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SER E LE EGRAM Y LETI :R BLV. IGHT MESSAGE NITS IT LETTER NI TEL hese three symbols e check number of telegram. Others indicated by the after the check. NEWCOMBNCARLTON. PRESIDENT If none of these three symbols GE W. E. ATKINS. FIRST VICE-PRESIDENT appears after the check (number of words) this is a telegram. Otherwise its character is indicated by the symbol appearing after the check. receipt at destination as shown on all messages, is STANDARD TIME. OU R7 JAN 29 PM 0 41 TO GO SLOVi FOR APPRE7 I ATED USE OF DCFF D JV -a q UN A ivit *oh of Ompiaott Sohn, E.C. 2. 8th February, 1927. by dear Strong, We have now received the annual salvo of speeches which we have become accustomed to expect from the Chairmen of our "Big Five", but it is only necessary to send you the Reports of the two which deal with a monetary problem in which we are both interested. These I send you herewith. You will see that it is another case of thieves falling out and honest men coming into their own with you and me playing the part of the honest men! Believe me, Yours m s incerely, evort°"A Benjamin Strong, Esq. I It PERSONAL. ofitglad, Sondon, E.C. 2. 15th February, 1927. -7 3/7 7 - Ir dear Strong, After having looked at Europe from your side of the water, seeing as one does more easily the wood as a whole, it has been a little disappointing to come back and see the trees The whole position is uncertain and so clearly as one does here. perhaps halting, or so I judge it to be for two particular reasons: First, that we here are suffering from the after effects of the coal strike, which may be long or short to an extent which I cannot judge, and that the hopefulness natural to this time of year is dimmed by the situation in China. Secondly, that there is no decision in France and no prospect that I can see of action being taken- indeed, it looks as if the French were growing more disposed to wait until the basis of some German settlement has become clear before they decide how to deal with ratification and with their internal position. merely a guess: This, you will understand, is I have not heard the prospects so defined in any quarter. I writing to-day to Mr.Harrison as to a visit to your Bank by our Chief Cashier, Mr.Mahon. This is in line with what we both feel as to the need for continual and growing personal contact. I hope the date I have suggested will turn out to be suitable in every way. Benjamin Strong, Esq. IPPage 2. 15th February, 1927. Robert hindersley is sailing for New York by the boat that takes this letter and expects to stay there one or two weeks: his object is to make arrangements for the future as to the business of the New York House. As regards Poland, I am wondering what is the outcome of llonnet's proposed visit to you at Biltmore and of Laynarski's confabulations with the Bankers in New York. As the general question of Poland is often cropping up and particularly now that the relations between Poland and Germany seem to have worsened, I have told Mr.Harrison that it would be convenient if he would keep me generally informed. Our market situation is not as comfortable as it ought to be. Excluding some foolish speculation on a small scale in one or two directions, the Stock markets are dull. The dollar-sterling exchange is weaker than one would wish to see at this time of year and just permits the shipment of market gold to New York now that the freight has been slightly reduced. Money is rather too easy to make our 5; rate at all effective, and it would be difficult to make it effective with the general expectation of a reduction in your rate, for the maturity of a three months' bill falls long after the 1st April when easier conditions are traditionally to be expected. Please urge Phil to write me a couple of lines now and then about his father, for this is just what he promised to do. Page 3. Benjamin Strong, Esq. 15th February, 1927. And let me add that it was well worth a trip of 3,000 or do. 4,000 miles to spend those days with you at the Carpenter Cottage. With great tharucs and affection, Yours most sincerely, Benjamin Strong, Esq. r.0. I-449pe q.h(ec 6-ft A., (14 ft evy 411-4 ts4 ;Ael fek, UNWG--tAefetA0vul [C 0 P Y] Feb. 26,1927 PLAZA ATHENEE 25, Avenue Montaigne Paris 11111 My dear Ben, After 48 hours here (less two, to be precise) I am soon going on to Berlin + thence perhaps to Brusselles, depending on how much of a grind it is. Of course it (traveling + talking) does keep one on the stretch most of the time. I came away now because it will be more difficult to do so later (Lubbock, Trotter change, for instance) + because I am now pushed out of my own house (Flodge). I must have told you of the dangers which suddenly appeared in several places in the wiring, any one of which might have set the whole house on fire at any time. I shall not be able to occupy the house again till the middle or end of March. And on top of this Amy has collapsed: Several weeks in bed: many weeks rest + yet nothing definitely the matter: Very disappointing + troublesome for you know Amy is the hub of the Universe!! nothing less. Here things have of course greatly improved + yet are disappointing. All the internal things are better... indeed good... Taxes- Budget-short-debt-Circulationdevtseh- price-levels +c. Yet the two crowing acts (to which these others should be merely introductory) are not in sight. There is apparently no date + no plan for either ratification or stabilise. The present Parliament lasts till the middle of 1928 + it seems we are to wait for the next! Poincard is ready to do anything but take the plunge! So Europe + the world are to wait indefinitely, with the franc more or less pegged until Poincare'makes to act with a new parliament this one) or until he is pushed out... by cumulative uncertainty + disappointment + perhaps by some wobbling of the Exchange? What I can't get at is the real underlying reason for such delay: it can't simply be parliamentary opposition: nor the personal disgrace of "devaluing" the franc: nor lack