Full text of Eugene Meyer Papers : Federal Reserve Board : Reports - France, Germany, Russia, 1930-31, Subject File, Box 120, Folder 9

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F ifte e n B r o a d S treet




N ew Y ork .

SS OLYMPIC - at sea
September 30, 1930,

PERSONAL

Dear Gene:
I am arriving home tonight and hope to see
you soon. I have had a most interesting tr ip abroad,
having spent su fficie n t time in London, Paris, Berlin and
Moscow to gain a pretty good idea of what is being thought
in those places about some of the more fundamental problems.
On the way across I dictated the enclosed memorandum which
brings into r e la tiv e ly short focus certain gleanings from
conversation and lite r a tu re which, i f they have any im­
portance at a l l , have a very profound sig n ifica n ce .
I am frank to s sy that I do not fe e l competent
to pass judgment upon the r e la tiv e sign ifican ce of the
distrib u tion of gold in the present world c r i s i s . Certain
it i s , however, that the f a l l in world prices which has
taken place in the la s t year is the most catastrophic the
world has ever known. The consequences have already been
far-reaching both economically and p o li t i c a lly . What w ill
be the further r e su lts and what steps should be taken to
meet the situation and prevent yet more serious oonsequences
certain ly c a lls fo r some very serious and constructive
thinking •
I hope to have the pleasure of discussing this
and other matters with you very soon.
With kindest regards,

Sincerely yours,

Mr. Eugene Meyer,
Chairman, Federal Reserve Board,
Washington, D. C.

RECEIVED
OCT 8 1930
o m o n of
thb W W M g g g J

jm

» g p crisis t^ i^IXY

XSEE

BE 5NCMHD

. In a apaech at Liverpool on September £Qth
Sir fosiah Stamp* a Director o f the Book of airland, mad certainly
oho

of tko soot k r ill loot economists of modem tin ts, remarked that

from a business and financial point of floor the present la "the
blackest time in batten memory*.
Xa a speech o» tko

mm

day Mr* Lloyd George

stated: **o are not merely golai threu# a orlala kilt metering late
« • ".

Thla oluiracteri station mould not ko oo important I f Mr* Lloyd

George bad not baaed his etatenant,

m

I

m

credibly Informed, upon

a wemerandun supplied to bin ky one o f the loading eeenmleta of
Greet Britain.
Certain It io that unemployment la increasing
throughout atrspe aid it eonld appear that thla winter w ill ko the
seat d iffic u lt one • other than war years - Burope has endured for
many deoadea.
Various remedies are proposed*

There le new a

foxy active nerenont for ta r iff pretaetlon la Great Britain and yet
many ley the no jar blame for the present d i f f i c u l t i e s upon the rapidly
multiplying impediments to f reedon of International trade*

The urgent

need o f rationalisation la pointed out me a possible road to British
competition of level terms with the output of huge nationalised
manufacturing unite or lower paid laker in other countries.

There la

an isRsense agitation la Orest Britain in favor of reduction o f puklle




ttatttlen.

S en people s s n r t that the destruction of wealth daring

the war is a fuadsnental ocmdltior.*
British electrical industries meimtain a sta tistic al
dart-rtasnt which has Just published a general surrey af acrid trade*
This ewrvay points eat that "the crisis la net sot of or®r-produetlcm so such as
ed aal-dlatrlbution sad uadeovoonsumption, there Is , et
present» s decided sleekening dees la ehipnmita of goods
fnpai market to market, a slowing down which may r e s u lt------eventually In a paralysis of our Chipping; md tha result
is that large sections of tbs world are In a state ef
starvation y while ether sections are suffering free ta ahU lly to dlspeae of products tfiioh would make starvation
tapessitie**
the server next seta two q u s t la i t
"(1 ) 2s ths present collapse In world trade a
temporary phenomenon, part of an inevitable process which
is ssseelsted with ths trade cycle, er Is It due to certain
fetters which are net really economic and have no preoodent
In pest ooonmsls history?

*<*> ft
\h » B
MflUftat to I'A-K VM sslut
ea expsaaftea In trade?"

xorid
r#itilrsn<Aig end alio 7 for

the survey submits that the present crisis la not a
"natural scsnoslc phsaoaencn, tat is dus to ’ certain devdepments which
have arisen as a result of post•war debt scttlsmsnts sad ths intrusion
af parody p o lltle a l factors late finance sad trade exchanges*’

The

noiael degree ef balance la International trade has been radically upset
It Is bald, by tbs growth of nationalism and 1fe* Intsnslfication of
ta r iffs , by tbs debt settlomeete with ths tfelted States, and by repara­
tions*

tbs la st two fastors here resulted in Franse and the tfelted

states ea Joying a credit belmte* of trade, whose oensequsnsc has been
a disastrous diversion e f tbs gold holdings of the world to those
countries; end this hoc deprived gold o f Its mein function, namely, the
flnsneing i f International trade*



•8 •
"tbles devcloptaiuit , says the mrvey, M
h»:s brought about
e collapse 1b wholesale prices and bee weakened the neat
important primary marketa la the worldwiarkats for the a « u *
.
featured products of V. .> nsia la&is tria l countries. It has
alee, through the,- «.
l «n af 1V.>
rtaarvek; of these
markets, m ^ a r e C it Harm3Uy impossible Sir them to racerer
within m appreciable period of tine* They can only reoorer
Ni f America and Franca embark on a vejgr Urge policy of Asrtlgn
loess accompanied by a redistribution of geld, but the
absorption of such loans la not easy In any market, owing to
the feat that depression haa reduced the number of channels
in whltfi cop l t d could profitably flow* It is only through
an increase in atatc inu&btadnaja on the part of theca
primary markets that any redistribution of gold oculd take
plate, and yet a*eh state indabtedneaa m it in I ts e lf increase
the burden of trration within those countries and in turn
render recovery vary d iffic u lt ."
The survey emphasizes the gravity o f tho feat that goM
reserve* have bean aerloualy dapiatad la the th ief primely markets, e*g«,

•

* %SV'

.„‘ i

* * '
•‘

3outh Asterlee end Australia*

• ' • . *■
« >.

)

,

<
*

.

The f u ll affects of thin depletion and of

the price collapse have not yet been f e l t , but w ill, It It stated, take
the form of

m

intensification of the adtoroe balance of trad© af countries

producing msin ly primary aaterit& i, and a parallel intensification af
. . .. • v .1 '/ •v .{ : .#
*,- >4 '■ :,I " , •k
induetria l depression in the chief countries manufacturing fur ©apart.
This w ill "retard almost indefinitely the recovery in prices which is
necessary to a world economic recovery,"

It is pointed ant that though «a

attempt is being made by the central banks to etiicKlata activity by aheap
money, this attempt w ill be frustrated by the tribute paid to France and
the Baited states.
Against this gloomy background the Intern* tlen&l trade
position appears to the authors o f the survey as "depressed without
immediate poeeiM lity o f recovery,"

ft la considered that the Thsited

States w ill require a longer time to recuperate than it required in 1021,
owing to the fe e t that it has increased enormously the productive capacity
end hue been involved in ever-eepitellactic* of assets.




•ItuatLoD of Germzqr la regarded m m e more
erttiCttl» •**«• **• reyiirati«s d ifficu lty ie be lag accentuated toy the
virtual abolition o f deliveries in kind « d

expert a

m ot bo "ffcrced*

to tbo detriment of the international price leral and the in te n s ifie s
tim of the world oeoneale depression,
Xn Great Britain indue tria l reorganisation |e abated
to be yreeeodinc and there are eigne ef yremieing esordination between
finance end induotxy, but - (the su rer says) •

•sarga&a grarasj rasa ara.
teU lags with ths present state of trad*, and «« arc oonfioatsA with i slaw, M m m , exhaustion of ths gold iwserve* a i N i u y to the f lain slag or Industry, o f national
promotion, sad of foreign trad* generally, lash an eximustlem oat cnly ho prevented by ths reallin tloc of • wash
ompo favorable balance of trade I ts e lf, end this favorable
helaaoe Is to ho fo o d In restriction of Imports. It has
tokat exsstly fir s ywars fo r ths truth to ho shorn that
asperta oosnot ha stimulated andor s reglne o f deflation,
s ^ so tho alternative is proposed or restricting Imports
tteoutfi s tan gs In ths national flso a l poll ay. n s gold
standard has not dons t a t Its greatest advocates haws
alaload In Its anpperti It has not otlnolotod notional
••tlT ltr, hot has, an tho ether head, paralysed national
«c«isumption and woekonod industrial offlolanty through tho
oouotant reglne of fa llin g prloaa tfileh It has lnpoaad.
Tho altarnatlwa Is now ettanlatlcn o f hone produstlan and
tho contraction o f Imports."

Vlowa of t a Msnaheetaa shnabor of Caesarea
On Soptoaho* 18th t a r s was publish ad In inland a
aasormadun on the gold standard hr the wary Influential Manchester
Clhanhor of Cobbsres.

Ikla msnor andon fallowed a waif aaraful study of

the subject by tho Chnsbor Board of Diractors, and It was forwarded to
t a PHno violator, ths eorerlng 1st tar stating that "tborw are few
natters more deserving of your greet influence" then tho subject natter
^•vorod therein,




n o aaaoraadUB paints out t a t In ths oplnleo of tho

Q S S S l& S iS i*'

nenotniy collIT. n*ti«*A end

•It to beoaRtng inoTeaeln^y ertdcnt", myn **»•

an. *toat there 1* not, nor So ttore likely to Ho, « yonrlar increase In
the *rod„3ilou of sal* whlah would to eumelmrt tod adoc(Bt>to to contain
the

full volume of world prodwotire e^urlty end totgtAn a |*>efittoie lovfcl

cf pri&Qi to? «0 jre 4 U i»i giBarally*

$PMMM*at dcjraaatea la largaly da# to th*i poi^iatant
N U In prlooo, which naaataar p o llg too csntirAy fallod to correct.
bow

* to too Board that the world*a - m A f of B i . l » not ,h4«3H*«

It
tb*

present volune o f world productive capacity.*

sir H«orv ttroktoohU Tirvo

s ir S m rr .3trak»»ah, o recognised authority on control
tanking, earranay and otoer ooononle natation*, too rooontly published on
Important aamoradm on the ooononle consequence* o f stooges In tto velna
•f so u .

Sir Homy mo o otoloort etonplso o f tto pAlty <* <*••* Brttoin’ s

returnInc to tto gold ctcndard, and so k messber of tto Tlnonelal Omsslttee
o f tto tong** o f Sail one to rendered valuable oorvleoo In tolplsg JMropean
countries to

rAlnk their

carrot A cs to

gold.

Sir Koniy strokes ahthink* tto t tto f A l In prlooo which
too Vtfri" plat# might, to non* extent I f not to tto whole, tore t o n
0voided I f tto ecntrA hanks of tto acrid hod handled their nenotory

ranehinee with more okttl oad cooperation.




Sir Homy eenoldero ttott
-too reeent f A l In tto g « e r A tovA A p r i s e .* • £ • !
In tto supply A earraney « d cred it. . . If, too .gold, stwdord
world tod boon aannllod with an odocuot* aconat

-1•

by the ixsrolse e f reasonable eooacrey In the use ef lie
aonetary geld supply there vrould have been m f e ll of
general prices* I f there has been no f e ll there would
h m beci no redistribution of wealth, no clogging of the
flow of exchange, no super-abundance of currency and
credit to oopply the stimulus for a rc/ereal o f the
*, and therefore no trade cycle,*1
>,

Sir Eeaay points out that gold bee appreciated In

▼nine in the period free Dacesbar 1985 to the end of Kay 1980, by 38*1
per cant, ef which 9*6 per cent eeaurred in the loot fixe itanthe.

