Floating the system: Germany, the United States, and the breakdown of Bretton Woods, 1969-1973

Diplomatic History

Volumn 31, Issue 2, 2007, Pages 295-323

  Gray, William Glenn ^a  

^a NONE

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EID: 33947364293     PISSN: 01452096     EISSN: 14677709     Source Type: Journal    
DOI: 10.1111/j.1467-7709.2007.00603.x     Document Type: Article

References (151)

1. Patrick J. Hearden, Architects of Globalism: Building a New World Order during World War (Fayetteville, AR, 2002).
2. Barry Eichengreen, Globalizing Capital: A History of the International Monetary System, 2d (NJ, 1998)
3. Harold James, The End of Globalization: Lessons from the Great Depression (Cambridge, MA, 2001).
4. For overviews along these lines, see Diane B. Kunz, Butter and Guns: America's Cold War Economic Diplomacy (New York, 1997), 192-222
5. also William Bundy, A Tangled Web: The Making of Foreign Policy in the Nixon Presidency (New York, 1998), 261-68.
6. See also Paul Volcker's version of these events in his coauthored book with Toyoo Gyohten, Changing Fortunes: The World's Money and the Threat to American Leadership (New York, 1992), 59-90, 101-28.
7. Joanne Gowa, Closing the Gold Window: Domestic Politics and the End of Bretton Woods NY, 1983), 173.
8. Francis Gavin's excellent analysis does take account of this systemic perspective; he notes that the Bretton Woods system began to wobble from the moment European currencies attained full convertibility in 1958. However, his study remains largely focused upon American decision making.
9. Francis Gavin, Gold, Dollars, & Power: The Politics of International Monetary Relations, 1958-1971 (Chapel Hill, NC, 2004).
10. Another historian working to "globalize" our understanding of monetary issues is Thomas W. Zeiler; see his working paper "U.S. Foreign Economic Policy and Relations with Japan, 1969-1976," available at http://www.gwu.edu/~sarchiv/japan/zeilertp.htm.
11. To date, the most multilateral account we have is Harold James's magisterial International Cooperation since Bretton Woods (Washington, DC, 1996), esp. 205-59. James takes account of French, British, and German views while focusing mainly on the story of the United States and the IMF.
12. "The D-Mark was a goddess," waxed Manfred Pohl nostalgically in 2001, shortly before the final introduction of the Euro. Manfred Pohl, Carl-Ludwig Holtfrerich, and Harold James, Requiem auf eineWärung. DieMark 1873-2001 [Requiem for a currency: The mark 1873-2001] (Stuttgart, 2001), 7.
13. Speech by Otmar Emminger, "st die schleichende In.ation unser Schicksal?" [Is creeping in.ation our fate?], 11 February 1965, Bundesarchiv Koblenz (BAK, Federal Archives, Koblenz), B 136, Bd. 3322.
14. On the Bundesbank's policies in 1965-1966, see Volker Hentschel, Ludwig Erhard: Ein Politikerleben [LAdwig Erhard: a politician's life] (Munich, 1996), 614-16. Hentschel is, admittedly, more critical of Erhard than of the Bundesbank here.
15. Helmut Schmidt in particular held Karl Blessing, the Bundesbank president, responsible Erhard's downfall; he campaigned actively for Blessing's replacement. Schmidt to Kiesinger, 24 October 1968, Willy-Brandt-Archiv (hereafter cited as WBA), Bundesminister, Bd. 15. See also Schmid's conversation with Nathaniel Samuels at the U.S. State Department 9 July 1969, National Archives and Records Administration, College Park, Maryland (hereafter cited as NARA), box 859 (FN 17).
16. Alexander Nüzenadel, Stunde der Ökonomen. Wissenschaft, Politik und Expertenkultur in der Bundesrepublik Deutschland 1949-1974 [The hour of the economists. Science, policy, and expert culture in the Federal Republic 1949-1974] (Göttingen, 2005), 308-20.
