THE PRESIDENT'S DAILY BRIEF
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05974167
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U
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19
Document Creation Date:
April 26, 2019
Document Release Date:
April 30, 2019
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Publication Date:
December 12, 1967
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The President's Daily Brief
T ecret 12 December 1967
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DAILY BRIEF
12 DECEMBER 1967
1. Yemen
2. South Vietnam
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3. Greece
4. Cyprus
5. Haiti
TOR .�SECRET
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Early this month, former Prime
Minister Karamanlis publicly condemned
the junta from his safehaven in Paris.
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/ Karamanlis
said he does not plan to get involved
in Greek politics at the moment.
If he goes back to Greece at all,
he said, it would be only after reforms
have been carried out and it would be
possible to lead a normal political
life.
Karamanlis ran the Greek Govern-
ment for almost eight relatively
trouble-free years (1956-1963).
The Security Council probably will
consider the UN peacekeeping mandate
for the island late this week. Greece,
Turkey, and Cyprus all seem to favor a
short-term renewal of the present man-
date, putting off discussion of an "en-
larged" UN role. The present mandate
expires 26 December.
As things stand now, the Greeks
are not planning to withdraw their of-
ficers (about 500) assigned to the
Cypriot national guard. The Turks do
not know this yet and there may be
trouble when they find out.
Ambassador Ross has just completed
an assessment of the situation in Haiti.
The ambassador sees no real threat to
Duvalier's control so long as he can
find the money to pay his security goons.
Haiti will continue to deteriorate eco-
nomically, socially, and politically,
but, the ambassador feels, Papa Doc will
be there presiding over the downhill
slide for some time to come.
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6. Communist China
7. Nigeria
8. Soviet Union
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If local officials in China's be-
leaguered provinces are not already
confused by the contradictory edicts
flowing out of Peking, they soon will
be. The latest instructions in Mao's
name state that fractious Red Guards
are to be handled gently, their revolu-
tionary exuberance turned into more
productive--but unspecified--channels.
A go-soft order could lead to
increased fighting, as local authori-
ties are likely to interpret it as a
directive to sit on their hands.
The civil war goes on. Casualties
are mounting, but there has been little
military progress by either side. The
Soviets have followed up their arms
aid to the federal government with of-
fers of economic assistance; they also
are working to exploit growing anti-
American sentiment. The Organization
of African Unity has been trying to
get the warring Nigerian factions to-
gether, but so far there is no progress
on that front either.
Kosygin will visit India from
25 January to 5 February. There is
nothing to indicate this trip is any-
thing more than routine fence-riding.
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FOR THE PRESIDENT'S EYES ONLY
Special Daily Report on North Vietnam
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16
12 December 1967
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Special Daily Report on North Vietnam
for the President's Eyes Only
12 December 1967
I. NOTES ON THE SITUATION
* * *
A Report from Hanoi: One of the refu-
gees who recently managed to get out of North Viet-
nam confirms that Hanoi's propaganda about US raids
on the capital is much exaggerated. He saw little
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bomb damage in the city and comments that "the Ameri-
cans have been very selective" in the raids, "although
occasional accidents had occurred."
* * *
Hanoi Calls for Renewed Support by Workers of
the World: The North Vietnamese trade union federa-
tion has issued an appeal to workers and union organi-
zers of the world to "still further increase their
movement of solidarity and support for the Vietnamese
people." This is to be in commemoration of the
seventh anniversary of the founding of the Liberation
Front on 20 December. The appeal, which was reported
by the French news agency correspondent in Hanoi,
also called upon the world's workers to "expand and
strengthen their opposition to the American aggres-
sion in Vietnam by every appropriate and creative
means."
* * *
� Hanoi Reports New Chinese Pledges of Support:
The Chinese people "are playing the role of a big
rear" and will continue their support for the Viet-
namese until victory. This is a quote from Chinese
Foreign Minister Chen Yi's speech at a reception on
9 December in Peking honoring the new head of the
Liberation Front's permanent mission in China. Hanoi
carried an account of Chen Yi's speech in its English
language broadcast yesterday. Peking itself has yet
to report the speech because Chen's status and
title are still unsettled in the wake of the Cultural
Revolution.
* * *
II. NORTH VIETNAMESE REFLECTIONS OF US POLITICAL
ATTITUDES ON THE WAR
Viet Cong on "Stop the Draft" Week: The Viet
Cong have praised antiwar activities in the US dur-
ing the "Stop the Draft" week (4-10 December), ac-
cording to a Hanoi International Service broadcast
in English on 10 December. No "brutal force" can
silence the "just voice" of the American people in
protesting the war, according to the Viet Cong.
