On March 3, 1973, President Richard M. Nixon, Henry A. Kissinger, Julienne L. Pineau, and George P. Shultz met in the Oval Office of the White House at an unknown time between 1:10 pm and 2:07 pm. The Oval Office taping system captured this recording, which is known as Conversation 868-015 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 Do not cite this transcript as authoritative.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.
You don't have to delete, you know.
Yes, you don't have to delete.
I'm so sorry that you deleted.
Why are you letting her go?
What's the matter?
I have to give her a chance at a social life.
Oh, here, I have a picture here.
I have a weapon for her.
I'll look out at Henry and just laugh.
You get one of them, too, so she can have two.
Well, I'll have you go to the other one.
Yeah, I think so.
You've done a great job.
Thank you.
Thank you.
That word goes around.
Where are you from?
Oh, yes, I am.
Oh, great.
Where will you be over there?
Are you going to the state of Washington?
You're not going to travel?
You don't need to travel?
Oh, great.
We're so glad to have you there.
They're lucky to have you, too.
You've got a good man there, Keo.
And, uh...
Thank you very much.
She'll be in town.
Bye.
Henry, did you listen to these?
Yeah, we had.
We had an hour and a half.
I left.
I told them that I don't know anything about the substance of the merit between our acquiescing in a common flow of the way we believe.
I left the letter.
And I came to the judgment that
the Europeans are going to take a common position, or are going to try to take a common position, that they think that position will be unpalatable to us, and that they are trying, or that Brandt is trying to buy us off in phrases about European integration and world stability for what he knows we won't like in the position they're going to come up with now.
I knew nothing about the substance when I said this, and George agrees that we probably, there'll be unpalatable features in this common flow.
My view from the political point of view is that there are two aspects.
One is we don't look strong if two weeks after the devaluation there's another speculative wave that then
Again, it changes things.
I'll put that aside.
The thing that bothers me most about the letter is that I think the time has come where we must make clear to the Europeans that they cannot take a common position without consultation with us on a matter that vitally affects our interests and buy us off in currency of abstract European integration and that sort of thing.
And therefore, leaving aside now the question of whether we should intervene or not, I think we must, in any event, make clear to Brown that this procedure is unacceptable to us.
Even if we lose on the issue, we then have the basis of maybe, as George explains it, the common flow as such isn't so much against our interests.
We then might have a basis, we will have a basis for doing other things later on.
I don't like the letter.
I think it sort of assumes that we're idiots that can be paid off by phrases.
I don't like the fact that Heath has been in touch with us at all.
We have nothing from Heath.
You'd call fire to us.
What do you think he's doing?
What's he thinking?
Maybe he is in the forum.
Well, why don't you tell us then?
It would be easy enough for him to communicate with us and to say, whatever happens, you tell us privately what you think.
As between whether we act the act in a common flow or whether we intervene or
Well, we have nothing to acquiesce in yet because everybody's opposed to that.
On the issue of whether we intervene or not, let me put that aside.
I think at a minimum, we ought to reply to Brown by saying, I want to thank you for your recommendations on the change in the exchange rates between Europe and the United States as a matter of general interest.
It is not a unilateral decision by the Europeans
It affects us and the Japanese.
I kept the Japanese involved and scored some points with the Japanese.
And it formed the Japanese, and we've done that.
But therefore, we believe that before you make a decision, we must be consultative.
Or, if you wanted to lead to say, we are prepared to defend the present exchange system.
This depends on what decision you make.
But at a minimum, I would say we must be consultative.
then if we should object to whatever the unparalleled approaches are, as they have told us here, as Paul Volcker and I guess you think are certain, if they are none, we agree to it, and then if we've established our principle, if they are, we object to it.
If they don't go ahead anyway, we then have the choice of either offering to intervene at that moment as an alternative.
And above all, we will have created the basis
cracking down on them later on on something else.
But I don't think it is good policy for us to acquiesce in such a soppy palazzo which in effect says to us, you are so interested in European integration that as long as we do it together as Europeans, you shouldn't worry too much about what the substance of it is.
