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STRONG PAPERS, Norman to Strong, 1922
(List created 6/2004)

(Undated, pgs 3 -5 (rec'd 1/22/1922 by
Governor's Secy))
February 6 (w/ January 27 letter & enclosure to
Norman from Victor Moll, Stockholm)
February 20 (w/ February 7 letter from Norman
to president of Banque Nationale Suisse)
February 23
February 24
February 25
February 27
(March 1 C)
March 2
March 6 (w/ February 6th extract from letter to
President Havenstein from Norman)
March 6 (w/ March 21" & March 3' letters to/
from Sir William Goode)
March 6
March 8
March 9 (w/ March 4 letter from Havenstein)
March 9
March 13
March 10
March 13
March 16
March 20

July 26
(July 26 C)
(August 2 C)
August 9
August 17
September 21
October 25
October 31
October 31
November 8 (w/ October 27 letter from Reginald
Hall to Norman)
November 27

March 21
March 22
March 23
(March 27 C)
March 29

March 30 (w/ March 3" letter from Paul M.
April 4
April 5
April 13
May 24
{May 31)
June 13
June 19
June 22
June 23 w/ clipping of June 21, 1822
June 23
June 28
July 5
July 6
(July 8 C)
(July 14 C)
July 15
(July 20 C)

Strong Papers Key for years 1922, 1927, 1928:
) = Document is in Papers but prior to now had not been photocopied and included in research binders
[ ] = At earlier date, item was listed as present but no original or copy is now in Papers
{ } = Photocopy exists but original is missing



if willing,creditor take a share in the desirable that Germany should
of the should countries.
It is task, together with some

Gerlany is, industrially, ccrrrercially and finan-

cially an important factor in Central and Eastern Europe.

acquired knowledge and

Not only do her resources and her geographical position give
great importance, but she has in the past

experience which are useful for
The problem is

the process of reconstruction.

to restore confidence and

the credit

-rachinery necessary for setting Central and Eastern Europe to
work again. Gov errrn ant s cannot do this themselves,
c aus e
apart from other reasons, credit operations reanire knowledge
of the position

and the character of possible borrowers, and only


It imowledge.
financiers possess thisis proposed that an

be for-led and registered as a



proportion of the necessary capital

of the
each country

should be subscribed in each

These shares

allotted to

instance to the group for-led in that

of by then at least in part to the in

country's nationals would be entitle

the Pirectorate in proportion approxi

There would be no government control.

committee would he constituted in the

preliminary plans to draw up a propTe

negotiate with groups in the several

of the cornoration. Rehabilitation of the transport systens
will. conduce to the free flow of trade and cartmerce and do more
than any other thing to prepare the ray for re-opening of private
enterprise. There is, however, rTuch more to be done. Old
indmstries have to be revived and new means of employment found.
The corporation -vri.11, at the same tire, encourage private enter-

prise 171iii inf.." to engage in particular underbakin7s.

The participation of Gerrarrr in the corporation would
incidentally afford a valuable opportunity for assisting, in the
payment of re-parations. To take advantaoe of it, the Gomm
Government would. itself take a proportion, say one half, of the
Gerian shares, and would be entitled to the d_ividends upon them.
It would not be necessary to make an exception to the general
7-)rinciple of excluding all Governnent interference and control
because the German privately held shares could be given double
vnting, power in place of the votes which would nomally
attach to the Government shares. If the corporation were a
success, the German Government should obtain a valuable source
of revenue in foreign currencies in return for a comparatively
moderate capital payment. The profits accruing on the shares
of the German Goverrvient would antaratically he applied to
reparation payments.
Contracts for the supply of materials and for other

purposes rill in general be allotted to particular countries in
proportion to the provision of capital for the corporation and its
subsidiary undertakings.
There would be a great advantage in registering the
corporation in same place which has a stable currency. It would

be rost convenient if reTistered in Great lritain if arrangenents
could be made for exemption or martial exemption fran taxation.
These shares rust all be subscribed on a newly forced
basis of currency. It is proposed that the currency selected


should be sterlina.
A preliminary marl of say, £10,000 in all, should be
provided forthwith by subscriptions fror, the Governrierrts of
the countries agreeinAT to participate for the purpose of
-,eetinc, the inftial expenses of enquiry and investigation
which r3.11 be necessary before further progress can be -lade.



Pi to la


Stockholm den 27th January 1922.

To the Governor of the Bank of England,

Dear Sir,

Enclosed I have the pleasure of sending you a
copy of an expression of opinion, given in Stockholm on the
12-IC November 1921 by a conf ea once of delegates from the

three Scandinavian central banks.

lo this declaration I

beg to add the following remarks:

Since the document was issued, nothing has
happened to alter the opinion of the said conference, viz.

that the first step towards the successive re-establishment
of the gold standard in Europe should be the re- establishing

of the gold standard in England.

As time goes on. it seems

to become clearer and clearer that a returi: to the gold

standard is the first and the most indispensable condition
for the establishaent of regulated economical relations in

The cl earer this becomes, the more pressing does

it appear that England, by taking the said measure, would

break the ice and open the way for the re-establishnt of the
gold standard.

During the last few days a new factor has

been added - the invitation to the conference in Genoa - which
would seem to paomote an English initiative towards a return
to the gold standard.

It seems to me as if the best possible

starting point would be created for the conference, if England,

for its part. had resumed the gold standard before the meeting
of the conference.

By this m ails a firm basis would be

established for the labours of the conference and the

conference would
esu3t) ess ,

be relieved of endless. and probably

discussions concerning the so-cal led monetary




The position of the different countries being


1116.3 (2) - February 20, 1922
Norman to Strong
Re Haverstein
and then like a brother and tell him
If you will write to him now
how he ought to keep his
what he ought to do and think, and
deal of good....
spirits up, you will be doing a great
contact our two Banks will sooner or
You will agree that without
later drift apart.



FEB 1 8 1922

of CS*Ia-d.

appointment of a technical adviser.

I think this demand
10 for autonomy

advantage to

position of

agreement co
could not be

feelings of t

Reparation pa

between the C

of the resul

autonomy of t
to urge this



be that the usefulness of the Conference at Genoa is

very greatly reduced.

I do not see what they can do.

The "International Corporation", of which I sent you
an outline in my letter of 30th December, is proceeding,
but I do not think that the French, or your, Government.
for that matter, will agree now to any helpful
arrangements with the Soviet Government.


the French will not permit any discussion of the

German Reparation payments, and your representatives even if they should go to Genoa - will not permit any
Indeed, I think it

discussion of Inter-Allied Debts.

that the

becomes increasingly

will not

permanently readjust the amounts they hope to receive
their indebtedness to the United States is to
from Germany until they are satisfied on what basis
This point was mentioned in my cable

of 15th December, 2nd and 3rd paragraphs.

Austria. Refer to my cable No

December 13th, 2nd paragraph.
answer this auestion.

I want you, pl

As I have told 7011, th

Government are considering an advance to Austr

probably on the security of the Tapestries, a

advance could be obtained in the United State

but. there is strong objection to it on the part of
the advance will be settled within the next few days,
those who consider that unemployment at home is mor

in need of assistance than distress in Eastern Euro
In any case, it is almost necessary that some

comprehensive plan should be taken in hand during th
next few months.

There has been for months past a

sort of understanding between yourselves, Vissering

and ourselves, among others, that the rehabilitation

Austria should be taken up by a consortium of Centr
Banks after the passing of a Funding Bill toAreleas

the Liens and you will remerber that as long ago as

last September you were to have received a letter fr

Hoover asking you to take steps in this direction.
you do so in the near future?

If not, I must consul

-5below ours for the past few months has had, generally
speaking, a very good effect, and in my opinion the

strength of sterling exchange is in part to be

attributed to this fact. But from our domestic
standpoint, the position has very much changed. in the
last few weeks. Trade is requiring less and less
money. There is therefore more and more for investment, and the Government finds it easier week by
week to obtain all the money it needs at descending
rates. The immediate position is complicated by two

factors - firstly, as you know, we are now in the
quarter when most of our taxation falls to be paid,
which should normally supply the Government with

-6It would look as if cooperation had broken down, but
do not let us admit that it has done so.

Rather let

us admit that for domestic reasons on our side we are
forced to go down first to your level, and that for
domestic reasons on your side you will again go below
us in the course of two or three months.

This is

really the meaning of your cable No.39.

Vissering had arranged to came over here

about this time, but unfortunately he is ill, and I do

not know when it will be possible forme to see him.
I an afraid the Neutrals are building great hopes for
Europe on the outcome of the Conference at Genoa.


even if this Conference is to be held - which now seems
Federal Reserve Bank of St. Louis

doubtful - they, and Vissering in particular,


Allied Debts after the passing of the Funding Bill in
Washington, would be premature.

There is an attractive

innocence in Mr.Moll's hope that Great Britain will at
once return to a free gold market, that he would like to
do so but unfortunately is tied by the leg by his agree-

ment with Denmark and Norway, and that therefore he begs
us to go ahead while he looks on and watches the result.