17. Otmar Emminger, "The D-Mark in the Con.ict between Internal and External Equilibrium," in Essays in International Finance, Princeton University Department of Economics, no. 122 (June 1977): 19.
18. For more detail, see Gavin, Gold, Dollars, & Power, 17-31.
19. In November 1968, for example, de Gaulle surprised outside observers by refusing to devalue the franc - despite the fact that France would instead have to implement painful austerity measures in order to bring the country's balance of payments back in line.
20. For a clear expression of such sentiments, which were widespread in Germany at the time, see the speech by Alwin Munchmeyer to the Düsseldorf Industry Club, 12 September 1968, Politisches Archiv des Auswärtigen Amts (PA/AA, Political Archive of the Foreign Office, Berlin), B 52, Bd. 612. Munchmeyer, then president of the Federal Association of German Banks, went on to demand: "Why is it our job to ensure that other economies become competitive?" (p. 6).
21. This is not the place to discuss these well-known events in detail. In summary: The British government did in fact devalue the pound sterling in November 1967; the United States did not devalue the dollar in March 1968, but it divided the market for gold. A riveting account appears in Robert M. Collins, More: The Politics of Economic Growth in Postwar America (Oxford, 2000), 68-97.
22. William Glenn Gray, "'Number One in Europe': The Startling Emergence of the German Mark," Central European History 39, no. 1 (Spring 2006)
23. also Chapter 2 of Dorothee Heisenberg, The Mark of the Bundesbank: Germany's Role in European Monetary Cooperation (Boulder, CO, 1999).
24. For U.S. thinking, see DepSta (Rogers) 59700 to U.S. The Hague, Rome, and Stockholm April 1969, con.dential, NARA, Record Group (RG) 59, Subject-Numeric File box 856 (FN 10). By this point, Volcker had already had a long exchange with the relevant German ministers; see U.S. Bonn (Fessenden) 3859, 21 March 1969, in the same folder. All subsequent references to NARA are from RG 59, SNF 67-69, or SNF 70-73; henceforth only NARA, the box number, and the. le code will be listed.
25. German specialists spoke of emergency situations that might call for wider margins still, perhaps ±5 percent. DGWashington (Oncken) to AA, 5 May 1969, 3, PA/AA, B 150, Bd. 152. For the sake of brevity, the abbreviation DG (Diplogerma) will denote cables deriving from the German embassies in Washington, Paris, etc.; "U.S." will denote cables from the corresponding American embassies.
26. Bundeskanzler Gruppe III/1 to Kiesinger, 18 July 1969, BAK, B 136, Bd. 3336.
27. Bergsten to Kissinger, 24 March 1969, Foreign Relations of the United States (hereafter as FRUS), 1969-1972 III:dOc. 13
28. Precise. gures in Bismarck-Osten, Aufz., "Deutsche Leistungen an Frankreich und auf dem Währungsgebiet," 13 December 1968, PA/ AA, B 52, Bd. 472.
29. For a useful study of Bonn's "offset" payments, see Hubert Zimmermann, Money and Security: Troops, Monetary Policy, and West Germany's Relations with the United States and Britain, 1950-1971 (Washington, DC, 2002).
30. For insight into Kiesinger's thinking, see his lengthy comments to the CDU-Fraktion, 13 May 1969, Archiv fur Christlich-Demokratische Politik (ACDP, Archive for Christian Democratic Politics, St. Augustin), VIII-001-1019/1.
31. See Schiller's comments to the Central Bank Council, 288. Sitzung, 8 May 1969, 7-8, BAK, B 136, Bd. 3329. German media coverage also indicates a strong disdain for French currency controls;
32. see Der Spiegel, 2 December 1968, 104-10.
33. See, for example, the interview with economist Herbert Giersch in Der Spiegel, 19 May 1969, 52-57.
34. The Frankfurter Allgemeine and Suddeutsche Zeitung, two pillars of the mainstream both consistently favored revaluation of the D-mark in 1969.
