99. Memorandum From Secretary of the Treasury Fowler to President Johnson1
SUBJECT
- French Gold Purchases
I have just authorized another $100 million drop in the Treasury gold stock, which will bring the reduction for the first six months to $300 million.
Our sales of gold to France in the first half will total $324 million. In other words, exclusive of French purchases, our gold supply during the first six months would have increased—even after allowing for domestic industrial purchases. A $150 million sale by Canada has been most helpful. (The Canadians intend to sell an additional $50 million later this year.)
As you know, the French policy is to convert all dollar accruals into gold. Even with no accruals, however, they adhere to a policy of converting [Page 290] a minimum of $34 million per month. Monthly conversions during the first half have averaged $54 million. However, French reserves have increased by over $100 million in the first two weeks of June, and conversions in July (which are based on June accruals) could run very substantially in excess of the monthly average to date.
Even though our gold losses are much smaller than last year, I am disturbed about the French attitude and by the implications of a continuation of their present gold-buying policy.2 I would like to discuss the situation with you privately.
I plan to meet for the first time with Michel Debre, the new French Minister of Economy and Finance, at the Hague on July 25–26. The occasion will be the meeting of the Ministers of the Group of Ten, convened to consider the G–10 Deputies’ report on international monetary reform.
- Source: Johnson Library, Bator Papers, Balance of Payments, 1966 [2 of 2], Box 15. Confidential. A copy was sent to Bator.↩
- Reflecting the concern with French gold purchases, Assistant Secretaries of State Solomon and Stoessel, on July 19, sent a memorandum to Under Secretary Ball entitled “A Proposal to Isolate France in the Field of International Finance.” (Washington National Records Center, RG 56, Assistant Secretary for International Affairs, Deputy to the Assist-ant Secretary and Secretary of the International Monetary Group: FRC 83 A 26, Contingency Planning, 1965–1973, Contingency Planning 1966 Dale and Solomon Material) Solomon and Stoessel discussed the U.S. Government’s decision to unilaterally cease selling gold to France, a policy of “selective non-convertibility.” They noted that “an attempt to isolate France via selective non-convertibility would involve two major changes in U.S. policy. The first change would be to broaden the NATO crisis to encompass economic issues. Cessation of gold sales to France might appear to be the opening round of bilateral economic warfare. The second change would be to risk starting down the path of non-convertibility of the dollar into gold.” In fact, this latter policy was under active consideration in the mid-1960s; a number of papers on breaking the dollar’s link to gold, including a March 5, 1966, memorandum entitled “Breaking the Link to Gold,” probably drafted by William B. Dale, U.S. Executive Director to the IMF, are ibid.↩
- Printed from a copy that indicates Fowler signed the original.↩