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O ffice Correspondence
T o __ _______Governor Meyer 1/________
Fro m
FEDERAL RESERVE
BOARD
Date January 4, 1933
Subject:.
Mr. Goldenweise:
Attached are copies of three memoranda supplied Mr. Joslin
at his request.
January 3, 1933
GOLD ’
iOVEMENTS
Since the middle of June, this country’s stock of monetary gold
has increased by $596,000,000, of which $105,000,000 was imported,
$459,000,000 released from earmark, and $31,000,000 represented do
mestic production and other minor items.
000
This addition of $596,000,
to the stock of gold represents a recovery of more than one-half
of the gold lost by this country during the nine months preceding last
June.
The table shows the countries to which the gold was lost during
the nine months and from which it was received in the following six
months.
Sept. 16, 1931 June 1 6 , 1932
to
to
June 13. 1932 Dec. 2 8 , 1932
Chango in gold stock.........................
Net import (+) or export
Earmarking operations................
Domestic production, e tc . . . .
Sept. 16, 1931
to
Dec.
28,
1932
-1,107,507
- 777,109
3 5 8 ,51 *+
+
28,112
+ 5 9 5,738
+ 105,528
+ 459 ,i4i
+ 31 ,0 6 9
France......... .
Netherlands,
Switzerland,
Belgium.........
Siam................
Germany.........
- 1 .0 0 3 .te3
1 6 5 ,3 2 8
- 112 ,9 79
- 121,33*+
14,649
12,860
+ 1 9 4 ,i4i
+ 1 7 .7 3 5
+ 9,791
+ 2 3 ,1 5 7
• •••
+ 7,^ 6 7
Japan..................
England..............
Canada................ .
China...................
India.................. .
M exico................
Czechoslovakia,
+
+
t
+
+
-
205,753
1+5,1+67
9,008
+ 10,681
+ 160,798
+ 3 0 ,1 0 5
+ 26,080
+ 17,928
+ 9,372
+ 1 9 ,5 18
+ 10,510
Other countries,
+
3 7 ,9 1 9
+ 37,2te
+ 75,159
-511,769
-6 7 1 ,5 7 7
+ 1 0 0 ,6 2 7
+ 59,121
Gains from (+) or lo sses to ( - ) :
56,386
20,662
15,557
1 3 ,1 1 2
~S09 , 2S2
-1^7,503
-103,188
-
9 2 ,1 7 7
- lU,6U9
-
5 ,3 9 3
+216,434
+ 115,33 1
+ 86,^91
+ 47,342
+ 33 ,^ 2 5
+ 2 2 ,4 s 4
Page 2
Talcing the period aa a whole there was a loss of gold to Franoe
of $809,000>000, to Netherlands of
%U o >000>000,
and to Switzerland
of $103,090,000, while receipts were #216,000,000 from Japan, £115,
000,000 from England,
i 86,000,000
from Canada, £47,000,000 from China,
1-33,000,000 from India, and $22,009,000 from Mexico*
Indications are
that the gold inflow will continue in the next few months both &a a re
sult of tiiis country receiving a considerable part of the new gold
mined and of continued imports froa Canada, Mexico, and the Far East#
The chart shows the total monetary gold stock of the United States
from
1919
to date and brings out particularly the fact that losses of
gold by this country in 1925,
1927-1928,
and
1931-1932
have in each case
Page 3
been followed by a return flow of gold.
The losses were In all cases
due to special circumstances like the Dawes loan in
money and large volume of foreign loans in
central bank balances in
1 9 3 1 -1 9 3 2 ,
1927,
1925,
the
easy
and the withdrawal of
The inflow of gold, on the other
hand, has lasted over longer periods and has reflected in general the
favorable position of the United States in its balance of international
payments.
January 3, 1933
Kh'CEWT CURRENCY DEVELOPMENTS
During recent weeks the return flow of currency from hoarding,
which was interrupted in October and November, was resumed at a
moderate rate.
As the year closes the general level of circulation, after making
allowance for usual seasonal demano, is lower them at any time during
the year, though still $100,000,000 higher than in November and early
December of 1931•
chart, which
3how3
The course of currency demand is illustrated by the
the amount of money in circulation weekly sine©
1922, after allowance for usual seasonal variations.
It should be noted
that non-season&l increases in currency do not represent hoarding alone,
but also increased use of cash where banking facilities are not available,
owing to bank failures, the effects of service charges ira-osed by banks on
small accounts, and since last summer the effects of the tax on checks.
The chart illustrates the major currency movements of the past two
years.
It shows the rapid rise of currency in the autumn of 1930 when con
fidence was shaken by the failure of large banks in Kentucky and later in
New York; the temporary decline in the autumn of 1931, after the President
first
an n ou n ced
his program of reconstruction; and the larger decline after
the beginning of February, 1932, when the Reconstruction finance Corporation
became active.
In both of these cases subsequent disturbances caused hoard
ing to be resumed; it reached a peak in the middle of last July, following
upon the banking disturbances in Chicago
Since July 20 there has been a decline of £370,000,000 in the
general level of circulation after allowance for seasonal changes»
The largest part of this decrease represents a return from hoarding,
though in the pact two souths the fact that the rise in currency has
been less than seasonal has been due in part to a smaller volume of
holiday trade than has been usual in recent years#
ALL BANKS IN TKI UNITED STATES: LLV?
m
m
k
* v m - m z
rjQlh)
AND
Rote; In addition to suspension# and reopenings shown in
the table, changes from year to year in the total number
of banks in operation reflect the effect of mergers, con
solidations, primary organizations, and liquidations*
: Number : Amount of deposits
s
of
|
(in millions)
: banks :
On December 31, 1928
3uspended during 1929
Reopened during 1929
On December 31, 1929
Suspended during 1930
Reopened during 1930
On December 31, 1930
Suspended during 1931
Reopened during 1931
On December 31, 1931
Suspended during 1932
Reopened during 1932
On December 31, 1932
25,576
$56,766
642
235
58
26
24,630
55,289
1,345
H7
865
22,769
53,039
2,238
276
1,692
158
19,966
4-5,821
ItM 3 *
287*
18,509**
62
728*
273*
41,688**
*u.;jrej prcll-alnnry ^Estimated
January 3 , 1 9 3 3
R.& S•
Cr. 3
CONFIDENTIAL
BUSINESS AND CREDIT CONDITIONS
Some of the factors in the business and credit situation to he considered
in deciding on an open-market program are discussed in the following paragraphs.
Business activity
Business activity, after increasing substantially between July and Septem
ber, has been relatively stable since that time, except for seasonal movements.
Industrial production, as measured by the Board* s seasonally adjusted index, has
continued through December at about
pared with
58
66
per cent of the
1923-1925
average as com
per cent in July, and factory employment and payrolls have also
been maintained in recent months at a relatively higher level.
The value of
construction contracts which increased in the third quarter, contrary to sea
sonal tendency, declined considerably in the fourth quarter; residential build
ing continued to be an unusually small part of the total, while the proportion
of public works was unusually large.
Distribution of commodities by rail has
continued at a relatively higher level since September.
The value of commod
ities sold by department stores, however, showed considerably less than the
usual increases at the Christmas season and was smaller than a year ago, re
flecting in large part lower prices.
Wholesale commodity prices, after reaching a low level in June, increased
during July, August, and early September, but since that time have declined by
an amount slightly larger than the previous advance.
The summer advance in
wholesale prices was largely in farm products, foods, hides, and textiles; the
subsequent decline has also been in prices of these commodities, particularly
grains and livestock, and has reflected in part seasonal factors.
Prices of
cotton and other textile raw materials, which showed a substantial increase,
2.
have declined considerably, but are still somewhat above the low levels of
early summer.
In general, the increase in industrial production this fall has been con
centrated in industries producing non-durable goods, such as textiles and shoes.
During recent months, however, there has been a marked increase in production
of bituminous coal, and in December output of automobiles increased substantially
in connection with the introduction of new models.
Activity at textile mills
continued at a relatively high rate in December, according to preliminary re
ports, and was at aoout the same level as in the corresponding months of the
two preceding years.
Output of steel,
however, was considerably smaller in
December than in the preceding month, or than a year ago,
Member bank credit
Volume of memoer bank credit, as indicated by weekly statements of report
ing member banks in leading cities, declined by $2 50 ,000,000 between the middle
of October and the middle of December.
This decline represented a further con
traction of loans, both on securities and other, with little change in the vol
ume of the banks1 investments.
At banks in New York City there was a slight
increase in loans and a larger increase in investments, while at banks outside
of New York City both loans and investments were reduced.
The decrease of $250,000,000 in loans and investments of these banks dur
ing the past two months followed upon an increase of nearly $800,000,000 between
July and October, so that the volume of credit in December was still $550,000,000
above its low level in mid— summer.
Notwithstanding the decline in loans and investments, deposits of the re
porting banks continued to increase.
Time deposits increased by $155,000,000
between July and October and then declined by $50,000,000 to December 2 1 ; demand
3
deposits increased by $650,000,000 between July and October, and by an addi
tional $3^5»000»000 since that time.
This increase has been largely the result
of a transfer of funds from Government to private account, and an increase in
the volume of balances re-deposited by country banks with their city corres
pondents.
The following chart shows the volume of funds of out-of-town banks
with correspondents.
At the present time street loans for out-of-town banks
are negligible and the total volume of $ 1 ,^70 .000,000 of out-of-town bank funds
in New York consists of balances held there by correspondent banks.
This
amount, which represents largely the re-deposit of surplus funds of interior
banks with their city correspondents, has increased by about $ 650 ,000,000 since
last February.
The increase in these balances since February has been about
twice as large as the excess reserves of the banks in New York City.
Increases in the volume of deposits since the middle of 1932 have been
accompanied by further declines in the rate of turnover of deposits; the
growth in the means of payment has not been accompanied by an increase in
the volume of payments.
The rate of turnover of deposits, or their velocity,
was U5 times per year in 1929 , decreased to 26 by the last quarter of 19 30 ,
and to l 6 by the last three months of 1932 .
Two charts are shown, giving the course of the principal items in the
reporting member bank statement, and the course of loans and investments at
banks in New York City, Chicago, and other cities.
volume and
Another chart shows the
distribution of the excess reserves of member banks.
F—-
E X C E S S R E S E R V E S OF M E M B E R BANKS
o ^ 0N3 or Dollars
(Wednesday Figures)
OOO
Millions
of Dollars
600
500
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
G-old movements
Since the middle of June, this country's stock of monetary gold has in
creased by $ 590 ,000 ,000 , of which $1 0 5 ,000,000 was imported, $^5 9 ,000,000 re
leased from earmark, and $3 1 ,000,000 represented domestic production and other
minor items.
This addition of $596,000,000 to the stock of gold represents a
recovery of more than one-half of the gold lost by this country during the
nine months preceding last June.
The table shows the countries to which the
gold was lost during the nine months and from which it was received in the
following six months.
s.
CHANGES IN UNITED STATES GOLD STOCK
September l 6 , 1931 to December 28, 1932
(In thousands of dollars)
Sept. 1 6 , 1931 June 1 6 , 1932
to
to
June 1R. 1972 Dec. 28, 1972
Change in go"1 d stock.............
Net import (+) or export
Earmarking operations..........
Domestic production, etc. .....
Sept. 1 6 , 1931
to
Dec. 28. 1972
-1,107,507
- 777,105
- 35S, 51*+
28,112
+5 9 5 .738
+ 105,528
+ 1+5 9 ,11+1
+ 3 1.0 6 9
- 5 11 ,76 9
- 6 7 1 ,5 7 7
+ 10 0 ,6 27
4. RQ 1QfT
Prance...................
Netherlands..............
Switzerland............. .
Belgium..................
Siam.....................
Germany............
-i, 0 0 3 ,1+23
- 165,288
- H2.979
- 1 2 1 ,33 !+
ii+,6i+9
12,860
+191+,11+1
+ 1 7 ,7 8 5
+
^ 9
j ,7Q1
1j x
+ 27 1R7
—gOQ
—OUj7 ,?g?
cOc
-l1+7,503
—1
07 ,100
1 gg
lUj
- JQg
177
°ix
1l
- lU,6U9
- 5,393
Japan....................
England..................
Canada...................
China................
India....................
Mexico...................
Czechoslovakia............
+' 20R
c-'“Vv 7R7
IJ J
^5 .^ 6 7
+
56,386
+
20,662
+
1R
“
X j 9 jRR7
jl
+
17
112
T
Xj 9 XX<~
9,008
+ 10,681
+160,79 8
4- 70 TOR
+ 26,686
+ 1 7 ,92 s
4 Q 77?
+
Rig
^ iq
xJ9j
xo
+1 1 5 ,3 3 1
+ 86ji+9i
+ >+7,3^8
+ 33.1185
j
OO LroL
LGfilt
T_ C.C.iL
Other countries...........
+
3 7 ,9 1 9
+ 3 7 ,21+0
+ 75,159
Gains from (+) or losses to (-):
+
7.’1+67
j
-oi £ LltIi
tclO,
+ 1 0 ,5 1 0
9.
Taking the period as a whole there was a loss of gold to France of
$809,000,000, to Netherlands of $1^8,000,000, and to Switzerland of $103,000,
000, while receipts were $216,000,000 from Japan, $115,000,000 from England,
$86,000,000 from Canada, $^7,000,000 from China, $33,000,000 from India, and
$22,000,000 from Mexico.
Indications are that the gold inflow will continue
in the next few months "both as a result of this country receiving a consider
able part of the new gold mined and of continued imports from Canada, Mexico,
and the Far East.
The chart shows the total monetary gold stock of the United States from
1919 to date and brings out particularly the fact that losses of gold by this
MONETARY GOLD STOCK OF THE UNITED STATES
Millions of Dollars
Millions of Dollars
5500
5500
5000
5000
i*500
4500
4000
4000
3500
3500
3000
3000
2500
2500
2000
1919
1920
1921
1922
1923
1924
1925
1926
1927
•
l---192ft 1929 1930
2000
1931
1932
10.
country in 1925» 1927-1928, and 1931-19 32 have in each case been followed by
a return flow of gold.
The losses were in all cases due to special circum
stances like the Dawes loan in 19 2 5 , the easy money and large volume of for
eign loans in 1 9 2 7 , and the withdrawal of central bank balances in 1931 - 19 32 .
The inflow of gold, on the other hand, has lasted over longer periods and has
reflected in general the favorable position of the United States in its bal
ance of international payments.
Gold position of the Federal reserve banks
As is indicated by the table below, the reserve ratio of the Federal re
serve banks on December 28 was 6 2 .7 per cent, the ratio varying from 4 9 .3 per
cent in Minneapolis to 71.7 per cent in Boston.
On that date the system had
$ 1 *3 3 0 .000,000 of excess reserves, the largest amount, $432,000,000, being
shown by the Chicago bank, and the smallest, $ 1 1 ,0 00 ,000 , by the Dallas bank.
The table shows also the amount of United States securities pledged as col#
lateral for Federal reserve notes by the different Federal reserve banks and
the extent to which they would be deficient in their gold position if the
authority to pledge Government securities were withdrawn.
a whole this deficiency would amount to $335,000,000.
For the system as
This deficiency could
be made up to the extent of $264,000,000 if some arrangement were devised by
which the banks would hold none of their own Federal reserve notes in vault.
But even in that case there would still be a deficiency of $70,000,000, indi
cating the great importance of having the provisions of the Glass-Steagall
Act continued.
11
GOLD POSITION OF THE FEDERAL RESERVE BANKS
(Amounts in thousands of dollars)
District
Re
serve
ratio
Excess
reserves
Federal
reserve
notes
out
standing
Elig
ible
paper
Collateral
United
States
Gold
secur
ities
Deficiency
in
gold
(1)
Own
Federal
reserve
notes
(Per
cent)
Boston......
71.7
1 0 7,5 1 1
218,931
1 3,3 6 0
21,400
New York....
57.0
378,981
666 ,654
5 7,3 8 9
9,000
Philadelphia.
5 6 .7
67,028
255,800
1+9,561
52,000
206,239 - ^5,839
1 6 ,1 76
Cleveland....
59.2
90,881
30 1,54 6
2 6 ,11 1
85,000
2 75 ,^ 35 - 70,642
13,501
Richmond....
62.2
37,502
110,490
17,192
18,000
93,29S - 1 5,5 0 0
Atlanta.....
5 5 .6
2 7 ,61+3
115,8 6 1
25,590
32,0 00
90,271 - 24,822
7.602
«
is , 145
Chicago.....
77.3
432,446
730 ,773
16,80 1
27,000
713,972 -
6,002
39 ,8 6 3
St. Louis....
5 8 .8
3 3 ,6 3 3
ni,77S
6 ,8 2 7
36,200
iot+,951 - 3 0 ,3 6 2
8 ,5 3 5
Minneapolis.. ^ 9 .3
13,4o 4
8i+,i+07
8,128
3*+, 900
76,279 - 30 ,8 8 3
3 ,^ 1 2
Kansas City..
5 8 .3
3 2 . >+97
99.767
1 1 ,1 3 6
29,000
88,631 - 20,239
8,636
Dallas......
5 0 .1
11,47^
44,096
5 ,0 6 5
16,000
39,031 - 12,199
5.069
San Francisco
6 3.9
97,536
259,6l4
15,144
68,000
244,470 - 5 7 ,5^5
31+,2l+9
Total...
6 2 .7
(l)
2 0 5 ,571 - 19,606
2 1 ,1 2 7
609,265 -
8 7 ,91+1+
1,669
1,330,537 2,999,717 252,304 428,500 2.71+7,1+13 -335,30S 264,259
If no United States Government securities were pledged as collateral.
12.
Currency movements
Return flow of currency from hoards was resumed in December, after a
period of two months in which there was little change in hoarded money.
The
chart shows the volume of money in circulation, after adjustment for seasonal
variations, for the period from 1922 to 1 9 3 2 .
On the basis of available information, it may be roughly estimated that,
barring unforeseen contingencies, the return flow of currency from the
Christmas peak to the end of January will be about $200,000,000.
National bank notes
Issues of new national bank notes amounted to less than $1,000,000 dur
ing the week ending December 28.
The rate of new issues reached a peak late
13.
in August of $19,000,000 for the week ending August 31, an(i has been declining
since then.
It averaged $12,000,000 per week in September, $8,000,000 per
week in October, $4,000,000 per week in November, and $2,000,000 per week in
December.
One large bank in New York Citybas retired its notes.
Total new issues of national bank notes since passage of the Federal Home
Loan Bank Bill amount to $164,000,000.
These issues were distributed by Fed
eral reserve districts as follows:
NEW NATIONAL BANK NOTES ISSUED AGAINST BONDS:
DECEMBER 28, 19 32 , INCLUSIVE
JULY 22 TO
(In thousands of dollars)
Boston.....................
New York...................
Philadelphia...............
Richmond...................
Atlanta....................
Chicago....................
St. Louis..................
Minneapolis................
Kansas City................
Dallas.....................
San Francisco..............
3,228
19,822
8,962
8 , 3 57
5,205
8,304
24,481
4,793
6,313
16,021
5,280
52,76 5
Total.................
163,533
Cleveland................
National bank notes retired— including re
demptions against which new issues have
not yet been made (partly estimated)
July 22 to December 28, 1932, inclusive..
17,062
Increase in national bank notes outstanding
July 22 to December 28, 1932, inclusive.. 146,471
National bank notes outstanding, December
28, 19 32 ............................... 880,825
Position of the public debt
The table below shows the volume and composition of the public debt on
December 3 1 , 1930, and November 30, 1932.
During this period the total gross
debt increased fi*om $ 1 6 ,000,000 to $ 2 1 ,000 ,000 , all classes of obligations
showing an increase:
PUBLIC DEBT
(In millions of dollars)
Bonds
Notes
Cer
tifi
cates
Bills
Dec. 31, 1930...
1 2 ,1 1 3
2 ,3^2
1,192
Nov. 3 0 , 1932...
1 ^ .2 5 7
3,539
Increase from
Dec. 31, 193 O
to Nov. 3 0 ,
1932.........
2,lU4
1,197
Non-interest
bearing
debt
Total
gross
debt
127
252
16,0 26
2 ,03 s
6^2
330
20,806
SU6
515
7S
^ ,7 8 0
Outstanding on:
December financing resulted in an increase of $15,000,000 in the public debt.
The cost of Government borrowing on different kinds of paper in the last
two years is shown below; it indicates that financing in December, 1932, was
at the lowest cost on record.
High
Bonds
Notes
3 3/8$
3 lA
Certificates
3 3A
Bills
3 l/U
(Month)
(Mar. 1 9 3 1 )
(Dec. 1931 and
Sept. 1931)
(Feb. and Mar.
1932)
(Dec. I9 3 1 )
Low
3
$
2 l/S
(Month)
(Sept. 1931)
(Aug. 1932)
3A
(Dec. 1932)
0.09
(Dec. 19 32 )
F o rm
pro. 181
I
f
O ffice Correspondence
To
From
______Governor Meyer_______ "
FEDERAL RESERVE
BOARD
+ i
Date__ January 7, 1933
Subject:.
Mr, Goldenweiser
ero
I transmit herewith a memorandum on easy money and its
relation to construction, prepared in accordance with a re
quest from you received on December 20 through Mr. Harrison,
Several members of the Division have had a hand in the
preparation of this memorandum, including Mr. Garfield,
Mr. Terborgh, Mr. Riefler, and myself.
2— 8 4 9 5
EASY MONEY IN IIS RELATION TO CONSTRUCTION
The relationship between changes in the availability and cost of
*
/
money in the short-term money markets and changes in the volume of busi
ness is not always immediate, simple, or direct.
Volume of business
activity began to decline in the summer of 1929 and has persisted with
little interruption to the present time, notwithstanding the fact that
short-term money rates began to decline abruptly in the fall of 1929
and that conditions in the open markets since early 1930 have remained
continuously easy, with the exception of a six months’ period in the
winter of 1931-32.
This is in contrast to developments in the 1921 de
pression in which resumption of activity followed closely upon the ap
pearance of genuine easing in the short-term open markets.
however, altogether unique.
It is not,
In certain depressions in the past, particu
larly those of exceptional duration and magnitude, such as in the nine
ties, extreme ease in the open money narkets had little immediate re
flection in expanding business operations.
Influence of money rates on capital markets
In this contrast between conditions in the nineties and today, and
conditions in 1921 and in other depressions, the most important differ
ence is not in the direct effect of short-term money rates on the financ
ing of current production and merchandising operations, where most of the
short-term money is used, but in the effect of abundant supplies of short
term money on operations in the construction and other capital industries
The direct effect of abundant supplies of short-term money on operations
-2-
which depend entirely on short-time financing is probably not of suf
ficient magnitude to reverse the tide of those economic forces which
determine the extent and duration of a major depression.