35. Klaus Schöhoven, Wendejahre. Die Sozialdemokratie in der Zeit der Groen Koalition [Years of change: Social democracy in the time of the grand coalition 1966-1969] (2004), 452-69.
36. DG Oslo, 7 July 1969, PA/AA, B 52, Bd. 587. On "leads and lags," see the conversation Kennedy/Schiller, 1 June 1969, NARA, box 2121 (Pol 7 Ger W).
37. "No Marks," Economist, 27 September 1969, 15. On complaints in the Swiss press, see DG Bern 149, 26 September 1969, PA/AA, B 52, Bd. 587.
38. See Schiller's report to the SPD-Parteirat, 30 September 1969, 14-19, Archiv der sozialen Demokratie (AdsD, Archive of Social Democracy, Bonn), SPD-PV, September-1969. Also of interest is Otmar Emminger's chapter on the 1968-1969 tumult; D-Mark, \Dollar, Währungskrisen [D-mark, dollar, currency crises] (Stuttgart, 1986), 135-71.
39. I have seen no indication that American officials, either from Treasury or the Fed, speci.cally favored the 1969. oat, though Klasen met with Kennedy and Volcker during the IMF assembly meetings and presented views as to the appropriate parity of the D-mark. DepSta (Richardson) to the U.S. mission to the OECD, 9 October 1969, NARA, box 756 (FN 10-1 Ger W).
40. Unofficial stenographic record of the Central Bank Council meeting of 25 September 1969, Historisches Archiv der Deutschen Bundesbank (HA BBk, Historical Archive of the Bundesbank, Frankfurt), B 330, Bd. 5871/2. At this meeting, Emminger and his colleagues planned to intervene in the current markets if the D-mark rose above a certain point, but they recognized that it would be impossible to state publicly where this intervention point would lie, for in signaling a new line of defense, speculators would immediately tend to push toward this goal. In a sense, then, the widening of margins had to be treated in public as a ".oat."
41. Rey to Schiller, 2 October 1969, PA/AA, B 52, Bd. 587.
42. DG Washington, 7 October 1969, PA/AA, B 52, Bd. 587. In meetings just before the IMF conference, Blessing had received assurances from the directors that a temporary float be accepted though not officially approved. Blessing, Vermerk, 28 September 1969, HA BBk, B 330, Bd. 5871/ 3.
43. "Aufwertung. Letzte Runde," Der Spiegel, 13 October 1969, 49.
44. Schiller, Kabinettsvorlage: "Verbesserung der Währungsparität der DM" [Improving the parity of the DM], 24 October 1969, PA/AA, B 52, Bd. 588.
45. Emminger's remarks to the EEC monetary committee on 21 November 1969, PA/ AA, 52, Bd. 588.
46. In June 1970, Canada. oated its dollar - and kept it untethered for an unspecified For a helpful analysis of Ottawa's experiences,
47. see Robert M. Dunn to the Fed Board of Governors, 6 August 1971, Gerald Ford Library, Ann Arbor, Michigan (hereafter cited as GFL), Burns Papers, B34.
48. Brandt's opening statement of 1 December 1969 is available in several languages at the Navigator web site, available at http://www.ena.lu/ mce.cfm. For a German transcript of the summit proceedings, see BAK, B 102, Bd. 93468.
49. A. G. Harryvan and J. van der Harst, eds., Documents on European Union (New York, 1997), 168-69.
50. See the letter from Belgian Prime Minister Gaston Eyskens to Brandt, 15 May 1970, PA/AA, B 1, Bd. 361.
51. Conversation Kennedy/Giscard, 3 May 1970, FRUS, 1969-1972 III: Doc. 146.
52. On Giscard's thinking in mid-1970, see Ref. III A 1, Aufz., 8 July 1970, PA/AA, B 52, Bd. 590; also his statement to the IMF and World Bank joint assembly, 22 September 1970, GFL, Burns Papers, B68.