He deale

M tolsoly t n elearly ndth the oontestloa t t » t till* 1* t o to gtoeral *or«rproduotloa” . tor a tona tin * production to* adroMad annually In a t o *
e n a t«r ratio f t * population.

Of too a w o d ltto a lneludad In too prioa

Index ae between December 1988 and M*r 1*30»

pear cent here f a l l * , 19 per

•ant here risen and 10 been unchanged*
There Is than e super-abandsnee in nearly threequarters o f tbs various kinds
there to

maxtoXr
a

ef rae * i U riels

the wirld needs currently,

« f tto produoara of aooh of to*a* ORtoxleto to asehaag*

thaa for otoars, nad pat they i n not *xoh*o«*d.
•be ere, in these cire»Mrtaneee,w Sir Hsnqr ecyc
ludo that these exchanges failed to be
entitled to
made, not because goods generally were in excessive mpply,
but because the process o f exchange was in aons way impeded *
T ^ T tf, as is the case, there ere no observable fopediasats
e f e physical or moral character, the theory ef cver-productlan fa ils and ec are driven Ibr an adequate explanation te
the cnly remaining factor effectin g the precees o f exchange,
v i * ., the adequacy of the eneunt of naney that is available
to e ffect theeo exchangee.”
One e f the interesting features e f Sir Htnxy’ s
sndm is a table showing the unewwn distribution ef gold reservesl Great
Britain bes 13 8a per head ef the population, U. >.wHb* Ve, :rrsnee -HI,
Argentine -L9 4 s.

Tht average ?t the «nd o f 1989 for the eight chief ccsntriee

*M M tod tor tha rtosladar-H Ta.

ttora to to t o * dlffw w w * to t o
V '
'
a *••. ..
* ,‘ * .
•m elon *r or to* aradi* apatoto of too** tototolaa, to tta flaw * f *to

l* m rr^

ItU r tifti. M to TCtoto* • d lftofto** of 100 par m b » , to to* V.S.A. •«*



rnnt%

- 7

-

According to Sir Henry, the deficiency in the" supply of monetary gold
in re la tio n to the assumed requirements of an additional 3 per cent per annum
was not remarkable t i l l the end of 1928, and the f a l l in prices was commensurate*
But in 1929 there was a deficiency of 100 per cen t, and the price f a l l was lagge,
sharp and immediate. The vtiole of the 1929 supply was absorbed by U.S.A. and France,

*»d* altogether, £950,000,000 was rbstraeted, far real prise Bignifioonce,

*****

gold-using countries,

.test alee could be ezpeoted, it is asked,

than a complete landslide?
But i t Is stated that seen a violent prla* aom on t
v««ld net be

m

economic disaster I f there were complete mobility and

flu id ity in a ll the parts of the industrial and social machine, end therefore
the further section of the memorandum, which gives a graphic review of the
distribution o f the national Income in tbe United Kingdom, le the meet sig­
nificant part o f this study.

About 1? per cent o f the lucerne goes in the

profits of enterprise, and is immediately subject to the impact of prise
ehesijgc, while the remainder suffers either not at a ll or much more slowly.
Sir

m rnrf

traces the e ffe c t of these varying degrees

of vulnerability ea the field fear employment, end the curtailment o f demand,
and sayat

,

<

*Tha phenomenon is due not to *orerwpredaction* but to
tte retara&tlen in the process o f exchange, and therefore ef
eonmuBpticn, cuuseo by a drastic rcdietriW tion of wealth
resulting from the f a ll in the general level of commodity
prices which, la turn, owes it s origin to na inadequate supply
of currency and cred it,**
--------- ------------ ----

Quid Pclsgstlcn o f the league of Hctlcus
H o Odd Delegation of the league o f Hat Ions* financial
ccoMlttec an September SSnd issued its interim report dealing with the
fluctuations in tbs purchasing power of gold,

The ccenittec states that the

present world production of gold amounts to about $400,000,000 annually end
this mount la not lik ely to be increased during the next three or four years.
*T he gold reserves o f banks o f issue and treasuries", it
is stated, "a t the end o f 19*0 mounted to about *58,007,000,000,
to which oust be added a further sum estimated at about
-2185,000,000 representing gold in oirsulatlom in a few countries,
gold in commercial basks sad hoarded seine, e tc ., outside <iaia,
a total, therefore, o f -*£,100,000,000. Of thlaHU.03,
,
,
-179,000,000 lay in the United States and we consider i t probable
that a considerable part at any rate of th is la tte r sum le
pwoMumtly lo st far effective monetary purposes."



Ik* proTlsional flgaroa at th . *ad « f XM9 * « * • #

tm

toeroaaa « f ^>48, 000,000 in the total goto *to«ks.

that the para,ant .eoaeal. 4*pr.**i«n W
TaAim

U th

im>
*4

rw ol* 1® • t<«por«rjr aaak«nlag

» U . thensh po«ibly th.

a llr .r w ill load to l»«r*aMd puroha*.. * f
•mtlctyat.

mi

B * repert aon.ldera

&>1&.

daalto. to th . pri.* «f

It U cot >ef« to

« .t w t o l i-.du.tioB In th* t e n d tor

wmr

t o " * to oon..

Baal tag with to* nonotair dajaad tor g*ld gKOtoXlgt
it

mr

r*u*n*hXy to .* p .« t .d , it to .M artod, tto t to* m a r e r ^ l r a a w t .

of B*U . i l l toad to taaraa*. »« predaetlaa wad trod. .n a n * . toX***
of w w w t andaiao t W r tM t chaaK*.
Ik* rrpart gto**

m

4 L.bor.te r ta ti.tle a l t*b l* .howln

th* w t t H lii goto pooltlaa anuaallr tor to. **«t tan year., hatod up«»
m iytog « .* w p t l« ~ .

TM* tohto * « r » toot th . .apply

«

tor M B.taiy purpo.*. a l ll to Uadaonat* hr X*34 t a l* * .

Xo d lv r is U

« * goldatallabl.
"•

iltu a tio# in U n *
Although th« 4«Mnd for geld f«r aoaetery purpose*

t o . raeatoad ■ twpom ty .to r t wtoe t* the w t o t d*pr*.«loB, t o .

tk . r*y*rt M tlM t* . that to . gold produotlon tor X930
wiXl anaunt to -MO,800,000 tod that pr*deotito . i l l dad. to* •»•** y a .r to
- m , 000,000 to 1*40.

t h l w B *. a*d *toH *et*d «*ar«M * f aawto • » « * -

soruad, th* A.e l in . to oatpat to Xltoly to e*»tta «. at *

a.oai.ratod rat*

aftar 1940, a* the 3oato A frl.to «to *«, to l.h aisonnt tor «»*r haif th*
praaant prodanti or., tocoBa. greitoally .taaw tad .




fit the

mjonwiz immXL

for ^epteeber 1990 there la

an important article entitled: "The Import « f cold Into France* by Tilalegh,
o f the University of Budepest, In whioh ha refers to th« foot that special
coM ltlens >3on«eminr Trane* and the United States Involved, *n oonstant
drain on the fold reserves of the nor Id and threatened dlaturbansofi o: the

fAtPA Order** which

m

esn "only be brought to

end by appropriate esatrel

bonking ta*1**1re s.*
There is in the scat number of the 3008*341(5 JOUftSAl. a
most interesting article by ?anl lla slg oo»K»nting upon the fa st that the
Bank of Bhgland decided on Tune Oth to pay out gold bars only of st^dard
finenesst that Is .9 1 6 -3 /3 ,

mi

the decision of the Bank of France not to

seeept b'ii* of a fineness inferior to .9 9 9 .

is a result gold withdraw. fro*

tbs Bank of England has to be refined aaew before it can be delivered into
Paris.

This mean* additional expense

mi

m s s l SL
Z
SU
SiIS.Handl.
S ir

delay.

PTOgirly

Gold

Joniah 3t«»p Is one of those vho has not ceased, in

end out ef season, to protest that until the world has learned the rules for
an appropriate intern«tlanally Menage* gold standard, there would be rapid
end erratic changes in gold prise level which would constitute serious
economic danger.

This ho considered as one of the important reasons for the

establishment of the Bank of International

SctUm m U

as

m

institution

for w »o n consultation and action among the great central banks.
In an a rticle in the London RATION for August 30th, 31*
Joeleh points out that the present failure properly to handle the gold supplies
o f the world constitutes *th» worst danger that eight year* ago any of us
could have feared, more sin ister in it s p o ssib ilities for e v il, end finding us,



- 10

latornaUcoallr,

..

tb.

r.l«tiY.lr

o«rti.m*

-

M U t e M ,

4«00.tl«.tt<*

4rlfting,

* » b

. * * " * " **»« f M t o r ‘ >

«

fttrth,r

fl
t
a
y|MW

to*

laaipmt* for • ’
DlrMtor * tl“ ®“ k 0f

avrlandt
■» Out for
& m 'Prim

.jpototod *

**U*i

XinlrU/r of Ovmt Britain ao»« w»«ui

oononle l*rt«o*y "o B sltto. •«“ u tla * of * * “ *

«■* rluBmaial . f r f

of f

« » « * » . tb . purp~. o f * 1 * » « t .

.-« f tb. M r w M * * » » • •
I .
t.

t» f—

**“ 1“ 4i°*

»*«“ * * ♦* Sr“ °t* Prt"P*rit,‘

t b .t t b i. c— t t f . B« t . r « r r f t « * 4 t b .t -itbont r* 4 "r*

yolittoo, i t . - b

«

«ro « tf» *

tb . « . « r ~ •—

to t b . r f f r a t t * « f b r l t i * F «*P «1 V .

« » « »•“

* *

thW #W* “ *r t0 * ’

(1) tound of tb. 41ff*rM.o i» *b» *■*• *t* d"rf* rf ***
'

sheltered end unsbeltarod Induetria**

(E) Rodu.tlon of tb . lonrA of rool

by «*•»* «

»*r • * * '

(3) RoadJosto.nt of tb. popar^tlaui s*d ln t.r -.U lo d 4obt
**'^**"\'*1 _
,-tni v^nVn is tbs Baaof.(4) ttrootor ooeyMotton «M»e
TT^nt of the world’ s gold supply*

''.Moats dri.ory Cmm.ll

tb .

pnbllo r*ort. -4 it

*»tf •brtM. that tb. politiMl

U

if

tb . » y « f carrying oot

b>. so far M b a ltt.4

r .M —

adatlM.

d lffiM lt io .

aro noprofMbd «

no
in

to bo * - m »

tsoaporahla •

Tb.
proo.Mioc i f »

of tb .

-M -» t

.

f obtain




b y —

bo.

fM T , f

dlapalr m i not

inform*

o o f itto n .

in

awland

by

fw 4 o -

b i f f l f l t p o l i t i c l y aw oon f far tb . O P aro*

,M tM tiT . t a r iff * i f
* *

foot that

l i b .I f f

t

in it 1 —

by *f - « tflfibU -tbf - .
t. f

obrion.

fUti-1

m « r 4 f by - r . tbM gbtfai
yioM

W

actly raloablo rowlt..

popol.H ty.
a . . y o liv *

Gamine out of tfto wn»idor*tU«i» muaoratod i
tlMM 1 . . v.ry iatttontisl . * « ! of
oonslders

ut

1* ^ l * * 5 «* « “ ■ * *

tto t it » y s till to oscows17 fo r togtoad to

luset vatUL tto pound oan to do-mland at • * »

,0011 ssooapliah * itto n ti® <*

lift

tto gw sral lnr.1

* •*

of prion.

