Seth Kaller, Inc.

“If the crisis had become more pronounced, if there had been a total blockade ...would we have had a serious run on gold? … It should be possible for us to get better coordination with the western governments…”

In this typed draft, with Kennedy’s handwritten corrections, the President asks Secretary of the Treasury Douglas Dillon about the monetary implications of a prolonged Cuban missile crisis.

JOHN F KENNEDY. Typed Draft Letter with autograph corrections, to Douglas Dillon, November 5, 1962, Washington, D.C. 1 p., 6¾ x 8¾ in. With Evelyn Lincoln (Personal Secretary to JFK) letter of authenticity, July 16, 1990, and small note card with Kennedy doodle.

Inventory #27507       Price: $10,500

Complete Transcript
The White House / Washington / November 5, 1962

Dear Doug:
      Is it your understanding that our present arrangements ^in international monetary policy^ stood up during the last two weeks?                 If the crisis had become more pronounced, ^if^ there had been a total blockade, and it had gone on for a longer period of time, would we have had a serious run on gold? What can we do to prevent a disparity in interest rates ^such as we have recently seen between ourselves & G. B^. It should be possible for us to get better coordination with the western governments to limit any causes for concern.

                                                                        Sincerely,  [unsigned]

The Honorable / Douglas Dillon
Secretary of the Treasury / Washington, D.C.

Note that this document precedes the Presidential Records Act, which made papers such as this created after the 1978 Act the property of the National Archives and Records Administration.  

Condition: Several small puncture marks to the top left corner from removed staples.

With: JOHN F KENNEDY, autograph doodles on a card, [Nov. 5, 1962]1 p., 5x3 in.
President John F. Kennedy wrote “Doug” three times with lines around each during a phone conversation with Douglas Dillon about monetary implications of a prolonged Cuban missile crisis.
[In Evelyn Lincoln’s Hand] Sec Dillon / #21

With: EVELYN LINCOLN. Personal Secretary to JFK, letter of authenticity, July 16, 1990.
“On November 7, 1962 Secretary Douglas Dillon called President John F. Kennedy at 10:15 a.m. to discuss the letter that President Kennedy had written to him on November 5, 1962. The handwritten notes on the card, which you now have in your possession, ‘Doug’, ‘Doug’, ‘Doug’ were written by President Kennedy during that conversation...”

With: additional collateral. 

Historical Background
In 1961, the U.S. deployed nuclear missiles in Italy and Turkey and supported the ill-fated Bay of Pigs invasion of Cuba to topple Fidel Castro. In July 1962, Nikita Khrushchev secretly agreed with Castro to deploy Soviet nuclear missiles in Cuba. After a U-2 spy plane discovered the building of missile installations, President Kennedy convened a meeting of top advisers, desperate to act before the missiles became operational. On October 22, 1962, Kennedy ordered a naval “quarantine” (not a blockade, which by definition would have been an act of war) to prevent additional missiles from reaching Cuba, and demanded the withdrawal of all Soviet missiles from Cuba. The crisis is widely thought to be the closest the world has ever gotten to a nuclear conflagration. After days of extremely tense negotiation, on October 28, Khrushchev announced the Soviets were removing their missiles in exchange for an American promise not to invade Cuba, with a secret additional promise that America’s Jupiter missiles would be removed from Turkey. The U.S. ended the naval quarantine on November 20 and removed the Jupiter missiles the next April.

Gold and the Cold War
In the 1950s, as Western European economies recovered from World War II, their payment deficits became surpluses, and they traded many of their excess dollars for gold, causing the depletion of American gold reserves. In 1962, a $2.2 billion deficit in the balance of international payments resulted in an outflow of $900 million worth of gold. To alleviate the problem, President Eisenhower hoped to but was unable to complete the withdrawal of American troops from western Europe.

Upon taking office, President Kennedy reflected his concern for the stability of the dollar and desire for a more favorable balance of payments and appointed conservative Republican Douglas Dillon as his secretary of the Treasury. The Treasury argued that the troop withdrawals were necessary to avoid “international monetary chaos abroad and deflation and possibly depression at home.”[1] Though Secretary of Defense Robert McNamara supported the Treasury, the State Department, especially Undersecretary of State George Ball, strongly opposed a reduction.

This brief letter in the wake of the Cuban Missile Crisis reflected Kennedy’s anxiety over the continuing gold outflow. On the following day, Secretary Dillon responded in a confidential memorandum: “it is my feeling that our present arrangements in international monetary policy met the test of the Cuban crisis with flying colors.” Insisting that there were “no crisis-induced withdrawals of gold whatsoever,” Dillon asserted that the “only visible effect” was “a brief run on the London gold market during the two days immediately following your October 22 speech,” which Dillon deemed “entirely understandable in view of the serious situation.” He also reported a “brief flurry” of movement into Swiss francs by European holders of dollars, which could have resulted in a demand for gold. However, with the cooperation of the Swiss, “we were able to mop up those excess dollars through activation and utilization of Federal Reserve swaps and Treasury forward exchange operations.”[2]

Dillon admitted it was difficult to answer Kennedy’s question of what would have happened if the crisis had been more pronounced, but he doubted that “a more complete blockade” would have had any effect. Military action would have been another matter: “A major military engagement between the U.S. and its Allies and the Soviet Union, even though nuclear weapons were not involved, might have necessitated worldwide action in the form of exchange controls such as might be expected in time of war.” Nevertheless, Dillon reassured the President, “short of such a situation I think our present arrangements have proved out remarkably well.”[3]

Two months later, Kennedy wrote Dillon: “I am concerned about the figures that you sent me on the gold drain for 1963. Won’t this bring us in January 1964 to a critically low point? What are the prospects that we could bring this under control by 1964?”[4] Gold deficits continued until August 1971, when President Richard Nixon unilaterally “decoupled” the dollar, ending the gold standard and foreign government redemption of dollars in gold at $35/ ounce. Private American ownership of gold, which had been outlawed under Franklin D. Roosevelt during the Depression, became legal again on January 1, 1975.

Douglas Dillon (1909-2003) was born in Switzerland to American parents. He graduated from Harvard University in 1931 and joined his father’s investment bank, Dillon, Read & Company in New York City. He served in the Pacific Theater in World War II, then returned to Dillon, Read, becoming chairman in 1946. By 1952, he had doubled the value of the firm’s investments. President Eisenhower appointed Dillon as Ambassador to France in 1953, Under Secretary of State for Economic Affairs in 1958, and Under Secretary of State in 1959. In 1961, President Kennedy appointed Dillon (a Republican) as Secretary of the Treasury, a position he held until 1965. He proposed the fifth round of tariff negotiations under the General Agreement on Tariffs and Trade (GATT), conducted in Geneva from 1960 to 1962. He served as chairman of the Rockefeller Foundation from 1972 to 1975.