But in any case, his letter gives a good opportunity
for establishing direct communication with the Riksbank,

and considering how sound his views are said to be, I

am only sorry to remember that he is dcminated by
political surroundings, to which allusion was made in
my letter of the 7th November last.

With kindest regards,


At a meeting, held on the 12 and 13 Noverber, 1921, of
the Board of Directors of the Bank of Sweden and representatives
of the National Bank, Copenhagen, and of the Bank of Norway, it
was determined to issue the followinps expression of opinion

respecting the question of the stabilization of the international
value of the currencies of the various countries:

it to be possible to stabilize any value at all, it

is necessary to have another value which is as stable as possible,
in respect to which stabilization can take place; in other words,
one rust have a measure or standard of value which is as fixed as
Previous to the late Great War, gold was the foundation
on which the currency of every country with a gold standard was
In all these countries gold was accepted as the measurer
of value. In every country with a gold standard, the system of
legal enactments by which the international value of gold had been
determined and guarantees created for the maintenance of this
value, was more or less completely abrogated after the outbreak
of the war by the suspension of gold payments and prohibitions
against the export of gold, etc. As a result of these measures,
gold becarlle an article of trade like any other class of goods,
and, like these, became exposed to all kinds of fluctuations. The
function of gold as a measurer of value was suspended and there no
longer existed any fixed and common standard of value.


effective gold standard, no long time will probably elapse ere
the example will be followed by other European countries, chiefly
by those which, in respect to the monetary standing, occupy a
comparatively advantageous position. The world would then once
more possess a fixed standard measurer of value, and. there would

have thereby been called into existence the first and most
indispensable condition for a successful issue to the struggle
against currency -difficulties. Of course it would only be one
stage on the way to the end: - the re-establishment of economic
health, for of the many different causes that have co-operated to
bring about the existing morbid condition of international economy
and which still act together towards the continuance of this state
some of the most Important belong decisively to the sphere of
international politics. These causes have arisen from the Great
War and, at the present moment, are to be sought for, first and
foremost, In the difficulties attendant on the payment of warindemnities and the carrying out of other international debts
resulting from the conflict, and also in the economic isolation
of Russia. It will be the task of statesmen principally to -take
the measures necessary to remove these difficulties.
As long as not even England has stabilized the value of
the pound in respect to the dollar, it is hardly probable that
any of the Scandinavian countries will be able unassisted to
stabilize the rat es of exchange between it s currency and the

Until a fixed starting -point, a fixed international
standard measurer of value has been obtained, every little county'


exchange of a number of different countries have been stabilized
by the re-establi&nent of the gold standard, and not before the
re-e st ablishment of unobstructed international credit, will it
be possible for discount-policy to regain its normal influence.



c,,6,13 9




hire what he ought to do and think, and how he ought to

keep his spirits up, you will be doing a great deal of
and perhaps as my cable No.37 suggests you can
bring in the auestion of autonomy.


Your position has clearly become more

difficult and this may doubtless be explained by the
Congressional elections due next November. But I understand from the newspapers that in spite of this election
the soldiers' bonus has ceased to be a practical question
at Present. This at least is to the good, for any each
plan if carried out on a large scale would probably upset
the whole policy of contraction which has been going on
steadily for months past.
If you see any chance of coning over
here, please let me know early. We are going to be very

busy until the 1st April. After that, if it should be
Impossible for you to come here, it migit be vise for me
to try and pay you a week's visit. You will agree that
without contact our two Banks will sooner or later drift
apart, and even before they do so may cone to understand
one another less happily than they do now, so please
give this question of your coming here early consideration

5. Nat ional


Nat ional Bank of Switzerland. Please

refer to my letter of the 7th November last and note the
enclosed copy of a letter to its President, which an enquirs,
they happened to address to us gave me the opportunity for
writing. It is proper for me to enclose this copy
because your name is mentioned.

But the answer merely

states that my letter has been handed over to their Board
of Directors who "will have to discuss the details," thus
showing that the President is tied by the leg.
Bank of Japan. I shall be glad to see
Mr.Fukai who you say (cable No.41) is sailing from New
York. I saw your friend Mr.Nakane a week or so ago but

from him I could obtain little hope and less encouragement

as to the possibility of closer relations, so I shall
hope to fare better with the other man.

Our position is becoming more complicated

and in many ways is just the reverse of yours. My letter
of the 6th February gave you an outline and since then
short money is so abundant that the highest class of

Securities is rising at too fast a rate to be healthy.
Doubtless as trade declined a general improvement in the
price of good. Securities was to be expected.; but I

expect ed





4 -


expectedthetolast more or less gradual, w
it be couple of months there
IP something like 10 per cent. I
going to stop and sooner or la

if not criticise, in political a

fact that while trade is worsenin

rife there is


boom on the Stoc

carne home to roost in the form

called capitalist.


in March how your prospects lo
according to your cable No.40 y
find. out.

Benjecrnin Strong, Esq.

7th February, 1927.
Pear 'Cr. Presi dent,

With reference to the letter o: the 3rd
instant addressed by the %T rue Nationale Suisse to the Bank
of England, an official acknovrledgient of which is being
despatched to-day, I have to state that the Bank of fl-u
could probably obtain authority to send to you, or to anyone
on your behalf, at any time, South African gold purchased by
you from time to time in the Tiondon market, and :meanwhile
they would be prepared to hold the gold on behalf of your
 Bank upon such terns as night be arranged.




.1A2 9 A'C ;< NO VVL

of- 61914 *13 28 1922
Krubon, E. c,

23rd February, 1922.
My dear Strong,


I understand that the Genoa Conference
is certain to be postponed, but I believe that it
is as certain to be held ultimately.

In this

belief, I enclose an advance copy of the Scheme for
the work of the Conference which is under consideration here.

You will notice that there are many
Points of mutual interest touched upon including
Co-operation of Central Banking and the restoration
of the Gold Standard.

For my part I am inclined to

think that the aims of the Scheme are at present a
bit optimistic!
I have sent copies of the enclosed to
all those here in Europe who have enrolled themselves under the banners of Central Banking, lyith an

exhortation that when the time comes they may be in
the position of having a settled opinion and policy.

The enclosed is of colIrse of a



highly speculative character until it has received
approval of, at least,the Allies;

at present it

represents only the British suggestions.

I dont

expect much real good fro:r1 Genoa - Poincare will

probably prevent thnt - but it ma:7 prove to be useful

first, by bringing nearer the restoration of the Gold
Standard and secondly, by recognising the established
position of Central Banks:

in the latter case I think

that a clause ought to be added requiring autonw.y for
all such Banks.


Yours most sincerly.

Benjamin Strong, Esq.

1:1j1 9


of 60ane
.101thrlt, E.


24th February, 1922.

My dear Strong,
I expect that the enclosed will
interest you.

The lecture has been delivered so that

my enclosure which is only a "proof" may have been
slirrhtly altered.

Mr.Hawtrey, who is a "leading light"
of the Treasury, makes it his particular business to
quarrel with the policy of the Treasury and of the Bank
of England!

With kindest regards,


st sincerely,


Benjamin Strorg, Eso.

MAR 2 2




25th February, 1922.

y4y dear Strong,

I write first to acknowledge your
confidential letter of the 7th in Which nothing seems
to call for remark excepting your prospect as regards
rates (middle of page 2) and the Cheap Money Campaign
(page 3).

Your position is disappointing and

seems likely to make continued co-operation more difficult than I had hoped.

well is

This I understand perfectly

due to local conditions mainly political or

appear to be.


In this connection you should look at

the relative clauses in the Genoa proposals enclosed in
my letter of the 23rd (e.g. page 7).

Generally speaking,

I do not believe that any artificial reans for the stahill

sation of Exchange would, if ever, be practicable until
the debts have been settled, the Reparations ad,lusted,

and free Gold Markets have again become much more general
than they are now.

And is it not true that when these

things shall have happened stability in the Exchanges


be looking after itself in the old-fashioned way and



artif-lcial stabilisation will hardly be necessary.
I will only mention one further and
practical point. Page 3 suggests that the various
countries should enter into gold contracts to ship gold
under certain eventual conditions. But how could they
do so? Before entering into such a contract each
country (or the Central Bank) must have the gold or know

where to get it. If they have the gold it is pledged
against their Note Issue or in sane cases pledged against
foreign credits: in neither case is the gold free for
eventual use aboperimp40-es and the suggested
contracts could hardly be arranged without special legislation. Thus, althoui I can see that theoretically such

a plan could work, I cannot see how pract_7cally it could
be carried out, and I should be glad of some further
enlightenment if you think we ought to consider the
embryo scheme at the present time.
On this general question I have been
talking to one or two of the Swedes lately and as you
know I have also been corresponding with 'Ir./oll. The
Swedish Exchange is roughly at a premium over the £ and
on a par with the $. They could easily (so they say)

attract gold but they fear to do so because of its

&nest is

domestic disturbances on prices, &c., and they are wholly
unwilling to consider the orthodox course (as I believe

it to be), namely to let gold cane in freely and as their
reserves rise to make foreign. Loans liberally. Instead
of doing that they are disposed to buy pounds and dollars
and carry than in New York or London at 2% interest until
their trade revives or they see which way the cat is
going to jimrp. Thus they may well fail to help (if they
do not actually impede) the rehabilitation of part at
least of the devastated world by following the time honoured custom as I have stated it: and likewise they
fear a free gold market which they of all Nations in
Europe could the most quickly achieve and which, for
reasons of stable Exchanges, Europe needs. I know not
whether to blame their politicians or their professors?
With kindest regards,
Yours most sincerely,

Benjamin Strong, Esq.


