On August 9, 1971, President Richard M. Nixon, Paul W. McCracken, unknown person(s), and Rose Mary Woods met in the Oval Office of the White House from 4:37 pm to 5:00 pm. The Oval Office taping system captured this recording, which is known as Conversation 558-007 of the White House Tapes.
Transcript (AI-Generated)This transcript was generated automatically by AI and has not been reviewed for accuracy. Do not cite this transcript as authoritative. Consult the Finding Aid above for verified information.
I said, Dr. McCracken's here.
He's right there.
Which way do you think I'm going to head out?
I'll tell him.
What time is it?
5.30, then.
Sure.
There's only one way.
You just head over there.
All right.
I'm sure you are aware that we're having a little disturbance in the internet.
Now, I have dictated a memorandum, or, well, it's not identified.
where I just attempt to sketch out the landscape here.
This is something where events, of course, are moving very fast, and they could overtake us tomorrow.
I thought something like this might be helpful to you.
It's a little long.
It's about six pages long.
Well, I'm sure you do.
Now, what I would like to do, however, is to bring this over and give it to Steve or something like this, and not send it through the normal channel.
Absolutely should have come to you.
You just hand it over, you got it now.
It's just about coming out of the typewriter now.
No problem.
Just bring it over and give it to, why don't you tell you what you do, just give it to Rose, my second heart, and she'll bring it in.
Fine.
That's the best way.
You know, the thing is, it's important to keep this very closely held.
I saw a very disturbing column by, I don't know, Paul Scott saying he
We have questions.
I have in mind, I know pretty much what we, I have pretty much in mind what to do, and the question is the timing that we must, we must not, we would like not to be forced to do something in a rather clear and happy way, to do it in a more deliberate way.
Right.
That's really what we've got to keep all everybody in.
It's sort of a little guessing here as to what's going on, and I've just got to keep it very close to the vest, and get started chatting around about it.
When we meet tomorrow, for example, that meeting I'm setting up to incur your request earlier, I just thought we ought to get the tree members of the council, and George, and just the four of us, that's about it.
Have all of you just talked for an hour or so about the economy general?
That's a good idea.
So that I can get a view of this international monitor, and I think probably it's not a good subject for discussion at that meeting.
I don't mind it being brought up mainly because I just don't want any leaks.
Sure.
This is the one area we can't have leaks in, don't you agree?
Couldn't agree more.
I know that whoever did this didn't do it the right way.
I know that.
But on the other hand, you must be terribly stupid because it's the one area where you know very well it designed to raise the perfect tunnel.
Well, of course, the idea was...
Your general feeling as I understand it is still because I'm just sort of like this kind of thinking because I've gone very far in my own thinking.
Your general thinking is in terms of letting the dollar float, the gold window, right?
That's correct.
Those two things, not the price of gold.
No, I wouldn't want to go that way.
Plus a few other actions, right?
Because I think...
I have a few other actions.
Yes, well, the question I keep asking myself is, where do we want to come out at the end of the tunnel?
And, I mean, not just what do we do tomorrow if the Swiss get another half billion or something like that.
Right.
But where do we want to come out?
Now, it seems to me where we want to come out is in a position where the dollar in the new sector is going to be, is going to have the strength which comes, if anything, from a little undervaluation.
Or, in other words, it's a little overly strong in the foreign exchange market.
Right.
I think the first reason for this is that it seems to me it is absolutely essential if this country is to reassert its capability for international political leadership,
To put it very bluntly, a weak dollar is just a ball and chain on you when you come into the non-economic level.
Now, secondly, of course, it's important that we come out in a world that generally has a liberal orientation on trade policy.
We don't want some... Well, what I mean is we don't want a...
In other words, we don't want to trip off and enter nice and light on the floor here.
That I can agree with.
Well, Paul has got a memorandum.
He'll be saying hello over here late this afternoon.
Late this afternoon, or what do you call it, late this afternoon?
Or tomorrow, 30 minutes.
Huh?
About 30 minutes.
Yeah, you bring it in to me.
It's a private memorandum on a matter of the matter.
Just like to do the stuff.
So I'll bring it to you.
Yeah, yeah.
I'll bring it to you.
Well, these are the parameters, as I see it, of where we ought to come out.
We could go into this in great detail, I think.
But it just occurred to me that for something like this, it might be useful...
To you, if you just had something that kind of laid out the landscape, I don't suggest a recipe.
Do you think this represents your thinking, or yours and Stein's?