A drop in the
cost of short-term financing from 6 to 3 per cent, for example, has rel
atively little effect upon the total costs of manufacturing textiles for
the market, or upon the price at which textile products can be merchan
dised.
Any stimulus which cheap financing might give to current textile
manufacturing and distributing operations, consequently, would be quickly
offset by the depressing effect of overexpanded inventories, so long as
consuming markets did not simultaneously expand sufficiently to absorb
an enlarged output.
In the capital market, on the other hand, changes
in the cost of financing play a more important part.
The availability
of mortgage money at 6 or at 5 per cent has an important bearing on
whether new construction will prove profitable at the prevailing level
of rents, and funds made available through mortgage money and other long
term financing have an enormous effect, directly in creating employment
and increasing consumption, as well as indirectly in furnishing a broad
market for construction materials, traffic for railroads, etc.
The most important effects of easy money on business conditions,
therefore, are probably to be found in conditions in the capital markets.
“
When the situation in these markets is such that easy short-term money
is translated into more abundant long-term money at a time when there is
an effective market demand for long-term funds, monetary ease in the
short-term markets is likely to be followed shortly by a resumption of
general activity.
So long, however, as conditions in the capital markets
are such that the flow of long-term money is not stimulated by the
-3-
availability of short-term money, its appearance does not of itself have
much immediate effect toward stimulating activity.
The 1920-31 depression
Conditions under which easy short-term money may be expected to
hasten the emergence of business recovery from depression were all well
illustrated in the period 1980-21, for in that period large deferred de
mands for construction and other forms of capital equipment had been
built up in the preceding years.
Buring the war, private capital n o t a
tions in this country were restricted in order to facilitate the n o t a
tion of government bonds, and housing and other forms of construction
were deferred, partly on account of high costs and restriction oi capi
tal flotations, and partly as a result of -priority'- arrangements which
gave war demands the first call on the productive resources of the country.
As a result, at the end of the war there were many industries in a posi
tion to increase their capital plant as soon as the availability of fum.s
made expansion possible.
This expansion of equipment occurred in indus
tries in which capital equipment had been deferred by the war, such as
housing, railroad equipment, and state and municipal construction of all
kinds.
There was also probably a considerable demand arising, out of the
development of new industries, and the relocation of plants in new areas,
which reflected the fact that from 1917 to 1928 large changes in freight
rates and other important prices entering into costs of production hac
created new low cost production areas.
The widespread introduction of the
automobile, finally, increased greatly the demand for housing in suburban
areas adjacent to large cities,
as
a reeult of these developments, demand
for housing was so large-as will be shown later-that resumption of opera
tions began at the very beginning of 1921 and did not await easing of creait
conditions wh.icli came later in
-4-
the year.
Euilding activity was, however, further stimulated by easy
credit when it developed.
The current depression
One of the conspicuous features of the current depression has been
the small demand for new capital.
Periods of business inactivity are
usually favorable periods for undertaking long-term commitments because
of lower urices and cheaper financing.
During the current depression,
however, these incentives have failed to operate in volume not only dur
ing the past twenty months but also during 1930 before the general un
certainty of conditions had resulted in hesitation on the part of busi
ness men to make long-teim commitments.
This absence of demand for cap
ital despite relatively cheap credit can be laid to two factors.
In
small part it reflected the fact that prices of building materials,
labor, and other elements entering into the cost of capital goods had
fallen more slowly than usual during the latter part 01 1929 and most
of 1930, thus offering less inducement for the inauguration oi new un
dertakings.
In major part, however, it reflected the fact that the
preceding boom from 1925 to 1929 was a boom in housing construction and
in capital goods of all kinds.
Sven after the residential building boom
which began in 1921 began to taper off in 1928, other types of construc
tion expanded further.
The tightness of short-term credit in 1928 and
1929 in fact did not reduce capital available for construction, except
possibly in housing.
With respect to other types of construction,
large corporate profits and stock market flotations continued to furnish
capital in large quantities for capital construction of all kinds, such
-5 -
as plant modernization and large scale utility construction.
At the same
time, furthermore, the bond market was furnishing ample funds to permit
a continuance of a large construction program by state and local govern
ment s.
The absence of increased demand for new capital in 1930, consequently,
reflected in part the fact that costs did not make new undertakings par
ticularly cheap at that time, but in much larger part the fact that the
preceding period of tight credit conditions had not succeeded in checking
stock market activity and had not, therefore, checked new capital flota
tions during the peak of the boom, with the result that the industrial
plant of the country as well as residential and business housing were
overexpanded.
i
Similar conditions prevailed in the long depression of
the nineties, which was preceded by a construction boom in housing and
railroads, with the result that subsequent abundant supplies of excess
short-term funds persisted for years without stimulating a large volume
of new construction.
Availability of mortgage funds
Expansion of construction activity, at the present time, therefore,
depends on the presence of specific needs for construction, on the exist
ence of a reasonable level of costs, and on the availability of funds to
finance construction operations.
These funds must come directly, in the
main, from two money markets, both of which are stagnant at present,
namely, the mortgage market and the bond market.
Mortgage money is es
sential to residential and many types of commercial building, the annual
volume of which averaged about ^3,600,000,000 a year from 1925 to 1928.
The extent of the subsequent decline in new mortgage financing is
illustrated by the fact that in 1932 building of this type aggregated
only about $400,000,000.
The availability of mortgage money is affected both by general con
ditions in other money markets and by specific conditions in the market
for real estate.
At present, while short-term money is exceptionally
easy, in the long-term markets generally yields are high, as is shown
by Charts I, II, and III, and there is little money available at any
price.
This contrasts with conditions in 1920-21 when many high yield
issues of bonds were floated successfully even before credit conditions
eased.
Fundamentally, the small current volume of long-term money of
all kinds reflects the fact that savings available for investment are
small or non-existent at the present level of national income.
Even the
insurance companies, for example, which usually invest a large volume ox
national savings, have invested large amounts in policy loans and have
reduced the volume of their new investments, notwithstanding uninter
rupted premium payments.
The. only real large source of funds in any of
the money markets at present consists of bank credit which is ample for
liquid short-term securities.
This credit, however, has not moved into
the mortgage or other long-term markets.
Current condition of real estate market
The present state of the real estate market is reflected, on the
one hand, in declining rents and declining real estate values, ana, on
the other hand, in an almost complete cessation of many types of new
construction in spite of substantial reductions in costs.
In the face
of a persistent oversupply of housing facilities, the volume of new
residential construction has now declined annually for four years, to
-7-
an unprecedentedly low level.
Four years is not a long time for a
general downward movement in construction to persist, so far as can be
judged from earlier experience, but the present decline has been by far
the most drastic which the counti'y has ever known.
After the 15 year
boom which ended in the early 1890‘s there was an irregular decline in
construction to a low point in 1900, a period of about eight 3 ears; alter
exoansion during the next decade there was a decline beginning about
1910 and continuing through 1918, accentuated after early 1917 by the
diversion of men and materials to the construction of ships, cantonments
and other war uses.
The decline since 1928, therefore, is unparalleled
not in duration but in extent; residential building of any character is
at an extraordinarily low level.
The severity of the present decline in residential ouilding and
the disinclination of lenders to supply mortgage funds to finance new
construction may be attributed largely to four factors:
(1 ) the ex
cessive expansion of housing which began in 1919 and lasted, with only
a brief interruption in 1920, until 1928; (2) the high level of costs
developed and maintained throughout that period; (3) the character of
financing this expansion; and (4) the general depression in business
which started after the decline in residential building was well under
way.
Extent of overexpansion (1919-1928)
.
The shortage of housing facilities at the conclusion of the war
resulted in a rapidly rising level of rents which made investment in
mortgages attractive and stimulated construction whenever prices made
-8construction possible.
Private building expanded rapidly as soon as
the armistice was signed and continued to increase until the autumn of
1919.
In the latter part of 1919, however, new residential construction
fell off when building costs became very high at the same time that con
ditions in the long-term money markets tightened.
Chart IY indicates
that the total physical volume of new construction undertaken began to
decline by early 1920.
The chart also shows that the physical volume of
new construction began to stabilize during the last half of 1920 and to
advance rapidly at the beginning of 1921.
The building boom of the
1920fs consequently was not initiated by easy money.
The shortage of
housing was so great that an expansion of new construction was profit
able throughout the worst of the depression of 1921 at a time when credit
conditions generally were still extremely tight and also at a time when
many other important lines of industrial activity were still contracting.
A genuine shortage in housing facilities that made renewed construction
profitable even at a time of general business depression was thus the
basic factor in the quick revival of construction activity in 1921.
The
rapid expansion in activity continued until the latter part of 1925 and
after that time the high level reached was maintained until 1928, as
shown on the chart.
By the end of 1924, however, rents had reached a
peak, as shown on Chart V and in consequence, subsequent construction
was undertaken to an increasing extent on a speculative basis.
The
oversupply of housing indicated by the downward movement in rents after
1924 was an important factor in the drastic decline in building which
began in 1928.
-9-
Costs
Oversupply of housing is not an absolute term but depends at all
times on the relation of costs to prospective income.
The .American
people could make use of a much larger absolute volume ol new housing
than was made available to them between 1919 and 1928, provided that
prices were cheap.
After the most pressing shortages were met, howevei,
they did not absorb in full at the prices charged the additional housing
that came on the market in the latter phases of the boom.
Building
costs remained higher throughout the boom than at the beginning of 1919.
In terms of prewar price relationships building costs from 192o to 1928
were about 190 per cent of the 1913 average, according to the index of
the Federal Reserve Bank of New York, whereas the Bureau of Labor's
Wholesale Price Index averaged about 140 per cent during the same
period.
A considerable part of the building done during these and_
later years prior to the decline was done on a speculative basis with
a view to Quick sale rather than operating profits and consequently
rested on an abnormal relationship betv/een rentals and costs, including
land costs, financing charges of all sorts, and taxes.
ffinanc ing
The character of the financing of construction in the period of
prosperity was another factor accounting for the severity of the subse
quent decline.
That many projects were financed on a thoroughly un
sound basis, is notorious, and the losses incurred by purchasers of
such securities have continued to demoralize the market for mortgages
and mortgage bonds.
Good issues as well as bad must, at present, meet
the skepticism of investors who have encountered heavy losses in real
-10-
estate investments.
General effects of the depression
All of these factors account for a severe decline in housing con
struction after early 1928.
They do not alone, however, account for
the drastic nature of the decline which reduced new residential con
struction by 90 per cent between 1928 and 1932; this is attributable in
part to the general economic breakdown.
As a consequence of a wide
variety of developments at home and abroad, incomes have been reduced
and people have been obliged in many cases to economize in their use of
housing by "doubling-up” or by exerting pressure for rent reductions.
Vacancies have also increased because of a considerable movement of
population from city to farm as unemployment has increased.
The ef
fects of these developments on the volume of residential building have
been particularly severe in the last year and a half.
During 1930 the
volume of residential building appeared to be stabilizing for a time
at a level less than one-half that prevailing in the 1925-1928 period.
At that time, however, costs were still at a high level and subsequent
declines in business activity resulted in a further contraction in
building volume during 1931 and early 1932.
Since the spring of 1932
there has been little change in the volume of residential building ex
cept that of a seasonal character.
Present prospects for new residential construction
Some of the elements in the situation which in recent years have
restricted the flow of funds into the construction industry, particularly
into residential building, are beginning to change.
Restriction of
-11-
activity to extreme low levels during the past year, for example, has
tended to limit the supply of houses, and further downward revision
of rents has undoubtedly prevented much contraction in use of space
which might otherwise have occurred.
Lower rents are discouraging to
lenders and borrowers if they result in reduced incomes from properties
as a whole, but if they permit larger use of space they may speed the
adjustment of supply to demand.
The pressure of reduced construction
activity has also led to large reductions in costs in many areas.
At the present time it is probable that in most localities ex
cessive costs are no longer a real deterrent to renewed construction
activity.
The published indexes which show costs down only 20 - 30
per cent from 1929 levels are based in part on inaccurate wage aata
and do not take into account large decreases in many important costs,
such as land values.
Actual wages now paid on construction are usually
much lower than stated wages, and it is probable that costs
o±
con
struction, taking into account all factors, have had much larger de
clines than the indexes show.
Moreover, when there is a prospect that
lower prices will stimulate increased purchases, present quotations for
steel and other materials would probably break further.
Scarcity of mortgage money is a more serious deterrent to building
at present than costs.
This obstacle, however, will begin to disappear
when building operations become profitable.
It would not require any
appreciable volume of mortgage money to increase residential building
50 or even 100 per cent from its present abnormally low levels.
The most important deterrent to resumption of building activity
remains, therefore, in the depressed state of the real estate market,
-12-
for so long as vacancies exist in suitable dwellings which are being
pressed for sale, it will be difficult to market new dwellings at a
profit in the same area, even at low levels of cost.
Yfith any real
resumption of activity, however, there would appear two factors v/hich
would lift the real estate market appreciably.
First, the present vol
ume of vacancies would tend to disappear quickly with even a relatively
small resumption of employment, since in many cases unemployed workers
who have ’
"doubled-up” or gone to live with relatives, will have to find
new shelter near their places of occupation as soon as opportunities
for work again appear.
Secondly, the drastic decline in general price
levels, operating differently on wages, taxation, and on cost of trans
portation, fuel, power, etc., has in all probability again developed
new low cost production areas which will attract industrial develop
ments during the next decade.
’.Then industry relocates its plants in
this manner, there may follow a demand for new construction for housing
paving, sewerage and water systems, etc., which would not be greatly ax
fected by the fact that surplus facilities exist in other sections.
money in the
s h o r t-te r m
money markets and changes in the volume of busi
ness is not always imriediete, simple, or direct. Volume of business
activity began to decline in the summer of 1929 and has persisted with
little interruption to the present time, notwithstanding the fact that
short-term money rates began to decline abruptly in the fall of 1929
and that conditions in the open markets since early 1930 have remained
continuously easy, with the exception of a six months1 perioa in the
winter of 1931-32.
This is in contrast to developments in the 1921 de
pression in which resumption of activity followed closely upon the ap
pearance of genuine easing in the short-term open markets.
however, altogether unique.
It is not,
In certain depressions in the past, particu
larly those of exceptional duration and magnitude, such, as in the nine
ties, extreme ease in the open money markets had little immediate re
flection in expanding business operations.
Influence of money rates on capital markets
in this contrast between conditions in the nineties and today, and
conditions in 1921 and in other depressions, the most important differ
ence is not in the direct effect of short-term money rates on the financ
ing of current production and merchandising operations, where most of the
short-term money is used, hut in the effect of abundant supplies of shortter® money on operations in the construction and other capital induatries
The direct effect of abundant supplies of short-term money on operations
jg
F o rm N o. 131
O ffic e C o rre s p o n d e n c e
FEDERAL RESERVE
Meyer
From
Attached are copies of a letter I wrote to Burgess about
the second and third sections of his study of devaluation,
also of a letter on the second section, written by Walter Gardner.
r e c e i v e d
FEB 8 1933
0 mrtuH O r TH E 3 0 '-'E R N 0 R
Ft-.Oi'.WAu
1
UOARP__|
/
4
COPY
February 6, 1933
Dr. W. Randolph Burgess
Deputy Governor
Federal Reserve Bank
New York City
My dear Burgess:
I have read your section on international effects of devaluation.
I have some comments on it.
I think that the discussion of the effect
on foreign trade does not present the case in the way in which it is
likely to develop.
What would happen if the pound sterling suddenly be
came worth $6.BO is that foreigners finding that they could get twice as
many dollars for their money would buy dollars in order to buy goods in
America with them and that would apply to commodities that are usually
exported and to
all kinds of other commodities.
in Germany.
wouldnH be a case of just wheat in Liverpool selling at
It
This is whathappened
the same world price, which would mean more dollars.
This is what you
say at first and later say that the price in Liverpool would not remain
constant.
What I believe would happen is that all the world would acquire
dollars and would bid for American goods, which would have the result of
bidding them up.
This, in turn, would make all foreign countries put up
various barriers against American goods with a resultant further disrup
tion of international trade.
with America by
Also
foreigncountries would try to compete
reducing their own prices.
I think that you have the
disruption properly pictured, but that the other part of the story could
be made much more realistic.
Page 2
I also think that the British example, which should properly be used
in this story, should nevertheless be a little more definitely differen
tiated from deliberate devaluation.
The British did not devalue the pound.
What they did was to suspend gold payments because they had to and the fall
in sterling followed as an adjustment to world conditions which had forced
the suspension.
In other words, the pound was kept artificially high by be
ing pegged to gold and when the peg was removed it fell.
That is not the
case with the dollar, which is pegged to gold, to be sure, but is strong
enough, so that if it were unpegged it might even rise rather than fall. De
valuation is different from suspension and I think that difference is not
made sufficiently clear in your draft.
I send you a copy of David Lawrence^ speech on the subject, which
might be of some interest to you.
I also send you a rewrite of this letter
in a more scholarly way by Walter Gardner.
I have just read your third section.
paragraph on page 2 is obscure.
The last sentence in the first
On page 6 it says "sound business does go
forward in an atmosphere of uncertainty."
In the effects on banking and credit, I should begin by saying that
many people believe that a 50 per cent devaluation would immediately and
automatically double prices.
This is a fallacy.
I also think that you
understate the effects of the agitation for devaluation.
All the gold
would be withdrawn almost over night and all banks, including the Federal
reserve banks, would fail.
The Federal reserve discussion is not convincing because it is too
much in our jargon— not familiar to the public.
Page 3
Page 10.
"Any devaluation, etc., might of course provide, etc."
This is not clear.
How?
Why?
This weakens the following arguments,
which also suffers from the fact that veterans’ loans did not create
new reserve money.
Page 13.
The statement that the Federal reserve system with a
ratio of 126 per cent would have a hard time to resist inflation would
not scare the proponents of the measure, it also implies that the system
lacks backbone.
Page 13•
The statement about "reserve funds or potential reserve
funds" is an example of Federal reserve jargon.
I offer these hasty comments for what they are worth.
Sincerely yours,
E.
A. Goldenweiser
Director of Research and Statistics
Enclosures
C O P Y
February 6, 1933
Mr. W. R. Burgess
Deputy Governor
Federal Reserve Bank
New York City
My dear Burgess:
I think you have made a very good analysis of the international
effects of deliberate devaluation in the United States.
I am not sure,
however, that you have sufficiently emphasized the peculiar position of
Great Britain and other countries which did not apply a policy of delib
erate devaluation but which, on the contrary, were forced off the gold
standard by the pressure of an increasingly unbalanced international po
sition.
The resultant decline in their currencies has on the whole
represented an adjustment to the realities of their trading position.
It
has been an uncomfortable process of readjustment for all concerned —
though less uncomfortable for a country like England perhaps than an at
tempt at drastic reduction of sterling costs.
It has undoubtedly con
tributed somewhat to the decline in world prices, and only loss is to be
anticipated from further instability of currencies after readjustment has
been effected.
The important point remains, however, that the deprecia
tion has been a process of balancing previously unbalanced situations.
Deliberate devaluation by the United States would run directly counter
to this process.
Our international position is still such as to lead, in
the absence of capital flights, to a steady inward movement of gold.
The
lowering of foreign currencies relative to the dollar tends to correct this
Page 2
situation and to produce a balance of payments between countries that
will permit general resumption of the gold standard.
An attempt to
lower the dollar relative to foreign currencies would be just the re
verse of what is needed.
The ill effects of the decline in sterling
have been incidental to an adjustment that was on the whole constructive.
A decline in the dollar would be destructive from every point of view.
From this general background I find it difficult to understand your
statement on page 31 that devaluation of the dollar would' bring about cur
rency depreciation in countries having an additional 30 to $0 per cent of
the world*s purchasing power.
If it has reference merely to countries the
currencies of which are still close to par, your table on page 27 would
show this group to be 17 per cent representing countries on the gold stand
ard (other than the United States) and 18 per cent representing countries
maintaining a nominal parity through exchange restrictions.
effects be limited to these countries?
Argentina —
But would the
Y/ould not Great Britain, Canada,
in fact all the outside world —
be forced into currency de
preciation corresponding in some measure to the devaluation of the dollar?
The very fact that the devaluation of the dollar would not be an adjust
ment to the realities of the international balance of payments would force
practically all other currencies down (in terms of gold) in order to main
tain the balance of trading and financial relationships with the United
States.
There are a few small points about your table on page 27 that appear
to require attention.
standard.
Mexico is included with countries on the silver
There is no free coinage of silver in Mexico.
The country uses
t
Page 3
a silver unit with a parity defined as the equivalent of 75 centigrams
of pure gold ($0.4.935)•
There is no equivalence, either legal or actual,
between the value of the silver peso and the value of its bullion content.
At present the value of the peso on the exchanges, depreciated though it
is, is more than three times the value of its silver content.
There is not
even a close parallelism between the movement of the peso and the movement
of the price of silver.
Such relationship as appears from time to time is
wholly due to the importance of the silver industry in Mexican economic life.
Certain other cases are not so clear.
It is my impression that Poland
still deserves to be ranked as one of the few gold standard countries.
We
have not been advised of the imposition of any exchange restrictions there.
Again, the rates which you quote us on Austria and Hungary would indicate
that they should be included among the countries maintaining a nominal par
rather than with the depreciated exchange countries.
Undoubtedly you have
in mind the unofficial exchange transactions in these countries; but if un
official quotations are to rule, the German reichsmark is depreciated.
The table as a whole is a very useful piece of work.
Even with Mexico
included it shows most vividly the unimportance of the silver standard coun
tries measured by actual trade.
It certainly makes it clear that the field
for international monetary action lies in stabilizing exchanges rather than
in endeavoring to restore silver.
The third section of your study arrived this morning, but I have not
yet had time to read it.
I am sending you a copy of David Lawrence's speech
on the maintenance of the gold standard.
It may be of some interest to you
as a popular exposition.
Enclosure
Sincerely yours,
E. A. Goldenweiser
F o rm NO. 131
Offic^CJorrespondence
To.
FromsIW
ernor Meyer
FEDERAL RESERVE c U ^ V
BOARD
n
Date__February 8, 1933
Subject:
Mr. Goldenweise
I,o
I am sending you a copy of a memorandum, prepared by Mr.
Gardner at Mr. Miller’s request, on "Devaluation in the Past."