***» Mtoo nai.tine s r ile .

« « • » **

m on

tto

b alB

r " t ! r‘a

' ht*

18 por otot sad PtorfblT

to * »ua>or tto t w «ld «U «ri«to m o t of tto

It «IU W rooollo* tto t at tto

ttm

tto l»uad « «

p l,««4 oa tto old to o ls, tto KWtotot non Tory otraiyly rsaistsd by aooncsaiats
life Teynos w d 1»f

tto t too points of Tlsw msatloond tooto *ith
to gold distribution «ro nsoad. i t is otoioo. toot tto oobjoot i .
lit o ly to towns o f otooAUy iaoros.in* taportanss a»t » « * * ? to foroiga
ooantrion bat ta tto Uhitod 3t«too no t o i l .
7 te

groat drop la oomsodity price* bosro dona witb

«*tw toorlaooo upon o sotmtry lito Oonanny thiol ot tto to®«t in »apnllsd
to -not ltn toes rnpartition P*y*>at. by OOtnnL nhijtooitn of ooaodiUoo
o nundiae (rrontty ttotaeo* prison.
for tto shly-at f

. ersntor toIw.

It in otoioon ttot nwb s situation o,Us
-

m m m U * - tton totors.

tto bonin of sir H«iy atrntonsb'o fi«»on tto burden of

Tton, upon

a»xmm rspnmtioa

S W t . laorsnosd by npproaitotsly 10 pnr sort f * » tto tot of
to toy

Mat,

1930.

1930

This nottlthat* din* ti» f*ct that tto purposs ot tit

T o *e plan n , nntonlly to .onto d o * tto M M

rspom tlto »«*— ♦**

T t o Onto® s i tuition in madsrod tto

mow

d iffic u lt by

tto foot tto t forslyi londlae to Os*»ny to. no ffto tly dtolaU tod.




.

U o

intlon *itb Or. :ataebt, forma rly Prenldaat of tba .aiehubank 1b
Bortto, I obtalnad an extreoaly illuminating atatnmant U

to Juot * a t tba

Betu«l figurea ar# aa to Corn- reparation snrmmta *» 1***'

» • 3rt»oM told

■o that from tho boginning or tba operation of tho Donna n « » 1® 4«to Oenaany

b*4 fold in reparations approver tely Bf b illion «»U a m .
period

too bowaund • » » • * «ppro*l®»tnly 4*

bUU*»

During * e asm

9m

by

borroolmg abroad a ll Ooraan rap"ration paymenta bo data b*w boaa «•* a“ 4

Camay baa obtained about t M i l l ® dollars narking oapltal to addition.
Dm situation that oenfwnt# Garaany

foral«n landing

baa an greatly dtminiAod and «boa wywnta m at be nada not only on aeoount
of reparation* but on aeoount of tba ».rrla e o f tba n o. dobt Um rrod, la
obTicmsly aost




Fifteen 3 r o a d




Street

N e w Y o r k

September 17th, 1931

Dear G-ene:
I had rather a wonderful opportunity
in Europe to gain an insight into the situation.
I had talks with a very large number of men of
the greatest competence and importance, who, by
reason of my knowledge of them in past years,
talked rather freely.
The results are set forth very briefly
in the enclosed memorandum.

I am preparing a

rather detailed development of the points in this
memorandum, giving the arguments in support of
these points, a copy of which will be sent to you
in a few days.

Mr. Eugene Meyer,
Chairman, Federal Reserve -Bane,
Washington, D. C.

34th Floor
Fifteen Broad Street
New York City

C O N F I D E N T I A L

THE EUROPEAN FINANCIAL SITUATION

The following observations are based upon a quick
survey of the European financial and economic situation, undertaken
between August 18th and September 9th, 1951.

Opportunity was afforded

to talk confidentially with statesmen, bankers, business men, economists
and publicists in Paris, Geneva, Basle, Vienna, Budapest, Berlin and London.
An unusual amount of confidential documentary material was supplied and an
opportunity generally was afforded for gaining an insight into the situa­
tion which the reading of current newspapers ?/ould not provide.

The

situation is too delicate indeed for frank treatment by the newspapers
of many extremely disquieting facts.

Confidence has been too badly shaken;

it is highly important not to "rock the boat".
The first point noted, as being particularly impressive,
was the extraordinary unity of opinion on the part of practically every
man with whom one talked in all of the countries indicated, in support
of the following propositions:
1. It is extremely unlikely that Europe will be able
to pay the United States any further sums on account of reparations or
inter-allied debts;
2. The United States will be very fortunate if it is
able to regain the principal and interest of Europe’s present indebtedness
to it on other than reparations and inter-allied debt account;




-

2 -

3. The present low world-prices of basic conmodities
and the maldistribution of gold (which is threatening the permanence of
the gold standard itself) are due in no small measure to the tariff policy
of the United States;
4. The present acute difficulties of Europe were brought
on by extremely generous lending policy on the cart of the United States
from 1924 to 1928, followed by the sudden cessation of such policy in
1929 and afterwards <

In 1930 and in the early pert of 1931 the European

situation was assisted by the granting of extensive short-term loans by
England and the United States, but the withdrawal of a large portion of
these short-tem loans this spring brought the whole situation to a
sudden impasse;
5. Europe will experience during the next six months
its worst winter in mo d e m history —

v.orse even than during the war and

without the psychological props which sustained the morale of the people
despite the hardships of the war.

There will be an extraordinary measure

of unemployment among industrial workers throughout Europe; trade will
slow down to a hand-to-mouth minimum; and the foreign purchasing power
of every countiy in Europe will be curtailed to a drastic degree;
6. Budget deficits on the part of practically every
\
•
government in Europe will be followed during the next year by a wave of
the most drastic economies; the standards of living of governments,
businesses and individuals will be materially lowered.
widespread cutting of dividends and reduction of wages.




There will be

Outside of France there was substantial unanimity
upon the following points:

1. The payment of Gorman reparations is at an end.
sooner all of the nations adjust themselves to this fact the better.

The
It

is not so much that in future years Germany may not be ablo to resume
payment of a portion of the reparations, but indications become more im­
pressive each day of the social and political unlikelihood of reparations
payments being resumed.
2. The present credit crisis was precipitated by France
as a counter-move against the Austro-German Customs Agreement announced
March 31st.

France, immediately after that announcement, began.’withdraw­

ing its short-term balances from Vienna and Berlin.
The failure of the Credit Anstalt of Vienna
followed, and the undermining of German banking came to a head in the
collapse of the Danatbank, which shook confidence in the whole of Central
and Eastern Europe to its foundations.

Now York had meanwhile become

.

frightened and was withdrawing its short-tern money from Central Europe,
and it was not long before London found itself unable to continue to
carry its accustomed burden and itself had to call for help;
3. The present financial policy of France, admittedly
now the strongest power in Europe, is dictated largely by political
considerations.

Holding one-fourth of the world*s supply of gold and

having the strongest army in Europe, Franco apparently feels that now is




-

A

-

the psychological moment to shape events in Europe for the next ten
years at le a s t , to suit the French book;
4.

The strained relationship between France and German

constitutes the chief stumbling block to the establishment of tr a n q u illity
in Europe, and soms accommodation of the serious p o litic a l issues between
these two countries is absolutely essen tial before that measure of con­
fidence can be established in Europe which w ill make

possible sound

reconstruction of European finance;
5.

The United States is looked to as the only country

in the world whose in itia t iv e and leadership can bo e ffe c tiv e in helping
to solve the extremely obstinate p o litic a l impasse which weighs so
heavily against the normal balancing of European economic and fin an cial
fo r c e s .

Hovering over the whole situation are many vague and
haunting fe a r s, some of thorn representing the serious anxiety of com­
petent observers, others representing the vague and lo ss responsible
murmurings heard hero ahd there throughout Europe.

These fears m y be

c la s s ifie d as follow s:

1 . That England may not bo able to maintain the gold
standard.

Yet even French bankers arc frank in recognizing that not

tho le a st important foundationstone of the whole c a p ita lis tic system
is the maintenance of the in teg rity o f the L.




- 5 -

2 . That, in view of the concentration of three-fourths
of tho w orld's supply of gold in the hands o f France and the United
States, the other countries nay be forced to go o ff the gold standard
altogether*
3 . That, i f pressed too hard, there nay be a p o litic a l
upheaval in Germany which w ill result in a repudiation by some f a s c is t
or communist government in Germany of the whole Treaty of V e rsa ille s and
a l l i t s works.
4 . That the c a p ita lis t system may come to be regarded
by the peoples as having proved so in e ffe c tiv e in meeting the present
emergency that desperate measures may be attempted to torpedo most
important and valuable elements in the system — to the injury of mankind
fo r an in d e fin ite time.
5 . That tho growing criticism of banks being muttered
in a l l European countries may r e su lt in so fetterin g the freedom of
world banking as to place another obstacle in the way of prompt world
recovery.

In view of a l l the foregoing, the most competent
European opinion looks forward to the coming winter with l i t t l e
te r r o r .

Time is running very f a s t .

short of

The London Seven-Power Conference of

July 20th to 23rd, 1931, in which Secretaries Stinson and Mellon p a r tic i­
pated, brought about tho appointment of a committee of bankers headed by




Mr. Albert H. Wiggin.
o f the Bank of France.

On that Commit toe was Mr. Moreau, formerly Governor
Mr. Moroau joined his associates in signing the

Committee’ s report, the most important conclusion of which was the follow ­
ing:
’’But time is short. The body o f the world’ s
commerce — whose v i t a l i t y is already low — has
suffered a severe shock in one of i t s members. This
has resulted in a p a rtial paralysis which can only be
cured by restoring the free circu lation of money and
o f goods. Wo bolieve that this can be accomplished;
but only i f tho Governments of the world w ill r e a liz e
the re sp o n sib ility that rests upon thorn and w ill take
prompt measures to r e -e sta b lish confidence. Their
action alone can restore i t .
We think it essen tial
that, before tho period of prolongation o f cred its
recomended by the London Conference comes to an end,
they should give to the world tho assurance that in ter­
national p o litic a l relations arc established on a basis
of mutual confidence, which is the sine qua non of
economic recovery, and that the international payments
to be made by Germany w ill not bo such as to imperil
the maintenance of her fin an cial s t a b i li t y ,
"WE THEREFORE CONCLUDE BY URGING MOST EARNESTLY
UPON ALL GOVERNMENTS CONCERNED THAT TRET LOSE NO TIME
IN TAKING THE NECESSARY MEASURES FOP BRINGING ABOUT
SUCK CONDITIONS AS WILL ALLOW FINANCIAL OPERATIONS TO
BRING TO GERMANY — AND THEREBY TO THE WORLD — SORELY
NEEDED ASSISTANCE.”

Tho Wiggin Committee Report was signdd August 18th.
Nearly a month has already passed and nothing v is ib le has been done by
the governments to act upon i t .
The LONDON ECONOMIST, whose ed ito r, Sir Walter Layton,
was the English member of the Wiggin Committee, commenting upon the situ a­
tion in i t s issue o f August 22nd, very ap tly remarks:




- 7 -

"The key to the situ a tio n , therefore, clea rly
li e s with the p o litic ia n s , who can hardly ignore the
representations unanimously submitted to them by the
accredited nominees of the ch ief central banks of the
world. Nor is the matter one which concerns Germany
alone. The Committee speak o f the recent c r is is as a
shock which has caused pa rtial paralysis in one of the
ch ief members of the world’ s economic body. I f not
cured by restoring the free circu lation of money and
goods, the paralysis inevitably extends to other memberw
of the body.
"The period of grace is short, but the task is
c le a r .
I f the Governments f a i l to carry it out, Europe
w ill be faced with a sim ilar situ ation to that of la s t
^uTy, but under conditions which w ill make it fa r more
d i f f i c u l t fo r the problem to be so lv e d .”

New York
September 16, 1931.







Rtebruary 10* 1931.

\

Mr. IT. Raffelovitch*
Ritz-Carlton Hotel*
Hew Toiic City.
Dear Ur. Raffelovitch:
Please accept my thanks for your letter
of February 5 and for the enclosed memorandum on the
economic consequences to the world of the present
situation in Soviet Russia* which I have read with
interest.
I was glad to have an opportunity to
see you while you were in Whahlngton.