of advice nor desire for permanent office on the part of Poincard. What is it? I cannot understand the Gauls. I suspect some undefined truth in what I wrote to you a week or so.. as a mere guess. I wish greatly to know what is happening to your pulse, + sleep + pins + breathing.. + not a word have I heard for 4 weeks! I wish also to know your general plans as soon as they begin to form themselves - for sping + summer - for your next move + for a later vacation. At home the continuing burden of the coal strike: the prospects of the Budgets (still rather uncertain) + the scale of expenditure (capital as well as current) make me uneasy... just as they seem to tickle the fancy of your friend W. Churchill! Added to this we in London are feeling a general malaise which springs, I suppose, from China + Moscow + is vague + undefined. On the other hand the N.Y. position + market seems wonderful. Goodbye, old man. Ask Phil to write a line. + be sure I am Yours [signed] MN PLAZA ATHENEE diva PARIS $5,,( oktita kevitc, ( &Aso 6n 4.42, JCIA4A, JexsA. 14L440. itta Tr4.:4,$ t k. teva-ituu AelWAtAkAk;, ittAtur 0#1 AcA) Iry cV CC.ctuci.,;"ocAlcakA47 ) (4944.A4t, ikktor.,1 tkaizf) . rkt dk6-40k, CtAki, mc. cdo ,A47c), (F.-KJ ga. 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Ut . /-:1 afro iAth n(ilAikk ftrbtt4021 WeraelAA-i Of 42, 4-1:fActtits 'AAA (tot itYA, ert kn.& - e. ert c`"`""'' tk-fthAakitA 6LeXuciuszdz, ketak I co,Ask fa ttJev, cot La ccik- (tAkAAtitv -1Z Itkxi vrtef, - St;ATev(rei ruakaAkszivvizvy eft-0-0-vv : Ftor (e.o.ettAit,2.1 thaekL24 Poft:.e00,; tt,,LA .t. kif4A atAA,,,i4 ay.Avext.kAal .1 A)k.,4 J rutacyvv:4 ex) vt(olk tocoGE, aNeetue.r4-c. . reAdtz-10 kA 3 --rweu.4 K.A.(44 (4D rttwa ,a_o soe lf% kckftivs pott14. ovatA _ckxte.4 hzdva coiAgv 411,30 tbs &AAA, (e,13 patc1412, Sotuts frr kA,Le-4> 4.4 fott"sApc,e _ 114 ,§Ivr4,,,----2.6.a,rn,n,y9r 64, year vte.vh fvuevei tiztA voe,e14e:rA Alitets e / ated lun&ti AliAVVI.". (9( PLAZA ATH eNtE Ac. ik12. CoLCAWAtt.) ; if (Cd'ai (44-4 CAfrote,"0 tr.ck,teCgt' cifet,s6 C 44 r, g-its)-u-r -41-06-1F-1,5 Ikt:f iveJ Lb CA_ eAk0 ) 4 utLrQ uni-3elv.kszA itu_et St4_4fe *Nal ck fattAiC iTtmc? viustLe ,Auat, wiz) ttANitAboy ,ze,,/10 getich C4. Kite NtAt A944 RA t CAL (4A) Sc As_ 0. isferatALtAs PARIS /144) Go-gi ,14,t . hunikak Cevuo. 'oned 6 p c-eZ ATKA 41-ce svuub 4 & a KJ- - idstAZ a,u,t., i (Q1 efru.A.4 I PERSONAL. And of englanti, Son C1011,E.C. 2. 12th March, 1927. My dear Ben, I was glad 6o have the cartoon which is enclosed in your letter of the 16th February because, apropos of yourself, someone had mentioned it to my Mother and I had promised to get her a copy. I was glad too to have your letter of the 15th, and whatever you may say about yourself I can judge from the number of letters you are ':a-iting that even if you are as depressed you are a deal more energetic than you were a couple of months ago! I take it as a good sign and so I may tell you do Schacht and I.oreau, both of whom happened to have heard from you a few days before I saw them. I am still waiting to hear something more or less definite about Poland, and if he has not sent me word by the time this reaches you, I hope you will give Harrison a reminder. Here the whole question of Poland seems to be entirely quiescent, and so it was, I believe, at the recent League meeting at Geneva. Generally speaking, 1927 is goin barren and disappointing year for Europe. to be a The plans vie had vaguely made or thought about a couple of years ago are receding towards the horizon. Stabilisation and reconstruction, which have PERSONAL IWO Page 2. 15th March, 1927. BenjamiA Strong, Esq. have been the vogue since the league first dealt with Austria, have for the time being passed out of fashion. In greater or less degree this is true as remrds Poland, Serbia, Greece, Roumania, Italy and France, and the effect on the Anti-Tariff Conference, planned more or leas deliberately by the League for this summer, will I fear be adverse: you cannot of course expect Anti-Tariff changes without exchange stability having been assured. And just as Paris sets the fashion for silk stockings and hats, so has she now set the fashion against stabilisation (and indeed ratification) and in favour of wait and see. This is the third time Lr-Poincare has seemed to hold Europe at bay - Cannes, Ruhr and now. If, therefore, we are to continue to enjoy the authority of M.Poincare, we must wait in patience for stabilisation for perhaps a year. This is the story, though told in less graphic and more impersonal fashion, that I heard at the Bank of France. I repeat it to you as such. M. Moreau also talked ,about varying the Agreement under which the Bank of France has to repay the Bank of England over the next few years. As far as I can see, it is not likely that anything will come of his proposal just at present. As to Berlin, you know as much as I do even whether McGarrah will be able to continue at the Reichsbank, as seems to be the hope of all his colleagues. As to Brussels, there PLiiSONAL. Page 3. Benjamin Strong, Esq. 15th March, 1927. there seems to be no fly in the ointment, except that in the shape of funds, they have too much ointment! The best to Phil and yourself and be sure to keep me informed of your thoughts and plans. Yours most sncerely, /7- 40444.-A-A/V- Benjamin Strong, Esq. P.S. I must have told you that I was evicted from Plodge on arrival from N.Y. - owing to faulty electric wiring - and shall hardly be able to live there again before next month. tanit of angland. PERSONAL 3ondon.E.c. 2. 