2—
8406
F o rm N o. 131
C O P Y
CT*
1
Orrice Correspondence
FEDERAL RESERVE
B
0A
R
D
rw February sr 1933
To____ Mr. Goldenweiser
Subject:___________________________________
From
______
Mr. Gardner_____
Devaluation in the past_____
«po
2—
8495
You have asked me to look into the question of whether any important
country has ever devalued its currency while it was effectively on the
gold standard.
You also indicated your interest in the action taken by
the United States in 1834-*
There are, of course, many instances of countries that have recog
nized the market depreciation of their currencies in setting a new par.
But there appear to be no instances of any importance since modern mone
tary systems were established of a country reducing the par value of its
currency while the already existing par was effective in the market.
In
particular the method of deliberate devaluation of a redeemable currency
has never been employed by
any of the chief countries as a method of
raising prices.
Previous to the last quarter of the 19th century the bimetallic
standard was prevalent.
It is well known that under this standard condi
tions often arose in which one or the other of the s tandard metals was
over-valued with the result that the over-valued metal tended to displace
the under—valued metal in actual circulation.
the United States in 1834,.
This was the situation in
Under the bimetallic system adopted in 1792
any one could bring gold or silver to the mint and have it coined into
legal tender dollars at the rate of one dollar for every 24..75 grains of
pure gold or every 371.25 grains of pure silver.
In other words, at the
mint 1 grain of gold was the equivalent of 15 grains of silver.
This was
February 8, 1933
Mr. Goldenweiser, - #2
thereafter gold in the bullion market became more valuable in terras of
silver, the bullion ratio shifting to between 1 : 15 1/2 and 1 : 16.
This
meant that for domestic purposes gold was more valuable as bullion, silver
more valuable as money; and silver became, to use the words of Gallatin’s
report in 1829, "the unit of money and standard of value on which all public
and private contracts are founded."
Gallatin’s further remark that "payments
in silver, suppressing small notes, are, as yet, the only practical remedy
against over issues of the worst species of paper currency" calls attention to
the fact that the daily business of the country was carried on largely by
means of banknote issues, njany of them without adequate reserves behind them
or actually in default.
None of these issues, however, were legal tender; and
the government itself issued no paper currency.
The only legal tender was
gold and silver coin; the debt evidenced by a banknote could be legally dis
charged only in specie.
And specie in practice meant silver.
In order to bring gold into use an act was passed on June 28, 1834, re
ducing the content of the gold dollar to 23*20 grains.
This made 1 grain of
gold the equivalent at the mint of 16.002+ grains of silver.
situation was reversed.
The previous
Gold was now worth more as money than as bullion in
the market; and by the same shift silver became worth more as bullion.
The
slight change made in 1837 increasing the gold content of the dollar to 23.22
grains and thereby reducing the mint ratio to 15«98&+to 1 still left gold more
valuable as money, silver more valuable as bullion; and gold in practice be
came the standard money of the country.
This situation was accentuated by the
Mr. Goldenweiser,
February 8, 1933
- #3
gold d isc o v e rie s in C a lif o r n ia and A u s t r a lia .
s i lv e r d o lla r was worth &1.04-*
By 1853 the b u llio n in a
Not only had s i lv e r d o lla r s p r a c t ic a lly
ceased to c ir c u la te but fr a c t io n a l s i l v e r money was becoming scarce.
To
remedy the shortage of sm all change a law was passed which s u b s t a n t ia lly
reduced the s i lv e r content of f r a c t io n a l coins and made the amount of th e ir
issu e a matter o f government d is c r e tio n .
In 1873 the standard s i l v e r d o lla r ,
regarded by th a t time as obsolete, was dropped from the l i s t of government
co in s; and in 1876 the sp e c ia l s i l v e r trade d o lla r used in tra n sa c tio n s with
the O rie n t was deprived of le g a l tender powers.
7*ith t h is se r ie s o f develop
ments the le g a l b im e ta llic standard disappeared.
In p ra ctic e , however, we had never had an e ffe c tiv e b im e ta llic standard.
S ilv e r coin had been the e ffe c tiv e le g a l tender of the period 1792-1834- and
go ld became the le g a l tender of our subsequent h is t o r y —
in g made fo r the greenback ye ars.
some exceptions be
What the act of 1834- d id was to s h i f t us,
in p ra c tic e , from the s ilv e r to the gold standard.
I t d id not represent de
v a lu a tio n of a p re v io u sly e ffe c tiv e gold u n it; but rath e r a change from a
s i lv e r u n it to a s l i g h t l y le s s v alu ab le gold u n it.
The new gold u n it was 6
per cent le s s in value than the u n re al go ld u n it which was p re v io u sly on the
law books; but i t was only about 1 per cent le s s in value than the e ffe c tiv e
s ilv e r u n it i t replaced.
with r a is in g p r ic e s.
The purpose of the le g i s la t i o n had noth ing to do
I t i s apparent th at the a c tio n taken in 1834- was o f a
very d iffe r e n t character from th a t proposed today by those who urge a sharp
reduction in the gold content o f the d o lla r w ith a view to l i f t i n g d o lla r
p ric e s to a high e r le v e l.
F o rm N o. 131
londpn
Office Correspondence
To.
Governor Meyer
From
Mr* Goldenweiser
FEDERAL RESERVE
BOARD
r
Date __February, 23.,. 1933...
Subject:
I attach a carbon copy of a table showing non-seasonal
changes in demand for currency, which was prepared for Mr.
Joslin at his request.
r MINIMI
2STIMATTSD IGH-SXASQHAL CHASSIS 18 DEMAHD FOH CUBREHCY
(In Billions of dollars)
Bsek Endin*
Oct.
5
12
19
26
Ho t .
Dsc.
2
9
+lk
♦lfc
♦1
—~
♦1
-2 6
♦9
-25
♦9
-2 1
-2 0
- T , -
-
•
5
Total
?
16
23
30
♦2
-U3
♦ 2
-bi
♦1
-1
-5
♦2
-18
-39
-28
-5
-17
7
21
28
b
11
18
25
Tsb.
Qthar iionay
♦2
♦2
lU .
Jan.
Sold Coin
1
8
15
♦ 2
+3
♦&
♦5
♦6
♦6
♦8
♦1 0
♦12
♦20
♦14
♦22
♦ k
—lio
-33
- 3
♦ 65
♦ 85
+69
♦68
♦73
♦3P
♦w
♦82
♦23
♦39
♦ 125
♦29
♦**7
♦135
F o rm N o. 131
espondence
Governor Meyer
Mr. Goldenwe iser
FEDERAL RESERVE
BOARD
+i
SnKjpr.fr*
Pat-p February 23, 1953
Preparation of material for _
the coming; international negotiations
. , o
2— 8405
Mr. Feis of the State Department called a meeting today of several
members of the group in Washington that had prepared material for the
World-Conference experts.
Mr. Deis had himself just returned from New
York where he had met with a group formed by Mr. Baruch at the suggestion
of President-elect Roosevelt to prepare for the coming negotiations with
regard to war debts and economic questions of an international character.
In addition to Mr. Baruch the group, which is entirely informal, is com
posed of Walter Stewart, Edmund Day, Tugwell of Columbia, Patterson of
Pennsylvania, James Warburg, Routine of Standard Statistics, Charles
Taussig of the American Molasses Company, and Feis.
It appears that
most of the factual studies will have to be made in Yfashington; and the
Division of Research and Statistics of the Federal Reserve Board is
expected to participate as it did in preparing material for the meet
ing of experts in Geneva.
The general range of questions will cover
the budget status of various countries, international balances of pay
ments, international debt position, central bank reserves, course of
commodity prices, and other relevant matters.
R EC EIVED
FEB
O F ^l.
2f
1933
OF T H E GOVERNOR
Attached hereto are tables and charts which I sent to Mr. Feis
of the State Department today at his request.
5QLD ^SERVES OF CENTRAL BANKS AND GOVERNMENTS
GOLD
RESERVES
OF
(In
Total
End of
year (49 countries)
^,3 5 6 ,71 2
1913
1914
5 ,3 ^2 ,03 s
6
,238,166
1915
6 ,625 ,95 s
1916
1917
7 ,1 3 9 .9 s1!
CENTRAL BANKS
thousands
AND
GOVERNMENTS
dollars)
United
States l/
1,290,420
1,206,487
1 ,706,922
2,202,157
2,523,084
164,853
1+2 5 ,9 74
38 8 ,5 32
3 9 5 ,31+1
1+1 6 ,72 3
678,858
802,583
967,950
652,886
639,682
278,687
498,508
582,443
6 0 0 ,377
573,21+9
8 ,l6 S
5 ,2 4 7
5,4o 6
5,572
5.786
256,126
241,539
238,906
265,540
288,020
France
England
(Germany Albania Algeria Argentina
1918
1919
1920
1921
1922
6 ,2 0 7,71 2
6 ,7911,26 s
7,232,703
8 ,029,962
S,402,l4l
2 ,657,885
2 ,5 17 ,72 2
2 ,1+5 1,18 2
3 ,221,215
3 ,505,551
520,969
578,130
75 I+.230
75 M 67
742,740
664,009
694,847
6 8 5 ,5 1 7
690,141
708,403
538,061
259,519
260,028
2 3 7,1 0 2
2 39 ,35 4
5 ,81 s
5.676
5,876
5.872
5 ,86 s
304,466
3 3 6 ,7 0 7
4 7 3 ,9 1 3
4 72 ,4 15
472,529
1923
1924
1925
1926
1927
8 ,6 35 ,75 8
8 ,9 56 ,>175
2 ,973,2 6 5
9 ,209.519
9 ,567,699
3,833,735
4,090,067
3,985,399
4,083,320
3,977,151
71+5,51+3
748,156
6911,761
729 ,271+
737,H9
709,480
7 1 0 ,391+
7 1 0 ,96 s
711,10 6
954,000
1 1 1 ,2 4 7
180,939
287,763
4 36 ,2 35
444,158
19
303
251
5,866
5,863
5,8 51
6,054
6,047
466,495
4 4 3 ,S96
450,592
1+5 0 ,5 5 7
529 ,131+
1928
1929
1930
1931
1932
1 0 ,026,796
1 0 ,30 5,12 6
10 ,9 15,519
11,282,948
e /1 1 .s9 1 .2 1 3
3 ,71+6 ,1 1 1
3 ,900,160
1+,225,109
U, 0 5 1 ,1+73
4,044,522
71+8,390
709,769
718,422
587,622
582,900
24l
6 5 0 ,12 7
5 4 3 ,83 s
340
376
527,799
983
2 34 ,3 7 s
192,042 E/1,0 6 3
8,082
8,088
3,097
8,208
8,214
607,290
1+3 3 .9 3 2
412,0 23
252,698
248,816
End of
year
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
Aus
t r a lia
A u s tr ia
2 1 ,9 8 7
38,995
73,552
78,351
S5.7S7
10 4 ,0 0 7
1 1 6 ,8 5 0
1 2 2 ,3 6 9
12 4 ,19 7
1 2 7 ,3 0 9
1 ,253,500
1 ,6 3 3 ,1+02
2,100,242
2 ,699 ,1+31
3 ,2 5 4 ,21+7
A u s t r ia Belgium
Hunsary
251,421 48 ,062
213,757 5 0 ,9 8 3
132,752 5 0 ,7 4 2
58,759 5 0 ,7 4 5
53,717 5 0 , 74 s
9
51,901
5 ,8 6 2
2,087
7,328
86,214
1927
1 0 6 ,0 0 1
11,8 8 3
9 9 ,3 7 8
1928
1929
1930
1931
1932
109,410
2 3 .7 4 3
2 3 ,7 2 7
3 0 ,1 6 s
2 6 ,6 6 8
2 1 ,0 3 1
1,313
Colombia
5 2 ,8 5 5
12 5 ,5 7 6
16 3 .3 5 1
1 9 0 , 75 !+
3 5 4 ,4 16
3 6 0 ,3 4 2 e /
1915
1916
1917
1918
1919
1.330
1.330
1.330
9,042
2 3 ,4 2 0
2 *1 ,3 9 1
3 2 ,9 0 2
1920
19 2 1
1922
3M
3M
1923
1924
1925
3**, 034
3**, 035
3^,03^
1926
1 0 ,3 0 3
i8,4oi
1927
7.439
20,462
192S
1929
1930
1931
1932
7,363
7,695
7, *+95
3 1*
34
*+,275
9 , 2 7 *+
1**»599
5 ,8 6 2
5 ,s6 i
6,553
6,899
6,919
9 ,0 0 1
3,379
i , o i4
5 , o4 s
5 .2 0 9 e /
Czecho
Danzig Denmark Ecuador
slo v a k ia
1913
I3lb
7,081
6,080
162,488
109,555
Chile
2 ,76 6
5 1,4 5 1
1926
End o f
year
2,709
16
52,204
5 2 , 51+3
75,316
51,598
42,073
2 ,5 6 6
2 , 59 s
6 ,0 7 7
6 ,0 7 5
B u lg a ria
Canada
897610
44,805
24,588
24,588
24,588
1 0 ,6 15
10 ,6 15
1 16 ,5 7 2
9 9 .1 2 6
12 6 ,5 4 5
2 6 ,2 2 7
2 6 ,2 2 7
1 2 ,3 5 2
1 2 9 ,7 6 1
7,137
129,712
7 ,15 5
1 1 2 ,6 0 5
7,335
95,073
146,588
B r a z il
2,593
5 1 ,H 9
5 1 , 1+17
5 1 ,4 3 s
1,5 6 0
S3,51+7
B o liv ia
53,072
45,111
11
13 1,2 18
1 2 9 ,6 2 0
1924
1925
1J
of
11,773
13,124
12,159
32,784
42,619
46,152
7 ,4 15
48,669
53,803
5i+,305
7 ,6 2 9
7,792
7,931
8,464
9,193
5 6 ,3 2 9
100,746
148,555
150,395
10,531
10 ,4 7 5
322
10,882
191+
9,529
9,997
sJ
Cgypt
1 0 ,9 2 7
Estonia
131,553
1 3 9 ,8 2 3
12 7 ,16 9
1 5 1 . 1+67
1 5 6 , 76 s
15 8 ,10 5
151,973
113.91+-S
7 7 ,6 2 6
1 0 9 ,8 4 3
77,642
84 ,1 2 6
F in lan d
19 ,6 6 6
2 4 ,5 0 6
10,464
6,973
2 1 ,5 5 2
29,233
42,247
46,6 11
35,73**
2 .2 3 0
2 .2 3 0
2 ,2 3 2
2 .2 2 7
52,159
2 9 ,6 2 4
19 .2 19
2,235
6 0 ,8 0 7
1 6 ,5 2 0
1 6 ,5 3 2
^ ,5 15
1 2 ,4 5 2
2 0 ,4 7 4
60,992
16.539
6 1,19 2
1 6 .5 4 0
1 6 .5 4 0
2 6 ,9 3 2
56,171
2 7 ,0 7 5
2 7 ,1 4 7
2 7 ,2 2 1
2 9 ,2 4 5
5 6 ,1 4 5
5 6 ,0 2 5
5 6 ,0 0 7
61,173
48,730
1 6 .5 4 0
1 6 .5 4 0
16 ,5 9 1
17,456
2 , o46
12 ,4 5 9
94
1,476
1,427
1,315
1,353
1,377
8 ,2 3 4
2 .2 2 7
2 .2 2 7
2 .2 2 7
2,3 71
8,242
S.351*
2,357
2 ,2 5 0
7,979
46,292
1,124
17 ,6 9 2
7 ,6 7 2
1,710
46,204
l,ll4
7,6
08
1,717
12,79**
20,118
46,107
1,755
1 ,1 3 1
7,591
1 2 ,1 3 2
32,664
2 0 ,2 2 5
1,752
1,133
7,653
2 / 10 ,12 2
5 0 ,5 2 4
4,081
7,670
35,693 e /2,94i r J 32,936
Less than "monetary g o ld stock" by amount of g o ld coin in c ir c u la tio n , jd/ Prelim.
2 4 ,2 7 1
2 1 ,7 7 4
17 ,0 1 5
8 ,8 8 5
11,9 2 5
3*+,352
37,375
^ ,7 6 5
42,237
GOLD
RESERVES
.* ^
OF
CENTRAL
(In
End of
year
Greece
Guat emala
Hungary
BANKS
thousands
AND
of
GOVERNMENTS—
Japan
Italy
India
Continued
dollars)
Java
Latvia Lithuania
1913
131k
1915
1916
1917
4,825
7,086
10,939
11.37S
n,907
123,921
SO,06 s
67,881
72,127
90,118
266,846 64,963
270,569 64,062
264,089 S8.1S7
2 2 4 ,172 1 1 3 ,4 1 1
208,207 229,980
10,39S
15,HS
12 ,0 5 3
29,452
31,517
191S
1919
1920
1921
1922
10,246
10,74 4
10 ,76 5
1 0 ,7 7 0
10,769
64,231
128,819
116,249
118 .34 1
1 18 .34 1
203.426
200.426
20b,12S
211,994
219,446
225,622
34 9 ,9 71
556.475
610,822
605,532
43,42'
69.13^l
88,214
5S.72S
6 1,30 6
2 .1 2 3
2 ,511+
1 ,5 1 9
1923
1924
1925
1926
1927
1 2 ,0 0 7
1 2 ,3 5 s
1 2 ,65 s
1 3 ,5 5 4
i4,72 s
1 ,76 9
1,740
• 6 ,8 72
10,36 5
29,526
34,432
108.609
108.609
108.609
108.609
119 ,0 9 7
218,092
221,045
221,585
2 2 3,5 3 1
241,991
602,343
5 8 5 ,73 s
5 7 5 ,76 s
561,810
54 1,8 70
62,869
53,726
73,394
79,369
71,640
3 -iss
>+,553
1+.51+7
1+.55 S
1+.570
1,61+5
3 ,0 7 s
3,2 2 9
3 .1 3 6
3 ,3 2 0
192S
1929
1930
1931
1932
7,196
6,326
6,630
1 1 ,3 0 1
7 ,6is
1 ,61 s
2,169
2 ,6 74
2 ,255
1,737
35,169
28,465
28,44s
1 7 ,63 s
l6 ,SSS
2 6 5,732
2 73,0 0 1
2 78 ,6 10
295,945
e / 3 0 7 ,1 7 0
540 ,873
542.475
411,770
2 34 ,0 71
2 11 ,8 9 7
68,264
56 ,10 1
55,693
4 5 ,2 2 7
41,749
U.5 S5
>+,619
4,646
6,089
6,880
3.1+27
3 ,50 s
3,939
5 .0 1 U
1+,907
End of
year
1913
1914
1915
1 916
1917
Mexico
New
Nether
Norway
lands Zealand
60,899 2 5 .32 5 11,89 2
S3 ,664 30 ,2 5 0 10,290
172,531 33,827 13,S3 7
2 36,216 37,1+11+ 33,027
250,690 39,i 6i 31,193
Peru
Portugal
Poland
2,151
2,608
5,280
9,319
Siam
Rumania
8,i4o
8,662
9,195
9,2i+7
9,2 6 1
29,242
29,733
42,647
95,201
34,531
1918
1919
1920
1921
1922
277,155
256,204
255,729
243 ,600
233,S79
39,506
38,260
37,263
37,39l+
32.367
32,6 91
39,590
3 9 ,>+72
3 9 ,1+71+
3 9 .1+71+
13,251
lb,181
20,843
20,955
21,009
1,644
2 ,951+
5,931
9,769
9,263
9 ,265
9 .2 6 7
9 .2 6 7
9 ,2 6 7
34,466
3>+, 725
3>+,79>+
3>+, 79>+
42,050
1923
1924
1925
1926
1927
2 3 3 .S76
202,854
.16,683 178,030
4,689 166,231
5,900 160,796
38,290
37,579
3 7 ,6 6 7
3 S , 007
38,280
3 9 .1+72
3 9 .1+57
3 9 .1+56
3 9 ,1+57
39,1+53
2 1,5 6 3
2 1,520
2 1 ,531+
2 1 ,64i
2 3 .5 3 3
13,099
19 ,91+9
2 5 ,79 3
2 6 ,6 77
58,o 4i
9 ,2 6 7
9 .2 6 7
9,267
9 ,2 6 7
9 ,2 6 7
46,364
4 7,8 2 1
1+8 ,5 3 7
1+9.5SS
50,805
171+, 692
179,681
171,31S
3 5 6 ,66 s
415,126
34,868
3 1 ,9 7 3
33,39>+
32,275
24,600
2 1,520
39,362
39,302
2 1 ,5 1 0
39,2>+2
1 7 ,5 6 7
41,202
1 6 ,7 1 7
38,662 £/ll,048
1928
1929
1930
1931
1932
6 .23 s
7.229
M 30
2,662
E / 776
End of
-.year.
1913
1914
1915
1916
1917
South
Africa,
3 S .3 7 7
30.693
32 ,0 56
27,o 4s
3 0 .0 3 5
Spain
Sweden
"9 2 ,W
110,589
167,331
241,443
379,436
27,372
2 9 ,OSS
3 3 ,3 2 5
1+9,183
6 5 ,511+
Switzer | Turkey
land
32,801
1+5,922
1+8,275
66,585
69,025
1918
1919
1920
1921
1922
33.3^0
35.5^0
5 0 ,1+Ui
>+9 .36 1
51.69 2
429,541
471,516
473,762
4s4,66o
486,971
76 ,5 32
75 ,3 5 1
75 ,516
73,6 31
73,1+28
80,04l
99,779
104,780
1 0 6 ,05 s
10 3,2 8 3
1923
1924
1925
1926
1927
52.500
53.09S
>+3,59>+
36.703
1+0 ,0 32
487,687
489,164
4 8 9 ,46o
4 9 3 ,282
502,302
72,853
6 3,50 8
61,647
60,162
6l,6 S5
103,669
97,61+2
90 ,i4o
91,050
99.7S5
1928
1929
1930
1931
1932
39.273
3 6 ,1+7++
3 2 ,6 3 5
39,1+33
3*+,907
493,S07
495,i 4s
470,531
433,624
4 35,8 32
53,223
65,569
,5 I+3
5 5 .1 6 0
55,202
102,874
114 ,8 32
1 3 7 ,591+
1+52,950
476,940
^/Preliminary
if
69,685
7 8 ,59 s
63,084
6 7 ,361+
5 6 ,31+1+
•......
9 ,7 1 6
9 ,2 6 7
9 .2 6 7
9,267
1 2 ,6 1 3
2 3 ,1 3 8 E/
1+9 ,32 5
55,112
55 .6 53
58,050
56,883
23,214
e /27,SC7
10,826
13,1+81
2 2 ,5 30
33.251
42,003
U.S.S.R.
