Nixon, Connally & Burns on International Monetary Fund and Import surcharge

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Yeah.

I'm thirsty in the center of this.

There are no problems.

I can come from a soldier's standpoint.

Yeah.

I'm hungry.

Sit down.

I'll just sit over here.

It's easier.

Come on, all right?

Sit over here.

If you're going to get down, I'm going to tell you this crazy tale that we had about the other day.

He said, you and I, that's my story.

I haven't yet, I haven't had a chance to talk to John about it.

You know, the night of the reception or something.

Let me see what we can do.

I'll see if he gets some attention.

That's the way we'll do it.

I think that's what you mean.

You mean he's, I don't know.

He's got to make my hands on the services.

Here was his position.

He's traveled all over the world.

Heads of state have bus programs everywhere.

He's been ignoring this country.

Actually, I contributed to it a little, but I was going to pay more attention to it.

I said, the same thing's true of you, Jim.

But what is especially important is if you give him a few minutes and make him feel better, it's going to cost you nothing.

What will it accomplish?

I don't know.

Create a better atmosphere.

And he may turn out to be a useful intermediary at some stage.

You know, he's taken some initiatives which are not bad for the market, period.

He's come across, presented a plan.

Under which there will be an average appreciation, 10% for the country, Japanese 15% or so.

I'm not a bad starting point, are you?

I know one of these guys, one of his special friends.

Oh, I see.

There he is.

Sure.

Well, let me say that the only purpose of the three of us chatting is to get the whole cabinet so they all sing the same tune.

And that's why we've been calling this meeting this morning, you know, interesting enough.

The Europeans, they listen for every little tidbit, and they'll listen to everybody.

I mean, they'll listen to an assistant secretary or a secretary, et cetera, you know, or he said, sir, Dave, you've got to be here the rest of it.

I'll go right back and report it.

They pay a lot more attention to that kind of stuff than we do.

So I'm sorry for you.

And our discussion is much more free than they are.

And I just wanted to be sure they at least understood what the game was.

I take the key to this game.

However, if I think it's down to John or to you, that's what we have to understand in our church.

I want to say that, too.

the others because after all, Bill was going to play his role, Bill and Matt Samuelson, and there are people, of course, that are trying to confuse, you know, everybody's in, but the key to this thing are the two of you, and I want you to know that that's what we're, that's what we're, what we're counting on now.

The reason I, I think it's very important for, and I, I don't know whether I did, I discussed this with you, I discussed it with John,

I think it's best that I not make any formal speech to the IMF because I am not ready to say what we ought to do and if you did, and that's why I thought that John would make a speech and I'll give a reception.

Am I right with you, John?

That's fine with me.

I must say that most of the people in the Peterson group and the Volcker group, they probably disagree with that.

They think you ought to make a speech.

I'm not prepared for it.

Didn't we do it?

I ignore it.

We don't.

And I think, well, the reception changed nicely before, and I've been around.

Now, if I tell you about that reception, though, what I will do to see this at the reception, I'll come in.

And then I'll make a few remarks.

I'll make some informal remarks.

We're outgoing.

We want to do this.

We are your friends, etc., etc.

Actually, it's a good speech.

What am I going to say in a speech except that kind of stuff?

And I can say, five minutes of the reception, I'll let some of you hear it, and let that be on the record.

And there's a lot of stuff that you prepared for last Saturday.

It wasn't an accusation.

Nobody asked a question.

but I can make some comments about the international monetary thing that you both drew up the other day, which is a very general stuff at the reception.

But you could make the hard speech.

Now, the line that I think is important to follow at this point is that, at this point, is to resist the temptation to

go back to, I mean, to move the way probably they want us to move, which is some modification of the old fixed exchange system, which I think John put in this morning.

We have to consider that as an option for the future.

It's one thing.

We are not ready to do it now.