London, England
:farch 1, 1922.

Federal Reserve Bank,
Nevriork N Y



Your 448 sir -Alliam Goode vt

is an unofficial financial advisor to

Austrian Government informs me that:
First - He is proceeding to 71ashin ton to urge release of liens

Second - luestion of loans is being seriously considered by J. P.
Morgan & Co.
I am inclineci to mistrust latter statement but you mi-ht ascertain

position confidentially and cable me.

If release of fleas is iminen

it seams important question of loans should be studied by lx.nkers boti.
here and in America with view to 'prompt co-operation.

Bang: of England


71-63nbint, E.C. 2

2nd '.'larch, 1122.

My dear Strong,

/ of the Bark of Japan called to
see me last Monday and presented your letter of introduction. We had a long talk and I found him a very friendly

fellow, anxious to co-operate in establishing the closer
relationships which we desire.
Before he left I gave him a copy of our
epitome of Central Banking and I arr hoping to make some

real progress with him at our next meeting.

Your timely hint as to the difficulties
which Mr. Fukai, as well as other Japanese, experiences in
our language, and the necessity for "going slow" was most
helpful: but I would rather that you gave me such a hint
with confidence in my intention to be helped by any
suggestion from you rather than, as you put it, Ildiffidentayl
please make a note'.
With kind regards,
st, sincerely,
BenjarAin Strong, Esq.







Benjamin Strong, Esq.


arch, 1922.


Page t.
opportunity of delilocratfzing the Central Bank and

obtaining sound financial advice for the Government.
With kindest regards,
Yours :

t sincerely,



Benjazlin Strong, Esq.


OF THE BANK OF ENGLAND - 6th February, 1922.

There is one further point that I wish to mention. Will you
please, :tr.President, write to me as soon as possible and tell me
how matters now stand for the legal granting of full autonomy to the
Reichsbank. The letter which you were so good as to write to me on
28/29 December (in alluding to B.I. of the aide-nemoire which I had
sent you) stated that you had already proposed a precise wording for
the Bill which had met with the approval of your Goverment. I
venture to think it very Important in your interest that this Bill
should be passed with as little delay as poss-Ible. I do not know
whether it is included in the suggestions that have been made by
your Goverment to the Reparation Commission, and I rezret, as I
have said above, that it was not a demand by the Entente, because
that would have so much strengthened and recognised the position of
all other Central Banks, as well as of the Reichstank. But it is
now important, I a2n sure, that zour position should be strengthened
to the greatest extent possible, and that hereafter you should make
a practice of objecting to any unwise economic measures or to any
inflationary policy which your Goverrnent may wish to adopt. It
matters not whether such policy may seen unavoidable or not. The
Important point is that the Reichsbank, once independent, should be
known to adopt towards its Goverment the habit of making excessive
note issues difficult, of recomendina to the utmost limit
Federal Reserve Bank of St. Louis




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of 600



MAR 28 1022


71-1:111001t.E.C. 2

6th March, 1922.


My dear Strong,


I believe you are now in Washington
and I am hoping to receive a cable from you in a I'm
days as to the prospects of this distressful country.
CableNo1,57..sent in your absence

tells me that Morgans are not considering the question
of a Loan, and my cable No.41 has told you that Sir
Willi&a Goode is at this moment proceeding to your side
in this connection as the unofficial aaissary of the
Austrian Governaent.

For months past we have both had the
idea that this question of the rehabilitation of Austria
should be taken up by Central Banks;

the first step

in that connection being taken by yourselves.

Now I

am rather coming to believe tfat for domestic reasons
you won't be able to do this, and the position is

- 2 -

a course or be willing to undertake it.
My idea is that, subject to the release

of the liens,

must see to it thatikAustria gets an

adequate Loan this sura.ler and I believe she can

provide adequate security.

I feel, as is stated

above, that for domestic 2easons surrounding your
position the negotiations had better not be taken up
Central Banks.

These negotiations could best be

conducted by parties in London who should, and
undoubtedly would, wish for assistance from parties
in New York Fand possibly from parties in Amsterdam or

other European centres as weal.

On the whole I

believe that the best parties in London to start these
negotiations would be Rothschilds owing to their

pre-war connetion with similar Austrian business and
owing to their family connection with



I have not said a word to them or to anyone else on
the subject and I do not intend to do so until the
position in New York has been defined by the success
or failure of Sir William Goode's conversations with


Bank of England,
2nd 71arch, 1922.

Dear Sir William Goode,

I am much obliged for your note of yesterday
enclosing an Austrian Trade Analysis which will doubtless be
extremely useful to others as well as to myself in elucidating
the Austrian position.

I note that in accordance with our conversation the question of Austrian Loans will not be brought before
English financial interests until you have discussed the matter
with Messrs.Morgans in New York.

Inasluch as before coming to

London you had already, on behalf of the Austrian Goverment, put
the question before them through 'fir. Jay of Paris (who I understood

was about to go to New York), I can see no other proper method of

I have so informed Dr.Grimm and Baron Franckenstein

who have been good enough to call upon me to-day.
If later the field should be clear in New
York I shall be glad to take the question up in London, and

meanwhile, wishing you bon voyage, I shall look for7ard to seeing
you soon after your return.
Yours sincerely,

Sir William Goode, K.B.E.

M.! OF


49, Westbourne Gardens,

Only to-day, I was able to dictate a longer letter to you gi

you more detailed informations about this and other question

But the letter must still be translated i
Der Prasident interesting you.
41411ksbank-Direktorium, and I myself must part for several days so that my
letter will only reach you at the end of next week.

will therefore only limit =self telling you that the cabine

yesterday has accepted the draft of the bill composed by the
ReichSbank, and it will as soon as possible be presented to
Reichsrat and then to the Reichstag.

I hope that, in the

course of this month, it will definitivly become law.


law removes every authority of the Reichskanzler to interfer

with the management and the policy of the Reichsbankdirektor

and fixes wholly and absolutely the autonomy of the Reichsba
direktorium and likewise the personal independence of the

President and the members of the Direktorium of any commandi

power and disciplinary authority of tLe Relchskanzler, their

2 -

full independence being safeguarded in a similar way as that
of the members of the Reichsgericht.

In a mere detailed lettex

I hope to give you further notice about th:-) matter.

With kind regards,
Believe me, dear Mr.Governor,
Yours sincerely,


31, Pine Street,
New York,
3rd March, 1922.

Dear Sir Henry,

I have your letter of January 24th from
Johannesburg, and I an very glad to have a "Lebenszeichenn
from you.

In reply to your question:

The campaign of

education, which we carried on at the time, was launched and
carried through before the enactment of the law.

In this regard

it differs from your problem because, as I understand, your
legislation has already been secured, and what you want is now
a campaign of education for the development of a money and
discount market.

I am sending you under separate cover a

pamphlet, which has been published suite recently on the Federal
Reserve System.

It contains the full story of our campaign and

also throws a side-light on some of our present r)roblens.


document has been gotten_ out as a matter of education for the

public, though I an afraid it is a little bit too scientifle and
too dry and somewhat above the heads of the people, that ought

to be instructed, in this case particularly our Congressmen and
the farmers.

However, a consistent campaign of education, -

in order to bring about a better understanding of the art of
accepting and re- discounting, - is carried on by the American

Acceptance Council, of Which I happen to be the Chairman.


Council, which is a voluntary organization.

We meet some four

or five times a year, and in between we have our °Acceptance
Bulletin° carry such articles, as may be instructive for our
bankers and businessmen.

In addition to that, we publish from

time to time pamphlets, which deal at length with one particular
phase of the problem, as a rule speeches, which some of us have
made on these topics, and which are disseminated in this manner.
I shall ask the Secretary of the Acceptance Council to forward
to you a complete set of these pamphlets and also of the

My own feeling is that what we are doing in the

American Acceptance Council will be of more service to you than
the earlier campaign in 1912/13.

The stuff, that we published

in that period, is so voluminous that it would, I believe, be

more than you would want to read, and I an, therefore, not undertaking to send it to you.

If you wish it, however, let me know,

and I shall be glad to see what I can still collect for you.


campaign, that we undertook in those years, did not cost much
less than t1,000,000.00.

What we spend at present is indeed very

moderate and entirely covered by our annual contributions.
In this connection, I think it would be
very interesting for us to carry an article in our °Bulletin°,

written by you, concerning your problem in South Africa, and
covering the organization of your new Federal Reserve System in
that country.