14th March, 1927. My dear Strong, I now come to try and answer your personal letter of 18th February which concerns practically nothing but the amalgamation of our Note Issues. I will answer you frankly but vaguely because, though the question of principle seems settled, the means of carrying out that principle are in a state of flux. Thus the principle (of amalgamation) having been settled, we were expecting throughout last fall and winter that the method of amalgamation would have been decided by some sort of coLlinittee of enquiry to be set up last month for the purpose. This committee would have made recommendations as to the amount of the future fiduciary issue, as to the security for the enlarged issue, the division of profits and so forth. Personally, I el-pected that this committee of enquiry would have been appointed in just the same way as the Chamberlain Committee which considered the return to the Gold Standard in 1925: namely, a small committee appointed by the Chancellor of the Exchequer to advise the Government, the Cabinet and himself and empowered to take as much evidence as they might decide. Eventually the report of such a committee would be published but their hearings would not be public. I have now come to believe that although such a PERSONAL 410 Page 2. Benjamin Strong, Esq. 14th March, 1927. a committee of enquiry will eventually be appointed, we shall have to ::ant at least till the summer. The main reasons for this -postponement are the uncertainties with which we are confronted at the present time and which were not anticipated six months ago: to mention only two - China provides a disturbing and most uncertain future; and the Budget which is uncertain but can hardly fail to lead to much controversy inside and outside Parliament when the new Finance Bill comes to be discussed. As regards the advice which we at this Bank would give to such a committee of enquiry; we should urge that the principles of the Act of 1844 be maintained especially regard to the separation of the Issue and Banking Departments and a fixed maximum for the fiduciary issue: recommendations of thus we accept the the Cunliffe Committee and of the Chamberlain mold Standard Committee. Of course we shoald recommend an increase in the fiduciary issue commensurate with the Currency 7ote issue which is to be turned over to the Bank: perhaps we should recommend ghat such fiduciary issue be a decreasing total over a period of five or ten years. And ignoring a number of details which would fall to be discussed, I need only further say that we sho ld oppose in any hearings a return to the circulation of gold coin and should approve the Treasury retaining its .iar- powers to authorise a temporary excess issue of Notes in an emergency. So PERSONAL Page 3. Benjamin Strong, Esq. 14th March, 1927. 1411 So far as I can judge, the number and influence of those of the public who wish to depart from the principles of the 1844 Act are almost. negligible: they include one Banker (as you know) who is too assiduous in airing his views: certain professors who no longer convince or even tickle the public: doubtless a number of manufacturers and exporters in the North whose attitude is more understandable than reasonable, and others, mainly cranks, who think in solitude more than they mix and argue with others. Thus, though the whole subject is bound to be extremely controversial I believe that, given a continuation of normal conditions, the great mass of our people favour a continuation of the present principles - enlarged to such an extent as to amalgamate the .3ank and Currency Note Issues. I will not attempt to argue why we think this better than any scheme which would give some so-called 'element of elasticity to the note issue', It would take me hours to write a letter on the subject, but I send you a copy of the current Bankers Magazine which has a pertinent article on this subject. Nor, picking up the thread of your le-,;ter under reply, do I really believe that the principle upon which the future amalgamated note issue is to be conducted will really turn out greatly to affect the position of the Bank of England vis-a-vis the Joint Stock Banks. But this a,ain is a long story and I won't stop to argue it. If, PERSONAL Page 4. Benjamin Strong, Esq. 14th 1.7arch, 1927. If, on the above or other lines, you could give us any information, advice or material, you know better than I do how helpful it would be, or if in opposition you would express any opinions, they would recDive the greatest consideration if not as great a welcome! moment I remain Benjamin Strong, Esq. What more can I say? And so for the PERSONAL. 1 I PERSONAL flank of angland, Sondmm.2. 25th March, 1927. My dear Strong, There are one or two points in your personal letter of the 25th of last month which I have been meaning to pick up. For instance, paragraph 2: Nothing whatever is being done here to stop or impede the issue of Foreign Loans - except of course in the case of debtors with unsettled accounts, e.g., France and Serbia. I do not know why more Foreign Loans have not been issued during the last month or two, a fact which I regret. I believe the main reason to be that the class of Loan which has been sought is not up to the Bankers' standard in one way or another. Your paragraph 6: The sterling exchange has behaved in just the way we expected it to do: it started the year weaker than would be normal because of the after-effects of our Coal Strike: its improvement was impeded by China:but slowly the exchange rate is growing firmer: it should perhaps be only a question of weeks before the quotation begins to approach parity. I think it is true that the French Line cut or offered to cut freight rate on gold to New York. a shipment was made possible by this cut. "Y* ES.-s. el 44:4 ofec Indeed, I believe I believe also that the fo English and probably other Lines wouldieet this competition. I siva have not enquired minutely into this because I do not see what there is to be done: in other words, it is most doubtful if all Lines would combine PERSONAL 4 28th March, 1927. Benjamin Strong, Esq. Page 3. When writing to you on the 12th March, I said that in my discussions with Moreau he had included a vague scheme for varying the Agreement under which the Bank of :Prance has to repay the Bank of England over the next few years. Nothing came of his proposals which were tentative and did not seem clear enough to be attractive. But he is making fresh proposals and I hope we shall find a satisfactory way of dealing with this old War Credit once and for all. With kindest regards, Yours ery sincerely, Benjamin Strong, Esq. tajt4;ari it7.11,44 ILOtti Cp40 r Ito tOCIAOW10 1. OA" eAk44 24 "A" pr./ft.:At , 41k 44; -16 wt. Seuitt4 '( C04.' td 011- (10 VI t/ is,ssvg.44 C- '1) . it3.1/2,41 et._ cu.