(Russia)
736,16 9
802,769
3 3 0 ,5 72
758,962
666,523
46,718
5 6 ,75 6
57,307
5 6 ,5 1 3
56,812
1/
1/
1/
1/
2,609
12 ,30 6
1 2 ,2 33
12,386
1 4 ,3 1 8
12.355
56.812
56.813
56 ,8 15
56,823
59,319
1+5 ,01+3
7 3 ,01+7
93,858
84,605
97,01+3
13,2 2 6
13.965
1 I+.657
16,620
17.133
68,365
9 1 ,2 8 7
68,205
14 7,0 2 1
60,447
21+S.S81
52,666
328,284
e / 1+8 ,32 8 E/36 7,6 9 2
17,5 6 6
18,426
19,025
3 0 ,91+8
30 ,9 9 1
Uruguay
Figures not available.
Yugoslavia
1 1 ,191+
1 1 ,031+
1 2 ,3 8 1
1 2 ,3 2 1
1 2 ,3 1 0
GOLD RZSLHVLS OF CILTTRAL BARKS AND GOVERNMENTS
(In m illion s of d o lla rs)
_nd of—
1928
June
July
August
September
October
November
December
im
J anuary
February
March
April
May
June
July
August
September
October
November
December
1
l
Total (49
countries)
9 .76 1
9 .8 51
9,891
9,937
5.961
10 ,010
10 ,0 2 7
1 0 ,05 s
10,081
10,108
10,065
10 ,1 3 2
10 ,14 5
10 ,16 0
10,249
1 0 ,2 7 3
10 ,30 5
1 0 ,3 0 7
10 ,30 5
United ,
State si/
Canada
3,732
3,737
3,7^9
3,752
3,769
104
98
3 ,7 5 4
3.746
3,746
3.776
3, si1*
3,339
3,931
3,956
3,974
3,995
4,oos
H .023
M 03
3,900
101
106
Uuroo e
Total (27
countries)
4,083
4 ,1 7 6
108
4,199
4,24l
4 ,25 s
$
4,292
4 ,329
79
78
78
78
78
76
76
4 ,3 9 4
4,387
4,395
4 ,292
4,329
4,357
4,370
4,437
England
France
Germany
826
843
843
1 ,1 3 6
496
1,173
1,190
524
830
1,20 0
57!
795
774
748
1,207
1,239
603
625
65O
743
734
1,333
1.254
746
759
791
774
1 ,3 3 4
1,34 0
1,4 0 3
1,4 3 5
1 ,4 3 6
6ss
1,462
1,52 6
1.54 5
77
77
77
4,463
4,50^
6o4
642
63 s
78
78
4 ,5 6 9
656
1,600
U,69S
710
1,633
4 ,7 6 2
731
736
1 ,6S3
4,784
4,809
755
4,572
795
4 ,920
4,960
5,009
5 ,12 2
763
1,660
1 ,7 1 7
1 ,7 2 7
74i
1,775
1,570
536
65O
65O
639
451
420
455
512
520
527
531
534
544
19^0
J anuary
February
March
April
May
June
July
August
September
October
November
December
1321
J anuary
February
March
April
May
June
July
August
September
October
November
December
1222
January
February
March
April
May
June
July
August
September
October
November
December
l/
10,370
10 ,^ 39
1 0 ,5 1 6
10,581
10,6 21
10,6 79
10,713
10,795
10 ,8 32
io,s6o
10,902
10,916
10,962
1 1 ,0 1 6
11 ,0 79
1 1 ,1 1 5
11,2 2 5
1 1 ,2 7 2
1 1 ,2 2 0
11,2 9 6
1 1 ,2 7 5
1 1 .1 3 s
11,24 9
11,289
11,340
11,418
11,4 9 9
11,515
ll,4l6
11,348
11,420
11 ,5 6 2
E/11,6 9 4
2/1 1 ,7 5 9
2/1 1 ,3 5 9
2/ 11 .3 9 1
4 ,0 61
'
4 ,1 3 1
4 ,1 5 9
4, 1 7 s
78
78
79
79
80
81
4,l60
94
3,921
3,985
4,i4s
100
4 ,1 5 9
no
4,184
4,220
4 ,225
4,285
4,309
4,343
U.373
122
129
110
92
9H
96
99
5,l4l
5,207
5,238
5,281
5,313
5 ,3 5 0
5,38 8
5,395
5,425
765
754
761
776
762
718
679
6S 5
699
712
4,445
102
>+,593
4.5S7
‘+,031
M 51
87
87
89
83
86
82
78
4,009
so
6,30 0
3,947
78
6,444
3,986
3,956
3,717
3.466
77
77
78
6,4s4
6 ,5 3 1
6,665
78
6,84i
3,522
79
6,871
3,639
3,74s
SO
,81
3.S19
3,885
85
86
6 ,8 9 7
b/ 6,923
2 /6,944
2/ 0,949
588
5 S8
588
588
608
* 663
670
676
67 s
678
67 s
4,045
s4
2/6,826
583
4 ,6 32
4,364
3,905
5 ,3 5 1
5 ,3 5 3
5 ,4 1 5
5,689
6,066
6 ,1 1 3
6,189
735
793
643
649
656
660
587
588
1,680
1 ,60S
1 ,3 5 2
i,S99
1,992
2 ,0 3 7
2,10 0
2 ,1 7 6
2,192
2,200
2,180
2,181
2,212
2,290
2,296
2 ,32 6
2 ,5 34
2,659
547
582
595
611
617
624
624
624
590
519
519
52 S
535
544
553
564
569
339
325
325
310
273
239
2,699
234
2,808
2,942
3,012
226
221
209
205
3 ,0 5 2
3 ,1 1 5
3 ,21 s
20b
198
3,221
3,224
183
3.24i
190
3,250
3 .2 6 7
195
197
3,254
192
183
Less than "monetary gold stock of United States" by the amount of gold coin in
circulation.
p - Preliminary.
GOLD RESERVES OF CENTRAL BANKS AND GOVERNMENTS (Continued)
(In m illion s of d ollars)
Europe
End of—
Belgium
1928
June
July
August
September
October
November
December
1323.
J anuary
February
March
April
May
June
July
Augus t
September
October
November
December •
1330
January
February
March
April
May
June
July
Augus t
September
October
November
December
1331
J anuary
February
March
April
May
June
July
August
September|
October
November 1
December
m i
J anuary
February
March
April
May
June
July
August
September
October
November ]
December '
110
112
112
113
H5
_ 126
13 k
13 *
139
i4i
i4i
1U2
1 U3
151
163 .
16b
16b
16k
lS'4
167
167
167
l6S
173
ISO
ISO
191
191
197
200
201
201
221
346
357
503
503
494
494
266
266
270
270
270
175
175
170
174
176
271
271
271
176
70
70
70
70
70
70
70
494
494
494
494
494
494
U 95
73
75
77
77
79
495
^95
495
46
46
46
46
46
46
279
279
279
279
280
2S2
283
283
286
293
352
351
3U9
49
49
359
363
*9
49
49
49
49
49
49
4q
362
361
50
51
365
364
503
503
273
273
274
274
274
274
274
275
27S
27S
279
279
49
353
357
503
68
68
68
6s
68
70
272
272
296
296
296
29 d
296
296
297
298
300
302
305
306
306
B/3 0 7
181
17S
17S
17S
ISO
ISO
1 77
176
17*
174
n b
n k
157
157
157
171
171
171
175
179
179
181
181
200
236
260
282
:
i
79
79
79
79
79
79
79
75
63
^3
p
63
63
63
63
64
64
64
64
64
64
67
336
362
67
357
67
351
353
35*+
364
384
39 U
408
55
*15
415
55
56
! _56
96
96
98
98
103
103
105
108
108
108
476
476
^77
b ll
*77
*77
*77
478
478
474
bn
112
112
112
118
123
123
128
130
138
126
466
466
124
124
124
124
467
467
468
468
162
225
229
328
*39
1+39
1+39
434
434
434
*35
4i 6
4i6
93
93
93
95
>+95
62
415
S7
90
91
91
. 1Q3
115
434
434
434
434
5^
51*
54
86
86
1+95
68
64
64
67
Switzer
land
Spain
67
37
37
37
37
39
39
42
b2
b2
44
46
46
35*+
Poland
175
175
175
175
175
175
175_ ..
213
273
356
p - Preliminary.
1
Nether
lands
263
263
266
266
266
.266. .
3*+
3^
3^
3*
3b
3b
3^
3b
3b
35
37
.37
^5
^5
46
46
351
259
.
126
126
126
2lk
Italy
30
30
31
33
33
33
H3
199
Czecho
slova
kia
422
425
*53
1+35
*35
t *35
1 *35
436
436
I
y.s.s.R.
(Russia)
80
85
75
76
82
92
9$
92
92
92
92
93
93
103
119
132
142
142
147
1*7
150
156
167
177
203
234
249
249
249
249
249
249
249
259
259
262
262
267
280
293
309
315
328
472
482
471
471
*93
503
509
329
329
330
331
335
510
509
368
2 /3 6 8
509
r /36s
£/36s
. p /368
493
___ * z
l
349
357
.
GOLD RESERVES OE CENTRAL BANKS AND GOVERNMENTS (Continued)
(In m illions of d ollars)
Latin America
End of—
~
1Q28
June
July
August
Septera! er
October
r
r
1929
January
Februar; T
March
April
May
June
July
August
1
Septemb* ;r
October
1230
January
February
March
April
May
June
July
August
Septembe r
October
November
December
132k
January
February
March
April
May
June
July
August
Septembei'
October
November
December
1212
January
February
March
April
May
June
July
August
September
October
November
December
Total (10
( Argentina
countries]
Asia and Oceania
Brazil
Total (7
countries)
Japan
S99
S99
902
902
292
897
S95
622
622
621
621
6ll
6l0
607
i2 o
i2 o
123
123
i26
l2 s
129
3 77
877
877
873
872
873
877
52 l
52 l
52 l
52 l
52 l
5^1
52 l
892
892
873
857
605
603
525
569
560
525
513
507
296
276
2 pl
232
129
150
150
150
151
151
151
151
151
151
151
150
882
882
883
884
879
878
872
8 79
S 79
872
856
828
52 l
52 l
522
522
522
522
521
52 l
52 l
52 l
522
522
225
228
225
222
22 i
22 o
236
232
232
229
^17
212
139
127
127
90
90
89
80
69
65
32
20
11
826
817
802
775
722
7^9
755
728
7^7
711
701
702
520
^ 77
U53
223
232
232
22 o
^33
231
2 i2
209
212
702
703
709
71'4
722
730
71^
69s
706
652
593
528
215
2 17
215
219
222
225
212
206
208
322
271
232
532
531*
535
53 ^
53 ^
536
522
523
523
522
523
e /520
215
215
212
212
212
212
212
212
212
212
212
212
S15
801
796
781
781
736
717
717
707
703
660
657
650
632
616
613
575
550
53^
506
1^97
2 S3
1+75
265
251
2 is
202
372
369
362
355
350
3^7
3^7
3^3
326
3^7
328
328
326
322
3*+l
321
397
390
378
370
362
350
322
309
281
270
265
253
252
229
229
229
229
229
229
229
229
229
229
229
—
■—
-
—
—
—
—
r—
—
—
—
r
1
1
—
—
_
—
—
—
«.
---------—
---------—
—
—
—
Africa
(3 countries)
P
63
62
62
60
61
65
62
62
66
%
ob
62
62
65
65
67
65
63
66
62
63
62
62
61
59
61
60
62
^3
61
#
62
63
60
59
61
60
62
60
61
59
67
69
,
b9
bS
70
7^
77
79
75
76
73
To
75
76
CENTRAL GOLD RESERVES IN CERTAIN COUNTRIES
(in millions of dollars)
Working reserves^
Total
Country
January,
1933
United States-^/....
England ...........
France ............
Germany ...........
Italy ............
4,064
615
3,221
196
307£/
Belgium...........
Switzerland .......
Netherlands .......
Poland ...........
Czechoslovakia ....
362
477
415
56
51
June,
1928
3,732
825
1,136
496
259
110
86
175
67
30
January,
1933”
June,
1928
1,490^
215
1,766
98i/
66 &
1,212^
284
143
111
202
149
308
223
17
21
17
31
118
8
62
1J Gold reserves in excess of legal requirements. Table of legal
reserve requirements given on following page.
2/ Gold holdings of Treasury and Federal reserve banks, not includ
ing gold coin in circulation.
3J Including $17,000,000 of working gold reserve of the Treasury in
January, 1933, and $7,000,000 in June, 1928.
4/ Deficiency in working reserves.
5J On December 20, 1932.
LEGAL RESERVE REQUIREMENTS OF CERTAIN COUNTRIES
Reserve requirements (per cent)
Liabilities against which reserves mast
be held
C ountry
United States
Federal reserve banks— Notes ..
— Deposits
England
Notes in excess of fiduciary issue of
£260 ,000,000 .....................
France ....... Notes and other demand liabilities
Germany .—
... Notes .......................... .
January, 1933
Gold and
gold ex
Gold
change
June, 1928
Gold and
gold ex
Gold
change
Remarks
U° V
351 '
On August 1, 1931 > increase of fiduciary issue
to £275,000,000 was authorized. Under present
law, authorization cannot extend beyond August
1, 1933.
ui
cj
ro
W K'N
+> CT\
P
0!
) rH
100
B
0)
u
35
30 ?/
Italy ........ Notes and other demand liabilities
Ho?/
&
•H
O’2
c
<D TO
Ho?-/
f
6fi«£H
in
Ho
Belgium...... Notes and other demand liabilities
30
Switzerland ... Notes ..........................
Ho
Netherlands ... Notes and other demand liabilities
Ho
20
Poland^-/ ..... Notes and other demand liabilities
30 ?/
30 ?/
15?/
2/
3C£
One-fifth of reserve in June, 192S, could be
in silver.
Reserve may legally include silver.
Ho?/
22?/
One-fourth of reserve in June, 1923 could be
in silver.
l/The Federal Reserve Board has authority to reduce or suspend these requirements subject to payment by the banks of a graduated tax upon
the deficiency in their reserves.
2 j The bank may, subject to the payment of a tax, permit reserves to fall below the legal minimum.
3/Requirements given for Poland for January, 1933» did not g° into effect until February.
Czechoslovakia
Notes and other demand liabilities
s
Millions of Dollars
UNITED STATES MONETARY GOLD STOCK
AND GOLD RESERVES OF LEADING CENTRAL BANKS
M illions of Dollars
r
Bank of France
.1000
Netherlands BanK
BanKof Belgium
BanKof Switzerland
OF DOLLARS
GOLD HOLDINGS OF CENTRAL BANKS AND GOVERNMENTS
BILLIONS OF
12
12
11
11
10
10
>
9
9
8
8
7
7
6
6
h
5
5
4
4
3
3
2
2
1
1
0
1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932
0
DISTRIBUTION OF CENTRAL GOLD RESERVES
MILLH
90001
9000
800o|
8000
7000
7000
(
5 C o u n h f '\ e s
U.S. France, Be Igium, \
Netherlands & Svsnfzerlam^^^
j
6000
6000
5000
5000
u.s.
^^ *****
^
4000
✓
_______
\
A
___
\y l
/
^
\
3000
> 3 ° ther £ 0L intries
ll C C D 'I
( Excluding U.O.O.n J
4000
7
x
^
3000
— t-----------
* *.
2000
2000
1000
1000
For list of “1+3 O ther Countrie
r
see back o i
0
0
chart.
1923
192^
1925
1926
1927
1928
1929
1930
1931
1932
1933
1
Other 43 Countries comprise:
Albania
Algeria
Argentina
Australia
Austria
Bolivia
3razil
Bulgaria
Canada
Chile
Colombia
Czechoslovakia
Danzig
Denmark
Ecuador
Egypt
England
Estonia
Einland
Germany
Greece
•Guatemala
Hungary
India
Italy
Japan
Java
Latvia
Lithuania
Mexico
Hew Zealand
Norway
Peru
Poland
Portugal
Rumania
Siam
South Africa
Spain
Sweden
Turkey
Uruguay
Yugoslavia
F oryn NO. 181
)ond<
O ffice Correspondence
To________ Governor Mever
From _
FEDERAL RESERVE
BOARD
March 1. 1933
Subject:.
Mr. Goldenweiser
.............
v
I attach copies of two letters addressed to Mr. Joslin.
C O P Y
February 28, 1933
Mr. Theodore G. Joslin
The White House
Washington, D. C.
Dear Mr. Joslin:
The figures you asked for are attached. There
are two comments that I want to make. First, that
we do not know how much of the currency withdrawn
during the week was for hoarding and how much repre
sents precautionary measures by banks and currency
requirements by communities where banking facilities
were suspended— like in Michigan. Secondly, while
the increase in gold hoarding has been substantial,
it is still not in sufficient quantity to constitute
a problem, unless it becomes greatly accelerated.
On February 24, excess reserves of the Federal
reserve banks were $1,200,000,000, compared with a
little over $900,000,000 in the middle of last July.
Very truly yours,
E.
A. Goldenweiser
Director of Research and Statistics
Enclosure
COPY
March 1, 1933
Mr. Theodore G. Joslin
The White House
Washington, D. C.
Dear Mr. Joslin:
I am sending you figures showing the number
of banks and their deposits at the end of 1928;
suspensions from that time to the end of February
of this year, and an estimate of the number of
banks and their deposits on the latest available
date. You will notethat the number of banks has
declined more than the number of suspensions. This
is accounted for chiefly by consolidations. In
the case of deposits the greater part of the de
crease has been due to general liquidation rather
than to suspensions.
Very truly yours,
E.
A. Goldenweiser
Director of Research and Statistics
Enclosure
ESTIMATED NON-SEASONAL CHANGES IN DEMAND
FOR CURRENCY
(in millions of dollars)
:
:
Gold
coin
: Other
: money
Week ending Feb. 21
4-20
~t
February 23 to 2$
4-19
4-13$
Total
76
4154
GOLD MOVEMENTS
(in millions of dollars)
:Net import ( ):Change in gold:Net loss of
: or export (-):stock through :
gold
•• '
:
earmarks
:
Week ending Feb. 21
February 23 to 25
+6
-57
-51
-6
-41
-47
NUMBER OF BANKS AND BANK FAILURES: 1929 TO
FEBRUARY 28, 1933
Number of
banks
December 31, 1928
Suspensions
February 28, 1933 1/
: Deposits (exclusive of inter
:
bank deposits)
:
(In millions of dollars)
25,576
56,766
6,119
3,735
18,040
40,000
1/
Estimated
1
March 6, 1933
The immediate question is what banks can open and on what basis.
The answer seems to me to be that every bank should open on the basis
of the proportion of its deposits that is covered by real values at
present valuations.
The determination of this may be slow and in some
cases, therefore, they may open on a smaller percentage until the def
inite percentage can be determined.
Banks with very low ratios should
not be permitted to open at all.
The second question is the extent to which losses suffered by de
positors should be assumed by the Government.
That is a separate ques
tion to be determined later after the banks are in operation and the
country is functioning again.
Some socialization of losses is inevitable.
For my point of view, it should not be approached primarily as a means of
restoring the credit machinery.
bottom and rest on it.
can be determined.
The credit machinery must find its own
The extent and incidence of socialization of losses
The principles to me appear to be, first, it should not
be so large as to further endanger the public credit; it should be on the
basis of justice to the depositors rather than on the basis of having any
effect on bank management; third, it should give preference to small de
positors; and fourth, it- should include not only the losses to depositors
by the write-downs that will now occur, but losses to all depositors in
closed banks for some stated period.
The advantage of this plan would be that it would not constitute
guaranty of bank deposits for the future.
It will be simply an assumption
of past losses by the nation as a whole as a means of reducing suffering
Page 2
and as a realization of the fact that the whole nation is at fault and
that the consequences should not be permitted to fall too heavily on
those least able to bear them.
¥
The only connection this will have with the guaranty of bank de
posits is that it will set a precedent which it will be hard to break.
For that reason the Government has got to insist as a price of assuming
that liability that the banks all be national banks and be under strict
supervision by the Federal Government.
F o rm ,N o . 131
FEDERAL RESERVE
BOARD
Date___ March 15, 1933
Subject:.
Goldenweiser<
F r o m ______ Mr
Mr. G
<f)
I have written a statement on the gold embargo and a
brief one on prohibition of hoarding.
I am sending them
to you so that you may use them if occasion arises.
I am
-somewhat out of touch here and don’t want to break into
open doors.
March 14, 1933
THE GOLD EMBARGO
The gold embargo should be l i f t e d at the e a r lie s t possible date.
I t i s the only way to maintain the gold standard, and would be a demon
stration of strength that would have a good e ffe c t both here and abroad.
The hazards involved are s lig h t .
Foreigners haven*t a large volume of
funds in th is country subject to withdrawal.
American cap ital fle e in g abroad.
The only danger i s from
The h istory o f the past decade has
shown that the f lig h t o f ca p ita l cannot be stopped by r e str ic tio n s and
th a t, on the other hand, i t i s invariably stopped by bold action in sp ir
ing confidence.
The most sensational example of that was what happened
in France in 1926 when Poincare' took command, and on a smaller scale what
happened in England when they paid the debt installm ent in gold la s t De
cember.
Capital knows no patriotism and p r a c tic a lly no law.
The only
e ffe c tiv e way of dealing with i t i s through appealing to s e lf -in t e r e s t .
I f the gold embargo i s l i f t e d , the d o lla r w ill remain strong in the in
ternational market and gold exports from th is country w ill not be p r o fit
ab le, nor w ill there be any object in fle e in g from the d o lla r .
I t i s not
only American prestige abroad that depends on our rapid return to the gold
standard, but also the s t a b ilit y of the d o lla r on the exchange market, and
consequently the recovery of our foreign trade.
The American balance of
international payments continues to be favorable; the panic has subsided,
and nothing w ill help more towards the return o f confidence than a bold
position with respect to gold.
- 2 -
A return to the gold standard, furthermore, would reintroduce a
more or le s s automatic lim itin g facto r on dangerous credit expansion,
i f that should develop in consequence of the numerous relaxations con
tained in recent banking le g is la t io n .
I f i t i s decided to l i f t the embargo, then I think i t would be de
sirab le to have introduced a b i l l placing us on the gold bullion standard.
That i s , lim itin g the obligation to redeem notes to redemption in gold
bars with a value o f $ £ ,0 0 0 .
I t would also be necessary in any regulation
about commandeering gold in private possession to make an exception fo r gold
held bona fid e fo r immediate export.
.
This i s done by law in England.
R estrictions on dealing in foreign exchange should also be removed at
an early date, but th is need not be done as promptly as the l i f t i n g of the
gold embargo•
.