In effect, all of that
In effect, what he's telling us is he isn't saying we're going to come up with a solution that protects your interests.
He isn't saying we want to hear what you have to say.
He says what we will do will strengthen European integration.
Therefore, it will help with political stability.
Therefore, you ought to be happy no matter what else it is.
He's recording his conversation with Pete.
And the key sentence is, we agreed that we must make every conceivable effort to find a way out of this crisis, which strengthens European integration.
Now, let's look at that.
I've said this twice this morning.
The reason we have to get you into this is that we have to make this decision in terms of the international political situation.
I would like to use it as a means to keep the Europeans closer to us rather than having
push away.
My approach is different in a sense.
I say, well, if we educate, we don't give one damn about Europe, in a sense.
This would argue for the second auction, of course, about what happens.
And then inevitably, the Europeans will be able to say the United States doesn't care.
And that hurts our bigger game regarding Europe.
You're approaching it from another standpoint.
You're saying, well, this is a hell of a thing for them to do.
And they ought to consult it in any way.
And whatever we do, let's give them that kind of an answer.
But that's not it.
We could put in all the right words about it.
We can say we are, of course, in favor of European integration.
We are, of course, we are also in favor of closer Atlantic partnership.
It is impossible, therefore, for either side of the Atlantic to take unilaterally decisions
that basically affect the other without consultation.
Now that is what they ask of us when we deal with the Soviets.
That's right.
Therefore...
I think your idea of putting the Japanese in is extremely...
Therefore, while we like the sentiments which you express here, and share them, I mean, I wouldn't shun them, so you're appealing to Gersh and I. Yeah, yeah.
And we feel that it is not a substitute for taking a, for settling those problems that affect the world on a general basis.
And therefore, while you, of course, will proceed in your European discussions, we believe we must have an opportunity, and we think so, for the Japanese to express their view on how this affects the entire monetary situation.
Then they have two choices.
They can either say, the hell with you, we're proceeding unilaterally.
And that sort of European integration is not in favor of us.
Or they'll consult with us.
At the same time, we could inform the Japanese what we've done, and they can then see us as the protector.
We affect only the Japanese if we have this communication with the Europeans.
If we have told the Europeans that we do not feel nation-group without consultation with us and Japan.
That's a very good point with that.
Now, let's talk about the fundamental plan.
We do rather have the United States take a position on it.
quote, leadership, end quote, massively intervening to protect the exchange rates and so forth, or would you rather do what George and Kurt Stein as economists, of course, are burned hard the other way as economists, and they would say, no, let's let the name mush along.
Good question.
As I understand, George, he thinks that a common float is really not again, it's really somewhat in our interest.
George?
George thinks that.
Come on, but when we negotiated this evaluation, we basically, that was one of our possibilities.
So if you do this, that's fine.
So we didn't.
But I don't like about... We have explicitly provided for cases where a group of nations may form a monetary unit, and he dealt with it as he goes.
So that is a great... What I don't like about the passive position, and I'm not talking economic in some ways, is that we've devalued the dollar 14 months after the Smithsonian.
And now, in effect, we are...
getting it devalued again, three weeks after devaluing it.
And it doesn't make us look strong, either domestically or internationally.
That's... That concerns me, too.
We don't want to do anything wrong.
This is not the way that...
I don't know how you can describe it this way, but I think among economists and at least some businessmen and financiers...
What has happened since 1971 is that we have gradually made progress toward a more flexible system, and we made a lot more progress a couple of weeks ago.
And as, say, Bill Friedman would describe it, I checked with Bill, he thinks the situation is great.
Let them flow, force them to flow, and then we will have a
a floating system of some sort.
They don't have all kinds of problems connected with it, but at least it's moved over in that direction.
That is a progress toward the sense of the system that we propose, although it doesn't have in it the sense of order that is in the system that we propose.
It's more at the end of itself.
That's the difficulty.
Many of my concerns can be met, Mr. President, by...
That letter that I'm suggesting, because that would show the Japanese and the Europeans that we're not in a passive possession.
But just to sit there while the Europeans devalue us again and put in a few hookers and get tapped like this, that isn't very strong.