53. Herbst, Aufz., 26 November 1969, PA/AA, B 52, Bd. 603. This volume documents efforts by trade experts within the Foreign Ministry to hold Brandt back from making too generous an offer at the Hague summit. The same reasoning guided German strategy throughout the negotiations of 1970.
54. Central Bank Council, 4 November 1970, 12-14, and 19 February 1971, 9, BAK, B 136, Bd. 3330 and 3331.
55. For excerpts from theWerner Report, see Harryvan and van der Harst, eds., Documents on European Union, 169-72.
56. Haig Simonian points out that Brandt felt he needed to make concessions in order to win Pompidou's cooperation on ostpolitik. Haig Simonian, The Privileged Partnership: Franco-German Relations in the European Community, 1969-1984 (New York, 1985), 91. 47.
57. This figure of ±0.6 percent was not spelled out publicly by the community in official documents; it represented an internal agreement among the relevant ministers. See U.S. Rome Martin) 2689, 29 April 1971, con.dential, NARA, box 819 (FN 3 EEC).
58. Monthly Report of the Deutsche Bundesbank 23, no. 2 (February 1971): 41-46.
59. Ibid.
60. Such observations were made often during meetings of the Central Bank Council. See, for example, Klasen's remarks on p. 16 of the 330. Sitzung, 20 January 1971, BAK, B 136, Bd. 3331.
61. Robert Solomon and Ralph Bryant, "Repercussions for the President of an International Financial Crisis," 8 December 1970, GFL, Burns Papers, B34.
62. The program was initiated by Charles Coombs of the Federal Reserve Bank of New York; extensive documentation in the "Eurodollars" folders in GFL, Burns Papers, B33 and B34.
63. Note Klasen's hurt tone in his letter to Burns, 4 May 1971, GFL, Burns Papers, B60.
64. Lengthy options paper prepared by Robert Solomon, 21 March 1971, GFL, Burns Papers, B65.
65. Bundeskanzleramt, Vermerk für den Minister, 4 March 1971, BAK, B 136, Bd. 3323.
66. Speech by Schiller to the Hanover Trade Fair, 22 April 1971, 9, AdsD, SPD-Parteivorstand, February-May 1971.
67. On the (uncannily accurate) reports in the Handelsblatt about the Hamburg meeting, which I suspect were fed deliberately by Schiller's ministry, see U.S. Bonn (Rush) 4908 and 4981, 27 and 28 April 1971, both ANF, box 819 (FN 3 EEC). U.S. Bonn (Rush) 5156, 30 April 1971, confidential, NARA, box 826 (FN 10).
68. Ludwig Poullain to Brandt, 27 April 1971, WBA, Bundeskanzler, Bd. 15.
69. U.S. Bonn (Rush) 5241, 3 May 1971, NARA, box 886 (FN 17 Ger W).
70. Monthly Report of the Deutsche Bundesbank, May 1971, 8.
71. See the report circulated by Irmler to the members of the Central Bank Council, 30 April 1971, HA BBk, B 330, Bd. 6158.
72. Central Bank Council, 337. Sitzung 5 May 1971, 4, BAK, B 136, Bd. 3331.
73. Conversation Emminger/Daane, 4 May 1971, GFL, Burns Papers, B65. On 5 May, Klasen told Burns that "if we [i.e., the American side] are worried about the trend of events in Germany we should inform Schiller and clarify our position or perhaps we should speak with the Chancellor." Ibid.
74. Central Bank Council, 337. Sitzung, cited in note 62 above; see especially comments by Fessler and Benning on p. 11. For a compelling analysis of the warring camps within the Bundesbank, see Peter A. Johnson, The Government of Money: Monetarism in Germany and the United States (Ithaca, NY, 1998), 81-84.