-4% 1 1;2.,4 AsL,AtAkk. Ar t740-4--0 cl" "t"27 Thorpe Lodge, Campden bill, W .8. ituL,Lh4 3104.i",...t C4 fy..k-,Ltc,A, .4 '44 egok (-Lt. C.3,4.k. 54triek 4 piNka:ak Ce-tts2- fts-f*Aftx_ lestfr: AJL;c-f... 7 0.6. LZs-pitc:J Cc a4i "L .aa1,re" 2 April 1927 THORPE LODGE, CAiPDIII HILL, W. 8 A portrait by Gari Meichers exhibited at the Century Club Dear Ben Could you throw any light on the above Exhibition and on the subject of any particular portrait which was there? Could you indicate the address where copies of any such portrait may be obtained -- either for a handful of silver or for a sweet smile? very serioust This is not a business letter but it is Seems you have neglected one of your duties? Needs your prompt attention. Ever yours, M. N. COPY 8. April 1927. .44 BANK OF ENGLAND My dear Ben There is a particular question about which I write this note -at the earliest possible moment. I do not know precisely on what lines our Committee will recom,land changes in form or personnel of our administration of the Bank. But it is clear that they will decide in favour of help from outside for dealing with outside matters, e.g., reconstruction, League, etc. We made a step in this direction last year through the arrangement with Siepmann -- which has been very successful. Now there seems every chance that we shall make another step to take effect after the summer. You know Niemeyer: he has an established position, great ability, and is aged about 44. he does not mean to stay much longer at the Treasury and could get a good job any day. So he is to come here, permamently, to do League work in particular and other work in general. I think he will be a great so far addition and I hope the idea will be carried out this year: I have not said anything nothing is definite and everything secret. to Harrison or indeed to any others except our inside friends, but oelieving this to be a step in the right direction, I wish you to know and approve it. With love (Signed) M. N. 4-11"4 '127 41:11111 of 6itiiand , k GAr* **A Cloft4. ZertkoLuAlf - ev4A-AuyerAlAtt v42 Attu -1 CALAI .7.44.1.4Z. tivetURJ U444441 404,4141 et..LA.4.41.1 toe s 444 act, et44) tit/Lek 4/4- ,1,444, 44 s( p oti-nt-rou4 kottota At'icivsevri : fut. 4/ &hake.: kai. /4-0*sklovu Zti rt. odt a *sec.(' At, out o itai 444A4. ino.41%. 6+4%4 o '1.14e46.41$06.4i sc 04 104 iL4.4 come...co get ov ttAfrA/ LAipy. cows, kt14..C, So 4t /WOK io 444 eNtify 111Z72 4TTadV 'CM taCTIZOAO aCa oil b;JTAT3 ribS 0:iTIG Jo 4,4Tx:iinox vao; Jo v371; aouzoA%-4:Indoc ToaTclzo uo rroboa:; r.boqq11,1 Emit 7,T 413u o 4/11:b2obuTo (G3N01(3) °:jrcay:, :tatn417 ::ocuml 417T; -Iroo!lb fl:.coaro oq xoT oAorrou 'OU uiuvruou cTlt Vtt3 01::coqqr170:%. oxtvl.m3To Ilmocoa canox of obujo nu wvliouT robq powlbadn uT v uompodn 1:biluod(10 tr,g 1 oq.T.T2A 'UV% u2Tc 71,1`1VIIIN COPY art April 17, 1927 THORPE, LODGE Campden Hill, W. 8. Dear old Ben, This is Easter Sunday and a good one too. I am at Chequers he has been tired lately and hasl'of alone with the Baldwins: course, many troubles on iris back and ought to take all the care of himself that is possible, for he is (I think) the great asset of this country. And, what's more, he always asks about youl I last wrote to you about Niemeyer and hope things will be fixed up with him in a few days. After he has taken up the job as a Comptroller (alongside of Harvey) I should like later to get our Rules altered and make them both into Directors as well as Officers: And so by degrees have half a aozen sucn Officers some or all of whom might gradually become Directors too so that we should have a group of who-e-time professionals on the Court. This is the line which I hope will be taken by the Committee you know about when they make a Report next month. But you know tae idea is only adopted slowly and perhaps unwillingly by some of our friends. I hope Miller will give a good Report about you when he goes over you these days. Then you can make some plans for summer and let me know them without delay. If you are not coming to Europe, I will come across the ocean and see you in June or July. Schacht is willing to do the same -- as we both told Harrison to tell you. I shall not write about Poland because Harrison knows all about it. He is a delightful companion and a great help to you, I am sure. But Poland is a most difficult problem from this end and touches so many wheels within wheels that it is a question about which I as an individual -- can only proceed with caution anu cannot speak with certainty. I am very pleased indeed that the Bank of France are now going to repay us entirely: it is almost more than I dared to hope when Moreau and I began to discuss the idea and it relieves us of the last serious lock-up of the war or post-war period. Your last letter speaks of the doings of some folks in Wash. and of your work nearing its end, but I don't see who is to take over your burden? Please tell me what you have in mind. I still see no early prospect of definite action in France and though (as in the case of Poland) some European questions are difficult, there are a good many waiting. And, after several talks with Monnet I am wondering if the Financial Committee of the League could not turn itself around somehow and join hands with some of your people and from a changed or wider °r`7 127 JIITHORPE LODGE CAMPDEN HILL. W.8. %.4,4 u eL.44 acil, pok, moo . 3 au..., Arecbuy om 4.41 s1A,400.441 4 cti.0 L st.tat 14.441. iLAtotti Apt, k4. 444 ch o(4,,04, ko fq, 444 a fa40 27 Ap44. kg.44z 640.4.t. tkf itxt. A. ULP(k0 (4-1 edt/t4 E. KtvG4 cat-Pc4 ONICeifOiL4 At; C0C44&rfruf 4,430,(A6 yo.! 644voglo.... crch oitAr 41 Ce Cj p4244 %IRO r moo. t4 N'aul.tizAw d .44k es lostik acid. 