205. Memorandum From the President’s Special Assistant (Rostow) to President Johnson1
Mr. President:
As the attached2 indicates:
- —the French franc is under heavy pressure;
- —the British pound is under considerable, but less, pressure;
- —money is flowing to Germany in a big way.
The heart of this is the requirement for a currency readjustment in Europe. Ideally, the pound and the franc should stay where they are; the German mark should be revalued upward—also the Italian lire and the Dutch guilder—to a lesser extent than the German mark.
We are lucky that Central Bankers were scheduled to meet in Basle tomorrow in any case; Joe Fowler, Fred Deming, and Ed Fried are in Europe and following this closely.
[Page 574]The issue is complicated because Strauss, as Finance Minister, would probably resist on political grounds a response to this crisis simply in the form of an upward revaluation of the German mark. He might even resign on the issue and free himself for the next German election. Our people are working for an intelligent readjustment which would avoid any further devaluation of the pound and, if possible, any devaluation of the franc. They have a week end to work it out before the markets open on Monday.
- Source: Johnson Library, National Security File, Subject File, Balance of Payments, Vol. V [1 of 2], Box 3. Secret.↩
- The attached memorandum from Joseph K. Newman (NSC Staff) to Rostow, November 15, not printed, summarizes that day’s “extremely heavy” speculation in British, French, and German currencies.↩