But if you wrote a very polite but very definite letter...
And I'd send it to Heath, too.
I'd say, we've been informed by Brandt.
We want you to know that Heath has many reasons, as you know.
But he has a fundamental principle involved that European integration was never seen as a substitute for Atlantic or world cooperation.
And therefore, we cannot accept the proposition that a decision like this should be taken without
full confrontation with the United States.
That doesn't force, there is no objection to a conflict, Lord, if it's... George, what are your concerns about the intervention?
The side is that it moves toward convertibility again.
It is.
In fact, it was in the last summer when we spoke over it in this pattern.
That was the concern.
So that's part of it.
Another part of it is that we are, in a sense, accepting the fixed rate concept.
And I think there's also a fair degree of risk.
Arthur feels that we could possibly make a deal with the Germans whereby they accept all of the genuine risk.
Now, when the genuine risk is some percentage
of billions and billions of dollars.
It's not negligible.
But it's our defense that we only risk it, that we devalue it.
What Arthur's proposition is, and he doesn't go further than this, that we say we will accept a risk connected with a further change in exchange rates if that change results from a formal devaluation by the United States.
And, says Arthur, since we have no intention of a formal devaluation of which we go to the Congress, go to the IMF, and so on, there's no risk of that from us.
The risk is if the Germans acquire a lot of dollars or loan us a lot of dollars at a rate of exchange which later changes as a result of some kind of common flow or some development in the system other than a formal devaluation.
that they've acquired something at a price that changes.
I suppose, I mean, look at the situation they're in now.
They've acquired six, seven billion dollars, and the value of those dollars have changed by ten percent.
It's gigantic.
And the Japanese are in the same position, and it's surprising to me that the political figures in those countries
aren't being attacked as being stupid for having bought these dollars, which then were depreciated, and now they are stuck with them.
They've lost a lot of money.
But that's the element of risk.
Now, the question is, would the Germans change the terms under which they loan us marks so that they accept all that risk and we don't accept that risk?
those are the conditions under which our success we should be willing to borrow marks from them and use those marks to intervene it's a question whether they would accept that i think as a bargaining proposition if we go forward with it it's almost certain they wouldn't accept it if they find that they can't work out a common flow and the european way turns out to be no way
they may turn to us and say, how about something like this?
Then we're in a much stronger bargaining position.
Or if they try to float an unfulfilled pardon and they're forced to a national vote, which is so unacceptable to them, then we're in a stronger bargaining position.
I don't think we're in a very strong bargaining position on this with respect to the Germans right now.
But nevertheless, it is true, as Arthur says, that we have disabused them of the idea that we would intervene.
We went out of our way to reply to Grant a couple of weeks ago to deny that we had assumed an obligation to intervene in the Smithsonian.
And we were clear in our own statement, along with the devaluation, that we had assumed.
We didn't say we wouldn't intervene.
We just said we had assumed no obligation to intervene.
And as a matter of fact, we've been under some attack in the Congress for intervening at all.
And the people who follow this area, I think, on the whole, people are convinced we ought to push toward a floating kind of a system.
But at any rate, the Germans undoubtedly are laboring under the assumption that we would not intervene, that we would not go in with them and work on this.
Now, why is it that the New York bankers, and Hayes, of course, is representing them,
their view on it.
Why is it that they overwhelmingly favor it?
Well, I don't know that they overwhelmingly do.
He does, and he reported that he had talked to, he said, a number of our leading bankers, and they, you know, and why do them, why do they, why do a substantial number of them favor it?
There are the same reasons Arthur had, right?
There's, well, there's the argument that if you have a known rate of exchange, it makes it easier to do business.
There's the argument.
That's what they're used to.
There's the argument in the New York Fed.
That's one of the things they do for years.
They've been intervening in currency markets, depending on the dollar.
It's like a boxer.
They're all set up in a box, and you lay down a box, and you say,
So there's that.
And then I think there are the other considerations that Henry has mentioned, that Arthur has mentioned, that we're starting to get into.
We're not moving to defend it against the speculators.
And I must say, moving to defend it against the speculators, nor do I, you know, I'm no longer so sure
that European integration is all that much in our interest.
