Lyndon Johnson's Dollar Diplomacy

Cicero wrote that unlimited money provides the sinews of war. The actions of the Johnson administration, which continuously grappled with what might be called a money/security axis during the years 1964-67, clearly illustrates the truth of this observation. I am referring to the connection between Anglo-American financial problems, the future of NATO and the maintenance of a British defence commitment East of Suez. For three years these intertwined concerns occupied significant attention in both Washington and London, as the Johnson administration attempted to juggle all these balls without jeopardising its real priorities – Vietnam, the Great Society and continued domestic prosperity.

Unlike his predecessor, Lyndon Johnson did not come to the White House with a firm policy in mind for protecting the US dollar. Nor did concerns about the Atlantic Alliance weigh as heavily with him as they had done with John F. Kennedy. However, in February 1964 a proposed British increase in bank rate (equivalent to the American discount rate) made the president aware that his administration would be affected by financial events in London.