-

With kind regards, I am
Sincerely yours*

Governor,




R itz-C arlton Hotel
Madison Avenue & 46th S treet
Hew York C ity .

February 5, 1931

Hon. Eugene Meyer
Federal Reserve Board
Treasury Bldg.
Washington, D. C.
Dear Mr. Meyer:
Permit me f i r s t o f a l l to thank you fo r your kind
reception in Washington.
I thought i t might in te r e s t you to peruse a memorandum
o f mine on the economic consequences to the world o f the present
situ ation in Soviet Russia, which I have forwarded to the State
Department, to Mr* Lamont, and to Mr. Fletcher, and copy o f which
you w ill find enclosed.
I w ill not f a i l to keep you informed about our endeavor
to regularize the market for foreign se cu ritie s in New York, about
which I told you, and which has made some progress since ny return
from Washington.
B elieve me, dear Mr. Meyer,
Yours veiy sincerely

RECEIVED

M B I I

m m mt sonar scotaixce
theih zmsisutk o o m r a c is
__________________ m j s i j o m ____________ _ ___________
X.

Appliestio - of Coastal*t principle# inevitably Xaftda to institution of foread
labor.

It is lneefce*i*rU>X* that the eon trails ties of iad^try, agriculture*

trade under State op*ration should b«s <os vi Is without national planning in­
volving f*»eb individual.
to choose his work.

It is Inconceivable thfct the letter should b« tblo

furthermore* the pay he le to receive is else a natter

for the sole decision of the State*

U*e* of subordination to such a state

of things weald load to the impossibility of carrying oo the Cancanist state
and therefor* has to be enforced by direct ;>*maltl«;s or Indirect penalisa­
tion#
£.

We see t h M this logical catenae of Communist prime iples is illustrated In
•very v y by the practices of the Soviet govem*a«Rt.

In varl-ua spheres of

activity or production* such penalties or penal lea tlou n-.rc been adopted end
one can only ear t h M the ;jriaelpies of forced labor as a ecmseqpamee of the
Communist regime are carried out with ruthless energy.

The latest decrees of

the Soviet Govern went I n reference to tha obligation of any person of *o»e
knowledge of railway operation to work on the railways is a striking example
of penalties.

The decree obliging the unemployed to work on the job assigned

to them is another example of the 00:*sequences of this system.
Any survey of Soviet legislative and admintstrative measures (hiring tbs
last years can only lead to the sane exclusions.
B«

Therefore* any investigation as to whether a product is the result of convict
or forced labor is superfluous and useless,

all one can establish Is the de­

gree of severity applied In various cases to workers who do not accept their




jobs or who do n o t carry th«a o u t.

But th is degree has nothing to do with

the general princip les involved nor with the consequence* o f such a sta te
o f th in gs.
Since the la s t few year* the ap plication o f CJocaainis® to Rusaiau economy
ha* and* considerable progress*

One oay e&y that today a vast m ajority

o f in d u stry, agricu ltu re an^ trade i s d ir e c tly or in d ir e c tly cowsamized or
c o lle c tiv iz e d *

For Instance, those farmere who s t i l l carry cm th e ir agri­

cu ltu re ! pursuits as in dividu al* are obliged to s e ll to the Government as
the so le buying agency*

the Government fix e s a r b itr a r ily the price and pays

Sn the currency o f which i t Is so le master*
4*

As another eonaequwuc© o f tb«* Communist regim e, the monopoly o f foreign trade
permits complete contradiction between o f f i c i a l quotations o f Soviet currency
abroad and i t s r e a l purchasing power*

As a l l transaction* with foreign cou n tries,

except contraband end b ootleg tra n sa ctio n s, are in the hands o f the Governse n t, and are n e ce ssa rily cm a gold b a sis, the Government can quote i t s currency
a t m y le v e l i t d esires*

At the

m m

t i e s , we see that u n o ffic ia l quotations

o f roubles in B e rlin , Warsaw, end China aura todgy e t «*u n d 8$ o f per, while
o f f i c i a l quotations are at par •

The u n o ffic ia l quotations r e fle c t the buying

power o f the currency on the in tera a1 market*
5*

The S tate management o f in du stry, agricu ltu re and trade as w ell as the currency
situ a tio n render very problem atic and indeed inppnetinable sound ca lcu la tio n *
o f co sts o f any given a r tic le *

Outside o f tha currency situ a tio n with i t s

in fla tio n and i t s progressive decrease o f purchasing power, i t would perhaps
ha p o ssib le fo r the S oviet Government to e sta b lish in gold * general p r o fit
and lo ss account, but th is i s hardly po s s ib le fo r Individual c la sse s o f pro­
duction or in dividu al a r t ic le s , even i f the Soviet Government had a d e sire to

calculate real costs*




-O '

6.

In addition, i t i s not in bearing \vith Soviet economics to calculate costs
the seme way as a c a p it a lis t ic en terp rise.

in

Such elements as in te re st on capi­

t a l , depreciation, obsolescence, renewals, and depletion appear to the Com­
munist mind as not being elements o f co st to be taken into consideration. The
cost o f labor i s a r b itr a r ily fix e d , as explained above.

Therefore, any a t­

tempt a t calculating costs o f Soviet production would h i t against imsurmount­
able ob stacles.
7.

Boat reports end reasonings referring to the Five tear Plan era asking a con­
stant confusion between mere production iaad economic production.

T
Thile the

second Is in d ire ct de pendence o f re a l c o s ts , o f distrib u tion *nd marketing
p o s s i b i l i t i e s , the w*re fa c t of production as re fle c te d by appropriate s t a t i s ­
t ic s i s not a measure o f economic r e su lts or o f sound development.

I t is

only aa indication o f quantities o f goods which are or w ill be ava ilab le for
the in te r io r or exterior markets, which are to be disposed o f regardless o f
co sts.

The two *ain questions which a r ise are how long such orsctices can be

continued snd how such in the intervening space o f time they can hurt the
economy o f the world and o f the producing country i t s e l f .
8.

When one takes into consider tio a the two factors o f the natural resources o f
Russian te r r ito r y and o f the forced labor o f a population which exceeds in
number that o f the United S tates, I t i s e a sily imaginable that should no
untoward events hapf»en inside or outside Russia, the Soviet Government w ill
be able to carry on i t s present plane and p o lic ie s over a period oT tim e, they
su b sta n tia lly increasing the present degression and therefore i t s dangers.
The a r t i f i c i a l i t y o f such a plan as the Five Tesr Plan and indeed o f the
Communist system i t c s l f w ill certain ly lead to numerous delays sand d i f f i c u l ­
t ie s in i t s ap p lication , but w ill n& prevent the p o s s ib ilit y o f a su b stan tial In -




crease ia volume of production in many branches.
0.

There is no doubt that with sound and reasonable principles of economic develop­
ment the Russian market could absorb, as it has in an increasing degree done in
the past, substantial quantities of goods and food-stuffs of every sort.

It is

impossible, however, that this normal process should take place over tee next
years under Communist guidance.

The application of the Five Year Plan has as

its corollary and even as its basis the reduction of the standard of life by
payment of minimum wages.

If one calculated these wages according to their

real purchasing :>ower and even should on© believe in the practicability of a
Coiammist regime, it is obvious that an improvement in living conditions in
ourchasing power would be possible only when the present effort directed mainly
toward building up of hesvy industry will be accompanied by another tremendous
and still more complicated effort regarding the induetrial production of con­
sumers s?ooda* Furthermore, a complete reorganization of the transportation
system and an entirely new organization of distribution will be necessary.

As

long as this is not done, and even the CosEaanist admits that for these purposes
the Five Tear Plan will have to be followed by a Ten Tear Plan, the standard of
life and the purchasing power of the population will remain at a vary low ebb
and Soviet economy will have no choice but to try to export a greet part o i its
increasing production.
10. Soviet economy is already f&cod by another necessity for exporting, regardless
of orlce, and this necessity will become more and more imperative.

The Five

Tear Plan as well as its subsequent developments and extensions, necessitates
very large imports of aachiney as well as of costly foreign specialised power
and labor.




In the past years, in the totnl absence of confidence permitting

obtertian of long term credits, the Soviets had to solve the quo.tion of their
balance of payments and especially of imports of machInery throughchert ter® credits.
From now onward they have to face increasing maturities for their old pending bills
and at the same time provide means of payment of ordinary imports and new extra­
ordinary import# made necessary by the development of the plan.

At the suae time,

they beer the burden of the foreign trade organisations and of Communist propa­
ganda and Communist activities all over the world.

It is only natural that the in­

creased difficulties of solving these problems have lately led to an increase of
the discount rate for Soviet trade delegations or Astorg bills which have risen
between the end of 13£9 and the beginning of 1951 from 16$ to around 28$.

Lately

the Soviet State Bank has been twice forced to export gold to Berlin. The Soviet
Government and its trade organisations have been obliged to have recourse in order
to obtain foreign currency to the most varied operations, including acquisition of
foreign goods on credit and the sale of the same or similar goods abroad for cash.
It is likely that the short sale of five million bushels on the Chicago grain ex­
change was due to the same desire of procuring foreign currencies.
The drop la world rrices in itself results in increasing the volume of ex­
ports in order to face payments of the same sise, but In reality the Soviet system
will have to face increasing payments, which aggravates the situation.

This will

inevitably lead, apart from other causes and apart even from the desire to harm
ce itaiistic countries, to a very substantial and progressive increase of the
quantities of various goods, raw materials, half manufactured, and manufactured
articles sold abroad.

This state of things is unfortunate for the world in many

respects.
Leaving aside the question of what a normal and economic development of
Russia on the basis of sound principles could represent for the world, it




smsi be recognised that her preseat system of production b&sed on principles
entirely opposed to those o f the rest of the acrid is in I ts e lf an immediate
menace which cannot be over-estimated.

In addition to th is, I t oust be remembered

that one of the cain hopes for a tr&de revival is founded on the fact that, by
reduction o f production the output o f goods s i l l gradually adjust it s e lf to
the demand, but a il hopes of recovery both for industry and for agriculture
can easily be thwarted by the action o f she Soviets.

In a period lik e this

market® and prices can be easily upset even by comparatively small quantities.
The world knows that the law of supply end demand corrects situations lik e the
presrat one over a period o f time*

However, the Communist experience in Russia,

being in it s essence a r tific ia l end creating a source of supply free from any
economic lim itation, through the realisation of the Five Tear Plan,

mm

easily

prevent the movement o f readjustment, while under normal conditions Russian
production would be based upon, and limited by, the some principles o f economies
which regulate production and trade e ll over the world.
I f these reasoning* are applicable to a ll countries including America, i t
is not superfluous to examine the economic consequences o f the Soviet regime
in Russia and of the application of the Five Tear Plan with particular regard
to the United States.
From this point o f view, i t is necessary fir s t o f a ll to cops with the
fallacy that figures of trade balances between tvo countries can be taken as
entirely separate u n its, to ta lly disregarding His general picture,

that is

important for the United States, and indeed for any country, is the to ta l o f
it s trade and mot merely the particular trade situation with one country.

In

other words, i t is easy to conceive a state o f things where a favorable trade

balance with one country is achieved at the price of endangering trade with
other countries.




Zt 1* also easy to conceive that such a favorable balance sight bring
an immediate advantage for the present, but sight result in a considerable
danger for the future.
In this connection i t is useful to remember that, as i t has been put
forward In o ffic ia l publications as well as is special literatu re, American
industrial enterprises starting subsidiary Manufacturing companies abroad
give an Immediate stimulant to exports, ruueely, o f mnehlnary, but that such an
* a r tific ia l stimulant brings with i t logical contrary a fter-effects because,
once the factory is bu ilt and operating a decrease of American eports in the
lin e of goods produced by the factory w ill resu lt, which is only in a feeble
degree compensated by nee exports in machinery and renewal parts.

