Conversation 656-027

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Hi John, how are you?

Let's just talk about the budget, the deficit aspect of the budget.

the fear of inflation, what has been the impact of it.

We talked about this employment thing.

And just the economic situation here in the U.S. and China is having this report from Dr. Marks that we might have to say good.

But there's nothing on the international market study to report on our, on America's economy.

Yes, yes, and I can give you some, we certainly should get back to all this.

Okay.

Yes, sir.

Yeah.

Well, I tell you, I will be tied up for an arm, so I'll call back.

Yeah.

Yes, sir.

I had another call in, but would you hold them now for an arm?

Right, right.

He comes in.

They come in, they come out.

It's okay, Lou.

I've got this.

I have a working session, Mr. President.

Here they are.

Aye.

I like this very much.

It really was, Mr. President.

I called Henry last night and told him that.

You got it?

Yeah.

I thought it was actually true.

I was interested.

Jack Colvin asked me, he said that he talked to you.

He asked me to call Clark Kerr.

And he had Clark for me.

You did?

Yeah.

And that's a public statement.

I was reacting to the cast and said to me the last night, well, I said, all right, at least he is scheduled.

I said, yes, that was it.

All right.

I said, yes, that's it.

We're following him.

Yeah, it's not a dovish committee.

On the other hand, we're pushing particularly on the ceasefire.

Yeah, it's not way out there.

Well, I thought we ought to have this meeting a sort of general rundown.

on various matters.

It occurred to me, you talked to John, perhaps his partner, that you talked about the low-income, as your evaluation type is .

And perhaps we ought to hear what you say.

Mark, do you want to cover in regard to that supply and so forth?

John has perhaps some up-to-date information in regard to where it stands in regard to able to get information on it.

So if we could sort of follow that through.

But I'd like to go any way you want.

Should we start with the economic side first?

And then I guess the other things fit into these things too.

And John also.

Well, I guess in front, I gave the chair this morning to the Republican leadership.

I feel a little more worried.

I feel a little more worried than I appeared to have this morning, for sure.

But we have a forecast.

a strong, steady rise in the economy, by no means an excessive rise in the economy.

But that forecast depends very heavily on the expansion of spending.

It's really an amazing expansion of spending.

Federal spending, I mean, from the expenditure drive, according to our estimates, the first quarter, that's the two quarters,

by more than an increase in the last seven quarters.

That's a very, an enormous increase, I think, to me.

It's very much about, I guess, that, I mean, it's not true.

It's not true at all.

The, uh, the, uh, the, uh, the, uh, the, uh, the,

This wasn't the case, in fact, it was down.

Why it was down, I don't know.

It's very preliminary.

We'll get better figures soon.

But I've never had it reviewed, so it was not.

But the first indication at the start of the conference has about said, and I'll share it with you this morning, has about said that January are not encouraging auto fuel sales.

So that

We don't seem to start with the people I talk to who go around and talk to business people.

We're not starting with the leaders you might expect from the rise that we're looking for.

And I tell you this, I can't repeat it, I can't forget it, but it is based on this day's push on the business world.

I know Arthur is pushing it, but we do not see any growth, or hardly any growth of N1.

That's certainly not a rate that you would think would accompany a nine to ten percent growth in money.

GNP, which is what we're looking for.

I'm particularly conscious of the

complaints that we are getting at the same time.

The situation is all incredibly strange.

And I have a big reason for it.

The complaints that we're getting about our very expansionist policy, particularly when I go to the OECD next week, and he's not talking, but he's in Paris.

We've had already cables from Paris from various French officials.

We hear a great deal today about our policy being an advancement, and to our advancement.

Irresponsible is what they've been responsible for.

I have to say to me that we should not be discouraged or terrified of that because that might be what they want again.

But that our lives are better than their own.

We can think, well, they should try, and they should expand more on their activities.

The other point of concern that I've seen to me is the prospect of the wage price.

I think it's working moderately well, but things like the doctor I've read indicate how fragile the whole thing is.

But I guess my guy has me worried supporting me.

Basically, I think he is going to contribute something to our county as a church.

So that might help him.

You have no particular... Well, first of all, it's hard to tell us that...

I intend not to have a hell of a lot of confidence.

It's the best we know.

I had an impression up until recently that we moved very well in December.

And you, John?

Yes.

What have you moved?

Retail sales.

You talked about retail sales in December being dead poor.

Well, you didn't mean poor, really.

A little number of figures.

indicated a small decline.

Fine, but what's last year?

I don't remember.

I was simply just in time.

Well, I bet it wasn't the year before.

Well, I think it has to be, remember, when they cease to adjust and they go from November to December, they're really taking a series of figures.

What about sugar figures on January?

Well, we're having a couple of weeks, and the weekly figures are even worse than the monthly figures.

But the Department of Commerce, in regards to that, is indicating a change where it may be down again.

It's a slight clue.

And again, the economy that we're expecting to rise by 9%, 10% to

I don't think he said that we have any evidence that we're not going where we want to go.

I guess the main thing I want to say is that going where we want to go depends very heavily

all right what other judgments do we have

But what I heard in the first regard is the curves and analysis of the curve of the car.

I'd be more.

I'd be more

Cyclic recovery.

Lengths of the work we've been making at Schroeder in the past few months has risen sharply.

The, if you look at my past, you know, in the last quarter, last few months, contracts are up.

Commercial, industrial, orders for capital are up.

The business appropriations for capital expenditures are up quite a bit.