I think in general it represents our thinking, except that of course Ezra has just come on board today, so he hasn't had time to speak.
How can I understand that?
Let me ask you a couple of things over here.
Did the retail sales figure come on yet?
Not yet.
Is it a little late?
Not yet.
I dare say I may have it now.
I haven't been in the office or recently.
I'm just curious.
I think they may be down slightly from June, but not by any consequence.
That's still substantially above last year.
Substantially above last year, I would guess...
at an annual rate from January, 12-15% still.
That's a pretty strong gain.
It's a curious thing, isn't it?
Retail still holding up so much, despite all the bearish consumer sentiment polls.
As a confident statement, you know, that consumers are sitting on their hands and spending.
What does it mean, period?
That shows you that that measure, well, somebody said in one of his studies of it that
Some of you or somebody else read a piece here that said that the consumer sentiment do not always predict what consumers do.
We are just finishing.
I asked one of our staff people to look carefully at that issue.
In other words, to analyze mathematically.
the relationship between these swings in measures of sentiment and swings in actual buying.
Oh.
And I don't know just how.
In fact, that ought to be done by the end of the day.
My guess is it'll show some relationship, but not a very precise one, and not a very dependable one.
So, this is... Money supply?
Oh, I'll talk about all these things tomorrow, but I just want to get a few of my... Money supply is...
Pretty heavy, isn't it?
Pretty heavy rate of increase.
Yeah, you have really not much to complain about there.
Not a bit.
Not a bit.
The Federal Reserve is concerned that it's going up so much.
I'm not...
I'm not unhappy about it.
Yeah, let it go.
Let it go.
It'll help us later on.
Get off it.
If money supply had a delayed reaction in February... Six to twelve months.
Really?
Wow.
Then we ought to really get a wallet.
And this is why, of course, with something like this you've got to get going early, you know.
I mean, it's why with monetary policy you want to make your changes well ahead of when you want to see a change.
Like now.
Like now.
So money supply is moving along pretty well.
Housing is looking fairly good, and I think we'll hold up pretty well with the new money.
With the subsidies?
With the subsidies.
Well, that was a choice.
But you know, the thing is, Paul, as I said, if we're going to spend $200 million on a $150,000 rubbish job, why not $600 million or $800 million in subsidized housing?
Sure.
Which way are you going to do it?
Sure.
Well, I suggested, in terms of technical economics, I suggested going up on the interest rate.
But I was not unhappy with the... Oh, no.
Oh, it's a close choice.
It's an integral of the interest rate, because it is what it used to be.
But I think right now, and it's certainly presently, people about them as bad.
The other thing that's curious is...
Other retail sales.
You know, they had a thing, which is probably a conservative check set up, in a sense, the way you go around the country.
I've been in the last two weeks in Ohio, Iowa, New Hampshire, Maine, and all of these are, that's a pretty good cross-section of east to the north, north-east, and then west.
And this is the...
I was very enthusiastic.
That was a good crowd.
Those people are as much the size of the crowd.
No, I didn't realize it.
They're going to have a job.
They have their problems.
They have their problems.
We know that.
We know that.
Indeed, my brother and his wife were in the crowd or not.
Well, I saw them out in the audience.
Oh, and it was a very friendly audience.
Yes, yes.
Yes, and they were, but I had the...
The sort of words I report then on sentiment.
It was a very friendly group.
The capital goods area is very soft.
There we've got trouble.
It hasn't collapsed.
It's done worse in other times, but we just can't get any life in that.
That's where the investment tax credit would help.
It would help.
No doubt about that.
That's why people talk about it.
That's why the businessmen talk about it.
That's right.
Yes, if we were to move, I think we ought to have that on our list.
And vast appreciation.
Well, that is vast appreciation.
Yes, that means we would have done a lot.
That means we would have done a lot for capital goods, because...
With accelerated depreciation, you see that's in magnitude about half, about half of the investment tax credit, if we were now to have the investment tax credit also.
Are we going on accelerated depreciation?
Yes, yes.
Although the litigation and that sort of thing, I don't think many businessmen are yet putting that into their plans.
I think that's one of our problems.
But that error will clear.
No, that was a good point you made in your press conference.
No doubt about it.
But the plan and the magnitude, you know.
Were you surprised that the...
I find it didn't go up more than it did in the video.
I mean, it didn't.
It was probably, what really happened is that June was probably 5.8 also.
High center, in fact, that was taken earlier in the month.
Right, right.
July is probably a pretty accurate figure that you've entered now.
Yes, and particularly if you take June and July together.