However,

the development o f manufacturing subsidiaries abroad by American concerns has
at least the compensation o f earning money for American enterprises and,
place in countries with which normal freedom o f trade relations e x ists,
may lead to developing exports of other American products owing to the additional
purchasing power created in the foreign countries.
In the case o f exports of machinery to Soviet Russia, even this argument
disappears.

Under a normal economic regime in Russia, an industry in continual

development existed and would certainly exist today, requiring the import o f
machinery from abroad.

These imports would be limited by a normal and gradual

rise in the capacity of production of tha country la accordance with the im­
provement of domestic needs and would be accompanied by s normal flow of Im­
ports o f other goods la accordance with the rise in he domestic standard of
l i f e of the country.

But today we are witnessing a rapid growth forced by

a r tific ia l means, and thereby leading also to s forced and rapid increase of
production, not accompanied by improvement of domestic conditions sad not ju stified
by the general situation o f world markets.




•8­

12*

Furthermore, i t is by no means indiiYerent to American economy that the other
markets o f the world should bo invaded by goods resulting from such

t

produo*

tian and thereby involving s competition which is unbearable for American goods*
This problem goes far beyond the question o f mere competition in prices
on certain articles*

I t is in direct bearing with the economic depression

in the world and the aggravation o f such depression through forced exports
c f commodities and other goods from Soviet Russia*
th is extremely serious aspect o f the general trade situation Is being
entirely overlooked by those who care to examine exclusively the present
figures o f trade between the United States and Soviet Russia*
The analysis of these figures does not warrant the assumption that the
present trade with Russia is o f great economic importance to the United States»
otherwise than in the sense that even comparatively unimportant figures may
play a certain role in the present d iffic u lt conditions.
A considerable portion o f the trade has nothing to do with Soviet orders
as such and represents the normal flow o f goods going directly or indirectly
from the United States to Soviet Russia to ta lly independent o f the Five Tear
Plan and of special agreements*
On the other hand* Soviet exports to this country as represented for instance
by manganese, anthracite and lumbar do considerable harm to American economy
by disrupting prices and therefore endangering established industries to an
extent which is probably far beyond the economic advantages o f the special tem­
porary exports from this country represented by Soviet orders o f machinery and
equipment*

I t is not d iffic u lt to forecast, on the basis of what has been b riefly

said, that within the next few years the inevitable increase in the volume of
Soviet commodities and goods which w ill be exported and disposed of through forced
sa les, w ill show s t i l l acre clearly a ll the dangers of the apparently favorable




-9-

bal&nee of trade between the United States and Soviet Russia, outweighing by far
in every sense the present advantages*
This, of course, is not the vie* of those who are primarily interested in ex­
ports of machinery, but a careful study of the situation will most probably show
that here again private interests are only capable of asking individualistic rea­
sonings and that only a power beyond them can weigh on what side lie the most im­
portant interests of the nation.
15. In addition, it has been shown that the financial situation of the Soviets and es­
pecially of their balance of payments, taking into account their ever-incrrasing
amount of maturities abroad, contributes to make transactions with v»ei&, based
greatly on credit, unsafe and this unsafety ia increasing as time goes on.
Therefore, it wight well occur

that

even the outstanding amount of American

short-tar* credits, represented aainly be exports of equlpaant, will run consid­
erable risks and in final analysis it might well result that the so-called ad­
vantages for American industry will be transformed in the latter paying itself
for the privilege of trading with Russia.
14. It is interesting to note that reasonings are ut forth claiming that, on the
basis of Soviet figures of their present and future requirements in equipment,
the United States could play a prominent part in catering to such requirements
and that this could contribute in relieving the present unemployment.
It has been shown before that the Soviets can only pay for such forced im­
ports by forced exports and it is not difficult to foresee that such forced oxports will har* American economy in its domestic field, either directly or in­
directly through their action on the world prices, and will severely hit its
foreign markets.

Such a policy would mean that temporarily, and proh:-tly against

their better interests, certain American industries would be helped to the great
damage of *11 other industries and in the long run of American production raid




tr&de la general*
fh« above mentioned fact of extension of short-term credits by American
manufacturers , and pertly also by Anericsn banks, needs careful weighing
sad not only from the point o f vie* of the financial risk involved in such
cred its.
This risk is illustrated by the feet that the discount rate for Soviet
trade delegations or Amtorg b ills has risen from 18# at the end oi 19K9 to
28-4£9# at p r e s e t.

I t is further illustrated by the fs e t that in most European

countries private firms and Individuals in gneral were so reluctant to extend
such credits that i t has been necessary for the government to step in and give
such ample guarantees as to enable the manufacturers to risk practically only
their profit*
An analysis of these guarantees show© that in sor:c oour t*i i>-v

have

been fixed within extremely modest lim its, for instance in Ita ly the maximum
amount is only $10,000,000 represented in fact by a barter of imports and ex­
ports*

Countries which have gone further in. th&t direct.;on

v.it

prompted

bj

p o litica l motives, lik e Germany who does not desire the downfall of the Soviet
regime as long as afam can play in her foreign policy ths* card o f a potential
m ilitary alliance with Soviet Bttssla, or lik e the present Labor government of
England who is merely trying to placate the le f t and pro-Bolshevistio wing on
the Labor party without whose assistance the present government would immediately
lose it s parliamentary majority#
For the United States, and especially for the United States government,
there is another side, and a very important one, to the sueotion of private
credits to Soviet Bussia#
I f events in the coming years follow the tread forecast by the present
cemorandua, I t might Tory Toll happon that at a certain no*ont the goTomaaot
o f th is country « i l l bo oonpoUod to fceko itopa o f indlridual or conoortad




defease against Soviet imports*
Is such as eventuality, i t is sot d iffic u lt to foresee that e ll those
Americas citisens and corporations who have short-tor® credits outstanding
with the Soviets w ill greatly hamper the freedom of actios o f the government
by pointing out the losses which they s i l l sustain as a result o f such me sures
of defense, i t being obvious that the Soviets w ill not be w illing nor able to
pay i f obstacles are put to their exports Is such a way as to curtail the same*
16*

This problem of the freedom of action o f the United States Government is
rendered s t i l l more complicated by another aide o f the question.

Today already

over 2500 engineers, specialists and specialised workmen, citizens o f the
United States, are employed by the Soviet Government who is highly desirous
st the present moment o f increasing this number by further employment of another
ten thousand men*
I t is easy to imagine what would happen i f the United States had this
number of men working in Russia at the time when the United States Government
would ba compelled to take serious measures o f economic defense as explained
above*

A ll the fam ilies o f the men would immediately repair to the State

Department and point out that the safety o f these men might easily be jeopardised
by such measures*

I t Is easy for the United States government to ascertain,

for instance from tho German an' the Belgian governments, to what treatment
certain German and Belgium engineers have been exposed whim the Soviet govern­
ment or even the local authorities of the Soviet government found i t expedient*
I f at the present time there exist no such grievances on the pert of the Americans
employed in Russia, this only shows that expediency dictates to the Soviet govern­
mentthe greatest caution in that direction because i t feels that without American
technical help the five tear Plan would be immediately compromised*

Should such

economic measures of defense be takes, the fiv e Tear Plan would be compromised
anyway sad therefore the employment of American an i any other specialists becomes



to s great exten t u s e le s s and the ex >©d Lency o f according the® good treatment

automatically disap rears.

We met not forget that the masses of Russian workmen cannot help feeling
that the foreign specialists arc treated in every way as privileged human brings*
They are now under special protection of the Soviet authorities.

Should this

protection slacken one minute, very dangerous results could follow.
I t is therefore obvious th*t for self-protocfcIon against the future and as

a seams of giving advice to those Africans who want to extend credits or who
desire to go to zork in Russia but mainly m a moms of keeping an entirely free
hand for the future, it would seen expedient to recommend great caution to the
American business world as well as to those who sight seek employment in Soviet
Russia.

One can’t foretell whether in the course of th© next years the Govern­

ment might not be compelled to & course of action not la bearing with the safety
of th© credits given and, what is still j»ore important, with th© safety of the
mess working in Soviet Russia.
By

falling to do so, the Government would greatly diminish its freedom of

actios at a time when various countries such as Belgium, France, Spain, China,
etc. are already applying or studying measures of defense rendered more and
more imperative as the situation develops on th© lines explained above. More­
over th© Government, though not directly responsible for business transactions
or for individual service contracts, would all the same incur « certain degree
of moral responsibility unless it took tho necessary precaution of giving &
warning about how the situation might evolve in the near future.
17. Another point worthy of note and consideration is the question of th© old Rus­
sian. debts.

The entire experience of the various studies conducted to that

effect by European Governments as well as the American experience of the con­
versations held up to now indicates that while the Soviets will not recede from
the principle




-15-

o f repudiation, they e r e w illin g to arrive a t a settlem ent provided they obtain
large c r e d it* .

In other words they merely consider such a settlement in the lig h t

or an increased in te r e st charge on new cred its end as a s a c r ific e necessary to
obtain these.

As under present conditions* long term fin a n c ia l transactions in

favor o f Soviet Russia are out o f the question because o f the risk involved,
th is would merely mean a further and v a s tly Increased burden cm the annual
Soviet foreign balance o f payments.

I t has already been demonstrated that even

in order to cope with the present burden, the Soviets can do so only through
forced exports.

Hew cre d its as w ell as in te r e st payments on the old debts

would therefore only Increase considerably the danger to the world economy in
general and to the United States in p articu lar o f such forced exports.

Jfor does

the budgetary condition o f the Soviet Government warrant such a burden, which
could be borne only by normally developing Russia, not by a country already im­
poverished and whose condition is being rendered s t i l l worse by what an Ameri­
can observer (Samuel G. Cross) so ap tly c a lls the "current ruthless p o licy o f
in d u s tr ia lis a tio n ".
A debt settlement would be only a snare and a delusion and would moan
merely extending a helping hand to the Stalin Government enabling i t to gain
time to continue the carrying out o f i t s program without even any "appreciable
a lle v ia tio n o f the unenviable l o t o f the Russian masses* and without any reason­
able assumption that the in te r e st payments w ill or could be continued over a
period o f time nor that the new cred its could be considered as s a fe .
The f i r s t p rin cip les in lending money are the past record, the character,
and the polioy o f the borrower.

From th is point o f view a lso a debt settlement

accomplished by new cred its seems to be e n tir e ly out o f bearing with sound
fin a n cia l p o lic y .

,

There are various fa c ts and symptoms which should lead one to believe
that fin a n c ia lly speaking the Soviet Government i s traversing a period o f




—14—

increasing d i f f i c u l t i e s .

This i s obviously the reason why i t i s making s

desperate attempt to obtain c re d its and using fo r th is purpose a l l p o ssible
means*

The fin a n cia l s t r a it s in which i t fin d s i t s e l f today also explain

a certain decrease in expenditure for propaganda and other Coramunist a c t iv it ie s
abroad.

I t i s highly undesirable to procure to the Soviet Government the means

by which i t s p o licy could again be in te n sifie d at a moment when the world
needs not only external but internal peace fo r i t s economic reh ab ilitatio n *
18*

Another point I s worthy o f attention*

I t has been and I s sometimes s t i l l be­

ing contended that trade re la tio n s are apt to change the prevailing system
in Soviet Russia through the influence o f intercourse with business men o f
other n atio n s.

I f such a view may have be«m a t le a s t th e o r e tic a lly ju s t ifie d

in the f i r s t years o f Bolshevik ru le in Russia, experience o f varied business
transactions and re la tio n s during the l a s t thirteen years has not in any way
confirmed such op tim istic hopes.

