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BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Office Correspondence To Chairman Eccles ffrnm Date nay 19, Subject: »T. Burke Knapp Dean Acheson made a speech in Cleveland, llisaiasippi, about ten days ago, which has aince been widely interpreted aa evidence that the Administration was contemplating a new poatwar ^Lend-Leaae* program. I find very little grounda for thia interpretation in the apeech, although Mr. Acheson does atate; *The facta of international life alao mean that the United Statea ia going to have to undertake further emergency financing of foreign purchaaea if foreign countries are to continue to btgr in 1948 and 1949 the commodities which they need to auatain life and at the same time rebuild their economies. Bequests for further United Statea aid may reach ua through the International Bank, or through the Export-Import Bank, or they may be of a type which existing national and international institutions are not equipped to handle and therefore may be made directly through diplomatic channels. But we know now that further financing, beyond existing authorisations, ia going to be needed. Jfo other country is able to bridge the gap in conanodities car dollar a •* Mr. Acheaon, after atating that it ia generally agreed that until the various countries of the world get on their feet and become self-supporting there can be no political or economic stability in the world and no lasting peace or prosperity for any of us, went on to present five ^imperatives* for our foreign economic policy* Aside from the one concerning emergency financing quoted above, he listed the following four: 1* *They mean first that we in the United States must take as large a volume of imports as possible from abroad in order that the financial gap between what the w o r M needs and what it can pay for can be narrowed. There ia no charity involved in this. It is simply common sense and good business. We are today obliged from considerations of self-interest and humanitarianiam to finance a huge deficit in the world's budget* The only sound way to end this deficit financing ia by accepting increased quantities of goods from abroad. There can never be any stability or security in the world for any of us until foreign countries are able to pay in commodities and services for what they need to inqport and to finance their equipment needs from more normal sources of investment.* To; Ghairnan Eccles -2 - 2. *This leads directly to a third imperative for our foreign policy. Since world demand exceeds our ability to supply, we are going to have to concentrate our emergency assistance in areas where it will be most effective in building world political and economic stability, in promoting human freedom and democratic institution©, in fostering liberal trading policies, and in strengthening the authority of the United Nations*11 3. ^The fourth thing we must do in the present situation is to push ahead with the reconstruction of those two great workshops of Europe and Asia ~ Germany and Japan — upon which the ultimate recovery of the two continents so largely depends. European recovery cannot be complete until the various parts of Europe's economy are working together in a harmonious whole. And the achievement of a coordinated European economy remains a fundamental objective of our foreign policy** 4. The final point covers extension beyond June 50, this year, of certain wartime powers enabling the Government to exercise export control over a limited list of commodities and transportation controls adequate to insure the movement of bulk products such as wheat and coal to foreign countries*