The broadcast claimed that Americans are seeing more
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clearly that the US is following a "ruthless" policy
and are opposing the "dirty war" in Vietnam.
* * *
Hanoi Allegations on US Troop Behavior: The
North Vietnamese are continuing to report alleged
incidents of insubordination or cowardice on the
part of US troops in South Vietnam. In an English
language broadcast on 11 December, Hanoi reported
that an American platoon in My Tho Province stayed
away from its base for nearly a day to avoid being
sent on a raid. Another platoon at the same base
reportedly refused to obey orders to go to the res-
cue of "buddies" who were being "badly mauled" by
the Viet Cong. Similar incidents in other areas
throughout South Vietnam were reported in the broad-
cast, including one in which five US survivors of
a recent attack threw away their guns and fled to
Saigon. The article closed by commenting that
"more and more American soldiers have come to
realize that the US war is an unjust war of aggres-
sion and the only way out of it is to rise up and
oppose it by practical deeds."
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DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
CONTINUED PRESSURE ON STERLING AND THE DOLLAR
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29
12 December 1967
No. 1683/67
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� GROUP
EXCLUDED ENOM AUTOMATIC
DOWNONADING AND
DECLASSIFICATION
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
12 December 1967
INTELLIGENCE MEMORANDUM
Continued Pressure on Sterling and the Dollar
Summary
The British Government is reported to consider
its recent devaluation of the pound a failure and may
adopt a floating exchange rate, perhaps within a few
days. If this were done, sterling could move down-
ward in response to market forces until it stabilized,
probably at A rate much lower than -$2.40. Such a move
would disrupt the international financial system, pos-
sibly causing an upheaval in world trade and economic
recession in many countries.
Britain's contemplation of the move to a floating
exchange rate arises from several causes. Both within
the UK and abroad there has been a growing belief that
the 14.3 percent devaluation was too small to have any
appreciable effect on the UK economy and the stability
of sterling. This has led to renewed pressure on the
pound, forcing the Bank of England to step in to sup-
port sterling, with resulting losses of foreign ex-
change reserves. Another element has been a French
program, run by De Gaulle and the Finance Ministry, to
undermine both sterling and the dollar. If the French
pressures succeed and sterling is scuttled by'a number
of nations, the ultimate French objective of placing
the dollar in extreme jeopardy may well be reached.
The UK is almost certainly aware of the probable
consequences of the action it is contemplating. It
would put heavy pressure on the US dollar, touching off
Note: This memorandum was produced solely by CIA. It
was prepared jointly by the Office of Economic Research
and the Office of Current Intelligence.
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a series of competitive devaluationsin Western Europe
and elsewhere. It could create an international at-
mosphere as vicious as the 1930s and force a return
to comprehensive systems of restrictive trade and com-
mercial controls by most of the world's industrial
countries. This could lead to a large reduction of
world trade and serious recession in those developed
countries that rely heavily on foreign commerce.
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1. A reliable source reported on 10 December
�that the UK considered its recent devaluation a failure
and may adopt a floating exchange rate. Sterling would
then be free to move downward in response to market
forces until it is stablized, probably at a much lower
rate than $2.40. If this action occurs,.it would dis-
rupt the international financial system, and it could
depress world trade and induce economic recession in
many Countries. The source indicates that the UK may
take action within a few days.
2. .British Contemplation of such a move arises
from several unsettling Causes. Since devaluation
three weeks ago, there has been an: increasing belief,
both Within the UK and abroad, that a devaluation of
14.3'percent was too small to have any appreciable ben-
eficial effects on the UK economy and the stability
of sterling. This belief has in turn led tO renewed
pressure on the pound, which forced the Bank of Eng-
land to step in to support sterling Last week and
again on 11 December. In two hours on the morning of
the 11th, the Bank of England lost about $95 million
in foreign exchange reserves through support opera-
tions. With dwindling reserves to support such opera-
tions, the British have good reason to consider either
a further devaluation or adoption of a floating rate.
One immediate advantage of the latter is that it may
forestall for the moment competitive devaluations by
other countries, which may prefer to wait until market
forces stabilize the pound at some new, lower rate.
3. Another element in pressure against the 'pound
has been a consistent effort on the part of the French
Government to undermine both sterling and the dollar.