If you could furnish us an article as long, or as

short, as you may feel like it, we shall be greatly indebted to

To turn to a more practical question, is

there any possibility of the International Acceptance Bank,
Inc., becoming connected with the new central banking
institution of South Aft lea?

It may well be that they might

want to carry some gold balances over here, or that they might

want acceptance facilities, or in what other way coula we
connect with South Africa?

So far, we have made no connection


worth speaking of down there, and if you

give me the

benefit of your advice in that direction, I should be greatly
obliged to you.

With kindest regards

and always with

pleasure at your service,
I am,

Sine erely yours,



We have almost all the important European Government banks as
our customers and I should like to include South Africa.

Sir Henry Strakosch,


Austin Friars,




76100114 E.C. 2

6th March, 1922.

My deal Strong,

This is just to acknowledge your two
letters of the 37th and 16th February in reply to fnine

of the 19th and 29th December last.
With kindest regards,
Yours very sincerely,



t of (14010

AIBenjamin Strong, Esq.

is to attain a political end under a co=ercial cloak,
the political end being that of getting practically
all the countries of Europe, and perhaps the United
States as well, round a table, and co-operating with

one another for the rehabilitation of Eastern Europe
andARu sia.

As commercial undertakings I doubt if they

have much chance of success.
As to your third paragraph, Sir Paul Dukes
was Chief of the British Intelligence Service in 1918.
Since then he has been Special Correspondent of "The
Times" in Eastern Europe.

He is now in the United States

with no sort of official blessing and Whatever he says
is entirely on his own responsibility.

I guess he is

rare a newspaper man than anything else.




(3mA of


lft 11001I, E C 2

9th March, 1922.

my dear Strong,

I enclose copy of a letter which I
have received from Havenstein, and to which I alluded
in my cable No.44, from which you will see that he
hopes the Bill for granting autonomy to the Reichsbank
will be law by the arid of the month.

With kindest regards,
Yours vary sincerely,



kRN1A 2'1

1G1001t, E. C 2

9th March, 19'If3.

My dear Strong,

I have received your letter of the
18th February in regard to rates, on which subject

please refer to IT letter to you of the 25th idem
(paragraph 1).

The ease in our money market is, in

my opinion, due to a real paralysis of trade - to quote
ro rvothi
your own words - and money continues s eping into
Lombard Street for employnent.

If you ask me how long

this is likely to continue I can only say that it is

very difficult to

prophecy as the remedy lies in the

rehabilitation of Europe;

but in any case I do not

think that we shall see much improvement within the
next two years.

With kindest regards,
Yours most sincerely,

Benjamin Strong, Esq.



E.C.. 2

10th March, 1922.
My dear Strong,

This is to thank you for your letter of
the 18th February which amplifiys your answers to my
cables 34 and 37 regarding the fteichsbank and makes me

appreCiate the more the difficulties of politics and
publicity with which you are conf onted.
I de not propo e however to write to

you at length as I think that any reply I can make at

the moment is fully covered y my letters of the 20th
moreover the question of

February and 6th instant:

autonomy is now only of Oademic interest seeing that,
as I cabled to you on tpie 8th, it will probably be law
So please accept this just

by the end of the mont .
as an acknowledgment.

With kindest regards,

t sincerely,

Benjamin Strong, Esa.




13th March, 1922.

Thorpe Lodge, Ca_mpden hat, W
My dear Strong



I have been wondering, ever since it came, how I
was to answer your letter of the 17th of -2ebruar-/, and to-day I

cannot do much more than say that I am unable at present to
answer your question about a successor.
You know that custom and tradition at the Bank require that
no one shall ever be elected for more than a year at a time, but
that in the past it has been customary for the Governorship almost
always to be held for two years.

At the beginning of next month,

contrary to custom, I am beginning my third year.

';hat will

happen after that I have not the least idea, but I must confess
that there is no understudy at the present time<qualified
into the gap.

to step

It is difficult for me to find out about this

question, perhaps more so for me than for anybody else; and opinion
among the i)irectors on such a question as this, although pretty

well known to each individual, has naturally not been crystallised
or put into words.

I think I may be able to write you a little

more definitely next month - anyhow, I will try and do so.
think that Addis, when he comes home, may have something to say on
the matter, and this - though 10 to 1

it rill be different from

everyone else's views - may help to clear the air..

As to your own position, I am greatly relieved to hear that
you have no intention or exl:,ectation of quitting the i ank yet

I did speal,, to .pre

rather frankly on this subject,

simply because he :Imev7 your conaition and because I was, honestly,

- 2 -

__frail about your health, and not in the least because I thought

you had any voluntary intention of making a change; and I confess
that, having seen a 1 i t t1 e of most of your vsociates, I have not

the least idea in the world which one of them would begin to be
competent to take your place.

Just let me continue this train of thouht for a moment.
From the tif:

"rere taken ill last fall the correspondence

between our two Banks in New York and London, in so far as it had

regard to policy or cooperation, began to dra, to be unhelpful,
uneonstructive, and of little use - at least to myself, since I

was trying all the time to build upon it a policy which both of us
could follow.

As a matter of fact, while I was day by day noticing

these changes, I was under the impression that you were still at
work but ill, too ill to be at work, and that it was because of you
illness that the machine appeared to me to be creaking.

I have

since learned that it was creaking because you were ill and awair hence my concern in talking to Moreau as to your alternate, if not

as to your successor.

Please do not write to me about these subjects at the Bank,

but - as you did on this occasion - to this aL,dress: sirailarly, I
do not take such letters away from here or show then to any of my
Yours .1


15, Nassau Street,

New York.



t3iin1 t


16th March, 1922.

My dear Strong,

We have lately had some correspondence with
the Swiss National Bank in regard to matters which are of



all Central Banks, and I have in conseauence

week had the advantage of a visit from M. Schnyder

de Wartensee of Berne with wham I have discussed such

matters as the possibilities of the Genoa Conference, the
Gold Standard, the relations of Central Banks

and the

desirability in the main of exclusive dealings between them
in their respective countries.
I am glad


M. Schnyder has gone hence,

say, to confer with llroran Vollenhoven of the


Benjamin Strong, Esq.
Benjamin Strong, Esq.

Page .2.


March, 1922.


unit of 60440

20th March, 1922.

My dear Strong,

I now reply to yours of the. 1Rth
February regarding the Guaranty Trust Co.

While I believe that the position as
expressed in 'Tr.Paget fs letter was sound, I am glad that
you have raised the larger question, which we ought to
discuss over the fire. Failing that, I write.
I welccrte American investors in this

If that is the rule, and I accept it, the

exception would be their position in the Discount Market
under the implicit conditions regarding which Mr.Paget was

In particular, this raises the peculiar
position of the Discount Houses here. They cannot exist
as such without a (special) account at the Bank of
England; that account may be closed at discretion by the
Bank and in the event of misbehaviour is closed. (There
are two concerns in this position now - a position which
means an end of their business.) Therefore the relations



Benjamin Strong, Esq

20th March, 1922.


of the Discount Houses with the Bank are very close and
can only be carried on by free principals.

If the control

were in New York (or Paris), those relations with
principals could not exist as the policy of the House
would be dictated by the Guaranty Trust Co. who would be
resident far away.

Again, as you know, it is in-gooses&

the custom of the Bank of England not to open accounts
for Foreigners or those resident abroad - other than
Central Banks - and this would certainly apply to concerns
in this country naninally British but actually foreignowned.

(The British Bank of Northern 0 amr erce while it

existed was a case in point for it was controlled in
Scandinavia and therefore ranked as foreign).

This answer is as complete as I can
make it in a letter. for I repeat that the subject is one
for personal discussion.
With kindest regards,

Yours mo



Benjamin Strong, Esq.


MAR 30 1'322


E. C . 2

21st March, 1922.

My dear Strong,

I now come to yours of the 21st February
on the subject of Mr.Moll's letter to me of the 27th

I agree that the first decision regarding

the restoration of Sterling to parity seems to rest with
this country - but such decision cannot be considered
until the abnormal influences have been eliminated, viz: (a)

American and inter-allied debts

Benjamin Strong, Esq.


21st March, 1Y22.


while the £ would stand still the t would be perhaps

I am glad to find that the Funding
Commission as appointed meets with such full approval
from you but, until its composition has been confirmed
by Congress tio line of action here can of course be

I am in touch with Moll about Genoa,
also on the subject of gold deposits between Central

Banks and while I should be glad for you to be in1144
touch with him too, I do not think I have any definite

suggestions to offer for you to work on.

You will

find from my letter of the 16th however that I have
endeavoured to bring you into contact with still one

more Central Banker - Mr.Schnyder, of the Swiss
Fational Bank.
With kindest regards,
Yours most sincerely,


Benjamin Strong, Esq.



'.Ink of





Pnliti March, 2922.

My dear Strong,

I am afraid that I an sonawhat
lyehindhand with your recent batch of letters and I
shat] rerhaps hardly have time to digest the:
sufficiently to reply in detail.
i4rst your letter of the 4th.


quite see your political troubles and difficulties

rate looming ahead here and not very far off eithe
41pge 2.