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(-Am/1%ot s cd-Ad"-:A"-t (t4L ka. &too ,cotfs%.0, oeouj, iccoui. a*. eetov 144 -& yon e-tvirt tth1/24% CYAl ;it c' 4, DO %UV COMIC WC AA "Iki liebeinhAiS Ill%0 c4 Alloz, eVad"ida. 3 4,44 ALIA, Pt.t 4t4.4.414, 4.40 ilk. lacass 0(04t etv,cfr sovect. evelk-t-tp Aeotemk. * 9 44.11471-0 ItZetdArtia - 8 dY etaal") 4,4% fa-LA.4A va you/ %I att., liwt dYle evtovb 14/14; AA ,O iNsocca cadv. "AA c*:. ti:to v1/44,2, r° 184C044444W a.itoky CA44 S /Lk * to & to-ka.4 464 S14/441 not ant 41:C4AX6 Gl, HILL. W. 8. "e.Aft.a 3 of. ce-itAradv..;04A1 . /Kt, rze.41.e_ J skAl, J'eg, .14.(At IP;k **Z- ateta.4 lo cfocerevor f.s24 70.444C.12) f1/4-ALLti,r% C4/' 14" 1,- Ivitteww fit4t, "'WV Crtr, 773m9(irw "Grr'41:^A# rlree-a0 olrYvp rnipli 1401 3v11/4"'w "drA Win) 17+9'TAO) °KV 1414 0 444 ,,stprils-voe, °ivy CIV*0, f 10:1VrOf p CrA, if Iv"ig ;ein %° rPV.141, 1 r ev-vin ierS3 9, ir "P. W'" 0w3 l irr/gt/t c Dr*, 011j& tm 4frmr-Aw .-Yrunv ri-rx 09 frervuor ov-a4v4rd. .ezn,9 -urvn.t4 ale Thlo ,frairox PERSONAL. Ranh of england, NO11d0I1, EX.2. 28th April, 1927. My dear Strong, I thank you for all the information in your personal letter of the 15th which has been submitted to those of my Colleagues who are acquainted with the contents of the letter to which you are replying. I should be glad to discuss with Dr.Stewart the whole question either in London at his convenience or in New York if I should be so lucky as to pay you a visit this summer. Assuming Dr.Stewart were willing and able to start in London by the 1st January next (and the sooner the better), I could be authorised to offer him in one form or another something between £5,000 and £10,000 a year for two, or perhaps three, years: agreement. or even longer if so arranged by mutual Before I attempt to define the amount and method of these payments, Dr.Stewart should consider his liability to taxation in one or perhaps both countries, and we might be able to make the payments in such way as would be least onerous to him. As to his prospects of contact with myself, any ansv.er must depend on our internal arrangements over the nex few PERSOI.AI. Page 2. 1 Benjamin Strong, Esq. 28th April, 1927. CON7IDENTIAL Benjamin Strong, Es q. 5th =Liy, 1927. Kis 1ajesty's Treasury,has contributed in large measure to an effective return to the gold standard. Believe me, dear " "r. Governor, Yours most faithfully, (S a.) M. NORMAN Strom*, Esq. PERSONAL PERSONAL Fault of (fivizuth 12th May, 1927. My dear Strong, This is a somewhat tardy acknowledgment of your welcome letter of the 28th April sending press clippings on the subject of our recent rate reduction. The form in which you present them is as pleasing as the act is kind. Believe me, AG I jamin Strong, Esa. 1 6,1 incerely, Yours Ik'A-t1,,,,,(1 0110."4% COPY Sunday, 11/kORPE LODGE May 22, 1927 Campden Hill, W. 8 Dear Ben, I have not heard much of you these last days. I guess because you have been in Washington for the meeting. Three weeks ago, you wrote and took me to task for keeping Lubbock out of the Polish business and other such discussions. I don't think this complaint against me is well-founded (less so perhaps today than in the past). Lubbock has much work of his own to do and cannot take an active part in all I try to do as well as keep up with his own work. In principle, he knows about Poland -- in detail he does not: he It is deliberately avoids it and leaves Siepmann to study the whole matter. Lubbock's choice -- not mine. But it is true all the same that there are some current matters (such as Poland) with which Lubbock could not make himself familiar in detail at present, and which should be left to Siepmann, Harvey, Niemeyer, and Cecil Lubbock himself takes this view. I hope you do. 1. I am most anxious to know your summer plans. By the beginning of August I must be back in London and Lubbock will be going away. During June and July I am at your service if you will only let me know your wishes by cable, but the time is near when I must make my own plans, either for America or Europe. 2. I am now settled again at Plodge but Amy is still away and not well 3. enough to come back. A breakdown is a mysterious illness -- difficult to explain and still more difficult to get rid of. I wish I knew what was happening in Paris: the foreigner, perhaps the speculator, has taken charge of the franc and I rather doubt if Moreau can withstand him. No country yet has been able to peg the Exchange over a long period without stabilisation, and I wonder if France is an exception? The dam bursts either at the top or at the bottom. Meanwhile Moreau, in trying to save himself, is playing havoc in London. First devisen (to frighten but continued the foreigner) to buy at he hisrefused fixed rates to sell --with the resu demand for dollars fell on the London market alone and the doll suffered down to gold export and by the market (just when we we nicely). Secondly (again to frighten the foreigner) Moreau has earmark gold here with part of his sterling balances .- with th market is squeezed and that our gold reserves are diminished an inconvenienced if he continues (for he has huge balances in Lon secret and upsetting. His demand for gold is capricious; quite rates of exchange and at present as difficult to explain as to tive market. Moreover, the offending foreigners are not Britis and etc. Yet all the trouble falls on London: That it is to Once the speculators believed that Moreayii market in Europe. will give him no mercy -- none at all.. 4. I do not write about Poland because I know nothing si in Paris and here and he can tell you all. I was surprised tha to do with it, except to exhort others. Meanwhile there seems details of Harrison's scheme. Perhaps Kindersley will go along other private Bankers -- that seems to be the last idea. 5. Schacht has been having his own troubles much controversy There is, of course, to Dawes and reparations on one side and Central Ba - 2is- winning. Of course, the future of the League IS d 7. problems to be solved -- and I agree with Monnet an easily be solved by personal and continuous help f I wish you luck with McG. an America or Europ e). will be smoked out. 