The French "program" is being run by the Finance Min-
istry and President De Gaulle over the objections of
the Bank of FranCe. It has invblved 4 number ofseri-
ous leaks to the press of critical financial informa-
tion that is uncannily accurate, well-timed, and full
of closely held data. These leaks have stirred up
speculation against both sterling and the dollar. The
French have supplemented their press campaign with
direct approaches', either by:semi-officiaThgovernment
representatives or by obviously "briefed" Frenchmen of
importance traveling abroad. For example, Argentina
was warned to get out of sterling, by Antoine piney,
former member of the French Government and now head of
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a French technical/commercial mission to South Amer-
ica. On the strength of his advice, Argentina did so
before the devaluation. We have circumstantial evi-
dence of official French complicity in Algeria's
recent conversion of $150 million into gold, direct
from the US Treasury. At least $125 million of this
amount was bought in Paris with francs that consti-
tuted most of the Algerian exchange reserves. If
sterling is in fact scuttled, French pressures will
have had their effect and there will be more than an
even chance that the ultimate French objective of a �
dollar devaluation will be reached.
4..� The UK is almost certainly aware of the
probable consequences of the action it is now con.-
templating. The British probably reason that a float-
ing rate will give them considerable leeway to pursue
a more expansionary domestic economic policy without
the necessity of supporting ,a weak pound with scarce
reserves. Moreovert.the fact that sterling will float
rather than be pegged at a new, lower rate, will create
uncertainty abroad and probably. give the UK precious
time and balance of payments advantages before retali-
atory devaluations take place.
5. It is unlikely that the US dollar will. .
escape the heavy pressures that would develop as a
result of a free sterling rate.' If sterling began to
fall, many holders of sterling assets would scramble
to sellout. As they unloaded their sterling, they
first would move into French francs, West German marks,
and US dollars, but the limited supplies of :francs and
marks would soon be taken up and the dollar would be-
come the chief Currency sought. Many of these new
dollar holders would seek gold as their final store of
value. The British have net short-term sterling lia-
bilities of about $8 billion, and a large portion of
�these claims could be redeemed within a relatively
Short time. As these claims are cashed in, the holders
Would convert the sterling into other currencies' at
the going market rate for sterling. The demise of
sterling as a reserve currency under disorderly con-
ditions would place the dollar in immediate jeopardy.
6. In the longer run, whether the pound stabi-
lized or continued to fall slowly, a whole series of
competitive devaluations in Western Europe and other
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areas could be expected. The international at-
mosphere could be as vicious as during the 1930s, and
not the least of the results would probably be a re-
turn to comprehesive systems of restrictive trade
and commercial controls by most of the world's in-
dustrial countries. Both the disorderly process of
competitive -devaluation and the re-emergence of trade
controls throughout, the industrial West could lead to
a:large contraction of World trade and serious reces-
sions in those developed countries that rely heavily
on foreign, commerce..
7 In the event that the US and other major
powers took strong countermeasures before the crisis
developed--suCh as a pooling of reserves, prohibition
of gold sales to private hoarders, and quick imple-
mentation of some reserve creation scheme--it is
possible that some of the results would be different.
Worldwide loss of monetary reserves, especially those
of the US, would be smaller. Although competitive
devaluations would in any case be inevitable, a coop-
erative atmosphere could keep their timing and Size
organized in some orderly fashion. As aresult,
there would be less disruption Of trade and fewer
repercussions on some of the West's most important
economies.
8. If, in fact, the British adopt a free ex-
change rate and other major currencies are devalued
substantially, the dollar would be seriously threat-
ened. Unless the US is then willing to support an
overvalued dollar, it would be faced with two alter-
natives: an increase in the price of gold, which is
General De Gaulle's objective; or the demonetization
of gold.
9. As long as no new and widely accepted inter-
national reserve asset is available, the:role of the
dollar as a reserve currency would be secure. If
such a new asset is created, however, the reserve role
of the dollar may diminish, but the importance of the
US in world trade will ensure that the dollar can re-
main the world's major trading currency if devalued.
10. The adoption of a floating exchange rate for
sterling should not cause the Wilson government any
insurmountable political problems at home. The Labor
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majority in parliament can be expected to back the-
move. Most of them have long believed that the preoc-
cupation with supporting the pound has impeded domestic
social and economic progress. They will view removal
of this obligation as lifting a tremendous burden from
their government. The Conservative opposition will
condemn the move and point to it as proof that there-
cent devaluation was another measure of the Labor gov-
ernment that was inadequate to solve the country's
economic problems. They will also claim that it breaks
faith with the holders of sterling and further erodes
Britain's international standing.
11. The recent appointment of ;(:)y Jenkins as
chancellor Of the exchequer : Will be helpful in selling
the plan-ftp,:the British public, Jenkins is a highly
respected activist, and a bold, now economic initia-
tive is not unexpected, The immediate selling job will
also be made much easier if, as seems qUite posPible,
the deflationary program that was to accompany de-
valuation can be made less stringent,- On the negative
side, the public, whose confidence in their government
is already badly shaken, will be confused about what it
all means. On balance, however, adequate publit sup-
port will be there in the Short term, although this can
evaporate rather quickly if the performance of the
economy does not improve markedly during 1968..
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