Well, I'm not so sure at all.
And that, therefore, if we can force them to deal separately with us, whether that mightn't be better for Atlantic unity.
Which basically would mean not intervening.
No, that might mean to intervene.
Why?
Because in either case, of course, I think one of the results of this crisis is that they're going to move towards a common
No, but it would mean that if you intervene, as I understand it, you must do it with the Germans.
The Germans would be breaking ranks with the others.
Isn't that right?
Well, it may be that the situation is the Germans would like to have joint intervention and defend from the present system.
They assume that it's impossible without asking us, but that's what their assumption is.
and that they're going on to this other approach.
In that case, if we want to intervene, we should let them know that this is at least a possibility, depending upon what they want.
So we don't know if they're necessarily deterring the Germans on this.
They're operating on an assumption about our attitude.
If the intervention works, as I understand it, it will delay at least for a bit.
make it harder to get a common European monetary system?
Not necessarily.
This is something they are striving for.
They have been saying they're striving for it for a long while.
To the extent that we accept the fact that there is a common market, it is a logical objective to try to have a common monetary system.
I think it's a real question whether they can have one that ties together
Italy on one extreme, Britain on the other extreme, and so on.
There's a tremendous amount of heterogeneity there.
That's going to be difficult to hold in one place.
And I suppose, in a sense, the moment of truth is upon them.
They have a crisis.
They're going to try to do this.
At any rate, if the Germans flake all of us, they will not be able to use this crisis to accelerate the process.
on arguments but I can't judge the economics of the intervention send it to work whether the Germans will do it yeah the point is the point is let's suppose we do nothing Henry's concern is that this plays into the line that unfortunately the Europeans together have developed a common policy doing nothing
Doing absolutely nothing, just noting this letter and then letting nature take its course.
Doing absolutely nothing, A, not only forces the Europeans together, but enables them to develop whatever policy they want and pay us off in constitutional currency.
It was integration and fine.
That I do not believe we should accept, because if that works here, they'll apply it all across the board
And increasingly, while demanding from us that in those areas where we have freedom of maneuver, we consult them.
And that is one of our big NATO, that's one of our big Atlantic drugs.
So at a minimum, in any event, I think you should write a letter that puts you into a posture of resistance as well as of maintaining Atlantic unity and triggering the Japs.
That's in any event.
Now, as between that course and that course plus offering intervention, because the way I would offer intervention is to say, if you're doing this only because you think we won't defend the dollar, I want you to know that we are prepared to discuss joint steps with you in defending the dollar.
On that, I'm not sold.
Absolutely.
If George's argument is right, that after all this agony of the come and float, if they come to us with a proposal on the come and float that we can live with, and we think it's constructive, and we don't accept it, then I wouldn't think it's bad for us.
What I don't think we can accept is that they made a major decision, just sent you a pappy letter by one guy,
The other fellow doesn't say anything.
And then tell us, here it is.
That, I think, is unacceptable for us.
And also we can maneuver with the chance a little bit.
We certainly must do that.
And that also doesn't make you look as, you know, you're being active and constructive that way.
Yeah, sort of halfway.
Well, no, it's not necessarily halfway because if George is right and if a common float is ultimately in our interest, if it isn't coupled with a lot of onerous conditions, then it is a perfectly responsible exercise of leadership.
We know it will be accompanied by the French have their way by any American rhetoric and some further...
Emphasis on the common things in the common market countries who are excluded.
So we know there will be a bite in it of some sort, but I don't invite those things on the ground.
It is hypothetically possible, isn't it, George, that the Germans are acting as they do because they think we won't intervene.
Right.
That the British would...
Since the British are floating anyway, that the British wouldn't object to the Europeans saying at fixed rates, vis-à-vis us, as long as they are free to float, which they are anyway.
That was the situation before this last flare-up.
So that...
They were quite content.
So that the choice for the president is that we...
And he went to write the letter, which I suggested.
And then adding to Brandt and to Heath, so he's playing with open cards, that if you're doing this because you think we want it to be, then I want you to know that we're willing to discuss with you.