75. Brandt to Scheel, 7 May 1971, Akten zur Auswärtigen Politik der Bundesrepublik Deutschland (hereafter cited as AAPD) [Documents on foreign policy of the Federal Republic of Germany], 727-29.
76. Brandt to the SPD-Parteirat on 17 May 1971, published in SPD-Pressemitteilung Nr. 208/71, AdsD, SPD-PV, February-May 1971.
77. For a detailed exposition of the course of the meeting, see DG Brussels (Bömcke), 17 May 1971, PA/AA, B 52, Bd. 585. A more general report on the conference atmosphere appears in the same volume: DG Brussels (Sachs) 1382, 9 May 1971. These make clear that the single most controversial point in the communiqué was the statement about "under normal circumstances."
78. Text of communiqué printed in Monthly Report of the Deutsche Bundesbank, May 1971, 10.
79. DG Brussels, 17 May 1971 (cited in note 67 above), 4. Dutch officials did not float willingly; they felt they had no choice but to imitate Germany's move. However, the central bank president, Ziljstra, later admitted that the float had been "a very handy and effective device in holding back a speculative inflow of dollars." U.S. Paris (Culley) 7423, 7 May 1971, confidential; U.S. The Hague (Middendorf) 2059, 21 May 1971, confidential, NARA, box 826 (FN 10) and box 834 (FN 17), respectively.
80. In the Swiss case, it was only the second time since 1848 that the franc had been revalued against gold - an indication of the contentious nature of the decision. DG Bern 168, 11 May 1971, PA/AA, B 52, Bd. 605.
81. "Let them float" was the consensus of a Nixon meeting with his staff on 6 May 1971. Kunz, Butter and Guns, 199, citing Ehrlichman's diary.
82. Found in Volcker's. les; see FRUS, 1969-1972 III: Doc. 152.
83. Hersey to Daane, 12 May 1971, GFL, Burns Papers, B34.
84. Conversation Connally/Giscard, 20 May 1971, FRUS, 1969-1972 III: Doc. 156.
85. AAPD 1971, 730-31.
86. DG Brussels 1391, 11 May 1971, PA/AA, B 52, Bd. 585.
87. Schiller's procrastination on this count was facilitated by French intransigence. The chancellor's office in Bonn expected that the Council of Ministers could reach a compromise, with the EEC accepting wider margins vis-à-vis the United States and also a more unified set of capital controls. Bundeskanzleramt, Vermerk für die Kabinettsitzung, 21 June 1971, BAK, B 136, Bd. 3332. Because the French would not yield on the former issue, Schiller did not have to yield on the latter.
88. Brandt expressed this quite openly to Pompidou, remarking that the float had helped to pump DM 9 billion out of the West German economy; see their conversation of 5 July 1971, held on the Rhine cruise boat Loreley, in AAPD 1971, 1061.
89. On Japan, see James, International Monetary Cooperation, 216, 220-21. On France, see U.S. Paris (Watson) 13070, 30 July 1971, NARA, box 827 (FN 10).
90. In1967, Bundesbank President Karl Blessing had presented this assurance in writing to the Johnson administration. Zimmermann, Money and Security, 224-29.
91. Allen J. Matusow, Nixon's Economy: Booms, Busts, Dollars, and Votes (Lawrence, KS, 1998), 148.
92. Central Bank Council, 345. Sitzung, 25 August 1971, BAK, B 136, Bd. 3331. See especially reports by Tüngeler (pp. 3-4) and Emminger (pp. 4-5).
93. Telegrams 469 and 471 from DG Tokyo of 26 and 28 August 1971, PA/AA, B 52, Bd. 604.
94. France did, in a sense, give some leeway to the market by introducing a "split" currency system. After 18 August, commercial transactions were to be conducted according to the official parity, without exception, but financial transactions, including tourist exchanges, would take place at market rates. There was a deeper irony still in France's defense of the Bretton Woods arrangements, in light of de Gaulle's earlier attacks against these institutions as representing American interests. For helpful insights into Giscard's thinking, see his conversation with Volcker, 17 August 1971, FRUS, 1969-1972 III: Doc. 171.