And what I'd like to suggest is that

is that John, in his talk, should lay out something that will probably not be acceptable, but something that would be at least secure to be an offering position on our part, and then have discussions at other levels

to see what they're willing to do.

Now, it seems to me that on that score, first, you could get a little rundown, John, as to what you think you might say as to

to what we couldn't.

Archer made the point the other day, and I think it's a good one, and I know you agree with it.

He says that we ought to put forth, you know, sort of, just appear to be offered something.

Right, Archer?

I mean, I don't mean offer a solution, but say, well, we can consider this or that, in order not to appear to be totally negative.

Correct.

That's right.

I usually assume.

Well, sir, you know what I'm saying?

They're horrible.

Yeah.

and that they're really putting out in the public.

Number one is the import surcharge, number two is the gold.

Now, I'm not sure Arthur and I agree on the gold, but I have asked for gold, and the conversation that we've had were two ways.

Publicly, I've said to them that you should take the position.

I'm not authorizing taking the contrary position.

I need you to make a change of price in the private conversation that I've said to them.

To change the price of gold, we have to accomplish

And to go to Congress with an issue of this kind would open up Pandora's box that, indeed, we get every protectionist speech made.

They're going to hold extensive hearings on our trade with every country in the world.

And I think we'll be months and months and months debating this issue while the whole domestic environment deteriorates to where we may be forced into a position where we can't do anything.

at least that's the risk to our artifacts that we can move, that we could change the price of gold more readily and more easily.

But be that as it may, I think there's a risk, and I don't think that this leaves the other aspect, the import surcharge.

What I would do, I would recommend that we

remove the import surcharge and our capital controls are on condition.

If they will remove such restraints as are necessary to permit a free float of our currencies during a transitional period so that indeed we can determine, so free markets can determine what the relative advantage of currencies are.

This doesn't have to be a big deal.

It can be a part of a suggestion.

Now, the other part of this would be one suggestion.

I would also suggest that we proceed right along.

And to the deputies, to the group of 10, I'd rather agree on what amount of re-evaluation we have for the government.

And so I'd like to toss this other out as a suggestion.

which is not just the three-out-of-one position.

In other words, you would often remove the surcharge and action by controls on the station that they, in effect, reciprocate.

And in a transitional period, have a free flow.

So they don't have capital control, they don't have two tier systems, they don't have, uh, interaction.

So we, uh, we, we can't account for the other tier systems.

I don't think they would.

Well, I think they'll be at the risk issue, but at least it's an offer.

That's an offer, and it's a reasonable offer.

The four problems that we have this season are these.

One, if we have a realignment, how much should it be?

Number two, they want to remove the surcharge.

Number three, they want to change the price of gold.

Why?

Because they don't want to re-value and us not de-value.

Now, if there is a realignment, it's not a question of how much, but who is?

Who yields?

Who makes up the $10 billion or $13 billion?

And what proportions do they accept this?

So here are four major problems.

During the transitional float, you saw the, you don't have to change the price of gold, because that corrects itself.

You remove the import, you ought to remove the import search target if they will.

So that's all.

The amount of real land, you don't have to realign anything.

The market will determine how much the real land is.

and it's also the country because the dollar will be in one position versus the yen would be in another position versus the canadian dollar in another position versus the german mark and french line and so forth so that

that this transitional flow period would answer all four of the very fundamental problems that we have to concern ourselves with.

And frankly, I think they're going to think the risk is too great.

They're not about to let it go up 25%, which they personally don't.

So they're not going to agree to not intervene and not control that flow, same thing with the markets.

But if it attacks you, if you don't make that only an open trouble, if we go right on through the

through the meetings, through the meetings, working on the other places as well, just carry on a bit more.

Now, that's another side of you as an opener, as an opener.

You certainly want to, you certainly don't want to hold back.

You don't want to hold back.

You're going to get out, so that's it.

It might be the fact they don't pay you.

I would modify that.

I think that one part of this is a fine product.