Genoa The Prime Minister is still bent on 1922
22nd March, the
To Benjamin Strong, Eso

Conference but truly it is largely political.



sent you the British Agenda in my letter of the
23rd February and these are being discussed this

week with the French, Belgians and Italians and wi
doubtless be altered.

You will see germs of sens

and perhaps of eventual stability in the Economic

proposals but there will be no discussion of Germ
Reparations and the Neutrals do not yet know

officially what the subjects for discussion will b

I have been daaadfully busy of late and

am still rather out of touch with you.

Your visit

to Miami is good for you and, I am sure, wise but
on the other hand it means that you are not in /\Llw

York and events move so fast and change so often
that we must depend more on cables than on letters.
As a final word let me say that I
read your letter to Blackett of the 13th February,


mentioned in yoursApf the same date, and saw in it
more reasons for -atfence than for hope.
did he!

And so

The plan for dividing German Reparations

into two parts, actual (small) and 22nd March, (large
contingent 1922.
To Benjamin Strong, Esq.

cage 4.

To Benjaain c7trong, Esq.




illattl; of 0.:Itit lam)
-11:oloolt.F..c. 2

23rd March, 1922.

My d :Dar Strdn

sending you the enclosed article

by 0.T.Falk,( whom you may remember meeting over here

during your visit) in the hope that you will find it
as entertaining as I did.

Falk is a Stockbroker as

well as an Economist, and I am afraid that his views

in the latter capacity are somewhat jaundiced through
being on the wrong side of the market in the former.
With kindest regards,
Yours vet y sine ere ly


r,17.*,.7T1T lt, 7- (-71:





London, :ngland
1:arch 27, 1922.

Federal Pe erve Bank
Newyork N. Y.


Your 465


I hone loan to Czechoslavakia which is thus being negotiated

#1 is this in any way due to Geodes visit

here will shortly be issued in :Taw York and perhaps Amst2rdam as well as London

You will remember that many Europian countries along with United

states must formally release or postpone liens on *listria in order to permit

issue of loan


If required by lenders whoever they may be I agree that

League should somehow stand aside in future from loan situati:n and a step in
this direction has boon tr11-:-, 17 recent refusal of Austrian Government to alroint

controller on behalf of League as desired by Economic Committee of League


It is essential in my oninion that loan an: now central bank

be treated-throughout as part of one question ..nd I believe this will be

welcomed by lqstrian levornrent


This could he arranged here, but am uncertain about French

with whom difficulties arc apt to arise in all Austrian matters


This is a question for J. P. Lorgan and Company as Goode

has opened negotiations with them,

were better

but in my opinion such negotiations


conducted in London by Eorgan Grenfell or others this is

not in order to eliminate inerican bankers whom I consider essential
but because by location tradition and knowledge London is in this instance
better adapted for negotiations ,Lnd co-operation with American bankers
Bank of England




of 0.*all

29th March, 1922.
LIy dear Strong,

In my letter of the 23rd ultimo
I enclosed a Draft Scheme of the work for the

Genoa Conference then under consideration by the
British Government.

I now enclose for your private
information a voluminous report by the Allies'
Experts on that Scheme.

I hope that it will

interest you.

I heard the other day that

Burckhardt of the National Bank of Switzerland another Central Banker - is laid on a bed of
sickness for some time.

Sickness seers to be

pursuing us but I take comfort from the fact that
it has jumped from you over England to Holland
and Switzerland.

Yours mo


I Tor
MevIA4t44Benjamin Strong, Esq.



NPR 10



30th March, 1922.

My dear Strong,
Sir Penry Strakosch has just returned

from South Africa where he has been in close touch with
our late colleague, Mr.Olegg, the Governor of the South
African Reserve Bank.

Strakosch came in to see me

yesterday bringing with him a letter which he had
received from Mr.Warburg.

I enclose a copy.

I do not know what you will think about
it but, frankly, I am amazed that such a movement should
have been backed up from such a quarter.

To me it is

unthinkable that the legitimate business of the Central
I am

Bank should be undertaken by an Acceptance Bank.

surprised that Mr.Warburg should assist ftri Acceptance Ba

to usurp the proper functions of your Institution.
As you well know I have done my utmost
to promote the most intimate and exclusive relations
between Central Banks.

In my endeavours I have brought

into closer relationship with you various Central Banks

4 through my collaboration
I hope that similar happy relations wil




Vita of 1;!1.4an

E. C . 2

4th April, 1922.

ny dear Strong,

In your letter of the 9th ultimo you

asked whether there had been anything further published
regarding the economic agreement between the Scandinavian


I made a similar enquiry of

the enclosed result.

He very kindly enclosed a

translation of the Articles c)' Convention which I also
pass on.

Yours most


T3enjamin Strong, Esq.


Vault of 644anb
71011.bett, E. C . 2

5th April, 1922.

My dear Strong,

I enclose a pamphlet by Sir Henry
Strakosch on South African Currency and Exchange which
I thought you would like to read.
Yours most F;ince-oly,


Tlenjamin Strong, Esq.





(.6v an


C. 2

13th April, 1922.

My dear Strong,

I am very much afraid that I have

once again been -amiss in writing you.
letters of the 22nd, 29th, 30t'.

I have your

and the 3rd April

and I Propose now simply to touch on a few points and,
since my visit is so neer, to keep gall news till we

First, in your letter of the 22nd

March, referring to the German payments, I think that
the Cannes programme is too heavy for Germany even if
the German Government can be induced to adopt a sound
fiscal and currency policy.
In your letter of the 28th March

you refer to your relationship with the Nederlandsche

I quite agree; you cannot force these friendships

nor can you man out a certain formal course of action
before the friendshiD has developed.

I am convinced,

and have made it my policy throughout, that relations
bet-; een


between Central Banks should gradually develop - I


admit on certain fixed lines - and then when one sees

how the land lies one may proceed to closer relationshi7
resulting as often as not in "matrimony'.

I can quite

realise that you are not prepared to risk antagonizing
your membership by trying to force your attentions
where old established relations exist with certain of
your member Baff:s.

I was glad to see from your letter

of the 30th March th-t you had written to Nr.Schnyder.

we had a very friendly discussion and I think that I

have once more been successful in sowing the good seed.
T could see from wha
he had heard from you.
I received a letter from him this morning saying that
said that he was pleased .

You ask for anything of
which was discussed with Fukai.

I am afrai

there was nothing worth mentioning.

He had

Genoa before your letter of the 3rd April arr
I am filly aware that I

skimmed over your letters but you must forgi

am very much pressed and there is very littl

On Board



(Handwritten Note)

May 24, 1922

My dear Strongy,
I wonder where you are and how you are? If well, I care not:
if ill, I hope in Pratt-land where there is quiet and care and all the
rest. I have not much to say, but just listen to me for a momenttlt
On the way home last September, I remember that I came to realise and
(so to speak) to define your position towards the world in general and
towards myself in particular (Quite apart from your value at home, which
to my mind is wonderful and out of which the foreign position has of
course arisen).
I wrote and told you this on board ship.
We foreigners need you as much, if not more than ever:
we don't
all know it yet but some of us do and others will come to realise it
later. Therefore we cannot afford to let you play fast and loose with
yourself--least of all in 1922. Yet that is just what you seem to me
to be uoing if I may be so bold as to say so.
You had a bad shake-up last winter and you have not, as yet,
entirely recovered from it. You will surely do so, but it's a question
of time: and time means going slow. I want you please to try and go slow
--for your own sake as well as for mine. By so doing, I declare you
will lose nothing--absolutely noticing --in what you achieve, but you will
and can save yourself any amount of wear and tear.
I need not argue this from your side.
But from mine I fear lest
"wear and tear" should come to mean rest abed and vacation and such
enemies which end in loss of touch between you and me and hence loss of
contact with the Bank.
I dare say you will jeer at these fears or warnings. I know
you point the finger (? of scorn) at me for taking things too easy rather
than getting up and doingtt (while we both know that while I have been
learning to use an old machine, you have had the job of making a new one- out of nothing).
But you think it all over, my dear fellow, just to please me and
without forgetting that I have an excuse for writing all this, for I
saw and heard you in Washington and I saw you dumb and weary in New York.
I am glad I came. If you want to harvest a crop you must manure the
land months ahead--and forget about itt I may have done some good that
way in Washington (both for you and for me) and I mean to try also some
in London.
We have had a deal of fog and shall be very late in landing.
As ever,
M. N.





1J L2




13th June, 1922.

7y aear Strong,

I have not written to you since landing at

Liverpool, and, letters being mainly historical, I have not
much to say to-say.

But you will like to know that Ben has been
staying here for ten says, seems quite well and happy, and is
now moving into some loaGings which are quite likely to turn
out just what he wants
come and go ior ainner

wants,They are willnear here that he can
and it so not


take him more than about a quarter -of-

cost him more than ten cents to Get here.
Yesterday, I received your letter of June lst,

ught home from the Bank, and, as agreed, I am going

oint of writing more or less personal letters to

, prooably from Here, ana shall write about notiihg

ousiness matters to and from the Banks.