Well, they're walking from month to month, if we're right.

Oh, that has to be correct.

But if you take this on a broader trend, I see business capital expenditures, and this has been the lagging factor in the economy.

Would you see that again?

But what do you think?

What do you say, John?

Well, basically the same thing.

I think by any standards, regardless of the December 4th quarter, did indeed have a 6.1% rise in the U.S. GDP.

And I'm not satisfied that your December retail figures in the department are correct.

I remember seeing a couple of stories in the Wall Street Journal in which they actually interviewed people about the first of the year.

uh major department stores around the united states this is sears and so on and uh they were saying fantastic unbelievable this was the sale of christmas and new year's and uh they just they were 17 above last year but this is the best

I just have to question the converse of the preliminary figures.

But author's right.

The labor market indicators, I think, suggest for the Kings in the next months ahead to work weak as a priest, I think.

Layoff rates down, the uninsured, the insured unemployment rate fell 3.8% in December according to my famous list.

And hiring rates up, health and water advertising is up.

Prices were not particularly good.

good in December, but that was the coolest we were all expecting.

And then we were all worried about housing.

December housing, I don't quite believe this is a big deal.

You'll probably prove to be wrong.

Housing starts from $2.5 million in December, housing permits from $2,231,000.

That has to be, that has to be, which has to, I'm sure, knock down a lot of subsidized items.

It was reported in early months.

It gets reported in December.

If you knock it down, if you knock it down, it's still a good 2.25 million.

2.3 million for the fourth quarter.

So the fourth quarter, how does it start?

Now, all of you, most of you are...

I got some information this morning that I heard from Adolph E. Lacks that the composite leading index in December, which will be made public tomorrow, shows a continuing strong advantage.

It's a leading indicator.

That's on top of a revised, upward revised November figure.

That's right.

And it's strong on a broad front, a leading indicator.

So, how did you do?

If in the end there is this, the thinking about the economy, it's better to take herbs

I think that John's line is more nearly correct.

Yeah, I agree.

I agree.

Well, then, in these meetings, we, of course, are always talking about the problem rather than how to fix it.

That's what I've asked all of you to do.

So I just want to be sure that we hear exactly as it is.

It's always, it's all a question of re-measuring.

Because what people's expectations are.

And I have a position, thank God, that President Johnson mentioned the layout, right, which is that

now to the, say, late 1969 .

The accession rate in manufacturing is up.

And the accession to the .

Those would be involuntary trade operations.

And then, of course, there are people who quit voluntarily.

And the Conservatives look bad against the rate at which they were being added to payrolls.

The accession rate was 4.2 per 100 employees when they operated 1.4 per 120.

So there's a big, big differential there.

On the curve rate, the question of federal spending,

Before you get into that, may I just say one thing?

Archer, you weren't at the cabin meeting, but John is undertaking responsibility for pulling together out of Herb's office and all of the cars and so forth, and analysis of who are the unemployed.

You know, the heads of household numbers would be pretty good.

You have a hell of a problem with regard to women and others, and there's two jobs in the bank to deal with, and of course, 18-year-olds and so forth and so on.

And you'll have that in about, do you think, in about three weeks or so, three weeks.

And I think it's going to be interesting if your job

You don't do that kind of thing.

Would you make a contribution to that thing, too, for us?

We're just going to know who the hell the unemployed are, and Herb's going to do it, and the Congress people, the labor people.

We'll probably get the best figures from later.

Are there seven?

Yeah.

I think we'd all like to know, and then we could see what the devil would do about the problem.

Do you think this is useful?

An analysis of the actor.

Also, I don't know how to talk about it.

You ask for what I think of it.

It doesn't really take much.

We all have been using the same figures.

And I honestly don't think more of us are doing the same thing.

Now, what I think...

I see.

I just don't want to get you wrong.

No, no.

Here's what I would do.

I'd like to get John to do it.

John can do it.

Yeah.

And let John send it around.

You see?

Yeah.

And then you'd have us retract.

We're out to do it independently.

Right.

Because we're going to be using the same sources, and probably we'll come up with the same thing.

You think you'll all use the same sources?

Well, the only source is .

Maybe we can come up with a recommendation for a special service.

Yeah.

Well, if you want a special survey, John, let's have it, right?

I think, I mean, if we want to order something, we might have to wait on it.

Let me tell you something that you probably don't know.

I don't want you to know, Mr. George.

These unborn contestants were revised.

in 1967, basically the definition of his character.

Now, one of the key questions in what served him is, if you find a fellow he doesn't have, he's not working, he doesn't have a job, well, what has he done, you see, to look for a job?

Now, you can ask that question in very many different ways.

One way of asking the question

A very simple way of asking the question is, what have you done within the past four weeks?

Another way of asking the question is, what have you done within the past week?

You may have done nothing within the past week, but you did something four weeks ago.

Now, the, uh, a special survey was run.

No, it's okay.

And if the question were, and the question they use is, in the survey, what have you done here in the past four weeks?

If instead of asking the question in the last four, if they were asking the question, what did you do here in the past week, some of the longer rate would be down by one-half percent.

This is an unpublished document in the mainland survey.

But they decide in the four weeks.

Now you ask the question, why do they decide that way?

Well, you know, these statistical people are pretty objective, but they have a lot of politics, too.

I don't know if that's good or bad.

I'm just describing it.

If they had taken the definition on a one-week basis, they would have been a great in the series.

They found that by taking it on a four-week basis, you could have something that looks continuous on the chart and wouldn't have a sudden drop.