March
14.,
1933
PROHIBITION OF HOARDING
Prohibition o f currency withdrawals, which i s included in
e x istin g regulations, i s a l l the r e s tr ic tio n on hoarding that i t
i s desirable to adopt.
I t would be f u t ile to t e l l people that
they must return th eir money to the banks.
Let the banks stay
open and pay out deposits fr e e ly and the currency w ill come back.
There is something inconsistent about permitting m illio n s of people
to lo se th eir money through bank fa ilu r e s and then t e l l those who
have succeeded in saving th eir nest eggs that they must return them
to the banks.
I believe that the psychology of i t i s wrong.
Let
people regain confidence and bring the money back on th eir own in
itia tiv e .
F o r m N o . 131
*^
Office Corresppntlence
To—
Gov -e rn o r_Ueyer
From .Mk ,
/(
C)
FEDERAL RESERVE
BOARD
Pate hnl Ch l6, 1933
_____________________
Subject:___________ __________________________________
Sinead___________________________________
_________________________________________________________
\
no
8496
a—
Attached are statements showing amounts o f gold and gold c e r tific a te s
received by each Federal reserve banhf ezcept San Frandsco, (which furnished
to ta l figu res only) "by days from march G to March 15*
The statements w ill 1c
completed as scon as we are able to obtain daily figures from San Franci cco,
Total receipts, by days, at all Federal reserve bank.s except- San Francisco
are as follows:
Total
Gold
certixicates
(In thousands of dollars)
2S9
Gold
coin*
30
March 6
315
March 7
ll,HUH
10,6*0
SOI
March 8
25,560
21,1+35
H,o 65
March 9
5 2 ,9 2 6
2S.766
2*4, l 60
March 10
3 6 ,UlU
13.H17
22,997
March 11
Hi , 550
i U . is s
2 7 ,3 6 2
13
6 c , 571
29.53H
3 1 ,0 3 7
March lU
57,973
32,12U
2 5 ,3 5 1
March lp
3 2 .H76
19,373
2 0 ,1 0 3
3?6,235
1 6 9 ,3 2 9
1 5 6 , U06
13,5SS
3 ,6 2 0
March
Sail Francisco
Mar, 6 to 15
3U, S23
1 7 3 , 1+1*9
For CIRCULATION:
Mr.
Mr.
Mr.
Mr.
Hamlin.....................
James.....................
Maries.....................
Miller.......................
Mr. Harrison...................
Mr. Morrill......... .
Mr. McClelland...............
Mr. Wyatt..................... Mr..................................Mr..................................
Please note‘ initial
and return to GOVERNOR,,
l!+, 963
171.37H
♦Includes receipts o f gold b u llio n as follov/s: March 0, $<^*GC0 ,0 0 0 ;
March 10. $130*000; March lx , $200,0001; March 1^,,
-1,000«
GOLD AED GOLD CERTIFICATES RECEIVED BY FEDERAL RESERVE BAERS, MARCH 6. TO 15, 1933
(Daily figures, in thousands of dollars)
-------------------------------------- 1-----------
1 System
1
Boston Hew York
F h ilaI delphia
Cl evel and Richmond A tlanta
Chicago
St.
TiOiii R eano1 is
Kansas
Ci tv
1
— Ul.V^....
Dallas
San
TOTAL
1211
March 6
7
8
Total March 6-8
2 6 ,3 3 7
72
31
313
10,900
3 8 ,1 0 0
319
March 9
54,584
10
3 8 ,1 8 6
11
44,017
66,6 S3
13
14
6 1 ,3 0 2
15
41.951
Total, week end ing
March 15
3 o 6 ,723
Total March 6 -1 5
344,823
23,900
51
15
4 i6
9
1
39
7
36
25
4l6
34, 800
482
49
*+3
1 , 91 s
39,200
746
1 ,2 5 0
234
1,991
389
2,104
1,811
3,136
2,120
24,800
22,500
29,500
1 ,0 5 0
1 ,9 4 0
1 ,0 2 2
120
317
42
20
232
5
81
127
151
62
211
777
92
675
2.73
193
29
211
777
9 ,3 5 ^
3,051
6 ,724
12,952
2,910
7,550
577
671
266
100
130
1 ,65 s
1 .7 7 2
1 ,1 1 2
285
4.081
1.081
1,448
1,046
228
939
1,192
l,3 ll
299
657
915
836
12
287
477
728
607
650
84s
1 .2 5 1*
1,081
7
1,2 0 5
7
709
2.467
836
6 ,1 1 2
634
3,327
2,^75
2 ,2 7 9
1,4 5 7
2,735
1,311
172,800
9,53^
S,750
5,270
2,761
54 ,60 7
5,901
5,44i
8,041
3,213 1 7 ,8 1 1
207,600
1 0 ,0 1 6
2,799
5 ,3 1 3
2,253
55,282
6 ,1 7 4
5.634
8 ,1 3 0
3 .4 2 4
1,505
35,6 0 0
21,200
12,594
13,0 10
2,269
862
1,592
676
18 ,5 8 8
GOLD AND GOLD CERTIFICATES RECEIVED BY FEDERAL RESERVE BARKS, MARCH 6 TO 15, 1933
(D a ily fig u r e s ,
System
Boston
Rew York
P h ila
d elp h ia
Cl eveland
in thousands o f d o lla r s )
Ri chirond
A tla n ta
Chicago
S t.
Louis
Minn- | Kansas
e a o o l i s 1 City
D a lla s
San
Fran.
GOLD CERTIFICATES
1221
21
.2 8 9
1 0 ,6 4 3
2 1 , 7 U0
72
31
313
—
. 10 ,2 0 0
2 0 ,50 0
286
13
1
Total, 6-8
3 2 ,6 7 2
4 i6
3 0 , 700
307
23
1
38
March 9
10
11
13
l4
15
2 8 ,9 5 1
1 3 ,7 3 8
1 4 ,5 5 7
1 ,2 2 8
2 6 ,30 0
769
996
9 ,8 0 0
85
379
135
6l
1 ,1 0 0
116
326
4o
249
3 0 ,6 5 7
1 ,3 8 7
602
32, 794
2 0 ,0 8 0
965
9^1
1 ,2 3 7
203
305
196
700
2 2 ,8 0 0
1 2 ,7 0 0
530
1 , 49 s
499
362
263
T o ta l, week: ending
March 15
l 4 o , 777
6,045
9 2 ,1 0 0
3 ,3 7 9
3 ,9 3 7
1 ,5 0 8
T o ta l, March 6 -1 5
1 7 3 ,4 4 9
6 ,46i
1 2 2 ,8 0 0
3 ,6 8 6
3,9 6 0
1 ,5 0 9
March 6
7
8
6 ,900
1 3 ,6 0 0
—
9
—
1
—
"120
—
5
77
57
42
—
20
296
184
56
33
52
245
600
139
98
53
52
245
625
490
1 ,8 3 8
1 1 ,5 7 9
3 ,3 2 3
239
199
731
56
133
338
46
100
10
81
2,216
455
690
369
129
4 i6
335
64i
1 ,4 5 2
716
693
594
622
162
129
321
369
1 ,1 2 3
670
707
1 ,0 2 6
1 9 ,3 0 7
3 ,0 3 0
1 ,9 9 0
3,33b
1 ,0 8 6
3 ,3 7 5
1 ,0 6 4
1 9 ,9 0 7
3 .1 6 9
2 ,0 8 8
b, 047
1 ,1 3 8
38
—
213
196
31^
-
—
—
——
—
185
3 ,6 2 0
GOLD COIN*
March 6
7
8
T o ta l, March 6 -8
March 9
10
11
30
801
4 , 597
—
—
3 ,4 o o
30
15
130
5 ,4 2 8
—
4 ,1 0 0
690
700
26
7
35
^7
7
21
5^
4
130
95
29
159
—
532
175
26
42
54
75
134
95
36
159
532
661
173
891
773
927
1 ,2 3 7
812
273
8 ,7 2 9
338
2,56 1
472
210
766
5^
185
4 ,9 4 6
7 ,3 7 9
5 ,5 8 7
6 , 09 s
474
484
508
595
319
786
951
4i9
1 ,8 6 5
665
120
147
340
501
1 ,4 7 3
1 ,4 5 1
2,098
776
666
47^
12
247
264
532
293
387
85^
424
472
4 ,9 8 9
2 ,6 5 7
547
1 ,7 6 8
1 M 36
—
7
2 5 ,6 3 3
Zb, 443
29*^60
3 6 ,0 2 6
2 8 ,5 0 8
— 2 1 ,8 7 1 .
815
1 ,74 9
12 ,9 0 0
1 5 ,0 0 0
1 5 ,6 0 0
1 5 ,9 0 0
1 ,1 5 5
S05
1 2 ,8 0 0
8 ,5 0 0
1 ,3 3 8
1 ,3 2 8
1 ,0 4 2
T o ta l, week ending
March 15
I 6 5 ,946
6,549
8 0 ,7 0 0
6 ,1 5 5
>+.813
3 ,7 6 2
1 ,7 3 5
3 5 ,3 0 0
2 ,8 7 1
3 ,4 5 1
4 ,0 4 7
2 ,1 2 7
T otal, March 6 -1 5
1 7 1 ,3 7 4
6,549
8 4 ,8 0 0
6 ,3 3 0
4 . S3 9
3 ,so4
1 ,7 8 9
3 5 ,3 7 5
3 ,0 0 5
3 , 5^
4 , 0S3
2 ,2 8 6
14
15
1 ,3 3 5
871
915
♦Includes r e c e ip ts o f gold h u llio n as fo llo w s :
March 15, $ 4 0 0 ,0 0 0 ;
522
1 ,0 5 1
Rew York - March 9, $ 2 ,6 0 0 ,0 0 0 ;
Cleveland - March 15, $ 1 ,0 0 0 .
March 10,
$ 1 0 0 ,0 0 0 ; March 1 1 ,
l 4 , 96 S
$ 2 0 0 ,0 0 0 ;
Larch 17.
Average amounts o f gold coin and o f gold c e r tific a te s in circu la
tio n in 1 9 2 9 , 1 9 3 0 , 1931 and 1 9 3 2 , based on end o f month figu res, and
the estimated amounts in circu lation on Larch l / »
1923
Please note- mitial2nd return to GOVEHflORr
13^>3» are shown beo.o\»*
Gold
Gold
c
e
r tific a te s
coin
(In m illio n s o f dollars)
902
371
1930
359
970
1931
363
1,000
1932
H36
710
liar. 17, 1933
U ll
510
J
GOLD AND GOLD CERTIFICATES RECEIVED 3Y FEDERAL RESERVE BARKS, MARCH 6 TO 17, 1933
(in thousands o f dollars)
» System
------------------| Boston j New York
Phila
delphia
1Cleveland Hi chmond
Atlanta) Chicago
St.
Louis
San
Kansas
[' MinnD allas)
je a p o lis ; City
___ L Francisco
TOTAL
1933
March 6 to ?
week ending March 15
Merck i6
March 17
T otal, March 6 -IJ
•29U,823
HE,735
1)8,293
H16
12,59>+
2,1 3 5
2,1+72
3 U,goo
* 1 6 0 ,9 0 0
1 9 ,6 0 0
>+23.956
1 7 ,6 1 7
3 8 , 100
>482
9,53>+
2,276
U9
21,300
2 ,6 3 6
1 ,6 6 9
>+3
5,270
7W4
65I
2 3 7 .1 0 0
l>+,923
1 1 ,3 6 7
6 ,7 0 3
2 ,7 3 0
1,399
92
673
2 ,7 6 1
193
5 .V +1
2k2
1 ,1 0 0
5>+,607
9 ,3 5 3
ll,C 7 7
273
5,901
1/475
1 ,513
776
>t, 657
76,217
9 ,1 6 2
7 , 25 c
92
1.990
70>+
211
777
3,213
33*4
17.311
1 ,2 5 2
612
2,7>+0
1 0 ,2 2 7
>+,370
23.351
89
3,0*41
3>*5
2 .5 2 3
GOLD CERTIFICATES
March 6 to 3
Week ending March 13
March l6
March 17
T o ta l, March 6-17
3 2 ,6 7 2
* 1 2 8 ,8 7 7
13,730
2 5 , 5>+2
i»l6
6 , c >+5
l , 6 oH
2 0 5 , S71
9,215
1 ,1 5 0
30,700
*3 0 ,2 0 0
307
3 ,3 7 3
9 ,0 0 0
lU ,1 0 0
13>+,000
1
32
600
1 ,502
375
2S9
1 ,0 2 6
1 ,2 3 6
1 ,0 9 1
23
3 ,3 3 7
673
72 U
Uoi
19.307
3,3 0 0
720
>+,065
139
3,0 3 0
1,039
965
6 .0 1 3
5,357
2 ,1 7 3
2 , 2*45
2 7 ,2 7 2
5,173
>42
3,762
5>+
1 ,7 3 5
303
75
35.300
13*+
6 ,5 5 3
3 , 9 9 !+
1 ,0 8 6
171
1+91
7>+5
125
177
21+5
3.375
69 s
331
2,551
5 ,233
1 , ’4*40
5,l>+9
,3 5
3, >+5i
550
159
2 ,1 2 7
209
1)35
532
1*4,1+36
1,325
605
36
1+.047
35 U
507
>+,701
1+.9UU
2 ,9 3 0
292
JJ
GOLD COIN
March 6 to S
Week ending March 15
March l 6
March 17
T o ta l, March 6-17
5,1+28
i 5l
>, 3 U6
23.955
22.756
6,5^9
9 S5
36s
1 0 ,6 0 0
,7213,035
#3, >+02
>+,100
30,700
175
6 ,1 5 5
26
1+.313
726
7.700
1,040
l,5U 5
9>+5
365
362
7f1 0 3 , ICO
S,915
7r6,310
^,535
♦New York's figures revised on actual count o f currency,
#Includes receipts o f gold ‘bullion as follow s:
Hew York
$3,3 0 0 ,0 0 0
Boston
30,000
Cleveland
1,000
d iv is io n of
S ank operations,
, 1933.
march i s
320
7,0 1 2
C ,U36
5 US
2 , 1+12
>+S,9>+5
3,929
1 ,9 0 9
13,702
tL
;
*
C a A . ef
»
Federal Reserve Board
t
Division of Examinations
Report on Investigation,
D, A* Jonoc et si*, Fiscal Agency Dept*,
Federal Reserve Bank of Chicago*
c o m m i i m
Under date of January 25, 1955, Mr. Stevens, Federal Reserve Agent at Chicago,
adviced the Board of the resignation of D. A. Jones, Assistant Deputy Governor in
charge of the Fiscal Agency Department of the Federal Reserve Bank of Chicago,
effective January 19, 1955# According to a memorandum from Mr. McKay, Deputy Governs**
attached to Mr. Stevens* letter, Mr. Jones* resignation was requested for the reason
that he admitted that he had participated in profit* arising out of certain trans
actions involving the manipulation of subscriptions to U. 8. Treasury issues*
In view of the information transmitted in Mr. Stevens* letter and through
subsequent telephone conversations and after a personal visit to the Board by the
\*V
General Counsel of the Federal Reserve Bank, it was felt that a thorough check-up
of the Fiscal Agency*s activities in Treasury issues should be made, and Mr. Cagle,
Federal Reserve Examiner, was sent to Chicago on February 5, 1955, to conduct an
investigation in vfcich Mr. Beaton, a national bank examiner from Sew York repre
senting the Secretary of the Treasury, officials of the reserve bank, representatives
of the Chief Rational Bank Examiner of the Seventh District, snd the Secret Service
participated, end his report, dated Fcbru ry 28, 1955, is submitted herewith. If, la
the reading of this memorandum, more detailed information is desired, the subject mat
ter may be located through reference to the index of Mr* Cagle*• report. Submission
of a memorandum covering Mr. Cagle* s report has been delayed due to the unusual de
mands of an urgent nature made upon the Examination Division during the recent bank
ing crisis.
Mr. Cagle* s investigation led to a trip by him to South Haven, Michigan, and
to the sending of a representative of the Chief Rational Bank Examiner to La Salle,
Illinois, and Kenosha, Wisconsin, to obtain information on transactions involving
banks st those places.
v
A review of the information contained in the memoranda submitted by
the reserve bank officials and that developed through Ur* Cagle*© investi
gation reveals transactions which, for the purposes of this memorandum, are
classified as follows!
(A) Transactions forming a part of a rather wide spread scheme for
profiting indirectly through manipulated subscriptions to TJ. S*
Treasury issues, which scheme had been in operation ov>?r a con
siderable period of time, in which B, A. Jones of the Fiscal
Agency Department of the Federal Reserve Bank of Chicago was in
volved and in which the following individuals participated to a
greater or less extent!
1* JT* H* Rumbaugh, now a Vice President of C. F. Childs and
Company of Chicago, said to be handling certain Government
securities transactions. From sometime in 1925 until
August, 1952, Hr, ftumbaugh was an officer of the Illinois
Merchants Bank, its successor the Continents! Illinois Bank
and Trust Company and/or its affiliate, the Continental
Illinois Company* Prior to hi© connection with the Illinois
Herchants Bank in 1925, Hr, Rumbaugh was employed by the
reserve bank as manager of its Government Bond Department,
“
2, Joseph Funck, Vice President, First National Bank, Konoeha,
VUeoaik*
(Resigned)
2, Wayne Huskier, former President, La Ball© National Bank, La
Salle, 111,, and its affiliated La Salle National Company,
and connected with Wayne Humner and Company, Chicago, Illinois*
4, W, A, Rateliffe, President, Citizens State Bank, South Raven,
Michigan, and First National Bank, Paw Paw, Michigan,
(B) Transactions involving one or more of the participants named above,
and certain transactions involving C* R, Sehoeneman of the Office
of the Secretary of the Treasury, With Continental Illinois Bank and
5
Trust Company ana Continental Illinois Company but in which the
Fiscal Agency of the Federal Reserve Bank of Chicago was apparently
not involved. These operations appear to have been conducted through
J. H. Ruabaugh of the Continental Illinois Company.
(C) Transactions in which appear the names of officers, employees and
a director of the Federal Reserve Bank of Chicago concerning which
come clerical or other irregularity was found and which may be
farther divided ac to the nature of the transactions as follows*
(1) Wash sales through Continental Illinois Company to permit
a profit to be taken*
D. A* Jones, Assistant Deputy Governor
IA. W. Daisy, Manager, Invertment Department
IMrs. I*. C. Laderer, Secretary to D. A. Jones
(2) Personal subscriptions to Treasury issues through Fiscal
Agency Department while under supervision of Mr* Jones, in
which over-allotments were made*
James Simpson, Director
James B* McDougal, Governor (self and rife)
J* H« Blair, Deputy Governor
C* R. McKay,
do
(self and family)
J. H. Dillard,
do
D* A* Jones, Assistant Deputy Governor
(5) Personal subscription* to Treasury lerues through Fiscal
Agency Department, while under supervision of Mr* Jonee, in which
proper allotments were made and to which no criticism is attached*
W* A* Heath, former Federal Reserve Agent
1* A* Hopkins, Assistant Auditor
R* J* Hargreaves, Manager, Personnel Department
Mark A* Lie?, Chief, Employment Divirion
A* L. Olson, Manager, Loan and Discount Department
In view of the enormous volume of Fiscal Agency transactions handled
fcy the Federal Reserve Bank of Chicago the investigations so far conducted
cover only a part of such transactions and were confined principally to the
-
year® 13£1 and
1952,
develop conclusive
4 -
but it 1b felt that the
proof
sco p e has b een
sufficient to
of certain unethical if not unlawful transactions,
and that while further investigation might develop additional criticicable
transactions it would probably not reveal, as Mr* Cagle Bays, any new
participants or new schemes or methods.
The question of possible irregularities in the Fiscal Agency Dcnartznent
of the reserve bank was first raised in April, 1952, when auditors of the
Continental Illinois Bank and Trust Company were apparently investigating
the accounts of one of their junior officer® with respect to the subscrip
tions of that bank to various Treasury issues and called the attention of
reserve bank officials to certain changes made in such subscriptions after
they had been received by the Fiscal Agency Department, such changes haring
been made, in a number of instances, by Mr* Jones* These changes were
explained by Mr* Jones &e having been made on verbal instructions received
from an officer of the subscribing bank. Mr# Jones denied having profited
by
any of these transactions and an investigation by the reserve bank
auditors did not reveal that he had received any benefit from such trans
actions. However, later information developed through outside sources, and
which would not be reflected on the records of the reserve bank, disclosed
that Mr. Jones did profit through these transactions* It was not until
January 18, 1955, when officials of the Continental Illinois Bank and Trust
Company again called upon officials of the Federal reserve bank end submitted
additional information developed by them, that Mr. Jones, when confronted
with such information, admitted that he had roceivod a participation in the
profits made by the manipulation of securities by the official of the Conti
nental Illinois Bank and Trust
Company
whose accounts were under investiga-
— 5 —
tioa - apparently Hr. ftuab&ugh. Rhiie Mr* Jones admitted receiving coma
$25,000 ae his share, the exact amount by which he profited is indeterminable,
as Mr. Jones, after making certain admission® to the officials of the r serve
bonk, refused to give any information to Mr. Cagle, basing such refusal on
•advice of counsel9*
Mr. Cagle*s report gives details of 18 transactions, most, if not all,
of which appear to havs originated with Mr. Rumbaugh and *.ere carried out *dtfc
“
the knowledge and assistance of Mr. Jones and, in e^rt&in Instances, with the
participation of Messrs* Funek, Hummer or Ratcliffe as officials of the banks
as listed in this memorandum* These transactions covsr a scries of 9w&eh9
purcharcs and sales of Government securities, usually arrant in advance of
the date of their issuance, and in *diich the Continental niSnois Bank and
Trust Company and/or its affiliate, the Continental Illinois Company, appear
to have been the maim if not the only financial losers, and in which Mr*
Rumbaugh and fir* Jones appear to have been the principal recipients of profits,
although Ratcliffs and Hummer, and possibly Ftmck, apparently participated
in profits derived from one or more of such tramsactions. In most of these
transactions no securities actually changed hands, although the records of the
Continental Illinois Bank end Trust Company or its affiliate, the Continental
Illinois Company, reflect the?e transactions*
The part played by Mr. Jones in th*> various transactions Included the
placing of dummy subscriptions In the name of certain banks until formal ones
could be obtained from the banks concerned, in order to insure their partici
pation in the 9hot9 issues - (ones in which the chance for a quick profit seemed
most likely), raising of the subscriptions of certain banks in order to obtain
>
V&f
— 6 **
a larger allotment for them) causing ovor-allotments to be made in tbe ease
of cei'tain banka or individuals, by changing the clasret &e shown by the
subscription*; handling substitutions; arranging dellv^riee, and charing in
profits resulting from th* various aanipulfttious. All securities and accounts
except the collateral held for the Reconstruction Finance Corporation and which
had been under the control or supervision of Sr. Jones r-ere verified by the
Auditing Department of the bank immediately following hie resignation and no
discrepancies A’cre found. It i« stated in Mr. KcKay* * memorandum that the
reserve bank suffered no lo&g of money whatever by Mr. Jones’ participation in
these transactions, end Mr# Cagle’s invertig&tion does not indicate anything
to the contrary. Tbe responsible position occupied by Mr. Jnaes, as head of
the Fiscal Agency Department gave him access to Its files end records, and to
advance information in regard to forthcoming Government issues, which made
him a valuable and necessary aid to the types of transection# engaged in, even
though he may not have been the originator thereof*
The activities of J* H. Rumbaugh, formerly an official of the Continental
Illinois Bsnk and Trust Company, are reflected in a large number of operation#
in the purchase and Bale of Government securities, many apparently •wash11 trans
actiont, entries covering which were made on the book# of the Continental
Illinois Bank and Trust Company and/or its affiliated Contlnental-Illinoi#
Company, end, in certain instances, such trail#actions involved subscriptions
by or sales to, and purchases from, the First national Bank, Kenosha, Wi&*#
La £’*.11# national Bank, La Salle, 111., Cltisen# State Bank, South Haven, Mich*,
and First national Bank of Paw Paw, Mich. Many of theto transactions appear
to have resulted in the purchase by the Continental Illinois Bank and Trust
7
Co*, or its affiliate, at a premium, of Government securities originally
subscribed for by it or by other banka involved, and, in some instances,
sold in advance of issuance, at par, with consequent loss to that institu
tion of the amount of premium paid, and Hr* Rumbaugh appears to have been
the recipient of a large portion of the profits* This is generally borne
out by such statements as the other participants would make*
Mr* Joseph Funck, Vice President of the First national Bank of Kenosha,
Mis*, appears to be Involved in sever 1 of the criticised transactions* A
part of the large investment
of
the Mash Motors Co* in short term Government
securities was handled through his bank, and a part through the Continental
Illinois Bank and Trust Company* Incidentally, a large amount of these
invertaents were held la safekeeping by the Federal Reserve Bank of Chicago*
Subscriptions to Government security lerues by the First national Bank of
Kenosha were in part for their own account and in part for the Mash Motors
Co*, which afforded the parties concerned in these questionable transactions
an unusual opportunity to manipulate subscriptions involving large amounts.
