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COPY

-to

Simla
26/7:1921]

My dear Strong,

I purposely refrained from answering your letter until your kind
present arrived; it has now done so, and I assure you that it is not
only an unalloyed delight to me, but a wonder to all beholders. I am
really very grateful to you for your generous thought; it was doubly
blest, for I Dave used it as an opportunity for insisting with the
Navy:?[ that I should go up to Kashmir for ten days to try it.
Seeing that it came from you (whom he always mentions with the
greatest affection and respect) he has not been able to refuse; and
I go on the 2nd of August. It is not the best time of the year, but
it is the only time which I can fit in between meetings of our
legislative Assembly.
It is a great pleasure for us here, who live in a world of ernest
dutiful highminded but mediocre men to see a first class artist like
Lord Reading at work. It is a difficult time. The mere transition
from a bureaucratic to a 'responsible' form of Govt ;would ordinarily
afford enough problems; the position is complibated by the great outburst
of nationist spirit which has led to the formation of a strong extremist
party. The latter - anyhow the best of them - are not for violence or
revolution; but you cannot in a country like InOla base your campaign
on abuse of the European + his methods without le adiggsooner or later
to trouble. I don't expect it on a large scale; but the Mahomedian
element has been stirred to its depths by politicians appealing to
religious prejudice, and some sporadic trouble we must I think have.
been one of toleration and restraint so far;
Our policy has
we wanted to set the new reforms scheme to work, and thereby tosecure
to ourselves the cooperation of the moderate elements in the country.
I think we are succeeding in the latter aim, but meanwhile the Nationalist party has steadily won its way with the lower + less responsible
elements in the population; it has caused a great deal of agrarian +
industrial unrest, and I think that matters must soon come to a head
between us. You cannot of course prophecy as to the exact form the
contest will take; and If course one has no anxiety as to the result;
but the times are full of interest:
Financially we are in a somewhat curious position. Trade is more
or less dead for the time, for our customers have failed us. Our war
inflation was not equal to that of other nations, but it was undoubtedly
heavy for India - she had always been accustomed to take her gains on
the balance of trade in gold or silver, and as this was not possible
during the war, we had to increase paper. We knocked off a good one
last year, but the future process of reduction will be much slower.
We could have got ourselves pretty straight but for the continuation
of operations on the frontier, very costly and not very useful, which
involve our working to a deficit instead of a surplus, in spite of very
Ordinarily, with money still somewhat inheavy taxation last March.
flated and with trade slack, we ought to have been able to set to work
to fund our short term loans; but India is at present (I suppose in
common with the rest of the world) disinclined to invest on long terms,
and all we can do is to carry on with five + ten year bonds. This we
are doing successfully, and without increasing interest. I think we
could get a good deal of long term money at higher rates, but there is
standard
so much political outcry at the fall in capital value of our old
ability to get support in
securities (3 l/2% that I should doubt my

lor

the Assembly for a loan which would still further depreciate the old
holdings. Further, we are still educating the public in the investing
habit, and with a callow young investing public, it is dangerous to
securities.
It makes
the value of
do anything which will
them very shy indeed of future long term investments. So that our
policy at present is limited to short term renewals, in the steadfast
hope that we shall in a year or two be able to do something substantial
The world 'financiers are helping us bravely by
on a long term basis.
knocking down interest rates; your bold policy of raising them having
attained its immediate purpose, you can I hope now afford to let the
world get back to a lower level.
I think that we are sound enough generally; we should be paying
our way well but for trade oppression + war on the frontier; we are not
of course adding unbacked paper to the currency (indeed last year we
brought one issue down 20 crores; we have a metal backing of 56 per cent
nominal and 63 per cent real, taking gold at full value, and we have
an automatic arrangement for the early reduction of the remaining unbacked notes) and we are not adding appreciably to our Treasury Bills.
The monsoon is going well, and if only we could see a revival of demand
among our customers, I think we could look fate in the face again without
The rest of the
mistiving. As you see- it is all someone else's faults
world has gone rotten + can't buy.
Excuse a long erreed, and again - my very best thanks.
sends you the kindest remembrances. Yours sincerely

My wife

(signed) W. Hailey

This handwritting is difficult to read and so any stayement,copied
here, should be checked ]
EHK

Delhi, the 4th December, 1922.