And they decided not to have this sudden drop.

But actually, my book, the proper question is not what the hell he did four weeks ago.

He did nothing during the past week, as you say.

And that makes quite a bit of difference.

Now, Ron.

sat right this first one uh all i got a picture of you however one of them another one you know just not more like it wasn't in good time i think you might express them and take them away right too because

I would make a point or two about the spending.

Oh, it hurts.

It hurts very hard.

to, uh, spend the money that they've got.

Could I, could I raise one with you?

I, I don't want to raise a particular question.

Jerry Gordon handed a note to me.

I always get a little sent to me at these meetings.

But anyway, I'm talking to Walt.

But his note is about HUD.

He said, George Romney's got a hell of a lot of money around for various projects, and he and a number of people, a number of congressmen say that HUD is just one of the worst

you know, not through going forward or not, I don't know, it may be that this involves some very controversial kinds of queens or what I mean is, but it may be also that they're not doing, would you look at the, that's what I'm, I certainly will, the, I told you to do that.

It's not probably funded to have one of these various inner city public housing types of things because we have felt it's just a failing program.

That is also very slow-spending money.

We do have some money that we're still reserving out of bonds, and we'll be testifying on that tomorrow, but which represent programs we talked about at Camp David.

Now, to some extent, this water and sewer type program where you have slow-spending programs, which gradually the federal government is being drawn in,

the ability of all the sewer systems all over the country.

John's trying to just tell us it doesn't make sense, and we're trying to drag our feet on it.

But for the most part, the funds have been put out.

We are, of course, being accused by the press in the sense of having held all these funds and now dumping them all out for a purpose of stimulating things before the election.

I think that it may be we will get attacked for doing any withholding.

And actually, the withholding you do for the non-apportioned money that is

that is handled that way for a financial management reasons is about the same as it was last year, about $12 billion.

So it may not be bad right now, given all the worry about the debt and so on, that we'll get a headline for the debt, or at least still holding back funds.

At least it shows that we're trying to be prudent in the management of the money.

On the other hand,

With that respect to her statements about a firm spending ceiling and his housing funds, we are pushing other departments to spend the money, and they have a tremendous amount of budget authority, as was brought out in the cabinet meeting.

Let's understand one thing, Doctor.

You weren't the captain, but I made this point.

I said spend the damn money in the first four months of this year.

Uh, because we talk about holding it until the month before the election.

That's too late.

If you spend it then, it doesn't do any good.

I mean, sure, you could make an announcement that you're going to spend money.

But if it's going to wrap up the economy, and if you agree with us, don't you, the thing to do is to get the damn money out now, later on.

If we, then we can pull in the rankings.

I'm sure it's going to be good with that, aren't it?

That's correct.

Also, uh, in terms of economic effects, there's also this.

The, uh,

proposed now, and I think very wisely, a rigid expenditure ceiling.

I've got a good plan, too.

All right.

Now then, at least some time before it goes, you get the money out before you get that ceiling.

We've got a plan for 73.

That applies to 7573.

And that won't have, let's put it that way.

Mr. President, you've done this in the Congress.

Yeah.

Your recommendation was for 73.

Yeah.

congressional people out, they will start playing with the idea.

And it may not come out just the way you want it, but we'll see.

But they take our number for 72 and sign it out, and that's all right.

We have good in ourselves.

There's a majority here.

Once you present the idea to Congress, there's only one ceiling to the president to propose, and that's the ceiling in his budget.

Well, when Congress starts moving and acting, they may take that ceiling or some other, higher or lower, depending on the politics of the

Just to give an idea, Mr. President, about the defense area and the burden we've been carrying in terms of GMP changes.

You saw that burden in terms of numbers of jobs.

The chairmen are very conscious of that.

But in the third and fourth quarter of 69 and the first quarter of 1970, the defense spending was on the order of $79 billion in annual rate.

From that figure, the first quarter of 1970, down through it went from 79 to 75 to 74 to 73 to 72 to 71.

Third quarter of 1971, the defense spending figure was $70 billion.

That's a tremendous decline.

That's spending.

Now, the counterpart of that is that chart on jobs that we saw.

But here's the numbers.

Now, beginning in the fourth quarter, it has turned around.

It went from $70 billion to $71.5 in the fourth quarter.

What is doable in getting it up?

What is doable?

Well, they're going to spend, they claim, and we're on their back and have been for the last two months.

They're going to get their rate of spending up to 75.8 in this fiscal year.

So that means their increase in the first and second quarter has to be very steep.

Now, lots of people don't think they can make it.

I think they have to spend at a rate of about 80%.

for the first six, for the next six months.

This is going up very fast.

Yeah.

Because if I see your number, you have to air it out.

OK. OK. Well, that's good, John, isn't it?

Yes, sir.

But I think, assuming the Defense Department can do it, our people think that they may be able to hit 75, hit 75.8.

They swear they can't.

And we're sort of letting them swear and putting them on the spot.

We're saying, all right, you fellas say you can.

There's the number.

Now you go ahead.

But we don't think you can show us.

And they're pretty good at getting rid of money over there.

And you have equally good men working on the domestic agencies, even though they spend a hell of a lot less.

Right, John?

Right, George?

Well, we're working on the domestic agencies.

None of them manage themselves as well as defense has when it comes to fiscal management.

We don't know.

We're a whole month behind in knowing what the odds are for the domestic department as compared to the measure of how much better, just in terms of the use of modern information technology.