Nobody says there's an aberration on July today.
No.
I don't know.
No, I don't.
You can't be sure.
But if June had been that much of an aberration, the June and July snapback ought to have been more.
And my only evaluation is that June and July together pretty clearly show that unemployment, which was a little above 6% in the early part of the year, is now as edged downward.
It's a little below.
5.8, 5.7, 5.8, 5.75, let's say.
Yeah, and be unsure.
Yeah.
Now, employment, of course, is not, it's still sticky.
We're not getting the gains there.
It would be good to see.
Well, I won't take any more of your time.
Sorry.
I wanted to... We have a plan that tomorrow we'll go through this whole ball wax.
All right.
And if we can bring up the international, if you want to accept it, I'm just...
I think about it as a
I don't say anything about it myself, but I'm petrified at having stories get out in a year, meeting on that subject.
You know what I mean?
We're never even talking about it, because I don't want any more leaks on it.
No.
Well, I'll bring this over then.
You see, a very good time, Paul, to do anything you want to do, is...
In terms of the international monitoring.
The question, of course, is whether you can wait that long.
I know.
We may be forced, but then we might be panicked.
We might appear to be panicked most of the time.
Now, of course, one possibility would be if this thing develops the characteristics of a run on the bank, which it could.
It could beat them off.
Just close the gold window?
Close the gold window, let the dollar float, and let this be the pressure on the rest of the world to get together and develop some kind of coordinated plan.
I cannot believe myself, and I'm not sure that this is true.
I know Arthur has this idea that five major countries sit down and he can talk nothing over it.
I just think that we can't count it on the French, particularly, to make it difficult for us.
They play the game.
And the French, if they do, we were going to talk about it, we were concerned about it, they might just go up and call in the chips.
The Germans will play the game.
The British will show they mean like sure that politically.
It's the French.
Politically, we don't know what's the damn thing.
And we don't know them.
And consequently, they'll play a cold turkey game.
I think they will.
So the Japanese know?
Well, they've got to be watch out.
Yes, they probably, the Japanese probably could be persuaded to go along, but I don't think there's any, I think all you could accomplish is that later on we could say, well, we tried.
But to be able to persuade them to make the
Themselves to take the actions of the magnitude which would be necessary.
Probability there is very low.
Very low.
The key thing, the key question we have, of course, is if this thing just really starts to come unzipped, then what do we do?
Right now?
Tomorrow?
Tomorrow?
Probably don't have much alternative.
I would think we would not have much old currency.
No, of course not.
And then... Because I would not... Mostly the gold window really makes the dollars look nice.
That's what it is.
Because then the only way a holder of dollars can get out of dollars is to sell them for another currency.
So how much did that fellow pull in to pay?
Now we...
We pay it by then at least the fiction of being willing to buy some gold.
But I would not, I think we would be unwise to let our gold stock run down too much more.
I agree.
But we've got to be ready to move.
I just want to move a little more deliberately.
I'm prepared.
I've got some other things in mind.
I don't want to just do this alone.
Sure.
I'll send it in.
That's it.
Thank you.
But I don't want to talk about that anymore.
Okay, bye.
I think we ought to develop some kind of an overt action there.
I think it makes people feel better.
It might also do a little good.
I think it might do a little good, but also if our policies were working, it would be creditworthy.
Well, that's true.
And there is so much sentiment.
The scheme is pretty hard.
The scheme is hard.
One reason I wanted, I was trying to see the way that
I've developed one or two variants of this old abuse of power idea.
I don't like that approach, but I agree with it.
I agree with it, except that it's a sort of an idle gesture that this man conquers.
Well, that's the problem.
This, and frankly, I guess we were developing it partly with that in mind.
In other words, what could we do to bat the ball back into their court?
Now I have a new variant of that, which I think I like a little better.
Instinctively, I believe in a free gun, so I like it.
Tell me this, uh, on the way to pricing, wouldn't you really have to have a freeze first to make it work?
Uh, this is, uh, I saw something I ran into that a second ago.
I, I am inclined to think that if you drive a freeze for a little while, you might have a freeze shot, and then back away with this kind of, uh, you know, a backstop.
And this would be the second step?
Second step.
Just a little later, there'll be no doubt about it.
Well, that's good.
Yeah, well, all right.
All right.
We'll see you tomorrow at 4 o'clock.
All right.
We'll talk to her at the other call.
Just do it.
We just want to get there and kind of refresh the economy.
All right.
We'll see how things are going.
Okay?
All right.
All right.