Mr* Funck is said to have directed the making of the entries on the books
of the First Rational Bank of Kenosha growing out of these questionable
transactions, but stated that he received none of the profits, all of which
went to Mr* Jones and Mr* Rumbaugh, as far as he knew* He also stated that
he participated in the transactions for the purpose of keeping on good terms
with Jones and Rumbaugh in order to obtain favors in connection with his own
subscriptions for Government bond issues and those for the Hash Motors Co*
He stated further that Mr* Rumbaugh told him that Mr* Jones had been getting
son® "hard break#* and that he would like to do something for him. tihen
the national bank examiner called to the attention of the board of direc
tor® of the First National Bank of Kenosha the irregularities appearing on
it® book® In connection with thes?e transaction®, Mr# Punch1© resignation
was requested, received and accepted immediately.
Mr. Wayne Hummer, who is engaged in an inver tment business in Chicago
known as Wayne Hummer and Co., was formerly president of the La Salle National
Bank, La Salle, Illinois. A number of the questionable transactions under
investigation involve purchases and sales with the La Salle National Bank or
its affiliated La Salle National Company cud it appear® that Mr. Hummer was
a
participant in the scheme® and shared in the profits, as indicated in the de
tailed explanations of the vsrioue transactions covered in Mr. Cagle1s report.
Mr. W. A. Ratcliffe, President of the Cltisens State Bank, South Haven,
Mich., and the First National Bank of Paw Paw, Mich., 1# involved in a number
of the transactions under investigation through purchases and sales between
the hanks controlled by him and the Continental Illinois Bank and Trust Co.
and the Continents! Illinois Company. Mr. Cagle states that although Mr.
Ratcliffe has refused to admit any part in the transactions, it was apparent
that Ratcliff# was an active participant, and from information developed
by Mr. Cagle on hie trip to South Haven it is evident that at least a portion
of the profits on certain transaction® were received by him in cash and either
retained by him or distributed to other participants in the scheme*
C.
H. Schoeneman, formerly attached to the Office of the Secretary of
the Treasury, appears in three transactions involving sales to him by the
-
9
Continental Illinois Bank and Trust Co, or the Continental Illinois Co*
of Government securities and repurchase of the same amounts at ft premium.
These transactions in each instance were completed on or before, the ieruo
date of tho respective securities, and evidently represent
Apparently no delivery of securities was
Mr* Schooneoaa, although, as Mr. Cagle
telephone or in pareo n .
made
sa ys,
transactions*
end no orders executed by
this could have been done by
These transactions were apparently handled by
Mr* Buabaugh for Mr* Schoeneman*e benefit and total profit© on the trans
actions reported, amounting to $1,781*25, were paid to the latter*
Mr* Cagle* % report does not reflect any participation by Mr* Eumbaugh in
these profits, although en interchange of messages between the t*e, as
shown in Mr. Cagle*s report, would see® to indicate the possibility of
sone reciprocal favor.
.
A. W. Dasey, Manager Investment Department, Federal Reeerve Bank of
Chicago, appears in one transaction with the Continental Illinois Company,
described hereafter, which reoilted in & profit of $555.94 to him, details
of which are as follows! Under date of June 9, 1951, the Continental
Illinois Company purported to sell at par to Mr. Dasay $25,000 B. 8* Treasury
bonds, 5-1/&%9 dated June 15, 1951, and due June 15, 1949, The sales
ticket was approved by "J.B.R.*, marked *pereonaln and bears a notation
"Repurchased same amount*. Under date of June 10, 1951, one day later, the
Continental Illinois Company purported to buy at 101-11/52 from Mr.
Dasey $26,000 U. 8. Treasury bonds, 5-1/B % , amounting to $25,555.94.
The
- 10 -
ticket evidencing this transaction was approved by "J,H.R." and bora
special instructions to •Hail check for premium", Hr* Cagle states
that there were no bonds passed and the whole transaction was supposed
to have been consisted before the entries went through the Continental*s
books simultaneously on June 15, 1981, it being the usual practice to
clear all bookkeeping entries when the bonds are issued* Hr, Dazey, in a
letter dated January 22, 1955, to Hr# McKay, confirming statements made
the day before, states that "Hr, Rumbaugh telephoned me asking if I wanted
to buy a small amount of these securities (up to #25,000) that they would
be glad to handle It for me". Hr, Dasey, whan questioned, stated that he
talked with Rumbaugh and Jones about this issue; that he was familiar with
prices and the market for Government securities; that he knew this was an
attractive issue; that he thought it wee perfectly all right and decent
for him to make this subscription for a manageable amount and that he meant
to sell out if and when the bonds reached 101 or above, even if this happened
to be before the isrue date; that he contracted for the bonds on the basis
of when, as and if issued; that he obligated himself for the bonds and would
have been forced to take them, or the loss, had the market dropped; that
he would probably not have been in shape to pay cash for the #25,000 but
that he could have arranged to carry them at the Continental or elsewhere
until disposed of# Hr, Dasey also stated that he did not enter subscriptions
for any of these particular bonds, either through Continental or the Federal
reserve bank; that he did not enter subscriptions to any other issues; ,that
he was involved in no other deals in connection with Government issues, and
- n -
that he did not enter into a repurchase agreement
time of this transaction.
trith
Mr.
Eu&bsugh a t the
Hr. Dazey's statements also included one to the
effect that neither Rambaugfc nor any other officer of the Continental
Illinois group had in mind securing any f&vort from hi® on account of
th is
or any other transaction) that he did not look upon the Continental minois
Company as an important dealer in Government securities, but that he usually
bought and sold such securities through other larger and better known
Government securities specialists.
Mr* Casey, under questioning by Mr* Cagle,
apparently became somewhat confused as to dates end market quotations affecting
his transaction, and retracted some of his more or less positive statements
previously made*
Mrs. L. C. Lederer, secretary to Mr* Jones, appears in one "-rash* trans
action, representing the purported sale on June
June
12, 1951,
11, 1911,
and repurchase on
of $5,000 TJ» S* Treasury bonds, B-l/SJf* through the Continental I l l
inois Company in manner similar to that described in Sr* Barney’ s ease, and which
resulted in a profit of
$07*19.
Mrs* Lederer11 statement in the matter, as made
to Mr. Beaton, a National bank examiner working with Mr. Cagle and representing
the Secretary of the Treasury, is as follows*
•Referring to my interview with you this morning re check issued
in my name, also indorsed by me, wish to state that this chock was
given to me merely as a gift* After much questioning as to what It
was for, I was told to take and accept it and say nothing farther* Still
being pussled at receiving & check and not knowing why I should re
ceive it, X was told that it came through a little bond deal which I
knew nothing of* I could not even state what securities were in
volved in this sale* Concerning your question as to whether or not
I have ever entered subscriptions for any one, wish to state I have not**
-
12
The following summary show© the subscriptions by reserve bank officers and
employees to 5-1/6$ Treasury bonds, 1946-49, issued June 15, 1951, and 5-1/4^
Treasury notes, series A-1956, issued July 25, 1952, concerning which some clerical
or other irregularity was found*
Sane
Date of Amt* of
Classification Amount
Correct
Over
_______________ Eubecrlp.EPbserlp. Allotted Correet allotted allotment aUofant
2 0 ,0 0 0
4 ,0 0 0
2 ,0 0 0
6 -1 -5 1
A
c w
6 ,0 0 0
J* H. Blair
2 ,5 0 0
5 ,0 0 0
2 ,5 0 0
7 -2 5 -5 2
1 0 ,0 0 0
B (*)
J . H* Blair
A
5 0 ,0 0 0
6 ,0 0 0
5 ,0 0 0
6 -2 -5 1
9 ,0 0 0
A
C
J . H. Dillard
2 ,5 0 0
1
0
,0
0
0
5
,
0
0
0
2
,
5
0
0
7 -2 5 -5 2
J . H. Dillard
A
B (*i
i
1
,
6
5
0
6 -1 -5 1
5 ,5 0 0
1 ,6 5 0
0
A
B (Z;
E « J* Hargreaves
6 —1 —5 1
1 ,5 0 0
5 ,0 0 0
1 ,5 0 0
0
A
B (z : 1
W* A* Heath
Mrs* Katherine
6 -1 -5 1
5 ,0 0 0
1 ,5 0 0
1 ,5 0 0
0
A* Heath
A
B (Z)
6 -1 -5 1
0
7 ,5 0 0
2 ,2 5 0
2 ,2 5 0
W* A* Hopkins
A
B (s '
6 -5 -5 1
1 0 ,0 0 0
5 ,0 0 0
2,0 0 0 )
1 ,0 0 0
Don A, Jones
B 5
A
—
5 ,0 0 0
1 ,5 0 0
*
500
Don A* Jones
1,0 0 0 )
B (5
6 -1 -5 1
5 ,0 0 0
B (z ;
1 ,5 0 0
Hark A* Lies
1 ,5 0 0
0
A
6 -1 -5 1
2 5 ,0 0 0
* 2 ,5 0 0
J* B* HcDougal
7 ,5 0 0
5 ,0 0 0
A
C \ i
6 -8 -5 1
5 ,0 0 0
*
500
J* B* HcDougal
B (s ;
1 ,5 0 0
1 ,0 0 0
A
Laura 6* HcDougal
(W)Per J.B.KcD.) 6 - 1 - 5 1
5 ,0 0 0
B (s ] )
1 ,5 0 0
A
1 ,5 0 0
0
<1
«
6 -2 -5 1
5 ,0 0 0
1 ,5 0 0
1 ,5 0 0
0
A
B (»!\
J* B. HcDougal
7 -2 5 -5 2
20, 0 0 0 )
C
2 ,5 0 0 )
2 ,5 0 0
5 ,0 0 0 )
* 1 ,5 0 0
C u;)
B
1 ,5 0 0 )
6 -1 -5 1
7 ,4 0 0 )
5 7 ,0 0 0
5 ,7 0 0
Cm R* McKay
A
D U: )
11,100
6 -1 -5 1
5 0 ,0 0 0
9 ,0 0 0
6,0 0 0 )
* 5 ,0 0 0
C. R* McKay
D(5 )
A
Marjorie B*McKay
(By C.R.McKay)
6 -1 -5 1
2 ,5 0 0
750
750
A
B (5 )
0
Charlotte G*McKay
6 -1 -5 1
150
0
(By C*R.McKay)
500
A
A (5 )
160
Esther Knudsen
1 ,0 0 0
500
6 —1 — 5 1
800
(By C*R*McKay)
A (5 )
0
A
Graham S* Conway
500
0
(By C.R*McKay)
0 -2 -8 1
A (5.1
100
100
A
2 ,0 0 0
600
600
B h, 1
0
A
Arthur L* Olson 6 - 1 - 5 1
0
600
Arthur L* Olson 8 - 1 - 5 1
2 ,0 0 0
600
B {21
A
500,000 2 1 0 , 0 0 0 ) 90,000
6 —2 — 5 1
5 ,0 0 0 ,0 0 0
I)
James Simpson
G
)
5 0 0 ,0 0 0
40,000
7 -2 5 -5 2
E)
James Simpson
80,000
7 6 ,0 0 0 ) * 4 5 ,0 0 0
1 ,0 0 0 ,0 0 0
G (1)
* )
* Separate subscriptions - should be combined, apparently*
(1) These subscriptions split into two parte - should be only one, apparently*
Written by typewriter*
As it happened, % * B mere allotted the same percentage on the 6-15-51 issue, but
this
not known on 3-1-51. Therefore it was wrong for D* A* Jones to shift
the amounts from Class B to Class A*
(2) Classification changed to A, apparently in handwriting of D* A* Jones*
(5) Originally put in Class A, apparently in handwriting of D* A* Jones*
(4) Hot in handwriting of subscriber*
- 13 -
The following
comments,
relate to the subscriptions by reserve bank officials,
listed in section 2, paragraph ”C”t on page 3 of this memorandum, to whoa over
allotments were made:
James Simpson, Director,- two subscriptions, representing two different
issues, June 15, 1931, and August 1, 1932, - one signed and filled out for him
by Mr* McKay, the other signed by himself, but filled out in an unidentified
handwriting.
The classification given on the first subscription was changed,
according to Mr. McKay, at Mr. Simpson’ s request, from one at #3,000,000 to six
at #300,000, resulting in an increase of #90,000 in the amount allotted.
The
second subscription of #1,500,000 was entered in two amounts, resulting in an
allotment #45,000 greater than if the subscription bad been made In one total.
Mr. Simpson was not interviewed in connection with thesd over-allotments, in
asmuch as Mr. McKay had handled the first subscription for him, and the second
subscription was not filled out or prepared by Mr. Simpson.
J.
B. MeDougal, Governor,- five subscriptions, three for himself and two
for his wife, in amounts ranging from #5,000 to #25,000, on three of which
over-allotmants were made.
Mr. MeDougal’ s signature appears on all of the
subscription forms, but the amounts were apparently filled in by others. Some
of the figures were evidently made by Mr. Jones, while others were evidently
made by Mr. Olson, who usually handled the bookkeeping details in connection
with Mr. MeDougal’ a investments and other personal accouhts.
Mr. tScDougsl stated
to Mr. Cagle that he did not know that the Fiscal Agency Department had permitted
padded subscriptions or had made over-allotments, neither had he looked over the
work of Mr. Jones or that of the department} that he did not look into the
correctness of the allotments made to himself or to others} and that the first
information ha had about the over-allotments to himself and about the manner in
which the forma, which bore his signature, were prepared, was when Mr. Cagle
called these matters to his attention.
- 14 -
J.
H.
Blair, formerly Deputy Governor - two subscriptions, representing
two different issues, totaling $50,000, on both of which over-allotments were
nade.
These subscriptions were originally watered under the proper classi
fications and the classifications later changed, apparently in the handwriting
of Mr* Jones*
Mr. Blair was not interviewed relative to these subscriptions.
C* R* McKay, Deputy Governor - slat subscriptions, all on the June 15, 1951,
issue, for himself and his relatives, In amounts ranging from $500 to $57,000,
on two of which over-aHobaants were made*
Mr* McKay was interviewed concerning
these subscriptions and stated that he had signed all of them.
He thought that
Mr* Jones supplied the allotment figures and that he (Jones) probably endeavored
to obtain for Mr. McKay as large allotments as possible*
Mr* McKay also stated
that he did not recall having seen the allotment letter notice showing the different
percentages allotted to the respective classes and did not look over the allotments
in connection with his own subscription, merely accepting the amounts as being
correct, and that he wanted more of these bonds than were allotted to him*
So
explanation was made as to why two subscriptions were entered by hi* on the sane
date for large amounts of the same Issue*
J* H* Dillard, Deputy Governor, entered two subscriptions, one for $50,000
and one for $10,000, both of which were signed by him, and on both of which over
allotments were made.
In the first subscription the amount applied for and the
amount indicated in the classification were in Mr. Dillard* s own handwriting,
i4d!e the other figures appear to be in the handwriting of D* A* Jones*
In the
second subscription the amount applied for and the classification appear to be in
the handwriting of an unidentified party.
was inserted under the wrong classification*
In the first subscription the amount
In the second subscription the amount
- 15 -
was properly classified, bet later changed to a more favorable classification.
An over-allotment of $5,000 was node on the first subscription and one of $2,500
was node on the second*
On February 16, 1955, Mr* Dillard was Interviewed
relative to his subscriptions*
He stated that he did not recall whether he had
looked over the formal allotment letter or noted that he had received an over
allotment*
Mr* Dillard also advised that he subscribed for these bonds as an
Investment and not as a speculation, and while he thinks he still holds them,
he may have disposed of some*
The records indicate that Mr* Dillard sold $2,000
Fourth Liberty Loan bonds, $5,000 Crane Company bonds, and $4,000 Canadian Pacific
bonds on or about Juno 15, 1951, in order to pay for his allotment of $9,000 on
hie first subscription*
D* A* Jones entered a subscription for $10,000 on the June 15, 1951 issue
and the proper allotment was made.
However, the records show that he received
an additional allotment of $1,500 for which there appears to be no subscription,
but inasmuch as the allotment* must balance, there must have been an original
subscription of $5,000 in this case*
It is interesting to note that while the Fiscal Agency Department under the
direction of Mr. Jones permitted over-allotments in certain oases, Mr* Cagle cites
in his report instances of large subscriptions filed by the Northern Trust Company,
the First national Bank of Chicago, Montgomery Ward & Co*, and others, in which the
subscriptions were checked very carefully as to clerical details, classifications,
etc., and points out that the careful checking of these latter cases indicates the
probability of intentional over-allotments in the oases under criticism.
This memorandum covers only in a general way the natters which are treated
at length in Mr. Cagle* s report, the details of which are fully eet out by him in
hie text and supported by photostatic copies of subscription letters, sales
US
memoranda, correspondence, etc*
It is the view of this division that the information disclosed in Mr*
Cagle's report is of such & nature that it should have the attention of the
legal department in order to determine the advisability of reporting the
facts to the Department of Justice*
Respectfully submitted,
LEO H. PAULGER,
C hief, D ivision o f Examinations.
From the attached statement showing the amount o f gold received
by each Federal reserve hank since March 6,
i t w ill he noted that
$562,000,000 of gold had been received by the reserve hanks to March
29.
The amount o f gold held by the public is also affected by receipts
and payments by the United States Treasury and by imports and exports
of gold.
Average amounts o f gold coin and o f gold c e r tific a te s in circu
la tio n in 1929, 1930, 1931 and 1932 based on end-of-month figu res and
the estimated amounts in c ircu la tio n on March 29 are shown below:
For CIRCULATION:............
Mr.
Mr.
Mr.
Mr.
Hamlin
..........
James _.J/_..............
Magee _
M i l l e r .. /. . .^ . —
Mr. H a r r i s o n . __
Mr. MorrilL.
Mr. McClelland^______
Mr. Wyatt..Y. ...............
Mr..................................
Mr..................................
Please note - initial
and return to GOVERNOR.
Gold coin
Gold c e r tific a te s
(In m illion s of d o lla rs)
1929
371
902
19 3 0
359
970
1931
368
1 ,0 0 0
1932
106
710
March 29, 1933
363
U03
C O N F ID E N T IA L
GOLD AMD GOLD CERTIFICATES RECEIVED BY FEDERAL RESERVE BAMS, MARCH 6 TO 29, 1933
( In thousands of d o lla rs’)
System
1933
March 6 to 8
3 8 ,1 0 0
Week ending March 15 *294,823
Week ending March 22 *173,179
March 23
8 ,3 5 2
March 24
7,315
March 25
8 ,3 9 4
March 27
1 0 ,707
March 28
9 ,951
March 29
10 .8 5 4
Total, March 6-29
561,655
March 6 to 8
Week ending March 15
Week ending March 22
March 23
March 24
March 25
March 27
March 28
Total, March 6-29
32.672
j Boston
4i6
1 .6 8 5
1.836
1 ,905
2.347
37,591
4 i6
6 ,0 4 5
*96,79 9
5.991
9,951
6 ,6 5 0
8 , 510
7,315
8 .4 2 4
298,891
York
34, 800
12 ,5 9 4 *160 ,90 0
6 5 ,7 0 0
12 ,9 10
1 ,2 0 0
2,0 31
1 ,1 0 0
1 ,8 6 7
*128,877
3,653
New
1,9 2 0
1 ,7 2 0
1,60 0
1 ,6 7 0
800
2 ,8 0 0
2 ,4 0 0
P hila
delphia
482
9 ,5 3 4
11,680
793
666
500
687
583
578
5.00 .
270 ,2 0 0
25,503
3 0 ,70 0
* 8 0 ,2 0 0
3 9 ,4 0 0
700
* * -8 0 0
1,770
5,270
2 .7 6 1
6 . 69s
3 ,1 9 1
4 ,2 4 7
378
286
213
236
303
398
188
201
319
_ 255
17,161
St.