And this is one of the things we've been working on since I've been at OMB to get a better enrollment budget system.

We call on Southern to get these numbers very properly.

Could you follow the scheme?

I mean, I noticed that in a fine group of guys, men and women that you had there, having one person

just a writer at each one, you know?

Yeah, we do.

We do.

Yes, sir.

We would ask for each one to write their back every day, because I agree that many of the departments now, it is just a product, for example, of the Treasury.

I mean, you have got to understand, they just collect, but the money is never that much.

Well, I mean, they don't have GSA, is that what I get?

Yeah.

Okay.

So that is the...

That is going forward strongly, and we're doing everything we can since we're taking our lips for the step.

All right, what is your, what is your view on the state of energy with regard to how we, how we handle the argument about the size of gas in some countries?

to be, just as Herb has indicated, to be non-apologetic, very affirmative.

That a deficit, when an economy is operating at a low full capacity, is non-inflationary.

That's what Rupert Coates is saying.

It's true.

What we're saying, what John and I both said, what I did really think,

So this is what we want to see, employment rising, and this is Peter Madison in some ways, but it's Madison we have to take, and it's an investment in an expanding economy.

and that we're trying to use a counterpoint in saying that we have worked hard not to have fiscal 73 out of control, that we do have a declining rate of increase in spending, that we do have the spending ceiling, and we're trying in all sorts of ways to keep the thing from being in a position where two years from now we can't greatly extend the outlays of the revenue.

That is going to be.

We're working on a 74 budget beginning that process.

And it's very, very hard to see how this is going to be done.

But we'll work around it.

We are in a very tight situation, all right.

I'm sure the analysts will see that.

But we're, our whole approach is this is what we're doing.

We have no qualities to make.

Well, we attend as perspectives

I'm speaking now.

I was here with the 73 budget.

You need not be concerned about the fact that we've asked for our seat.

They probably will not give us one on ourselves and not on them.

And as far as the cutting is concerned, I would confidently predict they're not going to end up cutting the budget because of the forces that operate against each other.

The big defense guys want more for defense.

So they're going to fight like hell in the cuts in that direction, and they'll end up along their heels.

And on the domestic side, hell, they're going to add to this question.

They're bound to add to it, because the main good God with all his candidates down there, I mean, they've got all their pet programs, Muskie's Water Program, and Canopy's Health Program, and all the rest.

But we're going to be feeding every chimpanzee or what have you in one and a half minute before we're through.

No, that's all going to come out of that.

The point is that your argument about the budget, though, it seems really relates not to what the Congress does, but it really relates to what George is able to get the departments to do in the next six months.

I'm not clear about that, but that's basically about the biggest step up is a great snake.

from the second half to the last half of the year to the state locality.

And I don't know how to do that, and how that's fleshed.

Does that depend on the revenue sharing?

The big increase is the general revenue sharing, and that, of course, depends on getting to that.

Can I ask another question?

General revenue sharing in one form or another is probably going to

Is that going to help?

You think?

Well, I think if the state's localities, especially if the state's localities are fairly confident that it's going to come along, I think there was that .

That's an additional lag.

It's an immediate lag.

I don't care if it doesn't matter.

But as soon as they're confident they're going to get it.

Now, the committee is holding hearings now.

Is that correct?

Yes.

What do you mean?

What's your estimate?

He's going to tell us what you did with this one.

What's your... Oh, wasn't it March?

I think I get it.

Why didn't I get it on March?

This won't come out the way you need it for, I assume.

Yeah, that's right.

I can't prove it, so I suppose I'm going to apply my testimony, or whatever it's worth, but that is not going to do it.

Well, let's see.

They may just get on their horses hard here because the heat on them is enormous.

If they get done in March.

Well, you see, there's a lag in legislation.

There's going to be a lag in tooling up at the state level.

There's going to be a lag in this plane.

I don't know.

The effect, I think, will be mainly the one that hurt Lindy through psychology.

Now, knowing that this money is coming along, they can be bolder on their own.

They won't fire a policeman.

A few other things.

One other attack being made on the budget is that we have shifted money from fiscal 73 to fiscal 72, and thereby distorted money.

extended stipulation in fiscal 72, and I heard the amount in 73.

And what we have said on that is that indeed we have shifted where we could find construction projects that could be speeded up and speeded up.

We pointed out that we have moved some welfare payments to the states.

across the line for fiscal year, for the sake of helping the states with their fiscal problems, anticipating the revenue sharing would come in.

And we'll take that up.

And so that's a move in that direction.

So we've been candid about what has been done.

They mean that they mean something more.

Namely, that you have that amount of shepherding on the books which simply cannot and will not take place physically.

Therefore, the rate of expenditure during the year will be more even than the budget suggests.

Now,

I think the way, and I think that's true, Mark, maybe.

Now, the way I would handle that, as you said, although it's simply to deny it, but not belligerently, because if it's more evil, it's not a bad thing.

Well, I think there's another thing about that, for example, he cannot hear back to us, not only the spending, but the contract setting.

And on the defense side, we've got to be careful that that wasn't the contract setting.

Yes.

And the plan is to be measured.

Mm-hmm.

We should be generating employment.

Now, how can you get that with the law, Congressman?

Yeah.

You're working on it from 1972 to 30.

Yeah, well, they didn't come out of 30 to 50.

All these things that we've been talking about since the fiscal of 72 are in the hands of the Cabinet.

Now, they didn't have services, they didn't have employment.