Der Strong,
Idany thanIcs for your letter of Aovember the 2nd

and its account of the change of conditions in the United
estates. Since you have written we have had the result of your
elections and if 1 mistake not it sho ;.s a very 'EEE# considerable

feeling against the present administration. ae are hoping here
that this also means that your present tariff policy will

undergo some change for 1 need not say that it is likely to
hit us and Great Britain very hard. But what you say about the
improvement in business is very encouraging.

I home that it

may mean the slow turning of the tide towards an improvement of
trade generally throughout the world. dhen I wag in London
McZenna told me that his anticipations and those of his
friends in the Banks were that there would be a revival in
41AZ::47/The renewed trouble with
European trade with the 44.44mtrea.

Turkey has unsettled conditions and this may have accounted
in great mart for the disappointment of his predictions.

But one cannot help feeling that all the chances of a revival

are there and that we only want some stability of political
conditions to make rrogress. For ourselves we seem to be
in for a much better time politically. One cannot prophesy about
the East; there are always surprises in store; but for the moment
the signs are

o

.

The non-cooperation leaders seem to

have split horelessly. The more intelli,:ent have been frightened

by the success that has been attained in

b1,

reforms.

You know yourself how great were the efforts we made to ensure
that the new constitution sho7T1d function.; how 44.4414.944

we were

in the face of criticism of the most outlandish nature and

how even when opposition took the form of really violent agitation

and open rst,n we still held our hands in the hope that
moderate people would rally round us and that the great bulk
of the population would get tired of the non-cooperative folly.
..epression is- always possible but it is seldom successful unless

it can be attended by a

psychological

change in the population
itself.

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Thee is unfortunately at the same ti e an extraordinary depression
in trade. The best test of this is that our railway receipts will

be 5 crones down on the budget estimates. There is little export of
./14,41

whetA

OL 4 AZe

1 ezedt44a-ffizi441,

i.4.44-tellgfrIkVaasi-ec:Iviai4..nd

Japan must take a good deal of

our cotton. But internal trade seems dead for the time. The petty
dealers are without cash or credit and it will be sometime before

they can get going again. The Bombay market has been indulging in an
orgy or speculEtions on lines which would astonish anyone accustomed
to your spot transactions or the ready settlements of London. The
consequence is that no one no,i, will touch industrial shares. There

is plenty of loose money and it all comes into our loans.
I have strong hopes that as E. result we mi{ht reduce the interest

rates on the fund on 1nTer terms in our next summer's loan.
I have toeygiven up the Finance Membership and taken
over that or the Home Department; you will I think remember meeting

my predecessor, Sir
taken by Blactett of the

Vincent at my house. My place is being

Home

Treasury whom of course you know

-5well. But because I have deserted the Finance Department please
do not de, ert me Gnd I beg you will Ellow me to continue the
-,7rivilege of receiving your letters on the ..itates. I shall show

this one to the Viceroy.

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ACKNOWLEDOED
jut_ 14, 1924
Delhi, the 27th Liar

19241.

Ey dear jtrollg,

Very msny
25th. I showed it to Lord

thanks indeed for yrs:ur

heading

who was much inter sted in it.

is

I

,.k) hope that your health I= now so far re-established that

you can look with confidence on
are
Ja very large crowd
in. tha

.

of

the future and Ian sure that there

people both in F,ngland and limerica

wish. Things here

,taken

from the e conomic standpoint are

now going fairly well. There is no

of busimssi but our balance of

its inevitable

effect on

who join

kind of a

trade is

the rupee;

1-,,r)om or even revival

with

slovay

food prices are falling md

some lins of business, such as tea and even jute, are doing
:pile well. i;e have a good harvest bef:r us and this should

mean a further fall of food prices. Pe opie in Calcutta are doing
.

business at a reasonable margin of profit

and even

71,3:-L-a),y, which

was at one t ia. e hardhit has had a revival owing to the hi,-Th

prices of cotton. The Cotton Lilis

there

however are in for a

bad time owing,:, to the cost of raw material and they cannot look
a -air_ for some years to the
sirice

v.:A-y high profits they have made

But I think it is fair to say that with this

sinl exception th.lns in

Li.dia are

Mak

on a pretty

safe basis.

