Full text of Papers of Arthur Burns : Letter, Arthur Burns to the President, Box N1

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D ear M r.

P re sid e n t:

T h e in te rn a tio n a l m o n e ta ry c r i s i s is n o t o v e r .

It i s t h e r e f o r e

h ig h ly i m p o r ta n t to p lan a h e a d .
If th in g s c o m e to th e p a s s o f a U . S .
and p u rc h a s e s ,

s u s p e n s io n o f g old s a l e s

w e sh o u ld d o a l l w e c a n - - b o t h

su b sta n tiv e ly

and c o s m e tic a lly --to m a k e it a p p e a r th a t o th e r g o v e rn m e n ts
h a v e fo r c e d th e a c tio n on u s .

W e w an t to p o r tr a y su s p e n s io n

a s a l a s t r e s o r t a n d to p r e s e n t a p u b lic i m a g e o f a c o o l-h e a d e d
g o v e rn m e n t re sp o n d in g to ill-c o n c e iv e d ,

be

lf-d e fe a tin g a ctio n s

of o th e rs.
T h e o p p o site t a c k — in itia tin g s u s p e n s io n w ith o u t b e in g f o r c e d
to it by th e a c tio n s o f o th e r s - - w o u l d p ro b a b ly le a v e u s in a
m u c h w e a k e r b a rg a in in g p o sitio n fo r p o s t-s u s p e n s io n n e g o ti­
a tio n s.

M a n y fo re ig n g o v e r n m e n ts w o u ld c l a i m th a t th e U .S .

G o v e rn m e n t h ad b e e n e a g e r to th ro w dow n th e g a u n tle t,

and

h a d d on e so w ith in s u ffic ie n t e x c u s e .

b oth

h e re and ab ro ad ,

a l a r g e p a r t of th e o n u s f o r th e en su in g p e rio d

o f c r i s i s w ou ld p ro b a b ly f a ll on u s .
m e n t,

In t h e p u b l i c e y e ,

In s u c h a h o s t i l e e n v i r o n ­

it m ig h t b e s ig n ific a n tly l e s s lik e ly th a t w e co u ld n e g o tia te

lim ite d e x c h a n g e -r a te fle x ib ility ,
aid and d e fe n se b u rd e n s,

a m o r e e q u ita b le s h a rin g of

a n d o t h e r i m p o r t a n t TJ. S .

o b jectiv es.

It i s t h e r e f o r e d e s i r a b l e to p a y o u t g o ld an d o th e r r e s e r v e s in
s u b s ta n t ia l a m o u n t s - - p e r h a p s tw o b illio n d o l l a r s - - b e f o r e a
su sp en sio n .

In a n y a n n o u n c e m e n t o f s u s p e n s i o n ,

m o reov er,

e x t e n s i v e a lb e it l o w -k e y e d p u b lic ity sh o u ld b e g iv e n to th e
a c t i o n s o f t h o s e c o u n t r i e s p u r c h a s i n g g o ld in th e w e e k s p r i o r
to su sp e n sio n .

T h e re is little r e a s o n fo r b e lie v in g th at th e

U n ite d S t a t e s w o u ld b e s i g n i f i c a n t l y b e t t e r off a f t e r s u s p e n s i o n
w ith ,

say,

$

10 - 1 /2

o r $ 9 b illio n .

b illio n o f g o ld r a t h e r th a n w ith ,

The b a la n ce of ad v an tag es,

say,

th erefo re,

is v e ry

s t r o n g l y in f a v o r o f p a y in g o u r r e s e r v e s f o r a n i n t e r i m

declassified

E.o.12356, Sec. 3.4.

- n . , * 7 5 ‘ f r W thU iA



q / n f t f r

$ 8 1 1 /2

p e rio d

-2-

a c tio n s of th o se c o u n tr ie s p u rch a sin g gold in th e w eeks p r io r
to su sp e n sio n . T h e r e is little r e a s o n fo r b eliev in g th a t th e
U nited S ta te s would be sig n ifica n tly b e tte r off a f te r su sp en sio n
w ith , s a y , $ 1 0 * 1 / 2 b illio n of gold r a t h e r than w ith , s a y , $ 8 - 1 / 2
o r $ 9 b illio n . T he b a la n c e of a d v a n ta g e s , t h e r e f o r e , i s v e r y
s tro n g ly in fa v o r of paying
r e s e r v e s f o r an in te r im p e rio d
b e fo re clo sin g th e gold window.
One of o u r m a in p o s t* su sp en sio n b a rg a in in g ch ip s (i. e . , a
c o n c e s s io n to g iv e to o th e r g o v e rn m e n ts ) would be an a g r e e *
m e n t to r e s t o r e d o lla r c o n v e rtib ility (into gold and SD R s)
a s p a r t of a p a ck a g e r e s o lu tio n of the c r i s i s . If anything,
th is b a rg a in in g ch ip w ould h av e a h ig h e r v a lu e if w e w ait
to su sp en d until i t s e e m s to be f o r c e d on u s by th e a ctio n s
of o th e rs .
S in c e re ly y o u r s .

A rth u r F . B u rn s

The H o n o rab le R ic h a r d N ixon
The
es'kfe&fc-of th e U nited S ta te s
T he W hite H ouse
W ash in gto n , D. C .

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