But there are several men who are working on it.

I have this, and I have John.

I'm the chief remote of the Cabinet meeting.

Is it clear to the cad, or is there need to be anything else said on, do you want me to do anything more, call anybody, do anything, and so forth?

What do you think?

No, I think it's very clear.

Okay.

I think we'll follow up on it.

I would have been surprised to talk to the various cad members now.

A little, they did understand.

About what their jobs were doing?

Yeah, they don't understand.

They don't follow their...

I'm older, but Tim was there.

He was not very good.

He knows exactly what I'm talking about.

Are I able to school the others in the room?

Are I bringing them?

Good, good.

And let me say, use my name in vain or any other way to help you.

Okay, yeah, you just tell them why you call them the president every 30 minutes.

Every 30 minutes.

Every 10 minutes.

Archer, how about a word on money supply?

You heard, sir, says that M1 is, the M1 is the figure that concerns you.

Well, yeah, yeah.

Yeah.

You know, we have most great, but big increases in GMP as we're expecting without traveling as much as 30 minutes.

So, Earth is right about that, but I don't know what to do.

I'm doing everything I can, but you see, we don't control them.

What do we control is reserves.

People decide, people make the decisions.

They'll keep their money in their checking account.

That accounts for that money.

or they'll put it in an interest-bearing account at a commercial or a restaurant, you know what I'm saying?

And we can't be silent about it.

Now, let me just show you the, uh...

They don't mean to slander us first, but we don't mean to go out and be shitheads, all right?

They're just trying to play.

You see, we...

The N1 looks sick in the fourth quarter.

The rate of increase is 1.1%.

It's terrible.

If you look at N2, and the rate of increase is 8%.

Now, if you look at time of savings deposits, other than the large certificates of deposits,

And the rate of increase is 15%.

And people are deciding.

There are a lot of reasons for the moment.

You can only speculate about that.

People are deciding to hold their liquid assets, not in the form of cash so much, but in the form of interest-bearing people.

Well, we're pumping reserves into the commercial banks this month.

This month we're pumping in reserves at an annual rate of 25% plus.

And the bankers are going wild.

Very, very, very well.

Your response is one of mine, too.

They gave me hell the other day when I received the answer.

They were suffocating.

Suffocating much?

What did I say?

Well, Mr. President, on the management side, I've got the...

Of course, of course.

On the management side, the New York bank is less than fully cooperative, and I'm almost out of the moment taking over the New York bank and running that operation myself.

The manager is down at least once a week.

Well, all I can tell you, Mr. Frum, you know I can't really.

But Herb, when he criticizes, and I can't just dismiss his criticism, he's not going to help, am I?

How do you relate?

All right, but that is the management of the accountants in Washington.

The what?

The management of the old farmhouse.

Well, you know, this is fun.

This is fun.

But you see, one of the differences is we have a private public system, and we show the implications of it.

Why is this a difficult achievement?

The Federal Reserve, the chairman is 42,500.

Chairman, Mr. President, I think you know he's not complaining.

I don't want to change him.

Not for me, ever.

I will say it.

No, I say it.

Where do we get this thing?

I'm not going to take five minutes.

Now, the other board members get 40 staff to suggest to do that, you see.

And they walk pretty high.

I haven't done a single service.

But, that's even.

You're a New York man.

The president who's under my control, he gets 90.

The manager of the desk, the vice president, is 75.

The fellow who runs the desk is 25 or 60, you see.

Now, if I move him to...

How can I move him?

Don't move him.

Just move the system.

Don't move him.

You really ought to take over that area of the operation.

He probably complains to the janitor a lot more than us.

I'll take the night one more.

The tail should wipe the dog down.

Well, it's not wiping the dog.

John, if I could find a way of taking it over,

My devices, other than those that I'm using now, which are psychological, you say, are just...

I'll do it.

I don't want to work.

I'll help any way we can.

Well, you can help, Mr. President.

No.

Would you call on me?

No.

Get rid of Brown for me.

Brown?

Yeah.

Now, you...

I don't know what you're talking about.

The U.N. Yeah.

Well, that'll give me another spot.

Do call on me, unfortunately.

the U.N.

I'm going to check to see whether that thing's about to be that job.

The one job is not one that we can claim we're trying to keep it.

And you all must forgive all the else from another country.

But I'm going to make another check.

I ask you to help me, if you will.

You might call him Bill Rush.

His mother has a very great importance to this, to us, to you, Steve, you know.

And we've got to perpetrate an ambassadorship.

I don't think the U.N. would like us burning chocolate.

Bill, I'm not going to speak his attention if you want.

Well, I can see the difficulty of this character.

I see what you mean.

Would you call Bill?

Well, gentlemen, we've got to have him in the U.N. job.

Okay.

All right, John, can we go around the clock to international problems or anything else that you would like to say?

Well, there are two or three things of interest.

The trade, Belarus' trade negotiations with these various countries have been going fairly unsatisfactory.

The Europeans

are going to agree to something probably Monday.

Not nearly as much as they should, but they're being quite adamant on some things, such as their preferential treatment of other countries.

But they will probably do something on citrus, less than they should.

They'll do something on tobacco.

uh they they say on grain storage or they will do something on wheat but they claim that they sold all their other grains and barley and so forth to russia which is all right they have they're going to do nothing on grain pricing the french are adamant on that score we make a website the italians are on our side on uh grain pricing

And they say that they're not going to give them citrus tobacco unless France gives them grain.

So we may put some up there Monday.