As to the Meeting of Oentral Banks, I can say

ond what I have cabled, for the reason that I am

each a provisional agreement with Visst4ering and
them, oeVore sending you out a further :!raft of



As to the Debts questions, the position has been very
aifticult and very involved since my return, 'out it is now

clearing owing to the Report nerving been published of the

Bankers' Committee sitting in Paris.

their report .is entirely right, altouGh



011)uld nave liked

the points to have been rather differently "stressed".


essential thing is that the Bankers' Committee does not break
up, but adjourns, and will therefore be available if the need

arises later and ou,ht, I think, meamhile, to nave a certain
effect on the ',Iovernments concerned towards ()ringing about dL


rurther, they have tied together German

Aeparatlons and Inter-Government Debts, and, lastly, I think
they hold out no hope that money for Germany can be raised in
the varioas countries until not only the German Reparations,

but also the Inter-Government Debts nave been aujusted.
Pending this Repoct, it

:as been difficult to obtain

proper consideration for the Washington Debt question.


I told

you just what I would do; and, as a natter of fact, by the 8th



On the whole, I think



19th June, 19L2.


-ear Strong,

Ben has now moved into lodgings at
36, Norfolk Square, W.2,

Nvhich he seems to like and which,

I hear, are comfortable and well kept.

The only thing

against lodgings is that they may make the lodger feel a bit
lonely, but we shall find out by degrees how Ben takes to it.
eanwhile, he is perfectly well and interested in life.
As to the meeting of Central Banks, I am awaiting
a cable from Tokio before I can get any farther, or communicate
with you.

As to the Debts question, it is quite decided
that no Commission or Representative will at the present time
oe sent from this country to discuss matters with the Refunding
Commission in Washington.

I imagine a communication will

shortly oe made to the State Department which is likely to
state that the question of Funding cannot be considered before
consultation with the Allies.

In other words, the whole

question will be held up, without commitment being made either

This is far iron what I should like to see done; far



far from what I advised.


It keeps matters in suspense,

whereas, if we were to aaopt a policy of "casting bread upon
the waters" here and now, a breach, or series of breaches,

would at once oein to stew in the vicious circle of the
Austrian debacle, of German Reparations

Exchanges, of

French Credits and Debits, and so on.
Very sincerely yours,


Benjamin Strong, Esq.,
470, Park Avenue,
Yew 'Ark City,


B.S., curing a private conversation with A.W. Mellon,
may say :-

"I guess !.N. cannot make any headway in London
"about the question of Refunding, - and it is soon likely
"to come up for discussion among the Allies.

"A modification of the cash payments due from Germany
"for Reparations in lS22 and 1923 is probable, along with
"increased taxation and increased control by the Commission
"and, in consequence, no reduction of the Schedule of
"Reparation payments during that period.

"Hence the Report of the Bankers Committee in Paris
l(rhich includes J.P.Morgan and R.M. Kindersley) is not
"likely to produce any direct res,Alt.

"All this points to a continuing reriod of economic
"uncertainty and instability -- with no settlement of
"inter-government Debts,

no improvement in Central

"Europe, and no revival in general trade."


FRIDAY, JUNE 21, 1822. Price id.
A very lively sensation was produced yester-

day on the Royal Exchange by an intimation,
that the Court of Bank Directors had adopted
the resolution of lowering the rate of discount
and of receiving bills in future at 4 per cent.
This measure. which has for a long period been
anxiously solicited of the Bank by . the

monied and mercantile interests, and which
has been also, it is understood, urgently required of them by Government, has been so
long withheld that when announced it was
quite unexpected. The motives of the Bank
for selecting this period probably are that
after the present month the reduction of the
interest of the Navy 5 per cents. will be completed, and as there will then remain ho
5 per cent. stock of the Government, a higher
rate could not be with propriety asked for
commercial discounts. On the funds and on
the foreign securities circulating in this
country this measure is likely to produce some

effect, nearly all of them having experienced

an advance in value soon after it was an-

Consols for the account, which in
the morning stood at 80i, left off at 811. No

time is lost by the Bank in carrying their

resolution into effect. as the new measure will
be in full operation on Monday next.





31:01th1nt, E. C . 2

23rd June, 1922.

M7r dear Strong,

I was as much surprised as pleased to
receive your cable No.14 as to your rate being reduced on
the 21st, for your earlier cables did not lead. me to expect
that your hands would be free enough to make this change.
I daresay you had a tussle about it and I am very glad that
you have got your way (for that I ari sure is what has

happened), partly on the merits of the case and partly
because I judge that you no longer fear a boom on the Stock
Exchange or a great rise in conntodity prices.
The enclosed cutting may amuse 7011.

I read it just before your cable arrived vrith a sort of
presentiment that it might refer to New York instead of to
London and that the date should be the 22nd June, 1922,
and not 18221

With kindest regards,
Yours most sincere17,

Benjamin Strong, Esq .





Benjamin Strong, Esq.

23rd June, 1922.

hear from him I cannot send you one which will be any
more useful than that which I left with you.

But I will

do so with as little delay as possible.

With regard to the letter of invitation,

I do not think any change will be needed in the wording

which you gave me to bring way from New York.
Yours most sincerely,

Benjamin Strong, Esq.








No .l






Bank of Esthonia (Esti Bank)

Bank of Java
Banco do Brasil

Reserve Bank of Peru
Banco de la Nacion Argentina

ACK NOWI,Eritit7.0
JUL 18 1922


5th July, 1922.

My dear Strong,

I have your letter of the 20th ultimo,

enclosing a copy of the amendment to the constitution
of the New York Clearing House Association.

With us the Bankers' deposit rate
moves generally, but not precisely, with the Bank of
England rate. the rates of the Discount Houses for
money at call or at 7 days' notice moving in sympathy.

Whenever an alteration is made in our Rate a Meeting of
the Clearing Bankers is held at which the Bankers'

deposit rate is settled until further notice. In prewar days the Bankers' deposit rate used to be fixed
at 17e0 below ours, but for some time past, it has been

2% below - first of all because our rate was very
high and they did not think it wise to go above 5%,
and latterly because with declining rates and little
demand for advances they did not wish to encourage
their customers to put money on deposit.

I think it

may therefore be said that the difference between

Page 2. Confidential. Benjamin Strong, Esq.


5th July

the Bank of England Rate and the Bankers' deposit rate
is arbitrary and is fixed wherever the Bankers think
it will be most to their profit and advantage.

After the Meeting of the Clearing Bankers to

which I have alluded above, a Meeting of the Discount
Houses is held, at which the rate for their money at

call is usually fixed at the Bankers' deposit rate
while that for their money at notice at about -V. above.

Broadly speaking, as you know. all rates for
advances are fixed in relation to the Bank Rate

including the rate at which documented Bills maybe
retired before their maturity.

I quite agree that it is unsatisfactory, and
perhaps embarrassing, for you to have this mathematical
scale of rates fixed by the Clearing House for their
various deposits in relation to your rate of discount,
but I should imagine, as you suggest, that the time

will come when either owing to their anxiety to attract
money or from fear of

losing what they have got they

will be jolted out of this static schedule.

Such a

happening would be only natural for after all everything


-uly, 1922.


My dear Strong,
He was quite

Ben was here three days ago.

- '1, and both contented and comfortable in his lodgings,
food, etc.

I fear he is finding Schr5der's Jollection

:)e..partment rather cull.

That is perhaps inevitable, because

it is mechanical work, but, as I tried to explain to him, there

is a world-reason in all these collections which he is putting
through, and the object of :is coming to London is to hitch
the reason on to the :retail work.

Politically speaking, we have of course oeen
dominated by the fighting in Ireland, and, if the ;orld has
learnt anything from

atching its coarse, it should certainly

have learnt that the Irish can tight just as well among themselves as tney can against the British:

in fact, most of

them cannot exist without figntingl

This has rather dwarfed the questions of Allied
Deets, German Reparations and Austria, all of yyich nano;

AS to the first, I was pessimastic when I wrote

to you a reek or so ago, but I rather think Opinion -- and,
inueed, political opinion -- is moving our way.

In fact,



be surprisea if some action were taken, but I do not

hat lines.

neanwhile, the aespatch to France and

pretty well drafted and agreed, and may be sent off

ything else is done:a/406*h (MAW Ar(41.4 ie,

As to the German Reparations, the whole position has
much more difficult by the murder of Rathenau, which

ollowed by a big depreciation in the -_ark.

The Germans

not got the money wherewith to make their payment on
.7.ost of the money that the Rcichsbank had with as

o be used for paying ior imports and cannot be replaced

so the instalment will either be paid by a loan which

ke to the Reichsbank for the purpose, or they may ask

ations Commission for time, - and, in the latter case,

is almost certain to insist on further internal control.

As to Austria, the prospects of a loan from New York

n Bankers is virtually out oi the question, and, indeed,

ar to all that the security to be found in Austria is

ore dependent on the "equilibrium" of 'Jermany.

itish Government going to find them any more money.

d to be decided within the last few days whether or no

ld receive further financial su;Dport, and the answer

o -more good money is going to be thrown after the

has already been doled out.