I think if the President says that, then he is willing to do it.
It seems to me we'll have a bearing on the terms of trade and the assumption of risk that gets worked out because we're offering they're going to be less willing to change the present arrangements under which we borrow market.
It also has to be considered that all those ratchets back into the Congress, and they know about swap arrangements, how it works, and the fact that we assume some risk, and it costs us something, and how much does it cost us, and so on.
And that is a point to bear in mind.
Poor Arthur was tortured by the fact that he had scheduled to testify next week on the Par-Value Act that changes the
The price of gold indicates the prospect.
If you write it without an offer of intervention, the practical result will be... You might affect the owner's conditions to put on us.
You will force them into talking to us, I believe.
Well, the point is, I think without an offer of intervention, I don't see what we have to...
But we could keep the offer of intervention for later.
I mean, if they attach a lot of ungledged conditions to a common float, we could then... A number of things are possible.
They might not agree on a common float.
Among themselves.
And secondly, they might...
They might agree on one of which falls apart.
That's it.
The Germans then are left in a position of having a national float which they don't like.
It's impossible.
At that point, they might turn to us and say, will you defend this race?
Another thing that you might do, minus the author of the intervention, will be that it will affect the terms they may be willing to put to us.
I think the Germans will be less willing to yield to the French
if they know it's going to involve us in a brawl, involve them in a brawl with us, and that then they have to accept it, and that then they must... that going ahead would mean going ahead against our stated preference.
That would be tough for them.
You feel very strongly against the direction they are going?
Yeah, pretty strongly.
I can see the arguments that Carter makes about...
I think we're sort of on a different course, and we've decided to try a flexible type system, and we should keep pushing further.
I mean, this, you think, if you don't buy our interview, that if we did intervene, that we could kick everybody around, get some action in three or four months on a system.
If you don't read, if you can't go with it, if you go for the intervention, everybody would sit back and do nothing.
Well, it takes the pressure off.
That's right.
Internally, whatever they may say about the desirability to go forward, everybody knows that it's desirable to go forward.
But I think that...
We will not.
I think on the monetary system that we need to think about it as going down two tracks.
There's a negotiating track where people are sitting positions and whatnot.
And then there's this reality track of what is actually taking place as things happen.
And our trick is to so manage the reality that it conforms more and more to the ideas that we're putting forward until they begin to touch each other in important places.
And that's when we're going to get this thing done.
And moving it in a flexible direction, I think, tends to move more toward our ideas.
I'm concerned that we have to put all this, of course, in the political context.
We have to talk with the rest of the government.
I think except for the New York bankers and the others, most people don't understand international things.
care less.
Well, I think that's what Parker was admitting.
He called it out of the country.
People weren't all that scared about it, correct?
Correct.
Although I think that it gets big headlines every day.
Those are things that they don't understand.
They don't understand it.
They still have a problem, and the dollar is under a dime.
So let's leave that out.
We can handle that.
What I'm thinking about is the
is the use of a more positive leadership role through possible intervention in order to serve our interests in keeping the Europeans apart, keeping them from developing united policy against us.
I wonder if you could really do it.
I wonder if you could really do it if we say, look, we write a letter to the press and say, look, you should have consulted with us and with the Japanese, so, so, that's good.
But I wonder if what we are looking at here is the possibility that the Europeans, for a variety of reasons, even despite that letter, will say, well, the Americans are not going to play
as positive a role as we think they should.
And consequently, we should develop our own system.
Now, maybe they can't do it, but at least it would tend to put them in that direction.
Or if we go the intervention route that you're pointing at, I suppose we did.
It seems to me that we have a
In effect, a leadership role with the Europeans that we don't have otherwise.
Now, I don't know what the hell we do with him.
My feeling is you cannot, in any event, oppose what he says he's doing.
You have to do it indirectly.
You have to write, unless you decide to do nothing, you have to write the letter I have in mind anyway.
But then you could add to the letter that I have in mind a paragraph that says,
As you gentlemen consider what to do, we want to make sure you're not under a misapprehension.