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W.8. yet,da - cea-td(gA4 Cia 143-;4t )14-0-niwt-e- Aca iciLLAA4% (0 (sal CitiLiAj kA4 cm. ii)e-A-C;b 444 lot kt, '14.0%244 i(cogitkew 10,4;At;v1 Nutite- og4c, nIA,teg,, Co tak(b-ttelkkie ,t4 /Mr iNA.45 ItASLA o ofA ; M Io 2a4.0e41 4AAAIGAZdt_ Otuvag, i 1.1 t aActil (e,t4 a v.JKij, (A-ftgi o w Butt. s-eAst, oicr t(sLf 94CCAA-Z/t $91---3(e 6e, se_6.rta ittArrtifLek 3 eC, 5oe_Area 44, G&W 21t01-(04t e;10%, X9M-TA4 Al 0a4uA (A) Ck ii(a4 Akaii Cf,k2.-1) /PUNt 6y 11-0N.00 nit..C./ yo K a CV71441A4.04.0 6110 ( (04 VA anA-1CceC, WtCf. .1. t elk-G) keitte, sue. c6)~4c,i tovt. to.;L 4t, 8-m494632 0 viki w 4 ccaztatt. oc,69uti waLta,k,2/4, (4,44stAls 74911-4 rs-LuA/ Aluat, vsNI PERSONAL. Bull of anglad, jondow.2. 31st May, 1927. my dear Ben, 3 During the last few days I have received your personal letters of the 16th and 18th of this month telling me of your talks with Dr.Stewart. I gather that owing to your kindness and helpfulness as a go-between, it is now open for me to write direct and tell Dr.Stewart of our ideas. This I will do. I shall of course expect to see Dr.Stewart on your side of the water and thus to answer any queries or give any explanations he may need: this will be much more satisfactory than a long corres- pondence with him. I may as well take this opportunity to acknow- ledge your separate letter of the 18th May, enclosing a copy of your letter to Dr.Schacht. By way of answer, I can only say that I intend to make it my business to sail hence during the second half of next month, to be at your disposal off an on for the greater part of July so as to return to London not later than the 1st August. You must make some decent arrangements about a place to which we can withdraw: it will never do to be stewing in New York with newspapers and reporters and visitors as well as probably a heat wave! Incidentally, I notice your remark in this letter PERSONAL. Page 2. Benjamin Strong, Esq. 31st May, 1927. PERSONAL. Cant; of 6ittlanib 74E9101M, E.0 . 2 7th June, 1927. 4 dear Ben, In continuation of my letter of the 31st May, I write to send you by the same mail a copy of the letter which I have written to Dr.Stewart. Your name of course is taken in vain, for which, as well as for your help, many thanks. Yours most sinoere4, ;Al' 1ovs10tovt Benjamin Strong, Esq. F.T1111501 WESTERN CLASS OE SERVICE Tl ac is a full-rate or Cable- s its char- SYMBOLS UNION indicated by a symbol in the check or in the address. NEWCOMB CARLTON: PRESIDENT BLUE Day Letter NITE Night Message LCO Night Letter Deferred CLT Cable Letter NL WLT Week End Letter C. WILLEVER. FIRST VICE -PRESIDENT The filing time as shown in the date line on full-rate tdegrams and day letters, and the time of receipt at destination as shown on all messages, is STANDARD TIME. RECEIVED AT 40 BROAD STREET, (CENTRAL CABLE OFFICE,) NEW YORK, N. Y. AtrgAN's C305C:2i;- PAS 15 RADIO SS BERENGAR IA- RCNEV1YORK JUL 20 1927 GOVERNOR STR;;NG 33 LIBERTY ST NEWYORK (NY) GOODBYE AND THANKS AND TAKE THINGS EASY MONTAGU NORMAN 25 July 1927 On Board the Cunard R. M. S. ItBerengaria." Dear old lien What about it? Where does it all lead ana what can we do? I always come away with the same thoughts -- flies in a web: can lift one (but the personal only one) foot clear: hard work to keep steady: touch largely usurped by the mechanics of the web: and so on. I enjoy being with you, but I am not, quite happy about you because I can't see the light at the end of the tunnel and am not sure that you are to be trusted to look after yourself. I enjoy your lectures anu perhaps I look forward to a time when you will live, -- far from Washington, in a land flowing with red wine, -- near to Mother Earth. For the present take life as easy as ever you can. It is hard Drop me a line now and again and to renew and can't be replaced. take my greet thanks for all things. Yours affectionately, (Signed) M. N. (Norman) (0,4 .0,i,7, CUNARD R.M-S. BERENGARIAT oet_ tev, 4,,Ayct,t- 65a..At krrouvca, oo '15C- 7 akt 6-4LA Ate, to f-5iL4 gitALQ, 11A Cf SR?. Cd44 0 -St.4-0GA4- e:f a awe ekcub,)10, eilt12, Lek__ cook kaJzfs c',4 4, e sitAcL oiA4. 714.9ut `42-e4LAAA.c, (-4 tiAt4ttgi et"k tt-4314 S ova, AtAset4A# GLA- -04.1 et) .4,kui c1(AsIAZ ke4LA' ft/CA.54 FAAA, rYtz,L.4.- (ck-e.gL. qt) A PRIVATE & COTFIDENTIAL and AutEust, 1927. Dear "r.Goernor, I write formally to acknowledge the receipt of your letter of the lath ultimo relative to the employment at interert of a portion of our balance. In accordance with the discussion which took place on the 12th idem between us and "r. Jackson ''.Reynolds, I shall feel oblied if you will piece the su.- of /10 million on deposit at call with the First 7ationa1 Bank of the City of row Yor3.. In order to obtain the necessery funds please eiscount or sell sufficient United States Treasury Certificates eue 15th September next. As tegreee with you. I enclose, in original and duplicate, a letter addressee to the First 1:ational rank which I trust will be setisfactory; I lenve you to make all arvene.ements on our behalf from time to time as to the rate of interest which the money will carry, withdrawals of sums deposited, or any other matter which may arise in this connection. Believe me, dear ''r. Governor, Yours most faithfully, (Sd.(1) Benjamin Strong. ,Esq. M.NORMkN. S.S.ZEVIATHAN - 6th August, 1927. 6th August, 1927. lysdear Strong, At the hand of lass Holmes, to whom will you please convoy my thanks, I have received a book of press clippings regarding our recent meeting in York which is the giit of the Federal Reserve Bank to the Bank of England. I have previously expressed to you my aamiration of tile pler_sing way in which clippings are presented by your Institution, and it only remains for me to say that we are grateful to you for your renewed kindness on this occasion. Believe me, Yours sincerely, kU'iCliv;z7D) Benjamin Strong, Esq. M. NORMAN PERSONAL. Audi of 61,0111 f1, jondmix.2. filth August, 1927. my dear Ben, Although kindly, Lubbock is so hard a taskmaster that he has not yet allowed me to write to you; but at least he assures me that he himself has written to explain this and to make my excuses. So if there is any blame lay it on his shoulders. 