Our ,state .r'inances are

now almost re- established.

The Inchcape Committee, which I had such difficulty in securing

Wore I left the Finance Department, made heavy reductions

-2-

cularly in the Army, and this year we have man Ted with a

little pullia

and pushing in various directions to secui.e a

balanced bud-76t. ae have wiped off nearly the whole of our

floating debt and can look forward next Summer

to

strictly

limited loan in India and (as we all hope) not a sterliir loan

in London. If we can keep clear of those somewhat disastrous
continually in the
Frontier operations which but us back so
41404 keel; the
last three or f.ur years, then e ought to bu on
increase in our trail ray Lat,s and Customs Duties should slowly

place us in incr.ased funds and indee: I think that frog this
point of view we have an encouraging outlook.
Politically, things are not so bad as they appear
which threateled
on the surface. Th, Non-Co-operation movement
have
our constitution from the Aitset and which really might

eveloped into something like revolution is for the moment more
all events some of them,
or less dead. Its chief leaders, or at
have come into our CouLcils

and this in itself has produced a

world thadt
serics of incidents which naturally strike the outside

make a
with some astonishment. They deliberately attempt to
which
deadlock; our constitution 7ives us certain reserved powers
and
allow us to gamy on the administration,notwithstanding;

there will no doubt be some agitation outside the Councils, but
this a7itn.tion will be for a revision of the constitution which

is somethi: Efferent from an agitation of a revolutionary
tan ancy. I an clear myself that we must 7o v.ry slow in

-3-

go slow in constitutional r:vision,

:ach stage good before

we advance to another. Je are admittedly in difficulty owing to
th

avent of a Labour Government; its presence gives more hopes

to extreue politicianL in India; on the other hand the Government
is afrairl, of its critic's in 7n-land and is therefore in two minds.

It will take us a little ti 'e to g:t a clear line of action and

in the interval we are all just a little worried an

anxious

but I cannot say that we are in any

.seriously perturbed.

after all the most important -points

the T:,neral econo-Lic

conditions of the country

GoTxnm nt

also the !T neral attitude, of

towards the people. Both these an, much better than

they were three T:ars

ago.

Lord ..,eadir7 is well but I think h:: would love

a little holiday which is difficult to ret. Loly Redding is
courageous as ever bl:t I an afraid she i /really

ilaite fit.

I myself an ju2t going Rome on two months leave -t the end of

which I take ovz the Governorship of the Punjab. That will be
interesting though somewhat troublesome but I shall :/J-t anticipate

trJuble and shall enjoy writing to you from Lahore.
I am,

Yours sincerely,

To

et Governor B. Strong,
Federal deserve Bank of New York,
New York.

h/i4fdiaiL

;governor's Camp,

INDIA.

June 6th, 1924.

JUL 14 1974
tT

Lly dear strong,

I just received yiur kind information of your
daughter's wedding; it came while I was away on short leave
to England, or I should have written to you before.

I need

not say how heartily I wish her happiness, and you will know

what I mean when I say that I wish it wl:th a full, though with
a very sore, heart.

I had leave only for two months, so that I got one
only in England: it was a great rush, but I succeeded in seeing

nearly every one of iwportance, and I also got four days' real
holiday in Scotland.

I do not know what queer foresight led. my

very English parents to give me a Scotch Christian name, but I

retain the most fervent hopes that i shall finally become an
inhabitant of that delightful country:
Its a Liberal by conviction, I was affected, very

grievously, by the state of English politics.

I had talks with

many Liberals, including Mr. Lloyd George; my difficulty was
to see where their future lay.

If they have any programme,

Labour has gone one better; they are divided by mutual jealousie
and their own young men are much depressed.

At the moment, they

seem to be deliberately marking time, with no policy of their

own, critical to Conservatives and hostile to Labour; their one
attempt is to invent a cry which will recapture the enthusiasm
of Englishmen.

But they represent the middle Classes, the shop-

keepers, the retailers, and these have ceased to be the force
they constituted in Gladstone's time; certainly, they are not
now even a united force.

One is driven irresistibly to the

conclusion that the Anglishnan, acting rather on instincts
than ideas, and rather on prejudices than principles, has no
room

room in his soul for a third party.

He dislikes thinking;

he demands a concrete and not a general policy, and, for the


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