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Extension of Credit to Russia and
Settlement of Outstanding Debts
An extension of |S$0 aillion credit to Ku»sl& could
three main things:
(1) MM substantial cent ributicng to UK solution
of our surplus cotton problem.
(2) Be an Important factor in helping recovery in
the United States.
(3) Settle the outstanding debt£ bet*eon
and the United states, and clear the 4«icke for
future economic collaboration between the two aost
powerful countries in the forld which, irrespective
of their political differences, constitute8 for the
United Itate* an Important factor for economic
improvement.
The proposal in outline Is as follows:
(&) Negotiate for a settlement of the intergovernmental
and private debts. A"Wetilement c«n'probably be re&ched
nt tnid time which would involve payamntf? ? mount ing to
|15 to $W million « f**r by
fb) The extension of a |t$0 asillion credit to Russia to
be used exclusively for fba following purposes 1 nfl under
the following conditions:
(1) ^lJO million to be expended within the next
two years on products aade chiefly of cotton,
which are processed in the United States. This
should f,&$orb from one to two million OR leg of
our surplus stocks.
(2) #50 ailllon to be expanded in the Unit'd States
on a
{ ) f?5 Billion to be expended on §•*£• coniisting
chiefly of le/ th* r.
|29 million to be expended on miscellaneous
manufactured iteas.
(5) All imports to be ©hipped only on United ftat s
or Russian boats.
• I (6) Buseia to agree not to reexport any of the
material #he purchases In the United |%at*l end
not to export any raw cotton or t e x t i l e i in
exce§8 of the velue of exports of the three
preceding years.
Teraas of the loan: Ten ye-r loan, afaortiied
monthly at the r a t i of 10 percent a ftye r «md
intere t payments payable quarterly t 8 percent
a year, and the difference between the. cott to
the government of borrowing and the & percent to
be applied towards the settlement of l o t i r public
nd private debt to the United States.
The loan cen be financed by special government
guaranteed serial note and hence not &ppe r in the
budget. Or i t could b<* financed out of silver seigniorage at no cost, tf i t «ere financed out of silver
seigniorage, i t would help get the support of the
silver Interests who are eager to h?-ve the government
lift Ice eoase use of the silver
( I t aay be «^orth considering th^t both the Russian
loan and the Chinese loan, as well an the Lstln American
loans, «ay b*» a l l financed by Sfjflal governaient guaranteed serial notfBS and hence not appe; r in the budget,
or out of silver seigniorage at no cost,)
The effects of euch a loan on (a) the current business situation and (b) the intern^tionsl p o l i t i c * ! situation, wo*ld bt s t a r t l i n g .
(a) Th«* cotton textile industry in the United Bt tes
ould hsL^e the biggest booa thfr t I t hap experienced
in many ye^rp. (The New England ani Southeastern
States would oenefit very substantially and their
repretentative« in Congress would bt keenly avart
of such benefits.)
(b) i t would ?ell one to two »illion bales of
cotton, which, 1 believe, is more cotton than the
export subsidy scheme will aispo?e of. Moreover,
the sale to Russia will not dep7eifi the price of
the other cotton we s e l l , nor will i t supply cotton
«t lot- prices t'~ the &&grepsor motions, w>r will i t
injure Braill as will oth> r plans for Increasing
cotton exports. Hassle ie probably the only &
• 3In the world here *e can sell cotton goods without
Interfering «ith ^orld a&irkets. Russia ha® an
adequate supply of raw cotton but hi g in&dequ&te
for processing th t cotton.
at*chitie goods rnd le
would benefit which ffuifl glvt «••<»? added legislative support frost Che c a t t l e states and industrial
states.
the point of vle% of Russia, the loan
would probably be eagerly *«locoed for the following reasons :
(1) Russia would b<? so anxious* to Improve h«r r e l a tions *ith the United $%*%49t for politiesX ae ^
M economic reasons, th^t she pro bub ly u-oulci c<:-n
this? plan a iMtU cost for such ft rurpoee.
(f) Russia ie bedly In need of finished commodities,
particularly of the character l n d l c ted bove.
(3) Russia hes &®ple supplies of ra* ootton, but
reports indicate that there If Q shortage of proce--sing equlpaent *nd, a shortage of finiihed goods*
Russia is probably e-ger to tni'ld up stocks of
finished ^oodg in t>repar»tion for Intern tlon&l
emergencies.
(J) Russia h&B adequate rupplles of gold to easily
tafce cere of the current pays^nt© tne loan *ould
r>- -;ulre. Russia is probably a good risk since she
h#«s aw>t i l l of ttia obligations contracted for unrttr
the n-w reglaie.
6/5/19
@FedFRASER