The reason fo r th is l i e s in the fa c t that

such intercourse i s lia b le to influence people only i f a t le a s t a certain de­
gree o f freedom e x is t s , permitting exchange o f views with the population with
which the foreign business man comes in contact.

Under prevailing conditions

in Soviet Russia the foreigner i s obliged to watch h is step even in private
conversation, which might turn out dangerously fo r him, and s t i l l more so
fo r the Rnsalans he i s in contact with*

Another season i s that instead o f

a weakening o f application o f the Communist doctrine we see an ever increas­
ing attempt at a 100,£ c o lle c t iv is a t io n ;

in te n sifie d Communism i s not conducive
remains
to the fu lfilm e n t o f the above op tim istic hope. The Communist Government
at war with the outside world, and i t is not only u s e le s s , but dangerous, to
disregard th is c r u c lsl fact*




APPENDIX
EXTRACTS FROM ADDRESSES MADS AT THE MEETINGS
OF THE INTERNATIONAL CHAMBER OF COMMERCE,
JANUARY 1951 SESSION

Mr* Rene Duchemin, President o f the Confederation Generale de la
Production Frazicaise and Vice President o f
the International Chamber o f Commerce*
"The Five-Year Plan that the U,S*S*R* has ju s t begun to apply i s
bearing i t s f i r s t fr u its * The Russian monopoly Is unloading upon the world
markets vast q u an tities o f goods that have more than su fficed to throw into
disorder markets already over-saturated, and these massive sales sire accom­
panied by prices lowered to a point where often the consumer only has to
pay the value of the raw material used"*
S ir Arthur B alfour, B a r t ., K .P .E ., Chairman o f the B ritish National Com­
m ittee} Vice President o f the International Chamber
o f Commerce*
have the Russian menace, which is p o l i t i c a l , moral and
economic. The Russians have adopted a low standard o f liv in g with an under­
fed and badly clad population and added to i t , forced labour. The F iv e Year plan has probably made more progress than the outside world has ap­
preciated.
"Russia*s wheat supplies to Great B ritain in 1910/14 were 1?£ o f
our t o ta l imports. In 1926/27 these f a l l to 4%. This season the figu re
has risen to 24^ and during the la s t four weeks to 40$. The prices have been
low, ranging around 2 2 /- per quarter. This year’ s importation has amounted
to 59C m illion cwts. and there was availab le in the wheat producing countries
o f the world 615 m illion cwts. To th is excess Russia contributed 60 m illion
ow ts".
"They have been s k i l f u lly playing o f f one nation against the other
to greatly extend th eir terms of c r e d it. I t does seem important that th is
whole situ ation should be very ca re fu lly studied by the Chamber as with the
standard o f liv in g and forced labour conditions which they have adopted th is
may become a world menace which may have to be met by prohibitions} ce rta in ly
the f i r s t step i s to not a s s is t such a situ ation by granting long c r e d it s ".

Mr. S ila s H. Strawn, Chairman o f the American National Committee, and
Vice President o f the International Chamber o f
Commerce.
"Russia - One great menace - perhaps the greatest aene.ee - to the
recovery o f normal economic conditions throughout the world was the practice
o f the Soviet Government o f s e llin g commodities at any p r ic e . This practice
obtained in the United S ta te s, as well as in other countries, but in le s s de­
gree* Obviously such a practice dislocated markets, impaired s t a b ilit y




Page p

and m aterially affected business conditions* Lately there had been a growing
tendency to r e s t r ic t the cre d it of the Soviets in the United States because
o f rumors o f the precarious condition o f the Soviet fin an cial structure and
the p o s s ib ility o f it s in a b ility to meet o b lig a tio n s ."
Mr. Gustave L. Gerard, Director General o f the Comite Central Industrial
de Belgique, Secretary o f the Belgian National
Committee o f the International Chamber o f Commerce.
"in connection with Soviet competition we have f e l t the reactions of
dumping in every sphere, but the Belgian Government has taken the necessary
measures and a recent Koyal Decree submits Russian grain and oertain other
industrial produots such as glue, stearins and oleine to a system of import
lic e n se s. This is an indication that although a free trade country, Belgium is
properly obliged to clo se i t s door when made the ob ject o f measures such as
Russia has employed.*

Mr. Josef Jachs, Consul General, Delegate o f the Swedish Rational Committee, of
the International Chamber o f Commerce,
"F ir s t i t must be remembered that Russia of today is in an
e sp e cia lly good position to indulge in we Unorganised dumping. I am thinking of
the low standard of liv in g o f the Russian people that is continually f a llin g and
of the large number o f prisoners that th eir Government can use to obtain oheaper
labour than in any other country o f Europe or the United S ta te s.
"Another thing that must not be lo s t sigh t of is that Russian
dumping is not an economic but a p o lit ic a l a c t, the primary aim o f whioh i s to
undermine the various markets of Europe and o f the United S ta te s . In order to
do th is more e ffe c tiv e ly the attaok has been launched upon ju s t those markets
that would f e e l i t m o st."

Sir F e lix Schuster, B a r t., Director o f the National Provincial and Union Bank
o f England.
"F ir s t ly the Russian question. I t seemed oe rta in , he had been
informed by good a u th o ritie s, that the p olicy o f the Soviet aimed a t destroying
the economic structure and through th is a lso the p o lit ic a l structure not only of
the neighbouring countries but o f the whole world. This question would have to
be faced.
Their evident object was to oreate p o lit ic a l unrest that would
undermine a l l so cia l systems and the very basis o f our c i v i l i s a t i o n .
They
sought to destroy the c a p it a lis t system, that system whioh we sincerely believed
to be the b est not only fo r those who were called c a p it a lis t s but fo r labour and
the masses o f the people in a l l cou n tries.
S ir F e lix thought i t was absolu tely
necessary to a c t , and to a c t before the Washington Congress*
"Confirming what Sir Arthur Balfour had already sa id , he thought i t
was e sse n tia l to refuse a l l c re d it to the Soviet Government and to s e l l to them
on a cash b asis only.
personally he believed i t would be b est to break o f f a l l
commercial rela tio n s with that country.
C ertainly i t was necessary to refu se,
as Belgium had done, to aooept Russian goods, whioh were the produot o f
prison or o f p r a c tic a lly slave labour. Rot only in European countries but in
the Far East China and India the f a t a l influence o f Russia has made




Mr. Rene Hentsch, Deputy Chairmen o f the Swiss National Committee*
HMr* Hentsch then addressed him self to the Russian problem,
Mr* Duchemin had said th at the world suffered from overproduction*
But today
they saw a great eom try seeking to organise formidable means o f production
w ithin i t s borders.
The Five Years1 Plan was nothing e lse *
As the principles
a t the very foundation o f economic, p o l i t i c a l , so cia l and re lig io u s l i f e o f
th at great country were ab solu tely repugnant to the princip les fo r which they
stood , were they to stand by and permit the forging o f t h is mighty weapon that
would be used to oppress the e ffo r ts they were making in th e ir respective
countries?
I t was necessary that everyone should make an examination o f h is
cwm conscience and inquire o f him self i f i t was not h is duty t o do everything
In h is power to oppose the r e a lisa tio n o f t h is plan*
The Swiss National
Committee endorsed ab solu tely the splendid statement made by S ir Folix Schuster,
No one could have stated the problem b etter than he had done*
Mr* Hentsoh
ended by emphasising the n e ce ssity o f cooperation greater now than ever in tha
face o f so d i f f i c u l t a problem.
When they saw fr ie n d ly cou n tries, lik e Finland
and Sweden and many o th e rs, suffering from Soviet com petition, the need for
cooperation was not open to doubt, i t was th e ir duty as buyers to favour those
countries and a l l th e ir e ffo r t s ou£it t o tend t o the p ractical r e a lisa tio n o f
mutual assistance

Mr. Carlos P rast, Chairman o f the Spanish National Committee, Vice President
o f the International Chamber o f Commerce*
"As to Soviet dumping, Spain has so fa r not been a ffe c te d ,
except that wood had been offered a t very lew p r ic e s, but these o ffe r s had
met with no success as the business men o f Barcelona had met and agreed to
r e je c t them*"

Resolution on Economic Situation Passed by the Council o f the International
Chamber o f Commaroe*
Amongst the general causes and symptcns o f the present
depression, the follow ing may be mentioned:
The forcin g on the world markets o f large quantities o f
grain , raw m aterials and sem i-finished products by Soviet Russia at prices
le s s than the normal cost o f production*










GENERAL STATEMENT
ON THE MUTUAL RURAL CREDITS

The rural credit institutions include at the basis
the local bank, a private institution formed only between
agriculturists and agricultural associations, the restriction of
which does not go beyond the limits of a "canton”.
Above these local banks and grouping these institutions,
stands the country bank of mutual rural credit, the restriction
of which generally spreads through a "departement”.

Finally

above the country bank the lav/ of August 5, 1920 created the national
bank for rural credits, which is a public institution having financial
and administrative self-government, and which, functioning according
to ikK banking methods, can easily put at the disposal of the inter­
ested institutions the advancing of funds which are necessary to them.
The national bank of rural credits is administered by a board
under the control of the plenary commission which elects it.
The plenary commission, presided over by the Secretary of
Agriculture, is composed of representatives elected by the two
chambers, of delegates elected by the country banks, and finally of
members chosen from among the most eminent representing the adminis­
trations concerned, which are appointed.
There are now 100 country banks for mutual rural credits.
The country banks include 5,897 local banks with 43o,417
heads of families.
These banks do business with their members and only in their
limited territory.




-2-

The "social” capital paid by the country hanks reached on
November 30, 1930, 138,957,370 francs.

Their reserves reached on the same date 121,461,355 francs.
On September 30, 1930, there were 2500 rural cooperative
societies or similar groups, who received 3139 advances on rural
credits.
The law of August 5, 1920, on mutual rural credits and
rural cooperation permits the rural credit banks to grant loans at
short terms, loans at middle terms, and loans at long terms individ­
ually or collectively.
The aim of the short term loans is to permit the agriculturist
to pay the current expenses of his farm, as, for instance, purchases
of manure, seeds, implements, animals, etc.
The amount is not limited 'ey law; it is fixed by the loaning
bank according to the importance of the work to be done, the professional
caoacity of the borrower, and the guarantees he can offer.
The duration of the loans cannot be extended beyond the date
which has already been agreed upon, and it shall not exceed one year.
The rate of interest of the loans cannot be lower than that
given to the “social parts"of the loaning bank, nor more than 1$ higher
than the rate of the advances on the shares of the Bank of France.
It now varies between 5 and 5§$.
The middle term loans are for the purpose of facilitating the
settlement or the reconstruction of rural cultivations.

That form of

credit perfects advantageously the credit at a short term.
Its aim is now specially to permit the agriculturists to make




-3-

outlays of funds which by their nature or their importance permit a
certain delay in amortization, purchases of important live-stock, purchase
of large implements, expenses for land ameliorations, for extension or
repairs to the buildings for agricultural use.
The maximum amount of middle terra loans is not fixed by law; it
is the bank of rural credit to which the demand is made which decides
the importance of the loan to be granted based on the information furn­
ished to them.
These loans are reimbursable by annual amortization.