I want you to know we are now prepared to, now that there has been devaluation, to defend the dollar, to be able to put it within certain limits or under certain conditions, and then have them come back to us saying they do not want us to defend the dollar and they want to go to that system.
we cannot say that we will not accept a European proposal, no matter what its content is.
That seems to me to be your choice.
And I would do that, I would send that to both Heath and Brown.
Now that in itself, and to the Japanese, now that in itself is a pretty assertive role, and more than we have done in the past.
And
would stake out a leadership position, because even if you lose on this, you can then invoke it in other negotiations, on other subjects where the cards are not so...
Eventually we can force them into a position where they have to talk to us on these matters, or we will talk separately on our matters.
They can't insist that MBFR, nuclear treaty, and so forth, we cannot operate...
without consultation, but on things like this, they can.
And since we have to get more sanity into this other picture, I would use this at least, at a minimum, you'll get out of it a better tone in the other discussion.
You see, George, in this international thing, the reason we've got to put your mind in a different way than we usually do is not that we can't think.
The whole European relationship is in a state of, I think, very profound change at this point.
And to the extent we can
We should use our economic and monetary strokes to try to affect that change in a way that will serve our interests.
I don't know.
Maybe the price is too high and we're getting a little pregnant with variability.
My instinct from this letter...
I'm really going much too far based on Peter.
My instinct is that he's made a deal that he's put something, I don't know what it is, that he thinks we won't like.
Therefore, I believe the offer of intervention won't be accepted.
I do not believe that the first theory.
I think it's too far gone for that.
Well, what secret is that?
But that isn't bad.
That wouldn't be good.
Well, you'd make the offer because you have in Germany a massive domestic problem.
According to George, one of the possible outcomes of this whole sequence, whichever way it goes, is that the Germans will have to float massively.
Isn't that right?
That's a possible outcome.
That, Brandt has sworn he wouldn't do.
Therefore, he's sure to tell it's going to blame somebody.
If it happens, now, if we put before him, if we force him into a position we've done a number of things against, either against us or have taken up certain options we've given him, it's a hell of a lot harder for him to make us the villain.
We can't say it must be intervention.
It's too far gone, in my view, for that.
All we can do is offer it.
Then let them say we'll do this load anyway.
Then it's on top of this load they refuse to consult with us on this.
At a minimum, we have greater freedom of action in some of the other games we apply.
We'll get ourselves paid a little.
Because we will have acted responsibly.
And they will have turned it down.
The answer to this letter is yes, we are for integrations.
We've always been for integration.
I've said it to you and we've practiced it.
But we've always seen it as a step towards Atlantic cooperation.
And in this case, moreover, it's world cooperation.
And we've never interpreted European integration to mean that Europe takes unilateral decisions that affect us, and in this case affect even the Japanese, without prior consultation.
Therefore, we insist, or phrase it more nicely,
that we have a chance to express the conditions of that solution.
They haven't told us what the solution is.
Everything's set as a flow.
Then you have to put into that this and other alternatives that may be available or something like that without offering intervention.
I just suggest that there is something abroad.
And maybe they would come back and say, well, what about it?
I'd say I'm willing to reconsider some of the positions I've taken.
We could say that we would like to, we feel that we ought to consider not only what you plan to do, but we ought to consider what we might do as well or something like that.
That's your order.
You have to be sure they don't stand safe under the building.
So...
Intervention of the building is a trouble.
Well, then...
I think George is coming to that side.
Right.
Well, you can either have that sentence in it or not have the sentence in it.
The advantages of the letter are, well, they are, because you have Japan.
You've done something you can do with the Japanese, and you've got yourself a platform where you can argue with them about their terms and failing.
And I think Brunt is willing to make an agreement without us.
Whether he's willing to implement an agreement
the terms of which we propose, at a minimum, it will stiffen his back against the French.
And given all the things he'd want from you in the nuclear field, he's got to be damn careful about crossing you when you show your teeth.
George, let's come to the merits.
Your view is that we did have intervention, that he worked for a while, and then probably had another crisis in a year.
Correct?
Probably.
Although I think the exchange rates now exist and are pretty reasonable.