Louis
Minn
eapolis
Kansas
City
D allas
89
8 ,0 4 l
5.216
352
331
846
287
211
3 ,2 1 3
2 ,1 3 0
128
132
80
102
l4 i
101
6 ,2 3 8
29.931
43
16 s
92
675
54.607
4 l, 722
1,970
221
1,741
2,693
91
2,960
155
272
132
2.493
369
5.264
229
9 ,5 0 0
8 ,8 5 4 114,125
GOLD CERTIFICATES
273
5,901
5,957
4oo
240
336
247
260
183
13,797
5 . 4^1
*4,425
173
81
755
850
639
£5_
2 ,1 7 2
7.27S
490
321 .
225
12,878
15,877
19,307
3, 9^
19.702
3 ,1 1 0
473
31°
2,212
1 ,8 0 0
283
175
6 ,lp 5
4 ,9 2 2
185
26
184
214
140
4,813
3 ,4 l4
182
159
99
97
179
ISO
# 1 2 ,4 5 6
# 9,149
__ 5,069
53.748
GOLD COII#
42
54
75
35.300
3 ,7 6 2
1 ,7 3 5
22,020
l ,4 i o
1 ,511
449
106
125
81
104
532
481
98
59
586
62
87
100
482
107
124
452
_ 90
5 ,872
3,785 #60,377
3 .6 2 8
8 ,4 2 4
6 ,7 7 2
8,719
134
2,871
95
3,451
2,080
91
78
36
4,047
1 ,8 3 0
108
96
10 ?
74
87
71
5,373
66
67
87
_91
6,106
2,106
168
127
193
103
276
102
7,158
'"figures io r .New lone ana Minneapolis revisea on actual count or currency.
** Minus fig u re due to over-estim ate on previous days o f amount o f gold c e r tific a te s included in unassorted
1 933.
317
462
653
2,011
March 6 to 8
5.428
4,io o
Week ending March 15 165,946
so , 700
6,549
Week ending March 22
2 6 ,30 0
76 ,38 0
2,959
March 23
500
111
2,361
March 24
1 ,9 0 0
3 ,6 6 2
147
March 25
1 .7 4 4
200
85
500
March 27
166
2 ,1 9 7
March 28
600
2,6 36
135
March 29
2 .4 1 0 ____ 517
300
Total, March 6-29
# 262,764 # 10,669 # 1 1 5 ,1 0 0
DIVISION OF B A M OPERATIONS, MARCH 3 0 ,
346
2*
2,374
8 ,0 12
a ^ e la S T lffo O O ;
9 .3 0 3
456
252
207
184
1,521
1,209
1 5 5 ,1 0 0
193
190
196
300
777
17.811
600
60s
491
San
Francisco
to:CAL
49
8,750
1 3 ,0 4 7
26,922
A tlanta Chicago
307
3,379
6,75S
600
2 ,3 0 0
200
Cleveland Richmond
OOo!°UOWS!
159
2 ,1 2 7
1 .3 4 1
6,4 8 7
88
24s
77
48
49
168
101
... 76
4,0 66
cmvrQncv.
B° St° n’ $3° ’ 000; Kew York- $3,800,0005 Philadelphia, fH o.O r'
532
i4 , >+36
123
22.653
To:
Federal Reserve Board.
From:
D ivision of Examinations.
Supplemental memorandum re
in vestigation o f D. A. Jones e t a l . ,
F isc a l A g e n c y Department, Federal
Reserve Bank of Chicago.
CONFIDENTIAL
In connection with the recent investigation made by Federal
Reserve Examiner Cagle o f operations o f the F isc a l Agency Department,
Federal Reserve Bank o f Chicago, i t i s desired to c a l l attention to
the follow ing matters which were not s p e c ific a lly mentioned in my
memorandum to the Board of March 25, 1935.
OVER-SUBSCRIPTIONS TO ISSUES OF GOVERNMENT SECURITIES:
Certain of the comments contained in Mr. Cagle’ s report,
previously referred t o , c a l l a tten tio n , in d ir e c tly , to the over
subscription o f many issues o f Government se c u r itie s , which has led to
the p ra ctice, with which the Board i s no doubt fa m ilia r , o f padding
subscriptions in order to obtain the desired allotm ent.
This practice
has resulted in the more desirable issues being over-subscribed,
n ecessitatin g a d rastic scaling dov/n o f such subscriptions and thereby
affording an opportunity, as evidenced in certain of the transactions
covered in Mr. Cagle’ s in v e stig a tio n , for the manipulation of allotments
and c la s s ific a tio n s in a manner which i s subject to severe c r itic ism .
An example o f th is type of transaction i s where subscriptions were enter
ed as being made fo r the account of customers, but payment fo r such sub
scriptions Y/as to be made by a charge to the bank’ s War Loan account as
k
indicated, although customers’ bonds Y^ere not e lig ib le as c o lla te r a l
to that account without written consent of the purchasers.
Inasmuch
as customers' subscriptions, usually in comparatively small amounts,
received a higher allotment percentage than would have been the case
had the same amounts been entered in one total as the bank's own sub
scription, this plan was apparently adopted ty subscribing banks in
some instances to obtain a larger allotment than would otherwise have
been possible.
The more common practice is simply to subscribe for a
much larger amount than is actually wanted, or in many cases could be
financed, in order to obtain an allotment of nearly as possible the
amount actually desired.
Mr. Cggle states (page 58):
"It seems that the practice of padding subscriptions
could be reduced ty the Fiscal Agency Division ty requiring
that all subscription letters, indicating that the sub
scriptions were for customers, be supported ty written
consents from the number of customers as indicated by
subscription forms.
Probably the best method of breaking
up this over allotment practice would be to not permit the
pledging of any securities except those shown as being
allotted on the bank's own subscriptions."
AUDITING DEPARTMENT:
Mr. Cagle comments (page 65) that it does not appear that the
Auditing Department has been giving sufficient attention to auditing
or supervising the work of the Fiscal Agency Department, and that, in
his opinion "the Auditing Department should be strengthened in this
respect, if no other."
The Auditor, Mr. Burgess, informed Mr. Cagle that up to the
time certain irregular transactions were called to the attention of
reserve bank officials by representatives of the Continental Illinois
-
3
-
Bank and Trust Company (January, 1S35) it had not been the practice of
the Auditing Department to check or verify subscription and allotment
letters against the accounts of the Fiscal Agency Division, but that
this would be done in connection with all future issues.
Mr. Cagle comments further:
"It appears that many of the over-allotments and other
irregularities would have been picked up by the Auditing
Department checking these records. It also appears that
an alert Auditing Department would have noticed that the
delivery instructions on many of the allotment forms in
dicated that unusual, if not irregular, practices were
being indulged in.
B y checking delivery records against
the subscription forms and the allotment letter forms, it
should have been quite apparent that something was wrong,
because there 7/ere too many instances where securities
allotted on one subscriber’s form were delivered to the
Continental for other banks, ***** Also, the practice of
changing delivery instructions on the allotment letters
returned by the subscribers was prevalent. We also found
that in a few cases the original figures on the subscription
forms were changed upwards - apparently in order to obtain
larger allotments, without sufficient proof of authority
for the changes.”
The following comments are made by Mr. Cagle in connection
with auditing functions:
"I am not convinced that it would be a waste of time
and money for the Auditing Department and Planning or
Operations departments to work out a closer control over
the Fiscal Agency transactions, since an enormous volume
of securities is handled in connection with each issue.”
”The Auditor agreed with me that it would be desirable
to receive direct from the subscribers written confirma
tions of oral or telephone orders or instructions given
by them to the Fiscal Agency Division to make changes in
the subscription forms or delivery instructions previously
submitted by them, and stated that this would be done in
connection with all future issues checked by them.”
"The Auditor also agreed that it would be desirable to
have the day and hour stamp indicated on the subscription
forms •"
Some difficulty was experienced by Mr. Cagle in determining
the method by which the reserve bank received settlement for certain
allotments of Government securities which were delivered to the
Continental Illinois Bank and Trust Company, the Continental Illinois
Company, the Nash Motors Company, and others, and in response to his sug
gestion to the auditor that a statement or summary showing the method of
payment, etc. in connection with the allotment to each bank on each sub
scription, particularly in the case of allotments involving large amounts
might be very useful, was advised it had been arranged to prepare such a
summary for the Continental Illinois Bank and Trust Company only, but
that it would also be done for other banks if they desired it.
Mr. Cagle also makes the statement that:
"Unless the auditor is clothed with a good deal of
power to supervise the Fiscal Agency operations, it
occurs to us that the allotments should be approved by
an officer superior to the one determining and certifying
to the allotments."
Mr. Cagle’s report indicates that the Fiscal Agency operations
at the Federal Reserve Bank of Chicago will be subject to more complete
and thorough check ty the Auditing Department in the future than has
previously been the case, and, it is noted from the auditor’s report to
the Board of Directors of the reserve bank that the addition of several
nev; men to his staff is planned.
Respectfully submitted,
LEO H. PAULGER,
Chief, Division of Examinations.
]
Memorandum For ______________
From Mr. Stevens
At the meeting of the board of directors of this bank
held on February 24, 1933, the Chairman again reported on the ir
regularities which had been discovered in the case of D. A. Jones,
former Assistant Deputy Governor of this bank.
He particularly
called the attention of the board to the over-allotments which had
been mpdft to certain officers and to one director of this bank in
cluding the Governor, the three Deputy Governors, and certain junior
officers, as well as one director, Mr. James Simpson.
Mr. Simpson was not present at the board meeting, but
Governor IIcDougal and Ilr. McKay made full statements to the board as
to their own subscriptions and as to their investigation of the mat
ter, and stated that these allotments had been made by Mr<> Jones
without instructions from them and without knowledge on their part
that they were Excessive; that the subscriptions in every case were
for bona fide investments.
After discussion, an informal motion was unanimously ap
proved entirely absolving the officers and director from any wilfull
intent on their part or any personal blame in the matter, and express
ing a vote of complete confidence in them in this regard.
It was decided by the board that on account of the personali
ties involved and the board’s conviction that there was no blame to be
attached to them, this action should not be made a mattes of record in
the minutes and that, therefore, it should be considered as an informal
expression on the part of the board.
A pril 13, 1933
Mr. Goldenweiser
I am sending you figu res that show oertain fa o ts about the
volume o f c r e d it, o f production, and prices on selected dates.
I f comparison is made between 1907 and March, 1933, i t is seen
that prices and production have changed r e la tiv e ly l i t t l e , while
the amount o f gold and individual deposits have increased almost
th re e fo ld .
Compared with the year #ust preceding the war, prices
and production in 1933 are down by about one-seventh, while gold
and deposits have more than doubled.
Compared with 1918, the la s t
year o f the war, prices have declined by more than o n e -h a lf, pro
duction by about one-fourth, while deposits have increased by about
one—fourth and gold by about one—th ir d .
F in a lly , compared with the
peak o f the boom, 1929, there is r e la tiv e ly l i t t l e change in gold,
while production has been out in two and prices and bank deposits
have diminished by about one—th ir d .
I t is apparent that gold , cur
rency, and cred it at the present time are available in large volume
in relatio n to the amount o f in dustrial demands and the e xistin g
price le v e l.
CREDIT, PRGEUCTIOM, PRICES
______________ (.Annml everajroa. Amounts la a l l U m i of dollars)_________________
xMonetary golds Jioney held*Individual de-iWholesale s Industrial pro
*stock of the x outside ofxposits of all x prices t
ductlon
xUnited Statest banks and t
banks
t
x
(June 30)
>1926 = 100> 1923-25 a 100
___________ !_____________ t Treasury
1896
735
1 ,0 6 1
5,744
49
35
1907
1,536
1,632
13,257
65
59
1913
1,893
1,820
17,515
70
71
1918
3,158
3,687
2 8 9860
131
85
1929
4,283
3,853
54,057
95
119
1932
4,239
4,906
4 2 ,0 0 0 (e)
65
64
1933 -Slarch
4 ,2 6 0
5,800 (p)
36,000 (e)
6 0 (p)
6 2 (p)
(e) Estimated
(p) Preliminary
Monetary gold stock of the United States. Prior to 1918, averages
of ead-of-aonth figures; 1918-1933, averages of daily figures*
Money held outside of banks ana Treasury*
Estimated annual averages.
Individual de oslts of all banks. 1898-1929, total deposits on June 30
of all banks in continental United States, exclusive of inter-bank de
posits — series derived from reports of the Comptroller of the Currency*
1932 figure for June 30 estimated on basis of Federal Reserve Board com
putation of all banks; 1933 figure for March 31, estimated.
Wholesale prices. Index numbers of the Bureau of Labor Statistics.
Industrial Production. 1898-1918 - Day-Thorns index of manufactures com
bined with Persons* index of minerals} 1929-1933, Federal Reserve Board
index of industrial production.
•
F o rm N o . 1 3 1
f)
O ffice Correspondence
T o_
Mr. Harrison
From
Mr. Goldenv/eiser
LAL RES]iERVE
FEDERAl
BOARD
Date
April 26, 1933
Subject:.
2— 8495
I am sending you a copy of the note which Mr. M iller
and Mr. Hamlin prepared at the time that a suggestion was
made about changing the gold order.
Mr. Hamlin asked me
to polish i t up, and I submitted a re v isio n , a copy of which
i s also attached.
Then Mr. Hamlin read to the Board another
statement d iffe re n t both from the origin al d raft that was
given to me and from the revision which I made.
had a copy of the la s t statement.
I have never
«
COPY
March 2 9 , 1933
The Board, in approving the modified form o f order sub
mitted to i t by the Undersecretary o f the Treasury does so
with the understanding th a t nothing contained in the order
would abrogate the e s s e n tia l o b lig a tio n s th at we have assumed
as an in te r n a tio n a l gold market.
(Mr. Hamlin’ s d r a ft)
The
of
F ederal
S e ctio n
h o a rd in g
m itte d
The
2
of
to
of
g o ld
it
and
general
th e
(e )
of
la n g u a g e
S ecretary
le g itim a te
tio n
does
not
h o a rd in g
fica tio n
draw al
or
co in ,
g o ld
29
S ection
in
th e
th is
of
th e
in to
g iv in g
th e
T reasury
th e
change
g o ld
in
th e
does
order
so
cou n try
b a la n ce s
be
under
due
C la u ses
C la u se
to
(c)
d e te rm in in g
B oard’ s
purpose,
S tates.
th e
what
of
th e
lice n se
of
fo re ig n e rs
as
m ore
to
m o d ifica
order
is
or
to
th at
re q u ire d
caused
by
its
prevent
th e
m o d i
n o th in g
p re v e n tin g
g o ld
not
th is
a cce p tin g
u n d e rsta n d in g
con stru ed
in
co n s titu te s
w h ich
In
(c ),
d is cr e tio n
ju d g m e n t
pu rpose
T reasury.
expressed
a d m in istra tiv e
U n ite d
w ou ld
c e r t i f i c a t e s — sub
of
th is
w ith
g o ld
th e
co n so lid a tio n
th e
a cco m p lish in g
fo rb id d in g
th e
w id e r
In
and
m o d ifica tio n
of
one
in
order
th e
U n dersecretary
th e
and
to
co n s id e re d
e x e cu tiv e
of
2
has
b u llio n ,
by
co n s ists
B oard
in
from
se ttle m e n t
proposed
appear
o f
th e
co n ta in e d
of
B oard
tra n sa ctio n s.
e ffe ctiv e n e s s
th e
th e
on M arch
m o d ifica tio n
(a ),
R eserve
th e
in
w ith
th e
sp e cu la tio n
h o a rd in g .
(M r.
G o l d e n w e i s e r 1s
re v is io n )
F o r m N o . 131
FEDERAL RESERVE
B OARD
Office
D ate
T o __
A p ril
27,
1 9 33
S u b ject:.
From
n o
I
w ith
h e re w ith
a m em orandum
b rie fly
retu rn
th e
n atu re
th e
ch arts
and
prepared
by M r.
L on gstreet
of
th e
m a te ria l.
le tte r
from
of
M r.
th is
C la rk e,
d iv is io n ,
tog eth er
s ta tin g
2—8495
Foiyn No. 131
Office Correspondence
FEDERAL RESERVE
^
Date
A pril 27, 1933____
To
Goldenweiser
Subject: Charts o f P rice s, Gold, E tc .,
From
Longstreet
Prepared by H. C. Clarke________________
a,a
2—8495
The accompanying charts prepared by Mr. H. C. Clarke of the U t i l i t i e s
Power and Light Corporation present figures on p rices, production, and
stocks oi certain commodities in the world as a whole, and in some cases
in individual countries, since 1920.
A chart on the percentage d istrib u
tion of the world’ s gold reserves among countries is also included.
These
charts illu s tr a te the fam iliar story o f decline in wholesale prices and
of growth in gold reserves in Belgium, Netherlands, Switzerland, and ch ie fly
France, since the onset of the depression,
Mr. Clarke does not o ffe r any analysis with these charts.
In his for
warding le t t e r , however, he makes the statement that the charts seem to in
dicate that there is a d e fin ite relatio n sh ip between the decline in prices
and "unbalanced11 gold holdings.
He further says that i f we assume a r e la t in -
ship of cause and e f f e c t , prices in the United States should increase materi
a l ly i f th is country’ s holdings of '’foreign exchange" were to increase.
The
meaning o f th is statement is not at a l l c le a r; but i f Mr. Clarke is using
the term "foreign exchange" as a synonym fo r "g o ld ," as seems probable from
the context o f h is l e t t e r , we should not n ecessarily expect a r is e in prices
in th is country to resu lt from an increase in our gold reserves; fo r , to take
a recent example, French prices have stead ily declined since 1929 despite
the large increase in French gold reserves.
It i s obvious, however, that there i s some relationship between the de
clin e in the prices of certain commodities and gold lo sses of certain coun
t r ie s .
The lo s s of gold from Argentina and B razil in recent years has been
a r e fle c tio n c h ie fly of the depressed condition of world markets for Argentine
Mr. Goldenvveiser
Page 2
April 27, 1933
S* ' '
and B razilian goods.
As the receip ts of these countries from exports con
tracted, the supply of foreign exchange available for the payment o f imports
and foreign debt charges declined,and gold was exported.
April 25, 1963
Mr. H. E. Clark©,
Utilities Power 8c Light Corporation,
Chicago, 111*
Dear Mr* Clarke:
Please accept my thanks fbr your letter of
April 20, and the accompanying charts, which I have
noted with interest.
Very truly yours,
L etter
and
chart
sent
to
D r.
C o ld e n w e is e r
Governor
fo r
com m ent
U t i l i t i e s P o w e r & Li g h t C o r p o r a t i o n
GENERAL OFFICES
327 SO.LASALLE ST.
CHICAGO
NEWYORKOFFICE
120 BROADWAY
C H IC A G O
A p ril 20, 1933
O FFI C E O F T N E
P R E S I D E NT
A P R 21 1933
J > D t u M L RTfIE
ESERgovbrn°5
VE
My dear Mr. Meyer:
Enclosed you w ill find a set o f charts which I trust
you w ill find in terestin g.
The f i r s t chart, giving the d istrib u tion o f world gold
in banks by years, from 1920 through 1932, shows a most remarkable
increase in the amount o f gold, from $7,23 9 ,0 0 0 ,0 0 0 to $ 1 1 ,8 4 2 ,0 0 0 ,0 0 0 ,
or 63.655.
You w ill also note that France’ s percentage o f th is gold
increased from 9 .5 $ to 2 7 .5 $ , or an increase o f almost 200$, while the
United S tates’ gold increased from 33 .9 $ to 3 4 .2 $ , or le ss than 1$.
The per capita gold in France increased from $17.00 in 1920 to $78.00
in 1932, or almost 350$.
During th is same period, per capita gold
holdings o f the United States increased from $23.00 to $ 3 3 .0 0 , or 42$.
The purpose o f preparing these charts was to determine
i f there were any relationship between the decline in prices in the
United States and changes in the relativ e gold holdings o f the major
world countries.
A composite chart o f the prices o f 109 commodities
shows that prices declined from 1924, but very rapidly from 1929 to the
present time. The other charts show the decline in wheat, com , sugar,
crude petroleum, crude rubber and coa l.
During th is same period,
important changes took place in the rela tiv e amounts o f gold held by
various countries.
Previous to 1929, the rela tiv e holdings o f gold in
each country had remained f a ir ly constant. The unbalanced condition
began in 1929.
I t would seem that a d efin ite relationship existed between
the decline in prices and the unbalanced gold holdings, although i t is
not presumed to say that th is relationship is one o f cause and e ffe c t .
Assuming that th is relationship were one o f cause and e f f e c t , and the
United States were to acquire a B illio n Dollars o f foreign exchange, i t
would seem lo g ic a l to reason that i t s commodity prices would m aterially
increase.
Very tru ly yours,
HLC:GS
•f \ C C *
1
FEDERAL RESERVE
Urrice Correspondence
I
have
q u e stio n
from
co m p ile d
of
th e
th e
e x clu siv e
banks;
of
June
ed
reduce
cash
th e
average
of
changes
mand
fo r
I t
it
fo r
is
th e
cle a r
war
th an
and
cash
cre d it
has
except
in
in
b in ed
has
th e
to
year
to
sum
in d e x e s
The
year
cre d it.
to
fo r
so
have
on
a
th e
m ore
In
decrease
sm a lle r
a ll
p rice s
ra tio
r a p id
th e
in
fo r
ra tio
th an
present
d e p o s its ,
th an
th e
sca le
of
th e
decrease
in
th e
th e
p rod u ction
and
de
and
graph.
curve,
m ore
term s
of
an
but
of
r a p id ly
grow th
been
decrease
th e
ou tbreak
th e
in
has
u sin g
attach ed
th e
1920
purpose
in d ica tio n
in cre a s e d
th ere
o f
and
of
u n til
of
p rice s
su p p ly
p rod u ction
rate
su p p ly
b a sis,
th e
attem pt
ra tio
rough
on
in
T h is
For
th e
S in ce
d e p re ss io n
and
a
reserve
th en
th e
w h o le sa le
g iv e
Treasury,
annual
p r ic e s .
p rod u ction
th at
and
flu ctu a tio n s
d e clin e d .
th e
g o ld
F ederal
of
th e
a ris in g
have
ra tio
betw een
sm a ll
and
th e
banks;
charted
th e
and
I
on
m on eta e
a u n ifo rm
p ercen ta ges
th e
it
d e p o s its .
to
re la tio n s h ip
had
by
and
converted
re la tiv e ly
w h ile
th at
1922.
th e
of
by
p re v a ilin g
currency
w ere
account
a
g e n e ra lly
of
fo r
p rice s.
th e
b ea rin g
banks
as
a ll
p ro d u ctio n
re su ltin g
in
I
th en
m uch
w h olesa le
in d u s tria l
th e
th at
a
of
at
100.
and
of
w e ll
dem and
in to
cre d it,
and
as
in d u s tr ia l
w ere
been
th e
sh ow in g
th ey
and
of
in d e x ,
d iffic u lt
1921
o u tsid e
one
as
and
been
currency
fig u re s
th at
and
fig u re s
d e p o s its
p ro d u ctio n
dem and
30
in d iv id u a l
to
currency
th e
ite m s
June
of
p rod u ction
be
show s
fig u re s
from
may
ta b le
and
banks
1899
cash
cre d it
com m ercia l
product
and
and
v a rio u s
by
by m u ltip ly in g
th e
o rice
cash
sh o w in g
h e ld
cre d it
d iv id in g
ta b le
of
th ese
com pu ted
of
a
atta ch ed
in d u stria l
and
you
average
cash
30
of
to
The
annual
dexes
was
su p p ly
in d u stry .
stock;
fo r
Anrti 28.1933
bo
ard
of
of
p rice s,
in cre a se
th e
p rice s,
tw o
so
com
th at
G overnor
th e
ra tio
le v e l
th e
cash
th is
and
of
p rice s.
gone
#2
up
April 28, 1933
ra p id ly
and
is
at
th e
present
tim e
at
th e
h ig h e st
reached.
e x istin g
v o lu m e
of
has
ever
I f
of
M eyer,
curve
cre d it
su p p ly
b u sin ess
can
in
be
accep ted
re la tio n
w ou ld
very
to
becom e
m uch
as
a
rough
b u sin e ss
a ctiv e ,
grea ter
it
th an
»
m easure
o f
th e
a v a ila b ility
needs,
it
in d ica te s
w ou ld
be
ad equ ate
th e
preseat
and
at
th at
to
a
i f
o n ly
fin a n ce
h ig h e r
a
le v e l
(Amounts
in millions
banks
g o ld
Year
d e p o s its
o u tsid e
M onetary
o f
and
a ll
banks
Treasury
stock
l /
(E stim a te d
(J u n e
30)
dollars)
Annual
In d iv id u a l!