Their

maximum duration is ten years.
When they are granted to a cultivator who is not a land-owner,
the maturity must be fixed at least three months before the expiration
of the lease of which he is beneficiary, or, in case of no lease, three
months before the termination of possession.
The reimbursement of the loan becomes immediately demandable
if the agriculturist who is not a land-owner leaves the cultivation on
which the loan has been granted.
The rates of interest on middle term loans cannot be lower than
the interest given to the "social parts" of the loaning bank, nor more
than 1jo higher than the rate of the advances on shares of the Bank of
France; it now varies between 5 and 5|■$.
The guarantees to be furnished by the borrower can be as well
as for the short term loans, a security, preferably one of the land­
owner's if it is a question of a farmer, a warrant, a deposit of shares,
etc.
They can be equally made by an assignment on mortgage to the




-4 -

order of the loaning "bank if the "borrower is a land owner.
For the granting of middle term loans, the local "banks made
their "borrowers sign special contracts which fix the conditions of
the loan, the guarantees which have "been given and the conditions of
reimbursement.
The long term individual loans aim to facilitate the purchase,
the settling, the remodelling or the reconstruction of small rural
cultivations that the borrowers must pledge themselves by written
contract to cultivate themselves or with the help of their families.
These loans can equally, by application of article 67 of the
financial law of December 19, 1926, be granted for the nurpose of
purchasing or the construction of buildings for farmers.
They give to the farm-worker the possibility of becoming
land-owner of a small tract, the cultivation of which may assure his
livelihood and that of his family, and includes specially a dwelling.
The amount of those loans may be at the maximum 60,000 francs,
not including the amount of expenses; they are reimbursable by annual
payments for a maximum term of 25 years; they can be reimbursed by
anticipation.
The rate now is 3^ and it is reduced to 1$ when the loan is
granted to a pensioned soldier or a civil victim of the war.
On the other hand, article 67 of the financial law of December
19, 1926 has foreseen that the rate of the individual long term loans
may be reduced in favor of the old graduates of an agricultural school
of the State, the wards of the nation, or the fathers of large families.
The borrower must arrange 7/ith the bank of the rural credit
which is responsible for the inquiry into the guarantees to be furnished,




-5 -

the principal of which consists of a mortgage-assignment on the
property on which the loan is granted;

complementary guarantees may

also he asked for.
The long term loans which are granted hy the National Bank of
rural credit hy the intermediary of the country hanks of rural credit are
made for the purpose of permitting is the cooperative societies formed
between agriculturists, as well as the other institutions governed hy
article 22 and the following articles of the law of August 5, 1920,
to proceed with the construction and various installations which are
necessary to them and which permit the starting of work and the
"immobilization" for a long term of certain important sums.
The rate of interest of these loans is now 3Jo*

They are

reimbursable hy annual payments extending for 25 years, and may he
extended to 50 years when the borrowing society intends to do the work
of reforestation.
The amount of the loans is fixed hy taking as a principal basis
the interest that the proposed cultivation may bring to the agriculturist,
the financial help personally granted hy the members of the society to
accomplish the work, and finally the value of proposed guarantees to
assure the reimbursement of the borrowed sums.
In practice the amount of the loans does not exceed a sum twice
the capital naid by the associate members.
The guarantees that the institutions have to furnish are formed
first by a joint contract of reimbursement endorsed either by all the
members of the society or by all or a part of the members of the Board.
Moreover, if the society owns or intends to acquire real estate,
it must grant on the said real estate, and on those of which it may




-o -

later become owner, a mortgage in the name of the State represented
by the national Bank of rural credit.

They can ask in addition to

this a pledge on his implements and all other securities which may
appear useful.
Deposit of funds -

The banks of rural credit are allowed to

receive funds
The movement of these deposits from January 1, 1930 to September 30,
1930 reached the sum of 2,267,000,000 francs, leaving on the date of
September 30, 1930, a credit balance of 984,000,000 francs.
On the other hand, by compliance with the terms of article 35
of the law of April 5, 1920, the national bank of rural credit can receive
itself the surplus deposits of the country banks.

The sums deposited by

the country banks to the national bank were on September 30, 1930
168 millions.
Resources of the national bank of rural credit.

The National

bank disposes,for the attribution of advances to country banks of rural
credit or to the cooperative societies, of the nredevancesH of the
Bank of France, which reached on November 30, 1930, the sum of
1,127,952,977 francs.
The law of July 15, 1928 has equally put at the disposition of
the national bank of rural credit a credit of 500 millions for the
attribution of middle term loans and the law of August 4, 1929 a credit
of 250 millions for the attribution of long term loans.
He

must bring to notice that the credit of 500 millions mentioned

above is now drained and that by a bill presented on November 21, 1930,
under No. 4,108, the Oovernment asked the attribution of a new credit
of 500 millions in order not to stop the attribution of advances for
middle term loans.

*




-7 -

Operations of credit by the “banks of rural credit.

The short

term loans granted "by the hanks of rural credit since their institution
until September 30, 1930, has reached the sum of

4,463,221,031 francs.

The reimbursement on these loans having been 3,701,966,008 francs,
the balance of these short term'loans current on September 30, 1930,
was 761,256,023 francs.
Middle Term - the middle terms current on September 30, 1930,
reached 565,712,224 francs.
Individual long term small rural properties -

to facilitate the "accession" for

The ordinary individual long term loans to

facilitate the accession to small rural properties granted since the
institution of that form of credit until September 30, 1930, reached
the sum of 614,979,115 francs, corresponding to 44,787 loans.

The

reimbursements on these longs being 175,332,367 francs, the current
account of these loans on Seotember 30, 1930, was 439,646,847 francs.
On the other hand, the special individual long term loans to
facilitate the accession to fckK small properties of pensioned soldiers
and civil victims of the war since the installation of that form of
credit until September 30, 1930, reached the sum of 266,032,060 francs
corresponding to 18,439 loans.

The reimbursements on these loans

having been 68,098,516 francs, the current account of these loans on
September 30, 1930, was 197,943,544 francs.
In short, 63,226 agricultural families had already had the
advantage on September 30, 1930 of the individual long term loans,
ordinary or special, the amount of which was 881,011,175 francs.




-8 -

Gollective long term loans -

These loans granted ly the

national lank of rural credit and through the intermediary of the
country lanks of rural credit to the rural cooperative societies,
such as cooperative wine cellars, dairies, "butter-dairies, fruiterers,
societies of common purchases and provisions (community markets)
cooperatives of threshing machines, etc., reached since the institution
of that form of credit until Seuteniber 30, 1930, the sum of

370,450,008

francs* -The reimbursements on these loans having "been 126,317,859 irancs,
the current account of these loans on September 30, 1930, was
243,642,109 francs.

«/




September 29, 1931

Dear I v y :

I hnve
and

been

out of the city for a few days,

this is the first opportunity I have had to thank

you for your letter of Septeefcer 17.
It was good of you to send me a copy of the
memorandum giving your Impressions of the European sit­
uation, and I have read it with much interest.
I shall be glad to receive the additional
itK3mor:-udum ahen it is completed.
With best wishes, I am
Very truly yours,
KSIgned) Eugene

Mr. Ivy Lee,
15 Broad S tre e t,
Hew Yoric, H. Y .

Meyer

il

A

m e r ic a n

I.G . C

h e m ic a l

C

o r p o r a t io n

521 F i f t h A v e n u e

Ne w Yo r k

TELEPHONE
VAN D E R B ILT

6715

CABLEADDRESS

“A M I G C H E M ”

IN REPLY PLEASE REFER TO

December 3 ,

1931

Dear S i r :
We t a k e p l e a s u r e
a copy o f

the

yesterday

afternoon

*
su b ject,




s p e e c h which^Dr.

"Settlem ent

i n , s e n d i n g you h e r e w i t h
Hermann S c h m i tz d e l i v e r e d

ov e r t h e r a d i o

from B e r l i n on the
•________ __
o f Germany's F o r e i g n D e b t " .
V e ry

tru ly yours,

AMERICAN I.G.CHEMICAL CORPORATION

R .W .Ilg n e r,
A ssista n t Secretary

PECESV50
rrp

1331

OFF!!*!-;

I

This d o c u m e n t is protected b y copyright a n d has b e e n r e m o v e d .

Author(s):
Article Title:

Schmitz Broadcast from Berlin

Journal Title:

National Broadcasting Company, Inc.

Volume Number:
Date:

Issue Number:
December 2, 1931

Page Numbers:
Note:




Document was transcription of radio broadcast released by
National Broadcasting Company, Inc.’s Press Relations
Department




S e p te m b e r

21,

1931

Ur. Eugene Biumenthal,
Liebman, Biumenthal & Levy,
36 frost 44th Street,
New York City.
My dear Mr. Biumenthal:
Upon my return to the office after a few
days* absence, your letter of September 16, with
the very interesting observations on the German
situation, was brought to my attention, for which
please accept my thanks.
Sincerely yours.

(Signed) Eugene

L

ie b m a n

,B

36

& L

l u m e n t h a l

WEST

e v y

4 4 th S T R E E T

N E W YO R K
EUGENE BLUMENTHAL
DAVID LEVY
W A L T E R H. LI E B M A N , J R .
IRA

VANDERBILT 3 - 0 5 3 3
c a b l e

' l e b l u M”

S. R O B B I N S

S e p te m b e r

1 6 th

1931.

Hon. Eugene Meyer,
F e d e ra l R eserve B o a rd ,
W a s h i n g t o n , D. 0 .

My dear Governor Meyer:
^
w eeks

ago,

When I

y o u w ere

k in d

su ch

im p r e s s io n s

as

th a t

co u n try .

do n o t

im p r e s s io n s
ever

I

are

of

was

en o u g h t o

I m ig h t g a t h e r
in

v a lu e ,

th e
but

to
say

fo r

G erm any some

y o u w o u ld b e

o f c o n d itio n s

le a s t
I

le a v e

fla tte r

am g o i n g

to

in te r e s te d

p r e v a ilin g

m y s e lf
p ass

s ix

th a t

in

in

th ese

them on f o r

w h a t­

t h e y may b e w o r t h .
My v i s i t

n a m e ly
n ess

about

about th re e

to

seek

c la s s e s .
b ecau se

w eek s,

c o n ta c ts

I b e lie v e

and

I

to

but

G erm any w as
d u r in g t h a t

in te r v ie w s

r e c e iv e d

th e

my m o t i v e s w e re p l a i n l y

to

sh ort

t im e

w ith

fra n k

of

I

d u r a tio n ,

made i t

my b u s i ­

G erm ans o f many d i f f e r e n t
e x p r e s s io n

secu re

of

in fo r m a tio n

a great

many

fo r

a b e tte r

who h a s

fo llo w e d

u n d e r s ta n d in g .
Germ an c o n d i t i o n s ,
recen t
of

ev e n ts

s u r fa c e

Germ any

is

w in te r .

ap p earan ces
a b s o lu te ly

Chair i t a b l e

n ecessary

7 ,0 0 0 ,0 0 0




p resen t
to

and i s

it

is

fa c in g

h ave b e e n u n a b le

o r g a n iz a tio n s
w ork.

in c lu d e

everyon e

in s o lu b le

c o n tra ry ,

bankrupt

r e lie f

u n e m p lo y e d

an a l m o s t

th e

The m u n i c i p a l i t i e s

b u d g e ts.
fo r m e r

k n ow s,

as

have b een

p u z z le .

my o p i n i o n

In
th a t

a c a ta stro p h e
to

b a la n c e

o b lig e d

to

p r o p o r tio n

of

th is

th e ir
abandon

The a p p r o x i m a t e l y 6 , 0 0 0 , 0 0 0
a la r g e

s p ite

to

young p e o p le

SEP 1 7

who h a v e n o t
fr o m

th e

been

a b le

G y m n a sia o r

to

secu re

h a v e b e e n u s e d up b y

th a t

c r e d its

c o u n try

m oney a r o u n d w hen he g e t s

te llig e n t

German w i l l

in g t h o s e

c r e d its

m e n ts,

m u seu m s,

w ork s i n c e

a d m it

r ig h t

a lm o s t

in to

m odel h o u s e s ,

and fr o m w i t h o u t .

a g e n ts

to

p o rt.

in

Bruexting a d m i n i s t r a t i o n

th a t

it

r e c e n tly ,

tu tio n ,
to

cut

th a t

b e fo r e

under

th e R e ic h
th e ir

th e

of

r e a lis e s

c e r ta in

has

fu r th e r

e ffo r ts

at

te n d e n cy
are

to

d e fin ite ly

r e p a r a tio n s
p resen t
is

d e c e iv e

in

b y m any,

th e

fo r m

to w a r d Communism,




of
or

th e

se e m s

w ill

th ro w s

in ­

in

p ark

sp en d ­
d e v e lo p ­

G erm any fr o m

a ll

I b e lie v e

fa c tio n s

It

is

r ig h t

in

to

e lim in a te d ,

U n le s s

be th e

any r a te

sta g e
in

o f th e

I

th in k
be

and t h i s
sh ort
of

in
has

G erm any —

fo r
th a t

to w a r d

th e
a

te rm c r e d i t s

tim e ,
of

made*

and

th e

S u ch an o v e r t h r o w ,

s e ttin g

a change

n o te

C o n s ti­

d is p a r ity

an o v e r t h r o w

in e v ita b le *

to

th e R e ic h w i l l

p e r s is ts

v is ito r .

th e

may c o m b in e

b u d g e ts.