So there is pressure from the bar.
Let's go in another way.
You just feel intervention is bad because you believe that convertibility was a bad track for us.
We should get the hell off of it.
I think that convertibility is something that is important to have in a monetary system.
If the system is so constructed that it has a kind of equilibrium that makes convertibility unnecessary, it is sort of applying psychological edge to something that doesn't need it.
Where you don't need it, you can have it.
Where you need it in the sense that people want to convert, as now, you can't have it because we don't have that much to convert with.
You can't use scalability as a substitute for equilibrium, as I understand it.
That's right.
It's bound to drain somebody to a point where you don't have it.
So you have to first construct the system that it is an equilibrium system.
And then you can have scalability.
And that's what we said.
They don't believe in an equilibrium system.
Because the elements of equal liberty not only include trade, but they include our military operations, they include our aid operations, and they include our investment.
And they all agree that somehow or other the exchange system should give us a hand to play in those three fields.
Let me ask you a question.
You mean that for us to intervene...
self-directed variability would give us, would play to, which is not only the French, but the British U-2, the European U-2, the monetary thing should be handled separately from trade, military, et cetera, et cetera.
In other words, is that true?
A little bit, but I wouldn't make that point too much.
I was just pushing, putting this to you in terms of the nature of the French objection to our plan.
Yeah.
Is there any way that we can keep all this stuff linked?
That's my point.
That's why I'm so eager to get the letter.
The letter is very important.
It's a barrier.
I couldn't agree more.
And to ease both of them.
And the jam.
And send one of them.
And send copies of the letter to the jam.
It seems to me that you could imagine this.
If you give the letter to Grant, Keith, and so on, and say, in effect, we think we should be consulting the work of all the things Henry said about what you're considering and any other alternatives that may be available, period, and then presumably they're going to respond to that.
They don't even respond.
Presumably they will respond.
There's no way they cannot respond.
Okay, so what can they respond with?
Well, on the one hand, they can respond by saying, here is what we are planning to do, and give us information.
They can respond by saying, well, are you willing to intervene or not?
We assume you weren't.
It would be better, I think, to have it come up that way, and to have the benefit of firing over the terms of this, than to us throwing that ship ourselves now.
Got a good point there.
All right.
I can live with that.
That's right.
What do we have to say?
Suppose they did that, and they came back, and they asked a question about intervention.
What would we say?
We'd say, well, if we can arrange the right kind of terms, we will.
Or should we say, no, that was not what we had in mind?
At that point, we have to make this decision.
What we have to avoid.
The advantage of my approach is, I mean, my approach is better than the approach that I mentioned, is that if we can get them to put their proposal forward first, we can't lose because either the proposal is acceptable to us on objective grounds and that we should find
or the proposal has a lot of hookers in it which we don't like, in which case we can at least alleviate those.
And if failing alleviating them, we'll get ourselves compensation in some other field.
Right.
They'll know that we objected.
That's the advantage.
They owe us one.
They owe us one, and we have a lot of things coming up in which it doesn't hurt us to have that psychological edge because we may have to do a few things they don't like.
Now, if they can get us into a haggle, and this is actually arguing against now putting forward intervention.
Supposing they get us into a haggle about the terms of intervention.
We put forward terms they won't accept.
Then they say, hell, we tried.
Now you have to accept anything we put forward on the common floor.
So I'd rather, from the negotiating point of view, when they come back...
get them to spell out all their 1915.
I agree with that.
I'm fairly with you.
I think the right approach is to have the kind of letter Henry said with no mention of interventionary and try to draw from them what it is that they have in mind and then have a chance to have something put in them.
And then we can see.
And we can put into place.
If we want to use the intervention option.
Well, I think we get a hell of a lot of our sort of technical analysis is that the probability of them being able to work out a genuine joint flow, including all their countries, Britain and Italy, is like 0.2.
And the probability of it working on two chances out of ten, the probability of them doing it and it working is like one chance out of ten.
The probability of working out something involving Germany, France, and Benelux, is probably six chances out of ten, or maybe seven.
And the probability of it working is perhaps five chances out of ten.