2. Your handling of your rate reduction was masterly and for the time being has helped us more than I should have expected, especially along with the easing in your call money rate. I cannot make any useful prophesy as to conditions during later months: the position here will depend,as you know, on the inevitable trend due to crop movements as well as on Berlin and to a lesser extent on Amsterdam. Schacht's position does not yet seem to have settled down and Vissering has very little to spare on the basis of his present rate. If I can give you a useful forecast I shall of course do so, but I feel comfortable for the next six weeks and in any event grateful for your co-operation and help. 3. I gave you the best answer possible as to the proposed issue of a Greek Loan after the September meeting of the League. So far as I am able, I do not intend that any part of the PERSONAL. Benjamin Strong, Esq. Fage 2. 11th August, 1927. the Loan shall be issued here unless an issue in New York is made simultaneously, but there are many ifs. For instance, the members of the League Committee take no responsibility for the issue of a Loan but only approve its conditions apart from price, and, having done so, then wish to see it out of the way. And it is said, with what truth I know not, that there is an especial willingness in Sweden to help with this Loan in connection with the Greek match monopoly, in which case the lenders though nominally Swedish would actually be mostly international and well supplied with funds. It is also said that in addition to such usual lenders as Holland and Switzerland, the French (for some obscure reason) are also willing to be lenders to the Greeks. But you can rely on me to try and induce London only to act with New York and to get others to press the Greeks to come to a settlement in Viashington. Let me hear what happens there. 4. As regards the Bank of France, 1,:oreau is away but Siepmann has paid a very satisfactory visit to Rist in Paris. It would seem that now (as all along seemed possible) they are persuaded of the likelihood of their sterling holdings running down; they are not taking, and do not intend to take, any more gold, and apparently they do not wish to exchange sterling for dollars because the total of the former is pretty well stationary. Nevertheless I arl offering, as a sign of goodwill PERSONAL Benjamin Strong, Esq. Page 3. llth August, 1927. goodwill and in the interests of both of us, to give the Bank of France $25,000,000 or 030,000,000 for sterling if they wish it. 5. Salter wrote to me a few days ago that he would arrange to go to New York about the 1st October in order to discuss American membership of the Financial Committee. I daresay he has written direct to you as well as to Dwight Morrow. 6. I hope we see eye to eye about your sterling The t12,000,000 more or less that you have here now assets. were acquired at the time of Moreau's difficulties and that fact has been very useful indeed to us both. But I did not think the figure should be looked upon as rigid or permanent: if we get near to Queer Street I may ask you to increase it and therefore when the reverse takes place I should like to see you reduce it. Thus, during this perhaps spasmodic improvement in the Exchange (due of course to your rate reduction) I should like to see a reduction either by your acquiring moderate amounts of gold in the Market here or selling sterling at your rate. And this is separate from the other reason which might induce you to acquire gold in the Market, viz., that when the Exchange is distinctly in your favour, the gold is likely otherwise PERSONAL Page 4. Benjamin Strong, Esq. 11th August, 1927. 410 otherwise to go to New York and so into the mousetrap. I trust both of these reasons are clear and will commend themselves to you. Believe me, Yours st sincerely, 0/144-41LAte I''....... Benjamin Strong, Esq. PERSONAL. Ault of 0111g land. Jonclon,E.c. 2. 13th A list, 1927. Ey dear Ben, When I was writing to you on the 11th, I forgot to mention a point arising from a conversation I had with M. Franck some days ago. You know he is sailing for New York at the end of the month, thence going to the Nest and coming back to see you towards the end of September. In the banking way there is nothing particular E. Franck wishes to do but he asked me how he could best find out the prospects and methods of increasing the sales in 1:ew York of Belgian luxury goods, viz., perfumes, silks, lace, leather, and all the rest. I advised him to ask you, thinking that you could find out an answer for him through Mr.Reyburn. you this warning. Believe me, Yours mbst sincerely, eluitaAA Benjamin Strong, Esq. So I just give 20 Aug. 1927 ork THORPE BODGE Campden Hill, N. 8. My dear Ben I cane t think how your arranaelent with Jere Smith was posit seemed so impossible when I came away (at least sible now: before Sept.). There is no question he will be very welcome to the Committee, but I do not know the steps towards an invitation. I am finding out. Nothing has been done about our internal arrangements since I cane back. There is some sort of a draft Report which is far from pleasing everybody and disappoints some. But no progress can be made at holiday times like these and so we must wait for a month. I am now waiting to hear from Dr. Stewart as to whether he will be able to come to us for some weeks in the fall -- as a visitor. This depends on his kr. Case who should have been home from Europe two weeks ago. Since the reduction in your rate, our position has been greatly improved and our control quite satisfactory. This latter is partly due to the market's uncertainties about the autumn. There is a Government maturity on Oct. 1st of some £80 million which will be difficult to On the other hand, deal with except through the short money market. one cannot measure the effects of the regular fall payments on the Exchanges. But as people seem