I expect

6th July, 1922.

in a few months to see the Austrian Government unable to
carry on, make a bow, and appeal tq the Powers.


that one can foresee nothing, but it is possible that the
existing Austrian 1-'rovilces will 6raduaily cut themselves

off from Vienna ,with the idea of uniting themselves to the
adjacent countries.

Or, alternatively, Italy, for

instance, may step in and take a sort of ::Landate in oraer

to preserve peace and to prevent a break-up.
very obscure.
Yours mos







Benjn. Strong, Esq.,
470, Park Avenue,
New York City,


It is all



London, England
loc/d July 6, 1922.

Federal Reserve Bahl{
7TeWYork, N. Y.




Your 20 paragraph 3.

Cannot estivate extent of gold

shipment but not less than 430,000,000
.second : -

Please do your utmost to avoid alterations in agenda

because as you know it has already been approved by several bankers.

But in paragraph 2 we might well eliminate words Wherever situated


Subject to your ..onvenience early October su':gested

for date of meeting

Fourth:- Regarding funding negotiations I hope British
representatives will reach middle of September though nothing
is yet settled

Examination of Austrian condiA.ons has just been completed

on behalf of J. P. Morgan

Company and Austrian minister will be informed

tomorrow that present position too unstable to make loan possible
Bank of England


Translation of Incoming





No. C


London Itigland.

Rea 'd July 14, 1922.
ioederal Reserve sank,
New York, N. Y.

STRICTLY C07:7117,7TI IL .?011 GOV7RNOR:

Your 1122

I Ara sure you will not allow your friends in Was"!",in ton to


that the first quustion referred to proposed meeting is how best to give
effect to the practice of continuous co-operation Arnow? eqntral banks.

I mention this after


your #20 narapraph
Bank of 7nslxtnd.

Our #20 paragraph 3:

Can you estimate probable extent of movement




of thtolane

15th July, 1922.

My dear Strong,

I have not written to you much of late
for the reason that the matters in which we are interested
have been altering and varying from within and without
with the quickness of a kaleidoscope;

so I have done no

more than send an occasional cable in which I have tried
to give you no more than the meat in the various eggs.

But your cable No. 23, received to-day,

raises(in its last sentence)a point over which we may be
at loggerheads.

The point is why paragraph 3 of your

cable No.20 suggested doubts in my mind as to whether
coftiot 00.44

Governor Harding and the others in Washington realisedkthe
primary question referred by the Genoa Conference to the

proposed Meeting of Central Bankers as I stated it in my
cable No.8.

On thinking over this question, namely,

your approval of the form of the draft Agenda, it occurred
to me that you regarded the further Conference in
Washington as essential before making even tentative




Page 4.

Benjamin Strong, E sq


15th July, 1922.

AO neighbours, or some sort of agreed mandate permitting a
Foreign Power, e.g., Italy, to administer and police
Austria for a couple of years.
With warmest regards,
Yours nip



Benjamin Strong, E sol


I rather hope to go abroad for a couple of weeks
about the 6th August.

Translation of Incoming






London 'Iagland.

Rec'd July 20, L122.
Federal Reserve Bank,
New York, N. Y.



Report stated to have boon published in your newspapers

yesterday appears in our Ilmspanors today to the effect that debts due to
Great Britain aro to be cancelled.

For your information these reports are

Inaccurate and at present no vial) canIzsllation is likely.
S000nd :- tfy

fi second paragraph on account of long standing arrange-

ments of Riksbank ?toll now desires omission of word exclusively in part 1
paragraph 5 I do not think such ommission would really affect principle
involved in the clause.

BMA of %gland.

Translation of Incoming






London, England.
Reo'd July 26, 1922.

Federal Reserve Bank,
New York, N. Y.


I anticipate a request will shortly be made by Great Britain

for payments by the allies of their war debts to the extent payment is required
From Great Britain by the United States.

A bad impression is likely to result

in Purope and America together with a worsening of any prospect of adjustments
of a reparation payment.

Real object of request is probably to induce France

to face realities although object may appear as an attempt to induce United
States to make concessions regarding funding of the debts due by Great Britain.

It will do no harm if your newspapers express strong. disapproval

of the apparent object as they expressed approval at the prospect of cancellation
mentioned in my #10 first paragraph.

1fter publication of request you may be

able to take action accordingly.

Business community here has generally come round to the view

that the sooner British re,resentativos reach Tashington and the sooner funding
is completed the better.
Ban,. of England.


Translation of Incoming






London 1gland.
Heed August 2, 1922.

rve Bank,

ork, N. Y.





As result of conversation 7ith Peacock. nlease consider
the following.

Can you not suggest to Mellon that he shnuld intimate
unofficially to Horne his desire that /brine himself should

go to Washington es a British representative.
As this idea is put forward without authority please do
not disclose its origin.

On the other hand I am, of

course, at your service as an intermediary.

%ord mutilated:

Bank of England



flIG 2 4 1:init of (gngland

R. S.

E.C. 2

9th August, 1922.
My dear Strong,

Your personal letter of the 27th July has just
Althourdi my door is indeed always open, I

think it might be a good plan for you to go to an hotel for


while and it certainly would be a ghod plan for you to bring


But it is too early, as you will have learnt
from my cables, to make definite plans. We cannot fix a date for
the Meeting of Central Bankers because no date or period can be
fixed for the Washington Conference on Debts. If, as seems
likely, the latter will take up most of October, it 1-1_11 be
necessary to postpone the Meeting of Central Bankers until
T\Tov crab e r at least.

There you have my views as promptly as possible

and as far as they are or can be definite. Further, I may say
that I should not suppose you would need an expert adviser or
associate. My hope is that the Agenda will be agreed(as to both
parts with practically no alteration, and to this end I seem to
be getting vague sort of nrcriises from all the more Important

When you come to France, Italy and Belgium they may

stand out, but that can't be helped.

Once the two parts of the
print ed

Page 2.


Benlamin Strong, Esq

9th August 1922.
4.1` tuL

printed Agenda have been agreed it will be open to anyone to
raise more or less informally, questions of general interest;

but it is not anyone's intention, so far as I ar: aware, to
agree to anything beyond general and rather vague principles.
I have had a long talk with Peacock and
quite understand from him, as well as from yourself and from
my knowledge of your situation, that 77011 need to be cautious.
By the time this reaches you the outcome of
M. Poincare's visit will be Imown: at the moment it looks wellnigh hopeless and I have never thought the irtnediate future of
Central _Europe looked blacker tl-:an it now appears to look. I
cannot, conceive how some sort of a break-up of Austria is to be
avoided long before the end of the year; nor do I see how a
condition very near to civil war can be avoided in Gemany. It
seems utterly impossible for the British Goverment to see eye
to eye, or even to come to terms,with the French Government in
respect of the methods to be adopted in dealing with the exenemy countries.

Of course you are ripe for a holiday and the
best thing you could do would be to get on the boat right away
and cane over here if only for two or three weeks. I should
have gone holiday-making by now but for one or two nasty

questions which have to be settled this month.
With warmest regards,
Yours most sincerely,

BenJaiin Strong, Esq.


Page 3.


Benjamin Strong, Esq.

9th August, 1922.

I have not answered your ouestions as to a trip either

in England or on the Continent (bottom of page 1 and top of
page 2).

The time of year is likely to be bad if your idea is to
travel for pleasure.

If, on the other hand, your idea is to

travel for the purpose of seeing the various Central Bank people,
then I think it impossible to settle your itinerary until the

time for starting is at hand.

Moreover, if youAhave just

attended a Meeting of Central Bankers here, I should hardly
think it would be necessary for you to call on the same persons
in their own cities so soon afterwards.

But there, a deal of

water must flow under the bridge before we can see our way ahead
as far as your trIp.


:17th August, 1922.


My dear :strong,

The Allied Conference made things very difficult
and very uncertain here while it lasted, and, su far as knowing
what is going to happen is concerned, we are now as completely
in the dark as ever.

In fact, the battle, which was originally

passed on by the ReparatiomeCommiscion to the Prime Ministers,
is nor transferred by the Prime Ministers to the Reparation,

Therefore, while



will happen re,;arding Germany, I myself believe that Iradbury
is strong enough to obtain a :roratorium for cash payments for

the rest of this year, but I realise that this would not, of

itself, prevent a default as reards payments in coal or timber,


But we seem to know pretty definitely that none
of the Allies will do anything more for Austria, and I do not
see why various portions should not be fighting aL,ainst the

Central Avernment

v :ithin a comparatively short time, - if,

indeed, any Ministers can be persuaded to carry on an Austrian
ckwernment for even a brief period:
The /

The extreme uncertainty which these conditions are
bringing about throughout Central Lurope is in itself, it
ceems to me, -a fairly good reason for not holding a meeting

of Central Bankers yet awhile.

The very relations between

the Eanks of the countries reprecented on the Reparation
Commission would be strained; while Favenstein at least would
probably feel himself in a ye-2y awkwaed hole.

