Office of the Historian

57. Memorandum From Secretary of the Treasury Fowler to President Johnson1

Washington, April 13, 1965.

SUBJECT

  • An Early Preliminary Look at First Quarter Balance-of-Payments Results

The preliminary results for the first quarter are encouraging in view of the sizeable deficits in January and February.

The preliminary over-all deficit figure is $161 million which, on a seasonally adjusted basis, amounts to almost $500 million—or an annual rate of $2 billion as compared with $2.8 billion last year. (We do not yet have the data to compute the regular transactions deficit which excludes special receipts from debt prepayments, advance payments on military exports and net sales of non-marketable, medium-term securities to foreign governments. These receipts last year averaged $167 million per quarter. Last year’s regular transactions deficit was $3.1 billion.)

The encouraging thing about the first quarter data is that we began to run weekly surpluses in the latter part of February which have continued to date. The March surplus was $518 million. This situation undoubtedly reflects the operation of your February 10 program. It also may reflect to a considerable extent an improvement in the merchandise trade surplus which deteriorated badly during January and February due to the dock strike.

The decline in our gold stock during the first quarter ($833 million) greatly exceeded the unadjusted deficit ($161 million) with the result of substantial decline in foreign dollar holdings ($732 million) and minor changes in other reserve assets.

Cabinet Committee on Balance of Payments

The Committee will meet on Monday, April 19, to discuss the operation of the February 10 program. I will send a memorandum on the discussion.2

Publication and Use of Data

We do not publish these figures for the overall deficit at this time. The Commerce Department publishes sometime in mid-May the figures for [Page 148] the regular transactions deficit. The figures in this memorandum should not be released for two reasons:

(a)
the figures published in May that are of key importance are a different computation (the regular transactions deficit);
(b)
the new material figures themselves often change substantially because at this stage they are preliminary returns.

I would therefore recommend that you not use figures if you wish to comment now on this subject. You are safe in stating generally that there has been a substantial recent improvement in our balance of payments, commencing about the time your new program was announced. That will be true, no matter what revisions in the figures are made to convert them to a regular transactions deficit and to eliminate errors in the preliminary returns.

Henry H. Fowler 3
  1. Source: Johnson Library, Bator Papers, Balance of Payments, 1965 [3 of 4], Box 14. Limited Official Use. Fowler became Secretary of the Treasury on April 1. For text of President’s Johnson’s letter accepting Dillon’s resignation, see Public Papers of the Presidents of the United States: Lyndon B. Johnson, 1965, Book I, pp. 347–348.↩
  2. Not found.↩
  3. Printed from a copy that indicates Fowler signed the original.↩