95. On Belgium and Sweden, see Tietmeyer, 23 August 1971, BAK, B 102, Bd. 120352.
96. On the key EEC finance ministers' meeting of 19 and 20 August, see DG Brussels (Bömcke) 2507, 20 August 1971, AAPD 1971, 1250-56. The Benelux countries opted to enact their own miniature version of the Schiller plan, floating together against the dollar while maintaining a deviation of no more than 1.5 percent from the internal exchange value of their currencies.
97. DG Paris (Ruete) 1581, 1 June 1971, PA/AA, B 150, Bd. 231; DG Paris (Blomeyer) 3559, 8 December 1971, PA/AA, B 52, Bd. 635.
98. Conversation onnally/Schiller, 25 September 1971, confidential, FRUS, 1969-1972, III: Doc. 181.
99. Brandt to the SPD-Parteirat, 18 October 1971, 84-85, AdsD, SPD-PV, September-October 1971.
100. For inside details on the cabinet meeting of 13 October 1971, see U.S. Bonn (Cash) 12859, 15 October 1971, confidential, NARA, box 827 (FN 10).
101. Central Bank Council, 349. Sitzung, 13 October 1971, BAK, B 136, Bd. 3331; see especially remarks by Klasen, 3-4, 13.
102. U.S. Rome 7583, 1 December 1971, NARA, box 834 (FN 17); also Volcker and Gyohten, Changing Fortunes, 86.
103. "Framework for monetary and trade settlement," initialed by Nixon and Pompidou on 14 December 1971, FRUS, 1969-1972 III: Doc. 219. The editor, Kathleen Rasmussen, printed numerous comparisons between this. nal document and earlier versions, providing a detailed view of the last-minute bargaining.
104. Figures from DGWashington (Pauls) 3036, 19 December 1971, AAPD 1971, p. 1971. Because the floating D-mark had earlier been trading at 10-11 percent above parity, the new fixed rates actually provided some relief to exporters. Brandt's cabinet was still quite critical of the outcome; it required several phone calls between the chancellor in Bonn and Schiller and Klasen in Washington to persuade the cabinet to endorse the deal. Cabinet meetings of 18 and 21 December 1971, PA/AA, B 52, Bd. 614.
105. Matusow, Nixon's Economy, 178.
106. Addressing the French president's complaints, Nixon to Pompidou, 16 February 1972, FRUS, 1969-1972 III: Doc. 224.
107. This was the case because of congressional reservations about operations that might diminish American gold or currency holdings. See the responses prepared for Burns's testimony to Congress in Bryant to Burns, 19 February 1972, GFL, Burns Papers, B5.
108. Flanigan to Nixon, 23 June 1972, FRUS, 1969-1972 III: Doc. 232.
109. DG Washington (Pauls) 196, 24 January 1972, PA/AA, B 52, Bd. 605.
110. Otmar Emminger, "Unterlagen und Überlegungen zur gegenwärtigen Währungskrise," 27 June 1972, 3, BBA, B 330, Bd. 6172/2.
111. Heath to Brandt, 23 June 1972, WBA, Bundeskanzler, Bd. 52. Emminger's report, cited above, indicates that of $7.9 billion in reserves held by the Bank of England, $2.6 billion folowed out in a matter of days.
112. Werner Ungerer, A Concise History of European Integration: From EPU to EMU (Westport CT, 1997), 123-25.
113. For a useful inside perspective on the European agreements of March 1972, see U.S. Bonn (Cash) 3197, 8 March 1972, NARA, box 828 (FN 10).