G erm any g r e a t
s till

th a t

com pel m u n i c i p a li t i e s

th e ir
in

her

in te r e s tin g

a s u b s t a n t ia l p e r io d

governm ent
at

ground.

and b a l a n c e

average
fo r

m is ta k e

em ergency p r o v i s io n s

e x iB ts

a lm o s t e n t i r e l y

a d m in is tr a tio n

b e lie v e d

change

e x te n d e d

and

w o r k in g h a r d t h r o u g h

over.

Much l u x u r y
th e

E very h on est

a tta c k in g

c e n tr a lis a tio n

T h ere
o w n e r s h ip o f w e a l t h .

is

th a t

is

a sse rte d

a p p r o p r ia tio n s

G erm any

a d ru n k en s a i l o r

S w im b a d et; S t a d i a ,

fe r tile

w in te r

to

e tc *

R u s s ia

a d v a n ta g e

as

Germ any made a g r e a t

and l e f t

w ith in

a g a in st

g r a d u a tio n

w h ic h w ere e x t e n d e d

The C o m m u n ists a r e

ta k e

th e ir

u n iv e r s itie s .

The v a B t

h is

9/16/31.

Page 2,

Hon. Eugene Meyer,

it

a s u b s ta n tia l
is

a change

t h r o w in g

th e

Hon. Eugene Ifeyer,
govern m en t

in to

nov engaged
th e

d is tr e s s

p a r tie s
is ,

w ill

lo n g

w e a th e r t h a t
sh ort

th e

in d u s tr ia l

is

b e lie v e d

Bruening f o r
a id

w i l l be

s to r m *

and t h e

U n ite d

s u ffic ie n tly

If

th e y w i l l ,

y ie ld

r e lie f*

th e ir

a s s is ta n c e

th e

T h e G erm ans t a k e

of

th e

b ir th r ig h t
V e r s a ille s

fr o m F r a n c e .

th a t

ab sen ce

sh e

of

w ill

su ch

On t h e
not

s till

in

based

on

a tta c k .

It

g o v e rn m e n ts,

g iv in g

stre n g th e n e d

to

Germ any

th e

p resen t

p o s s ib ly

home no more b a c o n t h a n
q u e s tio n ,

except

and sh e

such
is

fo u n d

and a n y

k ic k

h im o u t

th e

T re a ty

p o s itio n

o th e r
su ch

as

th e

at

p s y c h o lo g y

c h a n g e m ig h t

by a g r e e in g

te n d e r

th a t

not

th e y

to

ask

a c o n d itio n

hand,

be a
cannot
fo r

of

F rance t a k e s

e c o n o m ic

any

e c o n o m ic
th e

a s s is ta n c e

in

a p le d g e *
From w hat

F rance,

c r e d ito r

S ta te s,

is

o p p o s itio n

th a t

w it h o u t

as th e y w ere,

p o litic a l

m o d ific a tio n s

p o s itio n

th e

it

o p p o r tu n ity .

t h e y w e re b u s t e d

w elco m e

a r r iv e s ,

n ecessary,

B ru e d n g b r i n g s

th em

a co n c e rte d

T h r o u g h o u t G erm any one
th a t

a c tiv ity

th a t

o f th e

e x t e n s i o n s may b e

m o r a to riu m ,

fir s t

it

th ro u g h th e

E n g la n d

term

a d m in is tr a tio n

a

w in te r ,

o n ly

of

p s y c h o l o g i c a l moment

c o m b in e a g a i n s t

F rance,

w h a te v e r

fo r m s

When t h e

o f th e

th e r e fo r e ,

n a m e ly ,

fu r th e r

in .

9/16/31.

Page 3,

as

is

in fo r m a tio n

a r tific ia lly

b e g in n in g

to

I

o b ta in e d ,

s tim u la te d ,

e a t up th e

la r g e

b u s in e s s

is

at

c a p ita l

in

a sta n d ­

a c c u m u la t e d

by h er.
In
can ap p roach
w ith o u t




th e

th e

a s o lu tio n
th o u g h t

th a t

fin a l

o f th e
a ll

of

a n a ly s is

I

d iffic u ltie s
th e

don’ t

see

how a n y o n e

p r e v a ilin g

c a p ita lis tic

in

Germ any

g o v ern m en ts to d a y

m u st

ju s tify

th e ir

p o s s ib le

to

and t h e n

expect

p o lic ie s

of

g r a d u a lly
so

th a t

th o se

e x is te n c e .

e x te n d

h u ge

repaym ent

each

s u r e ly

th e

s e lf

to

ta r iff
be

fa c e

of t a r iff

o th e r

It

to

q u a lifie d
w ill

c o n d itio n

to

be

p rod u ce
to

be

one h a n d ,

w a lls

and
me t h a t
ta k e n

s till

down

an d m a r k e t

produ ce,

a c q u ir e

iB

w ill

seem t o

a p o s itio n

c o u n try

P r o b a b ly t h a t

does

have

best

it

on t h e

w a lls w i l l

in

is

hoar

a co u n try

is o la tio n .

c o m m o d i t ie s w h ic h i t

in te r e s t.

do n o t s e e

in th e

co u n try w i l l

w h ic h p r o d u c t i o n e v e r y

I

c r e d its

n a tio n a lis tic

but

9/16/31.

Page 4,

Hon. Eugene Meyer,

and

in

a s u b s ta n tia l
a very

h asy

d re a m .
F in a lly ,
if

he w a n ts t o

a v o id

p a r t n e r s h i p w ith t h e
S ta te

and t h e

in

th e

N a t i o n w o u ld h a v e

id e a ls

h is

s u r p lu s .

s im ila r

a lth o u g h

to

S ta te

The
to

th o se

th e R u s s ia n

th a t

Communism, b e w i l l i n g

N a tio n w i l l

and

I b e lie v e

and w i t h
have

sh are

a

th e

be u sed

so

fo r

w h ic h a r e

to

c a p ita lis t
go

N a tio n ,

la r g e r

th e n

th e

in to
so

in te r e s t
a c q u ir e d

th e

m e th o d s a r e

in

hope t h a t

have n ot

h is

by th e

p u rpose

in h e r e n t

a c tiv e

th a t

in

of

m u st,

th e
e a r n in g s
S ta te

a c h ie v in g

in th e R u s s ia n

my h u m b le

ju d g m e n t ,

e ffo r t,

very

much a s k e w .
I
and t h a t

th is

endeavored

e x p r e s s io n




not

to o

p r o lix

w e a r ie d
fo r

to con vey.
W it h

E B : AG

is

I

k in d r e g a r d s ,

I

r e m a in ,

y o u u n d u ly

w hat

and

I

have

T h is d o c u m e n t is p r o t e c t e d b y c o p y r i g h t a n d h a s b e e n r e m o v e d .

Author(s):
Article Title:

Dollar, Zahlungsbilanz und Kreditstorung (The dollar, balance of
payment, and credit disturbance)

Journal Title:

Frankfurter Zeitung

Volume Number:

Issue Number:

Date:

October 20, 1931

Page Numbers:

4







At

t h e moment when t h e Germ an G overn m en t h a s

ad d ressed

to

requ est fo r
p ro v id e d
th in k s

th e B ank o f
a m e e tin g o f

fo r

it

in

a d v is a b le

to

q u e stio n

in

e s ta b lis h

to

p o s s ib le *
to

1°
be

to th e

-

to

order

r e c a lle d

G o v e rn m e n t
a lth o u g h

to

th a t
to

s u b m itte d
in

F r e n c h G overn m en t
The o n ly
p la c e

up on

a v o id

th e

h e r s e lf,

th e

a v o id

th a t

v ie w

e ffe c t

is

n o t bound

p u rpose o f
of
in

c o m p le t e

have been

B r u s s e ls

In te r n a tio n a l
to

agreem en t w ith

requ est

as

sen t

and Rome

th e
th e

th e
w h io h

it

by th e

s h o u ld
Germ an

S e ttle m e n ts ,

F r e n c h G o v e r n m e n t,
la tte r ,

and

th e

th ereb y .

th e m o d if ic a t io n s

moke r e s e r v a t i o n s

as

as fo llo w s

in ad v a n ce

is

on t h e

o f G erm a n y ,

any m is u n d e r s ta n d in g ,

Bank o f

o b lig a tio n ,
to

c r e d ito r s

t h e memorandum fo r w a r d e d

th e

w as n o t d r a f t e d

o th e r

C o m m itte e

p o i n t o f v ie w

in London,

F ren ch v ie w p o in t

In

its

a

F r e n c h G o v e rn m e n t

e c o m m u n ity o f

th e F re n c h A m bassad ors
The

th e

e x p la in

In s tr u c tio n s

S e ttle m e n ts

th e C o n s u l t a t i v e

th e Young p la n ,

r e p a r a tio n s
order

In te r n a tio n a l

ju s t

w h ic h

to o k

F r e n c h G o vern m en t w as t o
F r a n c e m ig h t h a v e f o u n d
c o n c e r n in g

c e r ta in

c o n ta in e d

p o in ts




c o n ta in e d

full

in

lib e r ty

c r e d ito r
2°

w h ic h

t h e m emorandum.

T h e r e fo r e ,

of

agreem en t w ith

a c tio n

and

of

sh e

keeps her
th e

o th e r

n a tio n s .
-

G erm any r e m a in s bound

sh e w i l l i n g l y

and

by th e

s o le m n ly

o b lig a tio n s

co n tra c te d

at

th e

H ague.
The e x c e p t i o n a l
June by
of

th e
it

p r e v io u s a g re e m e n ts.
of

o b ta in ,

th e
at

r e d u c tio n
t o o k an

bona f i d e
as

to

3°

th e

w h ic h

d e b to r,

In

p resen t

w h ic h ,

s h o u ld

its

th e

t h e Young p la n
of

in

order

t h e H o o v e r m o r a t o r iu m ,

of

th e

th e

very

in te r e s t

of

a

p la n .

re q u e st,
th a t

in

p r e v e n t a n y m is u n d e r s ta n d in g

th e

German G o v e rn m e n t

th e f a c i l i t i e s

by th e Y oung p la n

of

in ­

p aym en t

do n o t m e e t a n y l o n g e r

th e

s itu a tio n .

r e s p o n s ib le

f o r her

F r e n c h G overn m en t
e c o n o m ic

c r is is ,

is
th e

r e v is io n

of

th e

G erm any i s

p resen t fin a n c ia l
ready to

may n e c e s s i t a t e

Y oung P la n t o g e t h e r w ith

be lim ite d

to

th e

p e rio d

th e

and a c u t e n e s s

c o n c e r n in g in te r g o v e r n m e n ta l d e b t s .
of

la r g e ly

d iffic u ltie s ,

a d m it t h a t

a m p litu d e

bejrond a n y p r e v i s i o n ,

s h o u ld

v a lid ity

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