But in any event, we probably will get something out of them that will be of mediocre value.

The Japanese are working on it.

The Japanese

We're not going to get all of the S for, of course, but we've got to get a long list of things out of the Japanese.

I don't intend to go into it, but a lot of it's verbiage.

Some of it's mean, some of it isn't.

They're going to go away with a terrace on soybeans completely, but it's only 5%.

They had $329 million in sales last year.

By far the biggest...

agricultural items we have.

We'll get something on, we'll get something on beef, we'll get something on meat, we'll get something on citrus.

We'll have to open up three states that are mandarin orange-ish because there's a lot of things that must be 2025 items that we'll get some relief on there.

We can handle it the way we want to.

The Canadians are going to do nothing.

And just to completely back up, we'll do nothing.

And they just claim that they've got a political problem in 1973, and they just can't do anything.

We say to them, well, we've got a political problem in 72.

The truth of the matter is, they don't want to cooperate.

They're being implacable, completely, wholly unreasonable.

And I think we ought to start to...

I had their old meeting with them in 72, and I just told them that was a bad idea to do so.

Thank you very much.

With this kind of attitude, I don't want us to have any further discussion.

We just have to continue to allow them to do whatever is in our best interest.

And what we ought to do, probably in a way, is to fairly soon give notice of termination of the order.

And we ought to reduce our

allowances for tourists to the same pay allow, which is to, given our terms, $100 a month for 30 days, we restrict it to $25 duty free every three months, which is what they've done.

uh and we'll just count them just honestly and just the question of status on the early interest and the interesting thing was they actually ought to appeal that we sent them in for the goddamn tax at their request and we then we frankly just gave them special deals over the years and i'll cast on a trip up there when i go up there

What I would do, Mr. President, is not to have anything official.

I mean, he's back here talking to us.

He's just been talking to us, and he's scared.

And I think I'm going to make a note to John now.

If you follow up on this, I'm going to mention to...

Didn't I hear you were going to...

Well, it's any, any, it's any covers all the time.

But there ain't, uh, there's a PC9 going out there.

I'm supposed to go up and see that.

So they follow up to them.

I promise to not do it.

And frankly, because he'd seen that in Russia, he has to counter it.

I see no reason to go up there and see the damn Canadians that probably, if they're acting this way, I really can't do it.

Because I've got a damn thing to discuss with them.

I mean, I can't in the United States.

We've got a long and hard road to find.

We're in a fight.

Damn, we just can't go up there and act as if when they're not cooperating.

Would you mind...

I would like to reconsider the trip.

I think that, you know, we certainly put that out there for them.

I really have to do it.

I can't.

We just need to do these things.

I go out there and I'll take the damn trip.

Why?

Why do I have to go out and do this?

But we don't have to do these things.

Well, I think at some point, you see, we're perfectly fair going now.

France had already said that we're irresponsible, that the steps in this budget here just means that we're not paying attention to our business.

Uh, and, uh, well, that's what all of us have come back to as observers.

That's why today we spread the word, and we spread it all over Europe.

So our problem is probably a long shot in terms of what these people are trying to do to us.

And I think we've got a year or two trying to get back at us.

Well, that's right.

As long as we have this international monetary thing open, and I had a long session yesterday, long this morning, and what the other countries are trying to do is push us back into a position of convertibility.

And I said, well, just say to them, well, you're not going to do that.

And I told Paul and Bill Dale, and I said, let's just, you just count and say that, let's have a moratorium on weak banks.

If under the rules, the problem is, it's soon gone over $60 million, and all she's got is dollars.

Well, you can't pay the fund in dollars because we're in deficit to the fund.

And under the articles, you can't pay any currency of a country which is in deficit.

So God, in fact, can't pay $60 million in dollars.

They've got to pay the Dutch marks, or the Dutch guilders, or Belgium, France, some country that's a circus.

So where do they get those?

Well, they normally come to us to give.

So we buy them and, in fact, pay their dollars.

I said, every country when it gets in trouble, that's more for them anyway.

They just have no payments, no interest in that period.

I said, well, they have a fund to reap.

They have a lot of money.

They've got a lot of money.

Well, just sit there to preserve our negotiating position for years.

They're going back to the burglaries.

I'm a little afraid of that now.

Because this gets all of the central bankers and the private bankers and the finance ministers worried, stirring.

They throw doubt on everything.

I perceive...

I guess the British in the industry were covered.

Well, we kept that.

It was a little country that likes Ceylon.

If Ceylon, they want to make $74,000 payment, they come to us.

We make him some drawing rights to pay.

Yes, Ceylon's been kind to us, but if she kept coming, she'd announce the president every day, maybe we don't get any money.

You know, a lot of the things we, in a lot of countries, we'll have some of them, we won't have them.

But they don't want us getting back into a confrontation with anybody but the same children who want to try and go back to a system of convertibility that we can't live with.

Well, the term fell out of time.

Well, sure, sure.

That's the thing, isn't it?

We're not the only source.

You're right.

I would handle it.

Let this be done in a number of countries that we should enter that.

I'm, you know, the first thing here is not your general position, John, but the, I don't want these markets stirring, and I don't want these central bankers and finance ministers casting doubt, doubt, doubt on it.

I want confidence to be a strength of us to you.

There's only that right now.

You just said, and I just said, because of our budget, they're already cashed in now.

I know, therefore, therefore, we're dealing with that.

Look, there's the President's message to the Congress on the ceiling.

There's the action you decided to take now.