Removal of the enforcer charge and lean tariff will permit a free float, which means getting rid of many of your controls.

But I would not say anything about our capital controls.

Why?

Well, they are

Very disturbed and irritated now.

We've told them that we need a turnaround of $13,000.

If we ruin the captain controls, that makes the turnaround even larger.

They have felt all along that our captain controls are not strategic enough.

Our captain?

They feel that this would replace an impossible burden on them.

I've told this to John, and I want to say to you, one of the Europeans, we've got to proceed on the assumption that we are just as smart as we are if not smarter.

If this proposal were made and I were a European finance minister, you know what I would do?

I'd get up there and say, the Secretary's proposal is a magnificent beginning.

We accept it, and we accept it heartily.

We feel, however, that he hasn't gone far enough, that what we ought to do is get rid of all of our quotas and all of our tariffs, provided the United States and all the other countries are willing to do the same.

Thereby, they throw into your lap the oil import quota problem.

the tax bill quota problem, the scale quota problem, the quotas on agricultural and marketing and so on, and you can have a hell of a domestic problem on your hands.

That's what I would do as the European finance minister, throw this right into your hands, but if people can't control it, you have a chance to.

I wouldn't say we're above that.

Well, I don't agree with Captain Control.

I certainly don't think we ought to say Captain Control.

I mean, I'm out of that somewhere.

I will leave.

I have a chance to leave.

I will leave.

But they just want to irritate them.

They certainly won't hate.

You don't have a chance.

But they could make the same boomerang that I'm speculating about.

Now, on the gold question, on the gold question, well, I'm no match for John in evaluating politics.

But I do know this as a fact.

That Proxmire, who was the chief opponent of raising the price of gold, has come out publicly and said he's for it.

Throw us in the Senate.

Throw us and turn your opponent in the House.

You know what he said?

On two recent waves.

He moved for a beach.

I know the president, he missed it.

And he moved for a big list for us.

He used to go out publicly.

Now, I had private innovations from the hill.

They were going to do that.

And the sentiment has changed.

And there is a reason for the change in sentiment.

A few years ago, when we had these political debates, people were talking about doubling the price of gold or tripling the price of gold.

And hell yeah.

Now what is being talked about is an increase of something like from $35 to $37.5, 17%.

Moreover, the problem previously was that we raise the price of gold, we reward all of the bad people in the world, the racists in South Africa, the Russians with their gold, the French with their gold, the speculators in gold, and so on.

They have a windfall.

Now with the official prices, 1968 with the official price at 35 and the market price at 42,

and you go from 35 to 37, you're not rewarding any of the white people.

So the whole political environment has changed.

I don't think you have a problem.

Now, from a marketing viewpoint, I would continue to take your position, but I would indicate this is a technical problem.

After some basic issues have been cleared up, we'd be willing to discuss it with you.

Let me ask you this.

What is more in our interest?

A more basically rigid system, which I understand makes the price of coal be more a more flexible system, which is really in our interest.

The price of gold has absolutely no economic significance in the new environment.

It's a purely political problem for all these other countries.

You know, they have their theology back home.

They have their commitments back home.

They can go and say what they want.

We've made our contribution in appreciating the value of our currency.

The U.S. has made its contribution.

Now, I say it's a heftiness.

I mean, you don't want to ruin it because it's too complicated.

Your thought is not to be this and something we talk about this week.

No, no, no, no, no.

But you're, what are you, what are you thinking about?

I don't think so.

I don't know what I'm talking about.

But I think that's part of the basis that I would disagree with.

No, I think it's absolutely not important.

I can explain that to you.

I think that's right.

The only way that this is at this point in time, we're trying to restructure, I think it's the majority of you, and I think it's all of you,

that we de-emphasize, though, and we de-destruct.

At this point, the problem is we're... Can I... Can I... Can I... Can I... Can I... Can I... Can I... Can I... Can I... Can I... Can I...