114. The Italians were given a unique dispensation to conduct all their market interventions - and settle their accounts with other European banks - exclusively in dollars. There were all sorts of reasons why this arrangement was unfavorable to Italy's European partners; for details, see DG Luxembourg 76, 27 June 1972, HABBk, N 2, K74; also U.S. Bonn (Hillenbrand) 8930, 27 June 1972, and U.S. Rome (Martin) 3754, 28 June 1972, both NARA, box 828 (FN 10).
115. As Klasen explained to the Central Bank Council, and later the cabinet, "The external economic flank must be protected sufficiently so that the Bundesbank can have greater maneuvering room in its credit policies, which will soon be necessary for domestic economic reasons." Central Bank Council, 365. Sitzung (official protocol), 15 June 1972, 3, HA BBk, B 330, Bd. 6172/1.
116. See Wolfgang Jäger's account in Geschichte der Bundesrepublik Deutschland. Die Ära Brandt 1969-1974 [History of the Federal Republic of Germany. The Brandt Era 1969-1974] (Stuttgart, 1986), 50-52. Schiller wrote a bitter letter to Brandt on 2 July complaining that he had been "ambushed" by Klasen during the cabinet meeting of 28 June. WBA, Bundeskanzler, Bd. 67.
117. Conversation Kissinger/Schmidt, 20 July 1972, FRUS, 1969-1972 III: Doc. 235. Also relevant: Conversation Schmidt/Shultz, described in DG Washington (Pauls) 1765, 21 July 1972, AAPD 1972, 939-43.
118. Kathleen Rasmussen, "Conflict or Cooperation: Foreign Economic Policy in the Nixon Years," conference paper presented at the Society for Historians of American Foreign Relations, Austin, Texas, June 2004, 19-21.
119. Giscard statement, 27 September 1972, GFL, Burns Papers, B69. Although not terribly specific, this was the most that Europe's finance ministers could agree upon at a meeting in London earlier that summer; see Hiss to Mommsen, 19 July 1972, BAK, B 102, Bd. 120354.
120. James, International Monetary Cooperation, 246-51.
121. These options, and others, are sketched out in a Federal Reserve study, "Some Alternative International Monetary Systems," 19 July 1972, forwarded from Burns to Shultz on 20 July, GFL, Burns Papers, B101.
122. U.S. ECBrussels (Schaetzel) 2605, 14 July 1972, NARA, box 828 (FN 10).
123. Citing a close financial adviser to Pompidou, U.S. Paris (Watson) 14247, 25 July 1972, NARA, box 828 (FN 10).
124. Unofficial stenographers' notes (transcribed) to Central Bank Council, 371. Sitzung, 21 September 1972, 7, HA BBk, B 330, Bd. 6175/1.
125. Helmut Schmidt, Men and Powers: A Political Retrospective (New York, 1989), 156.
126. It is striking how bluntly Schmidt conveyed this point to the Central Bank Council. During the meeting of 15 February 1973, he remarked: "The Federal Republic cannot permit the Bundesbank to pursue an autonomous credit policy that undermines the integration efforts of the EEC. Currency policy is today a significant component of foreign policy." That quote from pp. 12-13 of the official minutes corresponds closely in meaning to pp. 14-15 of the verbatim record. Both versions in HA BBk, B 330, Bd. 6703/1.
127. Central Bank Council, 381. Sitzung, 7 February 1973, HA BBk, B 330, Bd. 6702/2 (see especially the remarks by Schmidt's state secretary [and future Bundesbank president] Karl-Otto Pöhl).
128. AA (Jelonek), Aufz., 9 February 1973, AAPD 1973, 206-7.
129. Central Bank Council, 381. Sitzung (cited in note 117 above), especially remarks of Wagenhöfer and Irmler (p. 4). Brandt had reorganized his cabinet after the elections of November 1972; Schmidt was now "only" minister of finance (with responsibility for currency policy); Hans Friderichs of the FDP joined the cabinet as minister of economics.