It was very free, Mr. John, on lengthening the debt, putting out a long-term issue.

That will help you buy it.

I think all along, we've got to ask ourselves the question,

But are we building confidence, airing to confidence, removing doubt, putting an end to hesitation and uncertainty?

I agree with you, Arthur, and I don't want us to get into a long discussion, which we need to do here.

But let me remind you, Mr. President, that notwithstanding the success that we had in these international negotiations, it's a great, great reminder that the trade service is the largest in the history of the United Kingdom.

Japan, for all her problems, she wound up with $7.5 billion trade surplus in 1971.

And notwithstanding her devaluation or revaluation, she is now anticipating a trade surplus in 1972 of $7 billion.

This is enormous, just enormous.

This is equivalent to us having

It's probably a $35 billion trade, shouldn't it?

Now, our trade problems are not over by a long shot.

And our trade is not over by a long shot.

Believe me.

We're not out of the woods.

We're still not competitive, and we're still going to have to deal on a hard-nosed basis with these countries with respect to barriers, administrative barriers, tariff barriers, and otherwise.

So we're going to need to start to do another thing, and we're going to run probably another trade deficit for a number of months this year to assure the world.

And this is rehearsed economically.

This is one downside on this thing.

And again, I just want to point this out to you.

The common market is now ten, now six.

And they're saying they have preferential trade arrangements with 28 more countries.

You're going to see, in fact you're going to see right now in Europe, the strongest economic combine cartels in the world today.

The United States is not the biggest number of firemen.

Europe is right now.

They're going to be suspicious.

They've already made a special trade arrangement for 28 countries.

And they are going to say, how are you?

This is why everybody's been talking.

We say, we want to protest.

But they say, no, you can't protest.

We don't care.

We're not going to give money to a little preferential trade arrangement.

So what they're doing, they're building them a trading lot that's going to be far superior, far stronger than anything we've got.

No doubt in my mind about it.

It's just happening right now.

And this is all in a different setting from how it was pursued.

It certainly emphasizes the importance of not getting back into any form of conversion.

There's no question about it.

You need to get in that, and that needs to develop and create a crisis for us.

You can't get back into it.

But we developed a different policy, a different trade policy ourselves, and moved aggressively until we could all send it, until we could live it.

That's correct.

We can't live it without being there.

But we, at the same time, we're authorized, right?

We have the author's title.

Yeah, we don't want to have that.

We want to understand the experience of the rest of the world and so forth.

So, no question.

Well, we'll, uh...

But anyway, that's my statement.

I don't know of anything else, sir.

We ought to have the children of the sea.

The Japanese will let us know this week what they're going to do.

And finally, the Canadians let us know this afternoon

Monday the ministers meet on the year meeting, and that ought to all be settled by, I'll say, the middle of next week.

They'll only bring you this moment, where I think we have to do something about this candidate.

Would you pick the other one?

Well, I'll tell you two of them.

You and I are going to have a talk, and I'll get Rogers to see what I mean.

I can see the problem there with the candidates.

I think Harvard's got a good point.

Maybe the best thing to do is to cool it for a while.

But we might play with another campaign, too, you know.

We can get messages through them, other than through the state channels.

The difficulty is, the State Department has a real obligation to get along with all these countries.

So they are going to play hard on these folks.

And we can't talk out of two corners of our mouth.

Well, I have to.

I have to now.

Truth of the matter to me,

He's all love and kisses at the moment, says nice things, et cetera, et cetera, et cetera.

But we must remember that he's doing it for a very selfish reason, which I totally understand.

He's in deep trouble.

We're delighted in the walkway, but Jesus said, they just say, you know, up your tail.

You can't undo that.

We'll see.

We're not here.

Banking for tearing the road can blow up things for us in a way that we think most not going to.

Now, whatever we're going to do about convertibility, we've got to talk the language now of working out a new plan for convertibility.

We have no choice, Mr. President.

These exchange markets can get boiling.

They have been a little insecure.

People are now saying this is a simulated agreement.

It is not firm.

Now, I think we've got to talk about it.

In any case, I'm telling you, Mr. President, once you know it.

Next, I think, on this gold thing...

I think we ought to go with that legislation promptly.

We ought to state that it is a trade agreement.

No, no.

Let me just say a word about it.

We've said that before.

I know that.

What I would do, I would go with that legislation promptly.

I would say that these trade conversations have been successful.

We have gotten all that we wanted, but we've made progress.

I would say that, next I would say that we have created a foundation for conversations looking to the longer term on trade adjustments.

And then I say if our expectations are not fulfilled, then we have strong weapons that we can use, but we do not, we're quite confident we won't have to use them.

Now, Mr. President, I think if you proceed in that way, you strengthen confidence abroad, you minimize difficulties for Congress, I think, let me put it a little more generally, a lot of people are talking, people in this government are talking about fiscal and monetary policy.

I don't think that's our problem.

What do you tell, take the money, sir.

The banks,

You know, we talk about M1 and M2 and reserves and so on.

The banks are loaded up with money.

They're hunting for customers.

They're going abroad, searching for customers, begging for them.

Your, uh, your best sales are flooded with money.

They can't place the money to have.

We don't have money problems, Heather.

We don't have the banks that we have looking for customers.

Yeah, I know.

And the lower their price, they try to get a trustee after that.

Yeah, I know that, Jerry.

But what I'm trying to say is, it's not...

The lack of liquidity that is holding back this economy.

What is holding back this economy is... You know, we've had it hard since 1965.

