessment, which might easily be wrong, Mr. President.

I think it would be better to involve yourself in this and lose.

I've had people say that here, because of this gigantic inflationary increase, the President did nothing to stop it.

What do they have to say?

And they say, what do you mean, actually?

That's what you're attempting to do.

Well, of course, the, you know, there's a form under which we'll make an appeal to the American people.

Yeah, yeah.

An appeal in which you will be joined by the entire cabinet and the whole of the entire Congress

The Republicans have a practical feeling about the response to moral forces.

And it's all right out of the market, I understand.

They form competitions, kill them, but they use them.

They don't give a damn, do they?

No, because they usually take care of their older workers, and when you won't come along, they won't care.

Think about it.

It's a good idea to give us a little flexibility there.

You see, it says accordion type.

What do you require us to use for it?

If you appoint an outside board, it's on you to handle it.

That's right.

An outside board, that's what we're worried about.

And also, they'll say who you put on it.

That's where, that's where I'm keeping out loose caps for a while, ma'am.

Oh, yes, sir.

I hear it with the cabinet committee.

You control it.

Have a good trip.

Sleep on the plane.

What do you hate the second of?

Second of all, there ain't a thing.

Just ain't one.

My best, sir.

Goodbye.