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Declassified per Executive Order 13526, Section 3.3 NND Project Number: NND 63316. By: NWD Date: 2011 1961 JUL 121521

12 July 1961

MEMORANDUM FOR DEPUTY SECRETARY GILPATRIC

The following information has been received from Colonel Ed Black:

Following is memo of my conversation with Vice President Tho on 10 July prepared for the Ambassador at his request. Mr. Tho invited me to his office as a result of a note of introduction from General Lansdale.

Taking advantage of the opportunity I reviewed briefly the presentation which Staley-Thuc were preparing to make to President Diem stressing the "breakthrough concept," the need to mobilize Vietnam's full effort to meet the current crisis, and the principle of a complete joint approach on the part of both VN and US Governments to the emergency. Mr. Tho appeared to be already briefed on this subject. He freely conceded that it was impossible for the US to provide Vietnam with piasters. He acknowledged that the main source of piaster revenues was for the GVN to provide fora higher piaster return per dollar of US economic aid imports. The problem which troubled the GVN was their fear that such an increase in piaster return per dollar of US economic aid would cause a rise in prices and thus, in turn, would create an irresistible demand for broad-based wage increases. Thus the GVN might find itself involved in a wage-price spiral which it would be unable to control. He conceded, however, that the basic problem was more political than economic.

Turning to more general subjects, Tho pressed me for my opinion of the current situation in VN. I replied that based on my observations made during my last visit in 1956, the country had achieved tremendous progress. Tho, agreed, but still left me with the impression that he held a more pessimistic view of the situation. Rh