In other

words, I see no prospect of holdi G a eceting in Octobce.

apart from these reasons, which seer: to me sufficing,

I think it more than likely e-eet the month of October will see

me in Washington again in connection with the Refunding

So fer, this is orJy surmise, and nothing is

likely to be settled for several weeks.

But, as you would

not induce Mellon to cable to Horne, I had to deliver an
imaeinary message, and it is quite likely that the result may
seem to justify it..

You will be sorry to hcer that Adrlie had a sericus

operation yeetaday, when some obscure bit of his inside was
removed, bet he sot through it well, and has EUCli physieue

and determination, that I hope he will now make a ceeplete

I heve had several talks with peacock, and thus have
eee:ed to get closer into touch with you than by any ether
means - execpt personal contact.

I think it is r pity you

heee not been over here this month, for it is more and more

(Cony of nandwritten letter)

uollLnd, Sept 21, 1922


My dear B.S.
T am writing this in Holland, where I have been off & on for 3 weeks.
And I do so
just to Dick up the broken threads which were left dangling a full month ago.
It was about that time, while I was still following the daily round in London,
thst I was s uddently, "nut on my back" by a bad throat, which for a week or 10
days made life miserable, & T only-Just escroed what used to be called evuinsey"!
However that was ju_t a stroke of bad-luch_which might have happened to anyone:
9 now that I have been leading a "vegetable" life for several weeks I am fit again
Ftmean to go back to London about Sent.27th.
I can tell you nothing about business: excest that I have seen Vissering this week
who told me about his correspondee with your bank: he is very disturbed about the
future & not vary well. indeed I guess he will have to go away again for a month
or two.

Nor can I tell You about young Ben.
T still have the idea (quite between you & me) that I s hall be in Washington next
month - but since I left LeInnoci nlans may have been altered.
This reminds me that
I have never heard wne +.her uov . Harding was reappointed for another term?

I gather from wnat i, translated from the Dutch naners that Austria is tottering
(but may continue to totter) that the internal state of Germany is worsening & may
soon bring dis orders while there is no nropDect of a real settlement of Re narrtions payments & that , nothing may happen in Asia Minor - with Greece R G Britain
on one side & Turkey 9- France on the other!!
Such is Pear-:

I hn-e You are well.
As ever
M. uormin


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of Olitgland

Sandpit, E.C. 2
31st October, 1922,

dear Stronq,

Although I have been in London for the past

nonth, I have hardly written to you because of the continuing
likelihood of my sailing to New York on the way to Washington.

There have already been three postponements and the position now
is that a Mission of some kind may leave at the end of November
or roundabout the New Year.

Pending the result of the General

Election, it is impossible for the present Cabinet to fix the
date or its composition;

they obviously lean to the later date

as it crives more time for then to find their feet.

As to the conposition of any such Mission,
Horne would still be willing to go (though no longer a Minister)
if invited to do so by the Government of the day;

but subject

to the results of the General 7lection, I should think it more
likely that the new Chancellor, Stanley Baldwin, would take his

Baldwin is a level-headed, somewhat blunt man with a

certain amount of charm and with a capacity for gettirgon with
his fellow men, especially in Parliamentary circles.

I should

say that even if he is not clever he has plenty of co neon sense.
The dissolution, though long-expected, came

rather suddenly like a thief in the ni7ht.

Perl-i-)s we mist




Page 5.

Benjamin Strong, Esq.

31st October,1922.

extent their business has lain in remote parts of the World and

especially South Arefical and partly because their postior in
London depends upon their interests in the New. York and

We have decided to support them for the

Valparaiso Houses.

conduct of their business until the end of 1923, by which time
we shall know exactly/they stand and what are their prospects;
meanwhile they are entirely good for their engagenents.
I take the opportunity to send you an
article by R.G.Hawtrey of the Treasury on the Genoa Resolutions
on Currency extracted from the Economic Journal of September.

Hawirey is extraordinarily clear and clever, but he seers to me
to treat his sublects as if they existed in a vacuum;


as we see more and more, Currency and Finance are continually
at the mercy of political and psychological and international
and incalculable influences.

Lastly, I acknowledge your confidential
letter of the 18th October received to-day.
no particular answer.

It seems to need

But if the conditions which you descr-lbe

as "something of a boom" are going to push your rate up, be sur
and give me early warning.

Apart from your conditions, I see

no reason to expect a change here, but I an aware that some of
your friends on Wall Street are already carrying Stocks or
borrowing money in London.
With warmest reR7ards,
st sincerely,

n Strong, Esq.

31. oct.1922


Bank of England

Dear Ben.

On Nov 9th (or possibly 16th) our plans will be
announced for the year beginning April 1923.
They are as follows:

Trotter ceases to be Depy. Govr. + becomes
an ordinary director. he wishes to attend to his
private business which is not doing well. Lubbock
becomes Depy. Govr: perhaps a student by nature
brewer;by trade: cCper, industrious, charming as
you will remember. But he will have to begin at
the bottom to learn in detail about "the market",
Stock Exchange, Foreign Exchanges + generally the
technical side: He is just about our age + seemed
to us the most suitable man among us who is available for the job.

I continue as Governor.

(+ my so doing may raise some criticism, as
it will be my fourth year + people prefer the Rotation: But how swop horses just now?)
Bless you.
[signed] MN-


J8ank of (it,Okine


8th November, 1922.
My dear Strong,

As you will see from Sir Reginald's
note, which I enclose, he is only too pleased to let


you see the

Menu to which you refer in your

letter of the 16th October.

I art sending it to you

frame and all under separate cover, instead of having
it photographed for you, beca,_,.se it ocurred to me

that the document itself night best serve your

Be sure and send it back - or you will get

me into trouble.

I have received your letter of the
25th October with the Newspaper cutting of Sir George
Paisn's speech.

I am surprised that even he should

show such ignorance of the facts regarding the gold;

but he is now being kept pretty busy as Parliamentary

Candidate in

opposition to the Prime Minister,

Mr.Bonar Law, which ray

teach him a few new facts.

With kindest regards,
Yours npjt sincerely,

Penjamin Strong, Esq.

From Rear Admiral Sir W. Reginald Hall,

K.C.M.G., C.B., M.P.,

3( Oa: ccirL
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E.C. 2

27th November, 1922

My dear Strong,

There are very few matters of interest which
give me occasion to write to you in continuation of my letter of
the 31st October, although I nave since received your letterscf
the 3rd and this moment of the 15th.

1. The results of tne General Election indicated
a more decided swing to the right than nad been anticipated even
by partisans of the Conservative Party; that is to say, the
Government of Mr.Bonar Law has a majority in Parliament of 70 or
80 over all the other Parties combined and in consequence there
is no reason why we should not have a stable Government for
several years, except for the fact that we live amongst
uncertainties of every kind.

This majority has been gained chiefly at the
expense of the two Liberal or Centre Parties, viz., the followers
of Mr.Lloyd George and Mr.Ascuith, whose numbers are practically
equal, and together somewhat exceed 110.

On the left the so-

called Labour Party nave about 140 seats (the total number of
seats being only 015 now that Southern Ireland is without
representation) and comprise a certain number of extremists, but
on the whole a resolute and probably useful Opposition.
The immediate differences between the



Benjamin Strong, Esq.

27th November, 1922

into Parliament and became a Minister) and is taking up a
commercial position.

Last week he was elected Vice-Chairman of

Baldwins, Ltd., a large steel concern of high standing, which
curiously enough was the business of the family
Chancellor belongs.

which the new

Certainly it was built up by the father and

grandfather of Stanley Baldwin who himself only left it to take
up a political career.

Horne will eventually become the

Chairman and so I expect the head of this concern and I should
think he is well-adapted for the position.

Before the War he

had a great deal to do with the Northern Trades Unions.


the War he was much concerned with general labour conditions and
in addition to his legal training he has since acquired a good
knowledge of economics and finance.

The Revenue has been coming in so well during the

past six or eight weeks that the Market has continually been
pinched for money and in spite of disbursements by the Government

including certain repayments on capital account, the floating
debt has not increased.

On the first of next month there will

be a week or two of ease in consequence of the payment by the
Government of large dividends., but I do not look for any real

change in conditions for some time to come.

There is a general

talk about improvement in trade but I fear the wish is rather
father to the thought, except for the fact that the Autumn months
always see large movements of grain and cotton and so forth.

My cable No.54, added to the information which

had already been sent, will have told you just about how the



27th November, 1922

Benjamin Strong, Esq.

As regards Rebuilding, plans are gradually
being elaborated in continuation of the general lines which
as you know have been agreed, and we are at this moment

taking steps to obtain an Act of Parliament to obviate any
difficulties which might otherwise arise over the use of the
graveyard, which belonged a couple of hundred years ago to
the Church of St.Christopher-le-Stocks.

I beg you to arrange your affairs so that you

spend some time in Washington while I am there.


I shall not be able to run about the country much nor would
it be wise for me to do so, but you might help me to keep in

touch with facts and sentiment in America in general and with
you yourself in particular.
With warmest regards,


st sincerely,



Benjamin Strong, Esq.

1. 30 0M





.1\ettio YA,

Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102