I think it's very important that nothing come out this week to indicate that we have a divided front on this.

Here's what I had in mind.

I think what we need is a network of intelligence here.

And also, what we need is a real effort to, which Arthur, you contribute to enormously, because you know so many of these thoughts.

And you, Sue, whoever else you want, Bill, or Sam, you know, there are various people around there.

That would have taught us to see whether this united front is quite as united as it appears to be.

You see, now, for example, you're very close to the French, and you know the German, I understand, very well.

We have others.

The Japanese, of course, we've got certain emails and some hits there.

I think the best thing that they did, one of the best things, recognizing whenever you talk to them, you talk to them or John talks to them, that anything indicating that its policy is going to get out, particularly with the Japanese and the French, they're both great leaders.

The British will not be, and neither will you.

Well, the Germans won't, but the British won't be.

You know they won't.

But I think that our moving around among them may find some case in there and also be encouraging.

Rather than just treat it all as one.

I've been encouraging.

Look, the Germans have told me privately that they will work with us.

Up to what point, I don't know.

They have said that repeatedly.

Now that I've had intimations from the Europeans taking a gang up on the Japanese, and I'm not, I'm not discouraging that at this point, you see.

Yeah, sure.

They're afraid of that, aren't they?

Let me suggest that there's one other call that we ought to use in this.

And I'm sure you will agree with this, Archer, and I've already mentioned it to John and Skissinger.

Now there's a reason.

We've got a lot on the Germans.

And we've done what we've done for Grant and for Lenny.

He is very grateful.

Now he can sort of move around here.

With the Germans, that's going to be a willingness and an obvious advantage, you see.

Also, with regard to the Japanese,

the legislature can be of some help to you.

So I'd like for the two of you to keep him in on this case, too, on a political side.

And to a less extent, though, even with the French.

Now, I mention this to the legislature for this reason.

He had a problem with Grover the other day.

We've done a couple of things politically for the British, not big, but some.

Well, for example, I didn't take them on when they were shipping arms to South Africa, and I sort of put it easy with them on Rhodesia.

You know, a lot of things, which they appreciated.

You know, they were beating those men well back in the demagogues, you know.

And that doesn't mean they're not just big, tough as a dickens, but this is just a path that he knows Congress will give him.

We've talked with him also when they had the interrogation question.

He said, I don't care.

What about this thing?

He said, what really is the situation?

And he gets to the point where he's totally wrong.

He says that Cromer, when he's really at the laxest of him, indicates that the British position isn't all that sure, isn't all that solid at that stage.

Now let's look at our position vis-a-vis the British, getting into the common market.

Now here's where we count them.

After all, I have been saying, and I said it on my trip to Europe immediately after the inauguration, I've been saying it ever since that

that Britain is the common market, is the good thing.

That even though it would present problems to us from an economic standpoint, that looking to the political future of Europe is better to have Britain in.

This is, I believe, because I think it's, I think you cannot have a Europe that is going to be affected politically with Britain now because you've got the insoluble problem of the Germans and the Franks.

The Italians don't want anything.

The British can't.

will give a responsibility to that political if they otherwise never have.

This is very important.

Now, the other side of that coin is that putting the British in the market is not to our interest economically, certainly in the short range, and maybe not in the long range, because we thereby create a united trade union of 300 billion people

And they can really give it to us.

So, now, the British know that the British want to get ahead from a political standpoint, so that they can be someone of power, or an angle that we can play this game.

On the other hand, we might have to re-evaluate that.

Maybe it's not worth it.

Now, why is our role important here?

Because the decision

With regard to Greta Shepard, it's not going to be just simply economic.

It's going to involve political considerations.

On the fraction, particularly.

For example, you've heard of De Gaulle's attitude with regard to Britain coming in.

I saw it a lot when I was there before.

I saw it about that much.

But as far as Pompidou's concerned, who would you take off?