So I think there is a very strong likelihood that their efforts on a joint flow are going to be fruitless.
They're going to have an awful lot of trouble with it.
Now, at that point, we might want to have thought right here.
Now, if Brent finds himself in serious difficulty or something like that, the British won't, because they'll just go right into their flow, and they're going to be fine.
But if Brent gets into real difficulty, then we might put ourselves in the position of bailing him out with intervention and agreeing to do it on a massive scale and get everything straightened out.
And in that process,
We have to have a sentence in there about other alternatives.
I said we're willing to examine all alternatives that may occur to you, or something like that, or many or something.
Why can't we just put it in terms of that framework and draw it out of that way?
But that framework is premise of European integration.
Well, but we're not objecting to European integration.
Not formally.
The thing is that they have been talking about a common monetary system.
about common economic policies and so forth all along.
There's nothing novel about them just trying to do that.
But they'll never get it done unless they're under pressure from something.
We have, this isn't nobody's fault here, but we've worked ourselves for 20 years into the position where we have forced the European integration in the area where it's against our interests and have discouraged it in the area in any defense where it is in our interests.
So we've made the Europeans defend or not defend, which even works against our economic interests, and given them a free hand in the economic field where it's against.
So the priorities have been totally wrong.
But that's what we're stuck with now.
Well, should we go on the letter then?
Are you prepared to go to Georgia?
I'm sure.
Would that have raised some related question?
Sure.
That's about this trip that I'm scheduled to take, which is, I believe, next Thursday morning.
It's away for two weeks in Russia and in Europe.
And I must say, I'm sorry.
this way and that way about whether it's such a good idea to go away for that long.
And I think one could argue that all these things only enhance the advisability of going there, talking with them, and so on, on the one hand.
On the other hand,
We need to find a story to be here.
What's going on?
I guess my brother was in your class, but... Well, I was thinking the problem that we have basically is... Well, we put off our energy plan until after you returned.
We've got to put off our taxes, and we're going to do anyway, and we'll have to return.
We've got to put off our credit, and we'll have to return the credit.
Right.
And I could say, over there, but not now.
that the trade hasn't been set up enough.
You know, it has some advantage if George goes to the Soviet Union, because it shows it's the only thing we can do to put them right away.
It shows a high level.
We have got an idea now, and all of a sudden, it's all been worried about the MFN, but we don't have an answer for them.
I think we have an idea now on how to handle that.
Just do it.
Well, we have, and we got this out as a result of a discussion with Javis that came and visited about the trade deal.
He says, well, we've got all these senators and congressmen on the Jackson Amendment, and they're not going to get knocked off for that.
So rather than go for MFN from the Soviet Union as such, or in the context of just giving the president the authority, ask for the authority of the president to grant MFN to a country with the Congress having a 30-day veto power.
And that would mean
that the Congress wouldn't have to do anything positive about it.
They could just let it come into being.
And at least it would take off the hook, people.
who signed up and wish they hadn't.
They don't know how to undo themselves and give us a process that might get them.
I wonder, though, if the leadership would be forced by the activist types to put the name.
They haven't at all.
They haven't come up or all have pulled that way.
Well, I think it's kind of interesting that Javits is the one who suggested it.
I happen to disagree with something, but anyway, you don't have to.
The Soviets understand our problem.
The Soviets are interested in having some indication of the President and his election.
uh... uh...
you know, if you don't want for similar action by these clowns, you can also say, put a word, a note in the letter with the effect that Secretary Shultz is going to be in Europe and be glad to discuss it with you when he's there.
That would be a little lame for this thing.
Yeah, lame's hard to find.
They're going to act out hard to find.
Well, anyway, you feel... Well, and the only problem you're going is that we'll never have some vetoes and a lot of other things.
I think sometimes...
It probably just as well to show that the store can still run, even though you don't know it.
Do you think so, Henry?
I think at least on that.
You don't have to cancel it until we get the answers to these letters.
No, I don't.
All right.
Thanks, Henry.
We'll see you later.
Oh, I take this with me, don't I?
I don't know what to say.
the Secretary of the Treasury.
Thank you.