C urrency
1
of
(J u n e
average)
30)
In dexes
j
In d u s tria l
]
j
p ro d u ctio n
|
2/
|
1
o f-S u p p ly -
‘W h o l e s a l e
dem and
p rice s
i
ra tio
.1
V
cash
of
and
(19 26 = 100 )
(1 9 2 3 -2 5 = 1 0 0 )
1
9 8 .4
1900.
1 ,0 3 4
1 ,1 8 1
7 ,3 3 8
3 8 .6
5 6 .1
1 9 0 1 ..
1 ,1 2 5
1 ,2 6 6
8 ,5 4 0
4 2 .7
5 5 .3
1 0 4 .1
1 9 0 2 ..
1 ,1 9 3
1 ,3 3 0
9 ,2 0 6
4 6 .4
5 8 .9
9 6 .6
1 9 0 3 ..
1 ,2 4 9
1 ,3 9 5
9 ,6 7 9
4 7 .7
5 9 .6
9 7 .6
1 9 0 4 ..
1 ,3 2 8
1 ,4 4 9
1 0 ,0 9 3
4 7 .2
5 9 .7
1 0 2 .7
1 9 0 5 ..
1 ,3 5 8
1 ,4 6 6
1 1 ,4 1 0
5 5 .7
6 0 .1
9 6 .5
6 1 .8
9 5 .1
1
i
|
'
1 9 0 6 ..
1 ,4 7 6
1 ,5 9 0
1 2 ,2 8 9
5 9 .2
1 9 0 7 ..
1 ,4 6 6
1 ,6 8 2
1 3 ,2 5 7
5 9 .8
6 5 .2
9 6 .0
6 2 .9
1 1 5 .6
1 9 0 8 .,
1 ,6 1 8
1 ,7 0 6
1 2 ,8 9 3
5 0 .3
1909.
1 ,6 4 2
1 ,6 9 7
1 4 ,1 5 0
6 1 .8
1910.
1 ,6 3 6
1 ,7 0 9
1 5 ,3 1 7
1911.
1 ,7 5 3
1 ,7 1 4
1 5 ,9 1 4
1912.
1 ,8 1 8
1 ,7 6 2
1 7 ,0 4 1
1913.
1 ,8 7 1
1 ,8 2 0
1 7 ,5 1 5
1914.
1 ,8 9 1
1 ,8 5 4
1 8 ,6 1 2
1915.
1 ,9 8 6
1 ,8 4 9
1 9 ,1 9 8
6 7 .6
I
j
9 5 .1
6 3 .6
7 0 .4
j
9 5 .3
1
6 1 .2
6 4 .9
|
1
6 9 .8
6 9 .1
j
i
7 2 .6
6 9 .8
1
9 5 .6
I
6 6 .8
6 8 .1
|
1 1 2 .6
i
7 3 .7
6 9 .5
|
1 0 3 .0
1
8 6 .7
8 5 .5
j
8 4 .3
8 8 .0
1 1 7 .5
j
7 0 .5
8 6 .7
1 3 1 .3
8 3 .3
1 3 8 .6
j
1
j
1916.
j
2 ,4 4 5
2 2 ,8 3 3
2 ,1 1 9
1917.
j
3 ,2 2 0
J
2 ,6 6 2
2 6 ,4 2 7
i
1918.
|
3 ,1 6 3
j
3 ,6 8 7
2 8 ,8 6 0
1
1919.
|
1920.
i
J
1921.
j
1922.
1923.
|
3 ,1 1 3
3 3 ,6 8 2
4 ,0 3 3
9 7 .6
7 1 .7
8 1 .9
|
3 7 ,7 8 3
4 ,4 5 9
,
9 6 .7
|
1 2 5 .6
1 0 0 .6
J
1 0 6 .8
|
1 2 6 .1
3 ,7 8 5
j
4 ,0 5 0
|
3 ,9 5 2
| 4 0 ,4 6 5
4 ,4 8 8
j
3 ,9 8 2
j
4 3 ,5 9 1
9 4 .6
9 8 .1
3 ,9 6 8
j
4 7 ,4 3 1
1 0 3 .8
1 0 3 .5
j
1 1 6 .7
1 0 7 .9
1 0 0 .0
j
1 2 1 .0
5 2 ,2 4 8
1 0 5 .9
9 5 .4
j
1 3 5 .9
5 4 ,1 0 6
1 1 0 .8
9 6 .7
j
1 3 2 .4
| 5 4 ,0 5 7
1 1 8 .7
9 5 .3
J
1 2 6 .0
J
4 ,3 6 5
1 0 1 .6
4 ,4 4 7
j
4 ,0 0 8
j
3 ,9 8 1
j
|
j
4 ,1 0 9
1929.
j
4 ,3 2 4
1930.
1
j
4 ,5 3 5
1931.
J
1932.
|
3 ,9 1 9
1 9 3 3 - -M a r ch .. . |
1
4 ,2 7 9
|
3 ,8 7 7
3 ,8 5 3
|
1 5 5 ,3 1 1
3 ,6 9 9
5 1 ,8 0 5
4 ,1 2 9
4 ,9 5 6
j
5 ,8 0 0
i
from
of
M arch, 1 9 3 3 , e s t im a t e d .
2 /
1 9 0 0 -1 9 1 8 , D a y -T h om a s1 in d e x
m in e ra ls ;
1 9 2 9 -1 9 3 3 ,
Federal
3/
y
In dex
num bers
th e
R a tio
o f
o f
currency
in d u s tr ia l
in te r -b a n k
reports
of
o f
o u tsid e
p rod u ction
o f
th e
B oard
Labor
banks
tim es
1 7 2 .8
8 1 .1
J
2 3 0 .8
6 4 .8
j
2 7 4 .5
6 0 .2
j
2 7 8 .0
|
|
d e p o s its ,
and
in d e x
of
a ll
of
.
,
com b in ed
o f
1
i
C o m p tro lle r
m a n u fa ctu res
R eserve
B ureau
j
_
i
e x clu siv e
d e riv e d
8 6 .4
7 3 .0
6 1 .0
3 6 ,0 0 0
j
9 6 .0
6 4 .2
4 1 ,8 7 0
4 ,9 0 6
|
J
1
1
d e p o s its ,
9 7 .6
8 4 .5
j
4 ,5 8 7
to
6 7 .1
3 7 ,7 2 6
j
banks
i
3 5 ,6 8 7
j
S tates,
7 7 .9
1 5 0 .7
|
3 ,7 0 8
1926.
T otal
|
4 ,0 9 1
1927.
U n ite d
1 5 4 .4
j
I 4 9 ,5 2 7
1928.
8 7 .5
i
j
|
1925.
I
j
2 ,8 6 5
3 ,2 7 5
|
1924.
l /
1 1 1 .3
banks
th e
in
«
,
v /ith D ay s
in d u s tria l
co n tin e n ta l
C u rren cy.
F ig u re
. .
in d e x
fo r
~
01
p rod u ction .
S ta tistics.
Treasury
w h olesa le
p lu s
in d iv id u a l
d e p o s its
o f
a ll
p rice s.
D iv isio n
A p ril
25,
of
R esearch
1933
and
S ta tis tics
F '/r m
W
N o . 131
C C*
1
Orrice Correspondence
To__
Go v e r n o r
FEDERAL RESERVE
B
0A
R
D
D a t e ___ M a y 5 ,
1933
Subject:... ....Demand fo r Currency
M ey e r
From
2—8405
The
o f
o f
$ 4 0 ,0 0 0 ,0 0 0
C om b in ed
a
v o lu m e
fo r
m oney
th e
circu la tio n
red u ctio n
o f
o f
in
circu la tio n
w eek
and
g o ld
$ 7 5 5 ,0 0 0 ,0 0 0
o f
and
ce rtifica te s
sin ce
th e
peak
o f
j
i
la st
M arch
4.
th e
peak
o f
m illio n s
F ig u re s
re d u ctio n
M arch
W ednesday was
13.
$ 6 3 3 ,0 0 0 ,0 0 0 ,
fo llo w :
of
d o lla rs)
I
Federal
G o ld
a
CIRCU LATION
i
T otal
$ 5 ,9 5 4 ,0 0 0 ,0 0 0 ,
sin ce
co in
(In
!
M ay 3 w a s
$ 1 ,6 2 7 ,0 0 0 ,0 0 0
MONEY I N
i
on
G o ld
C oin
I __________
R eserve
| C e rtifica te s;
| A ll
O th er
J__
N otes
M arch
4
7 ,4 8 5
626
762
4 ,1 4 2
1 ,9 5 5
M arch
13
7 ,5 8 1
512
626
4 ,4 0 5
2 ,0 3 8
A p ril
26
5 ,9 9 4
342
338
3 ,3 5 6
1 ,9 5 8
3
5 ,9 5 4
327
306
3 ,3 3 0
1 ,9 9 1
-2 9 9
-4 5 6
-8 1 2
+36
-1 8 5
-3 2 0
-1 ,0 7 5
-4 7
M ay
Changes
M arch
4 -M ay
3
-1 ,5 3 1
M arch
1 3 -M a y
3
-1 ,6 2 7
fo r
th e
Changes
in
each
F ederal
w eek
reserve
e n d in g
M ay
3
in
d is tr ic t
are
show n
dem and
in
th e
fo r
im p o rta n t
atta ch ed
k in d s
ta b le .
o f
currency
CHANGES
I N DELAND F O R CU RRENCY—
WEEK E N D IN G W ED NESD AY,
(In
m illio n s
o f
LAY 3 ,
1933
d o lla rs)
Federal
j _ _ _ J ______________________ ;______________________ _____________________________ j C h a n g e
reserve
j
G o ld
J G o ld
ce r-j
co in
jtifica te s j
F.
R.
n otes
i
A ll
J oth er
|
j
IM ar.
T ota l
sin ce
4,
1933
T ota l
B oston
-
0 .4
-
1 .3
-
3 .2
+ 5 .0
+ 0 .1
-
New Y o r k
-
6 .2
-1 6 .5
-
5 .3
+ 1 0 .5
-1 7 .5
-4 8 2 .3
P h ila d e lp h ia
-
0 .7
-
1 .4
-
2 .3
+ 0 .6
-
-
C le v e la n d
-
0 .7
-
0 .9
-1 0 .4
-
0 .4
-1 2 .4
R ich m on d
-
0 .7
-
1 .8
+
2 .4
+ 0 .5
+ 0 .4
-1 0 5 .9
0 .1
-
0 .8
-
3 .8
t
-
-
-
A tla n ta
0 .5
3 .8
4 .2
2 4 .0
7 6 .0
-1 1 1 .9
4 2 .7
-4 0 4 .0
-
5 7 .6
3 2 .0
C h ica g o
-
2 .9
-
5 .0
-
0 .7
+ 9 .3
+ 0 .7
S t.
-
0 .6
-
1 .7
+
1 .1
+
+ 0 .1
M in n e a p o lis
-
0 .3
-
0 .6
+ 0 .5
+ 0 .6
+ 0 .2
-
K ansas
-
0 .6
-
1 .0
+ 0 .2
+ 1 .2
-
0 .2
-
5 2 .0
D a lla s
-
0 .3
-
0 .1
- 0 .3
+ 1 .3
+ 0 .6
-
2 7 .0
San
-
1 .2
-
In
L o u is
C ity
F ra n cis co
tra n sit
T ota l
In
1 .3
1 .1
-
3 .7
+ 2 .9
-
3 .1
-1 2 1 .8
-
-
-
0 .1
-
-
0 .7
+
-1 4 .7
-3 2 .3
-2 5 .7
+ 3 2 .9
-3 9 .8
342
338
3 ,3 5 6
1 ,9 5 8
5 ,9 9 4
327
306
' 3 ,3 3 0
1 ,9 9 1
5 ,9 5 4
0 .6
circ u la tio n :
A p ril
Hay 3
26
6 .3
1 ,5 3 0 .9
Form No. 131
FEDERAL RESERVE
BOARD
QfFice Correspondence
To
I
G overnor
From ______ M r .
Date
Subject:
M eyer
M ay 5 ,
H o a rd in g :
o f
.19 53,
G o l d _______
Thom pson
2—8495
v
u u
A cco rd in g
M ay 3 t h a n
M arch
4
at
sin ce
d u rin g
of
is
January,
sen ted
in
h o a rd in g
ruary
fo r
th e
was
and
to
in
g o ld
years,
was
th e
in
The
th an
at
any
m ore
c e rtifica te s
in
c ircu la tio n
and
tw o
th 9
m on th s
ch ie fly
in
M arch
retu rn
is
th e
ta b le
g o ld
g o ld
in
of
to
and
m illio n s
o f
th an
f if t y
as
a lso
in
to
w ere
g o ld
co in
years,
at
in
th e
any tim e
d om estic
la rg e
as
The
but
v /ith d ra w n
hoards
w ere
th at
in
la rg e
1930
+ 2 2 0 .1
-
1 5 .4
+ 2 3 8 .0
-
2 .5
1931
-2 0 1 .6
+ 4 0 .2
-2 4 0 .8
-
1 .0
1932
-2 0 9 .5
+
5 9 .8
-2 7 6 .1
+ 6 .8
1935— January
+
+
1 0 .3
-
+
a /
+
1
9 .4
B u llio n
1 .0
5 7 .9
February
+ 1 6 5 .9
+
1 -4
+ 1 7 0 .1
+ 5 5 .1
+ 1 1 2 .5
+ 2 .5
M arch
6 -A p ril
-6 6 6 ,0
-2 6 1 .6
-3 8 2 .3
-2 2 .1
A p ril
6 -M a y
-1 1 2 .4
-
-
-
-7 7 8 .4
-3 0 9 .1
In clu d e s
v a u lts
reserve
som e
fo r
4
g o ld
fo re ig n
banks
or
b u llio n
w ith d ra w n
accou n t,
T reasury
and
3 7 .5
by
o ffic e s .
7 3 .0
banks,
retu rn ed
1 .9
-2 4 .0
-4 5 5 .3
d om estic
su b se q u e n tly
jy
+ 1 5 .6
M arch
M arch
9 2 .4
G o ld
G o ld
jC e r t i f i c a t e s !
sin ce
v o lu m e .
d o lla rs)
J
R eturn
Feb
I N D U S T R Y AND THE A R T S
IN
C oin
3
th e
in
T otal
5
pre
1933,
G o ld
1 .9
to ta l
fig u re s
F ebruary,
b u llio n ,
on
sin ce
th an
from
about
p rio r
D O M E S T IC DEMAND FO R GOLD FOR OTHER THAN U S E
(In
o f
d e p re ss io n .
p a rtly
ce rtifica te s
am ount
sm a lle r
be
hoards
re d u ctio n
b u llio n
present
show t h a t
co in
is
g o ld
e stim a te d
d u rin g
a cco m p a n y in g
tim e
d o m e stic
to ta l
$ 8 0 0 ,0 0 0 ,0 0 0 .
h o a rd in g
e a rly
le s s
recent
n e a rly
1923,
past
w ith d ra w a ls
e stim a te s ,
sm a lle r
g o ld
th e
our
any tim e
am ou n tin g
circu la tio n
v o lu m e
to
to
h e ld
in
Federal
ow n
2.
F ig u re s
in
re la tin g
m illio n s
o f
cre p a n cie s ,
th e
d o lla rs.
but
d o m e stica lly
to
in d ic a te
has
been
h o a rd in g
of
g o ld
They
are
th at
p ra ctica lly
retu rn ed
su b je ct
to
th e
”
D o m e stic
P ro d u ctio n
b u llio n
to
are
re la tiv e ly
a ll
o f
cen tral
th e
show n b e l o w
la rg e
b u llio n
b a n k in g
d is
w ith d ra w n
a u th o ritie s .
J
J A d d itio n s
jIn d u s tr ia l
j
J
to
G o ld
j A v a ila b le
j Q o n s u m p tio n j S t o c k
from
j
j
L0 S S e s
j
D o m e stic
__________________ 1___________________ j
Sou rces
j
fo r
H oards
j__________________
1930
4 7 .1
1 7 .7
3 1 .9
-
1931
4 9 .5
8 .4
4 2 .1
-
1932
5 1 .9
3 .5
4 .3
0 . 3 ^
February
3 .0
0 .3 y
M arch
1 -4
0.8
M arch
5-A p ril
A p ril
5 -M ay
5.2 y
5.2 y
1933— January
y
P rod u ction
M arch
y
2/
In clu d e s
fo re ig n
5
3
fig u re s
d a ily
In co m p le te
and
y
rate
fo r
o f
A p ril
ou tp u t
/
-
and
was
M ay
are
3 .0
1 .0
1 5 .6
1 .3
2 .5
2 7 .0
-2 2 .1
6 .8
not
1 .0
-1 2 .9
-
0.3 y
0 .3 y
2 .5
6 .8
4 1 .6
7
° /
-
a v a ila b le
and
1 .9
th e
used.
fig u re s.
b u llio n
accou n t,
Treasury
w ith d r a w n
and
o ffic e s .
by
d om estic
su b se q u e n tly
banks,
retu rn ed
to
h e ld
in
F ederal
own
v a u lts
reserve
fo r
banks
On January 13 in his speech Senator Thomas said that during the week
ending on January 11 the Federal reserve system took out of circulation
the sum. of £80,000,000 and cancelled the money# He goes further end says
that this diminution in the amount of
m oney
resulted in a scarcity of money
reflected in a decline in the price of^securities and commodities.
The fact is that the Federal reserve banks did not withdraw any money
from circulation, but that member banks, in accordance with usual seasonal
developments in January, received from the public some of the currency which
had been withdrawn during the holiday shopping period. For the week ending
January 11 this amounted to $80,000,000. Not having any need of "the cash
in their vaults, the member banks deposited the money with the Federal
reserve banks. This amount of money deposited with the Federal reserve
banks was in the first instance added to the reserves of the member banks.
There were, however, during that week a number of other developments:
125,000,000 of gold was received frem abroad and deposited by the member
banks, and the proceeds added to the reserves of member banks at the Fed
eral reserve hanks. As against these movements the federal reserve banks
allowed $39,000,000 of Government securities to mature without replacement,
which reduced member bank reserves by that amount. As a consequence of
these various movements together with some minor ones, member bank reserve
balances increased by £60,000,000 during the week.
Senator Thomas is therefore mistaken in saying that the Federal re
serve banks withdrew the money from the market, and that the security
sales by the banks were sufficient to absorb the decrease in money
ar
in circulation. The fact that member bank reserve balances increased
by £60,000,000 proves conclusively that that is not what happened#
Discounts for member banks showed only a nominal decrease of .'3,000,000
for the week. The money, therefore, was not used to reduce discounts but
was added to the reserves of member banks#
further on in his statement enator Thomas said that as national banks
issued their notes under the Glase-Borah amendment, the Federal reserve
banks sold more of their securities than the amount of national bank notes
issued, with the consequence that money in circulation was constantly re
duced. This statement is entirely incorrect# Between July 20, 1932 and
January 11, 1933, national banks issued about "l60,000,000 of additional
national bank notes# During the sane period United States Government
security holdings of Federal reserve banka declined by N24,000,000, the
entire decline occurring- in the last week# Between July 2C end August 10,
the Federal reserve banks bought 110,000,000 of Government securities, and
from August 10, 1932 to January 4, 1933, there was no change in their hold
ings, which remained at 1,851,000,000, while during the last week holdings
diminished by £39,000,000.
-3-
It is apparent, therefore, that Government securities were not sold to off
set national bank note issues. During the sane period discounts of member
banks declined by $290,000,000 end their holdings of acceptances by (20,
000,000, so that the total amount of reserve bank credit declined by
332,000,000. This decrease, however, which of course was an important
factor in improving the position of the banks by reducing their indebted
ness, represented the net effect of a number of different movements. The
monetary gold stock of the country increased by £597,000,000 during the
period; money in circulation diminished by 146,000,000 by a return flow
from
hoarding; and the net increase in Treasury currency, including national
bank notes, was 1140,000,000. The funds derived by the menfrer banks from
these sources were reflected in the reduction of '332,000,000 in reserve
bank credit and in addition in an increase of 538,000,000 in member bank
reserve balances. T'nese balances on January 11 were f‘2,574,000,000, or more
than $600,000,000 in excess of the legal reserve requirements. In general
what this represents is thet the maintenance of a constant volume of Govern
ment securities by the Federal reserve banks during a period of rapid Inflow
of gold and return flow of currency from hoarding, as well as additional
issues of bank notes by the nation-! banks, resulted in a substantial
reduction of member bank indebtedness, end in addition in the building up
of a large volume of excess reserves by menfcer banks. These excess reserves
represent a pressure on the banks to resume active operation and are the
means by which the Federal reserve banks cooperate in a program of encourag
ing the revive! of business.
@FedFRASER