Remember, Pompidou now has come quite a ways.

It might not take too much.

I'm just thinking out loud for the moment for us to sort of put a little on Pompidou's plate, and he gets a little bit more rigid about the British interim.

Now, I mention these things because it seems to me, John, that

It seems to me that we don't, while we must never indicate to them that this is an economic problem, let us recognize that for the British, for the French, for the Germans, and for the Japanese, it is all tied into politics.

And therefore, we don't want to give them a damn thing politically.

Unless we get something economic, they have the same torment we can take some things away from them politically, but they care that they're too hard on us economically.

That's just about the way it seems to me.

What's the time period on the market?

I don't know.

I don't think there's a lot of time.

January 73.

Wait, 73?

Yes, sir.

That's a party senator for the state.

I would not allow this decision to be made without winning at the international

And also, as we were saying there, without witting, very heavily until the elections in November of 72, the domestic political repercussions.

Because boy, there is, domestically in this country, there's a strong,

And I infer in her hand, too, which is not all of it, and which we damn well have done.

We've got to be just a little bit ahead of them, or some are going to seize that, you know what I mean?

And I think we can.

We just, it's a tightrope act.

We've got to be very responsible, and yet we've got to convince the American people we're standing up for their interests.

That's what it gets down to.

That's why making a deal too quick, appearing to be too outgoing, well, appearing to be outgoing, but also appearing to be strong and firm for U.S. interests is very important to us at this point from a domestic political standpoint.

So what we'll do is now, let's come back to this speech.

Does this meet with your general thing that I could make a few remarks at the time of the reception, which would be brief and general and the rest, and have John make the speech opening the audience?

I don't know.

I'm not the Secretary of the Tribunal.

Well, I don't want to make a speech anyway, but what do you do?

Well, I'm lonely.

I'll speak anyway.

I govern the United States, so... Well, you made one, and if you...

I don't feel that strongly about it, very frankly.

Some of them do.

I don't...

I think if you will make some remarks to the governors and all of the governors up here, I wouldn't argue with that.

I don't know if you feel a different way about it.

I don't know if I am impressed with last year's five, but I hope you will remember to do a little bit of a change here.

I think it's very important that you lose nothing in life, and I see you make more attention again.

Okay.

I'll speak to that.

As I said, my reluctance is only because...

I...

I can't do anything more than that.

I can't blow something out of a tree.

Whereas John, I'm telling you a lot.

I really, I don't think I can do it out there and give them a lot of litter and generalities because as you said, they're smart.

They'll say it.

For God's sake, he didn't say anything.

Well, that's what I'm afraid of.

The legal policy, I'm not going to give them litter and generalities, is it?

that you're going to be really on center stage in track.

You can't just be a top goalie when you get in that position and you've got to make even a stronger statement about the protection of America.

And this tends to destroy everything you've done.

That will destroy it also with that.

That's what I'm saying.

You do more harm than good.

You can't get up there and just say, oh, I'm an internationalist guy from the world, from the

You've got to work this out.

You've got to protect your home from it.

We're going to speak these big things to the American audience.

It'll be on television.

We're going to have to get her to the key room.

It will not be on television.

There, I can just say what I want.

I can be very honest over there.

And I think that's the place to get off going.

And then also afterwards, I can circulate around and you and John can bring up the investigation.

I'll stand there for an hour or so.

You should bring out to me the guys that are trying to help us.

Right.

And we'll just have a little... And we'll have a little press session.

The press is the most important.

It's more important than others.

And we'll check in with it.

I'm having a...

I'm giving a dinner for the central bankers of the group of ten.

I'm having a private dinner at my home with my husband and his wife.

Good.

And a number of other private meetings.

Mr. President, I think I want to, I did want to comment on this at the cabin, because there were too many people there.

I wanted, you know, I want to comment, I didn't want to comment back here, to take it back here.

Look, he said, time is on our side.