We've had an accumulation of troubles in this country, and confidence has deteriorated in this lousy war we have now.

Riots in the streets, on the campuses, well, sure, it's quieted down, that's good, but once you have confidence in the riches, it takes time before it's rebuilt.

Now, the argument is, this president's business confidence is a good deal higher today than it was six months ago or even three months ago, but it's not high enough.

I think we, you know, I don't know.

I don't know.

But we've got a debt ceiling first.

We've got a red-blue shirt now.

I've seen two walkers up there.

George and I went up on the debt ceiling Monday.

It was in a week there after we had the gold bill up there.

But we're going to get the gold bill up.

We know on the gold bill, that's why I brought in John Graham, we know on the gold bill it's going to take time to get it done anyway.

But we'll get it up and make a statement.

We expect the trade negotiation to be completed by the time the bill gets to my desk.

Is that what we'll do?

Right, John?

Yes, sir.

That's what we'll say.

Let's get ourselves when we get out there.

We're going to be asked.

That's why you have to build up with that.

And all I'm saying to you is that we've got to know that we've got difficult maneuvering with respect to trade matters and international monetary matters.

What I want is an atmosphere

such that the doubts and the hesitations of the financial people are created.

They are created, Mr. President.

You ought to see the cables and the correspondence I hear.

The bankers are panicky people, and they communicate this disease to other people in there.

That's all I'm getting at.

John, I expect you to take care of the bankers.

Thank you for your soothing speech.

Well, you've got to go test by and so on.

For purposes of our own meeting, could I suggest that Kurt and me and St. John participants, we've all got busy schedules and so forth, but I was thinking that about every two weeks would be useful.

Does that sound about right to you?

About every two weeks.

So we'll be here for about two, George, and you follow up with the following story.

And incidentally, on this, the time of day, for me, is irrelevant.

In other words, I put this ahead of other things.

So if somebody's got to testify on that day, or somebody's got to do some kind of thing 5 o'clock at night, I don't mind.

In other words, another thing that's good for me, a breakfast meeting is fine at some time, if you want to do that.

But work it out so that in a couple of weeks, we can meet here for extra evening.

I think it's a good idea to get up in a lousy frame of mind and raise hell with each other.

Let's go over here.

I've got a minute to talk to you, sir.

Ah, I've got a cigarette in my hand, sir.

I've got a cigarette in my hand.

You know, it's quite a nice day out.

If you look out, I don't know how, how's it feel?

Is it warm or cold?

Very cold, very cold, very cold.

Oh, I try to walk the Dutch Prime Minister out.

Yeah, she's a big man.

You know, it's a funny thing, John.

This Dutch Prime Minister has never been this patient.

Curious thing with all the relations.

Now, the Queen did go, but we even got a moderate reception.

Which on the Dutch, I'll never forget when I was driving through the countryside in Indonesia.

I took a tree, of course, from Jakarta.

I went way up in the mountains.

And I remember seeing

And they've done a hell of a lot for that country and still do, and the Indonesians no longer.

So it's very interesting how some of these countries who had this colonial background, after an initial reaction of hatred, finally determined, well, you know, they can do things for us because they're tied to the school systems, the health systems, some language.

But all of this, and there's sort of this culture tied to it.

Interestingly enough, that's the way it works in this area.

Believe me, it's not to our end.

It's to our end.

I have to write down there.

You know, Brazil is the United States plus a Texas.

That's what they always say.

That's before we got Alaska.

And it's a huge place.

But beyond that, we forget that we always think of Brazil being the Amazon, the snakes, the jungles.

And it has a very different climate.

It's got millions of acres.

It's like the American Midwest, right?

There's millions of acres.

And I tell you, there's a country that in 15 years, 20 years, got a hundred million now, a couple hundred million at the end of the century.

And boy, there's going to be some most Portuguese work.

Well, they have the best government at the moment.

and the Americans.

They have, at the moment.

Now, if I had a good government, their good government is a lot different from what our people here want.

As I told the next Prime Minister, I said, well, then you've got to understand that the Latins, the Latin countries need, as I thought, the French style, the French Constitution rather than the American Constitution.

I said, basically, they need a strong...

head of state, and so forth.

The Italians desperately need that.

When the Spanish move from after the period of Franco, they can't go to an idea like ours where they end up blowing up.

And the difficulty in all of Latin America is that they have never found the delicate balance.

In Latin America, you either have a dictatorship, total dictatorship, or you have just a wild anarchy.

And what you need, I mean,

The genius of de Gaulle was divine under France, which is also a Latin country.

Remember, they had 13 or 14 parties.

The genius of de Gaulle.

It was not just foreign policy and all the rest, but the genius of de Gaulle, in addition to restoring the spirit of France, was to insist on a constitution that made the president of France, in more power than the president of the United States, the strong, central, bigot, and not put so on by these goddamn parties.

And that's what's made the country go.

And frankly, they're gonna have to go that way eventually.

But in Brazil,

as it moves along in these other countries in Latin America could learn far more than that, rather than listening to what our good people from the State Department say, look, what you need is our kind of democracy.

Look, we have a hell of a time running our kind of democracy.

What can people do who have no idea about the other background?

Well, that's my speech for today.

OK. Good luck.

See you all.

Oh, John?

Yes, sir?

I called Walter Nelson.

Well, good, Walter.

I'm talking to him.

Is he still in contact?

I'm still worried.

But is it easy for a mother to phone his 3-0 grandfather?