View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

y




THE WHITE HOUSE
WASHINGTON

August 20, 1940

M1M0RANDH1 FOR:

Honorable Marriner S« Eccles,
Chairman, Board of Governors,
Federal Reserve System.

Dear Mr, Chairman:
The President has asked me to send
the attached correspondence on to you for
your information.




Very sincerely yours,

CN M* WATSON
Secretary to the President




Copy

BERNARD M. BARUGH
597 Madison Avenue
New York

August 1,

My dear Pa:
Here I s that memorandum.
I t contains thoughts necessary
t o meet every point of attack by Funk.
If

intelligently used, i t can torpedo all his assertions.
Perhaps we may have to change
our methods in dealing with gold, and we should say
perhaps because there is a direct threat to all
concerned. No gold price - no open prices - my,
what can be done with proper arguments.
This will drive the South
American countries towards us and will scare
Russia because she has a tremendous production
of gold.

B.M.B.

From time immemorial, gold has been the only
thing that at any time, anywhere, in war or peace, could
be exchanged for goods or services. Today it is the
same for those who have it.
Perhaps the United States paid too much for
the gold we purchased but it was done for the purpose
of raising prices for everyone, everywhere.

Though,

as Dr. Fund so gloatingly says, it might have been at our
own expense, even Germany benefited by increased world
trade because of the increased purchasing power of all
countries, including Germany's associates - Russia, Japan
and Italy*

The axis powers benefited proportionately

to the greatest extent.

They enjoyed the fruits of a

policy which they say has resulted in injury to the
United States without enduring the burdens.
Perhaps the price of gold may have to be
changed. What will be the effect if it has to be lowered?
Will Russia, with her 250,000,000 to 500,000,000 yearly
production, be made happier by Germany's desire to
demonetize gold, or will Germany take this production
from her?
We can always buy gold from those with whom
we have trade relations.
What will be the effect upon the .Americas who
depend as much on gold prices as prices based on gold?



- 2-

What becomes of the famous barter system if the
United States stops making a price for gold on union all
prices, even those of barter, are based?
How will Russia, Africa and Latin .America, all
of whom like high prices which w have made, engage in
barter with nothing but a black market or no free market
at all on which to exchange their goods?

Does the past

history of Germany leave any doubt as to her attitude to
all other people whom she considers her inferiors?
There will be no open market price for anything.
The United States has never wanted to dbstroy
Germany, or European trade, or to get South American
trade, except on the basis of fair competition and only
that part of the trade which rightly belongs to her.
Her reciprocal trade treaties have been examples, like
her gold and silver policies, of her desire to lift the
trade of the world that all might share.
If Germany insists upon barter, we shall be
forced to meet her on that ground.

Will Dr. Funk

understand that when this good-natured sleeping giant
moves in that direction we shall not turn back until
we have shown the utter futility of this narrow policy
(economic war) which Germany is threatening to force upon us.




- 3-

Now just a few words as to raw materials and
self-cont ainment.
It has been the policy of America to use the
products of all peoples*

Germany has said she will

make ersatz or substitutes.

That path is open to all.

We are about to enter it but on a broader scale than
Germany.

Our scientists and physicists are now being

enlisted for the accomplishment o f this object.

It

will not be long before those who have made this threat
will find they have created a frankenstein.
-America created the automobile, the aeroplane,
mass production and industrial mobilization, which even
Germany says she "conscientiously followed."

America

will now find substitutes through her science upon which
no one has a monopoly, which will astonish the world.
America, with the awakening of the sleeping giants and
giantesses of her youth, will go to the end of the road
that will make puny the efforts of those who will destroy
the opportunities of the vhole world for a place in the
sun. We will create and make substitutes that will make
it impossible for other nations to live against that
competition.







Germany has started this and asks the world to
barter.

We will make cheaper and better raw and manu-

factured materials through our free competitive system
even against the sweated labor of the totalitarian powers
and their conquered provinces.

We accept the challenge

and the new game of marbles.
We do not relish this but if Germany, as
Dr. Funk says, wants a barter system, she will have to do
it on a basis different from the way it is being done now.
No more umbrella holding by Uncle Sam except for his
friends.
If they want to play marbles on the basis of
deceit, we will play by ourselves and with other free
people and free nations.

If they will have war to

the hilt, on substitutes, we will meet them there and
outdo them.

The raw materials of some of their

conquered provinces will be as useless as if they did
not exist.

We oan play any game of marbles and win.

We will gird ourselves to meet this threat
sent on the morn of the Havana Conference.

All will

be sorry but those who stand with us for the policy cf
live and let live will be least sorry.




We can make synthetic rubber, as well as
produce native guayule rubber, and get increased
production in Central and South American countries.
Today there is an excise duty on raw rubber.

It will

be a simple matter to have that duty applied to imported
rubber except from those nations with whom we have free
trade relations.

This is really a subsidy and oan be

applied to any substitute, to any extent to which Germany
may force this economic war. We do not Bake but we shall
not fail to meet to the fullest any threats that may be
aimed at our welfare.
There is a very great possibility we may be
able to use some of our silver for plating instead of
tin.
There are so many things that can be used with
intelligence and wisdom. We must not let anyone think we
can be beaten at any game of marbles. This is important
just now because of the morale. It is important because
it is true.




September 6, 1940,

My dear General Watson:
This is to acknowledge on behalf of the
Chairman, %rho is out West on vacation, receipt
of your note of August 20 enclosing correspondence that the President requested•be transmitted to the Chairman for his information.
This acknowledgment is belated because
I had aaked some of our r«s«aroh people confidentially to go over it, which they have now
done» I will see that it reaches the Chairman•

Sincerely yours,

Elliott Thurston,
Special Assistant
to the Chairman*

General Edwin M. Watson,
Secretary to the President,
The White House.

ETrb




August 20, 1940

Deer Barney:
I have your arguments elmed at our friend,
Doctor Funk, but somehow I don't believe it worth
while answering hjm.
I am taking the liberty of
sanding a cop3~ of your B&alysie to Marriner Eccles.
I wlsb I conic, see you more often. Hope
you are feeling well end will let me know vahen you
are in town next.
Alweys sincerely,

Honoreble Bernard M. Baruch,
597 Madison Avenue,
New York, N. Y.