He's absolutely right for a world governed by reason.

But a world is not governed solely by reason.

And at least in the short run, emotion, passion, even madness can govern the world.

It's not to the interest of the other countries who put up restrictions on trade and capital movements and so on.

They have armed partisans in their gangs.

short run, having their political problems, having their business pressures, et cetera, they're already doing it.

That's fact number one.

Fact number two, fact number, fact question mark number two, now this is something I am going to look into pretty carefully, but the central bankers keep on telling me,

that there is signs of an incipient recession in Europe.

The Japanese say that they are in a recession now.

The only country I know anything about, from an economic viewpoint, not with any detail, I've been busy with those things, is Germany.

Germany, profits are down sharply, and borders for capital Britain are down.

These are signs of an incipient recession.

Why are these countries having a recession here?

Well, you know, they can't blame it on us.

Yeah, but why?

I mean, or not really.

I mean, they could, but we are not.

We can't be blamed for this.

Well, this is what I'm doing.

I think the silence of the Soviet recession, if they're real, you know, I don't know about any kind of big subgroup in Japan that's kind of gerrymandering,

They do primarily to the inflation problem, with the cost of...

But you're worse than ours.

Yes, the cost of going up in Russia is an unknown.

That's a problem squeezed, not a recent cause.

But look, if there is an international recession next year, mark my word for it, we are going to be blamed.

There isn't a slightest question about it, and every dang economist in the world that follows politicians is going to do that.

So this is what we're trying to do.

Yeah, yeah.

You know, your point you make, the irony of this is that here these Europeans are all lecturing us, put your house in order, get your inflation under control.

And yet, every one of the countries in Europe and Japan have a greater inflation than we have, except for which, I don't know.

This is, this is true.

We have the toughest changing inflation policy in the world.

And so we're probably making a little progress.

Well, look, this is a good point to have it right now.

We don't want to have a big international downturn next year, because that could also affect our economy.

I'm going to get a fax here to what degree you're exaggerating.

Good.

Give me a report on that.

Maybe that'd be a good subject to have.

You wanted a paper that all made some notes on

Thank you, Mr. Patrick.

Yeah.

Thank you, sir.

I need it now.

All right.

Thank you, sir.

But I'll not testify, and we'll leave with him on an awkward interception.

I'll tell you later.

Thanks for having me.

at the same time as Troy wanted to give you help.

He's compelled.

He didn't give the star away.

We don't believe that.

We'll just go give it.

Okay.

Well, thank you.

Thank you, Parker.

Oh, Parker.

Did Bob Holden speak to you about why you didn't come to that Japanese restaurant?

Yes, it was Bert.

I don't tell you, you can't blame Bill for it.

What I meant is, the list, you see, the list was, I didn't even know who was coming, except, you know, because I know we don't give dentists anything.

They don't give dentists your cash.

But I just said, alright, because the State Department made up the damn list.

And so I just signed the sign, so they'd know that he was a nurse.

But on a thing like that, hell, I heard all of your narration panning, and you should have called Haldeman and said, come.

Because I asked Haldeman, I asked Haldeman, I said, where the hell is Arthur?

I said, is he sick or something?

You remember?

Remember, I just assumed that you were going to be there.

But you don't do it because you don't want anything like this.

I know it.

You're telling people to invite.

I never hear the thought.

I heard since that was when you should have been.

Well, because you could have helped, you see.

But just so you all can recall, it was down in Wichita, Dallas.

The end of our formal meetings.

I know, but that's fine.

I know, I know.

You were there.

I know.

But don't worry.

Don't worry about my people.

I know.

I know that when I'm in the entrance, the country would have been served.

You think they are, you know, we just, you know, don't worry about me.

No, that's not the reason.

I'm just helping.

You know what?

I'm going to help.

That's your job.

Thank you very much.

Nixon, Connally & Burns on International Monetary Fund and Import surcharge

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