130. Schmidt expressed this in no uncertain terms to the Central Bank Council; see its 382. Sitzung, 15 February 1973, 3, HA BBk, B 330, Bd. 6703/1. In a small conference with Economics Minister Hans Friderichs and officials from the chancellor's office, Schmidt remarked astutely that France must once again have a chance "to save Europe." Bundeskanzleramt (Strehlke) to Brandt, 8 February 1973, WBA, Bundeskanzler, Bd. 60, Bl. 162-63.
131. Pompidou continued to poo-poo a joint float; see DG Paris (Braun) 413, 10 February 1973, vertraulich, AAPD 1973, 223-25.
132. Brandt to Nixon, 9 February 1973, vertraulich, AAPD 1973, 218-20.
133. Volcker and Gyohten, Changing Fortunes, 108-11.
134. This Italian move came without prior consultation among the EEC partners, a sore point at the European Commission. U.S. ECBrussels (Hartman) 792, 15 February 1973, NARA, box 820 (FN 3 EEC).
135. Schmidt enjoyed glowing press following this victory, prompting the habitually contrarian Spiegel to relativize his success. "Wie Napoleon nach gewonnener Schlacht," Der Spiegel, 19 February 1973, 17ff. See also David Binder, "Dollar Crisis Leaves Bonn Confident," New York Times, 22 February 1973.
136. Monthly Report of the Deutsche Bundesbank, March 1973, 5.
137. Conversation Brandt/Heath, 2 March 1973, vertraulich, AAPD 1973, 343-45.
138. Brandt to Heath, 8 March 1973, AAPD 1973, 355-58. See also Brandt's follow-up message of 11 March in WBA, Bundeskanzler, Bd. 52.
139. Brandt to Pompidou, 8 March 1973, WBA, Bundeskanzler, Bd. 51.
140. Quoted by David Binder, "European Solution Urged by Bonn on Money Crisis," New York Times, 12 March 1973, 47. For Schmidt's certainty of Germany's ability to bring other European governments into line, see his phone remarks to Shultz as relayed to Brandt, 7 March 1973, WBA, Bundeskanzler, Bd. 18.
141. For French insistence on the need to defend the current parity structure even within the context of a float, see DG Brussels 858, 5 March 1973, PA/AA, B 202, Bd. 105685.
142. A helpful and precise chart outlining the changing composition of the snake over time appears in Ungerer, Concise History, 129.
143. As early as the 4 March meeting of the nine finance ministers, the EC Commission had formally proposed a joint float along with other defensive measures. U.S. ECBrussels (Greenwald) 1166, 5 March 1973, confidential, NARA, box 820 (FN 3 EEC).
144. James, International Monetary Cooperation, 242.
145. For recommendations along these lines, see the memo by William J. Casey (then Undersecretary of State for Economic Affairs) to Shultz, 7 March 1973, NARA, box 835 (FN 17); also the observation of the Fed's international staff on 2 March that "we do not want to give iron-clad guarantees and spend billions on intervention." Edwin M. Truman, "Implications for U.S. Interests of a Joint Float by the EEC," 2 March 1973, GFL, Burns Papers, B55.
146. Truman, "Implications."
147. See Schmidt's record of his conversations with Shultz on 9 and 15 March 1973, sent to Brandt on 30 March, WBA, Bundeskanzler, Bd. 18.
148. For Emminger's assessment, see Central Bank Council, 384. Sitzung, 13 March 1973, 3, HA BBk, Bd. 6704/1.
149. On the triumph of monetarism at the Bundesbank, see Johnson, The Government of Money, 84-95. For a comparative chart of German inflation vis-à-vis its European partners in the 1970s,
150. see Matthias Kaelberer, Money and Power in Europe: The Political Economy of European Monetary Unification (Albany, NY, 2001), 108.
151. Indeed, in late June 1973, the D-Mark had to be "revalued" upward by 5.5 percent - a seemingly counterintuitive move in the midst of a common EC float. U.S. Bonn (Hillenbrand) 9398, 29 June 1973, NARA, box 886 (FN 17 Ger W).