alive to the dangers, perhaps preparations have been made in advance. Lubbock is away for a month longer and Niemeyer does not come to us till about Sept. 15. I have been trying to keep you regularly posted by cable and I hope you feel I have succeeded. Letters get so much out of date that I am more anu more inclined to rely on cables to keep you in touch. These shipments of gold from Cape Town to Buenos Aires may become so large as quite to affect our position. They are mostly clue, of course, to large Argentine crops, largely sold to Europe. The the more he will lean upon us more gold is thus drawn from(aaTt for his reserves and the less fresh gold will come to London for a period. Doreau has been away all this month, and I cannot go to Paris while Lubbock is away. But, as you know, I have made the best arrangement I could with B. of France on the lines you advised. It seemed to us that when the conversion of £ into 1, was actually offered, Rist was less anxious to agree to it tan earlier. But that is arranged and to the advantage of both. Please tell me how you are and where you are living and whether Phil is with you. The last letter from you said nothing about all this. Its questions have all been answered in one way or another. Amy is back at Plodge but not yet fit for doing all she used to do: Still she is improving. My love to you, (Signed) M. N. (Norman) 24, LODGE AMPDEN HILL. 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S S s. s laJESTIC 23/8/27 22nd August, lc.)27. dear Strong, Your letter of the '.th Lugast and the photos Lientionod therein have now arrived and I send my best thanks to you for both, The ease contlinin,7 the photos .:as considerably damaced by water which had unfortunatoly reached the edE7o o2 the prints. endeavour is boin An made to repair the miochiof (which is probably not serious) and I hope to be able to pace on the photos in accordance with your wishes. Believe me, Yours sineoroly, (SIGNED) M. NORMAN. Benjamin Stronl, Esq. °E4kir \ ar_ 23rd 19Z7. ./Zr thloh dear you Ctrons's The cow loa h.rkve cezat aeoozd12-18. to we had of 'Stabillzatlal, Itibbook and rlyaelf youzproale boen v;atehInc, azid arzlved boat than. ka 04 beh alf tor to-v. d of ua both Zellevo we Youra alneeely, (SIGNED) Zcnjarlin Stronz, Eaq. M. NORMAN. 11 ...v. um. ....1 J.. "14311 ITn.ur, ,+ 1007 0. o' 7.1.e%r .1.:r.Govalmors h:iva reoefivea. your lotto:: of c;11.-,11 ci:c1s.c.31.trea at. otirlte.1.. o to t'llo ou ::71.1%-ct with bcon Concluoted a:9 I an grot1 intiobtd. to ,;:oz1 yca ..1.:.vo rade 0.7.1 our dear LI...Cover:1°r* Belleve Youra mat , Esq. . . o0\11 PERS ONAL. And of o-'71 Jondon.E.c. 2. 27th August, 1 ':;L7. 1,:y dear Ben, I am glad to be warned that Winston is likely to pay me a call: I like him and shall be pleased to see him, the more so if he has been improving the attitude of the City Bank and Charley Mitchell towards you. This raises a question about which I am enquiring by cable to-day. If it is true that Speyers and the National City Bank have arranged to handle Greek business jointly, what is to be their attitude towards the League Loan which it is proposed to issue in the Autumn: It must have been Winston who advised Washington to prevent the issue of Loans to countries who had not settled their debts with the U.S. and presumably he advised the Bankers to listen to Washington. Is he now advising Charley Mitchell to hold off from this Greek issue and making Jimmy Speyer do the same':' Rather a queer predicament; therefore your personal note of the 16th August is the more helpful. Yours mosj sincerely, alerVIAIL/10% Benjamin Strong, Esq. , PERSONAL. Both of &gland, joodtmEc2. 29th liugust, 1927. y dear Strong, Cis Lubbock from his holiday retreat has sent me your letter of the 16th August to deal with. He had evidently written to you to explain the burdens he insisted on laying upon me so that he himself could go unburdened for a vacation! 2. I have been cabling so fully as to the Exchange position that I can say no more about it except that the news of the opening of the Conversion Office (i.e., free gold export) leaves me uncertain as to its probable effect on the Argentine Exchange and on the Argentine demand for gold. It is true that our position may be tender, chiefly because the French skimmed everything off the Market some three months ago: should now have been in a strong position. otherwise we As it is, things are a deal better than a few weeks ago they seemed likely to be. 3. I am glad you are in touch with the Common- wealth Bank people, and of course a fundamental reason for my cabling to you on the 5th instant was that you should link up with them before they linked up with anyone else. I did not at that time know that Mr.Collins was to join the other two in New York: I know Collins and think he can be relied on to be helpful - the other two I don't know. 4. Of *A PERSONAL. Inh of 6111and. 2nd September, 1927. My dear Strong, Referring to my letter of the 29th of last month, I enclose a pro forma statement as to freight charges, &c., from Australia to San Francisco and to London, in order that you may have the figures before you and possibly check them with Mr.11arrison. At the same time I may as well enclose a note as to the dollar-sterling gold points. I shall be much obliged if Er.Harrison will kindly check these particulars and inform me if he is in agreement. 2. I know he has all the figures in his file. Mr.77inston called here on the 29th August but as he was following Charley Mitchell to Scotland that day we did not have much time together. the end of the month. I expect to see him again towards Meanwhile he confirms what I told you - that the City Bank have agreed in principle to join Speyers in handling any Greek Loan that may be authorised by the League, but that neither of them would move until the Greeks had reached a settlement at Washington. Yours mo l Benjamin Strong, Esq. (f sincerely, 0/11mal4A , S 5t:). '...;eptenber, if dear Bea, Anon:: the variouc ".7ol-:e2n cues tions have alseltssoci fron tirae to tirao, I may have raentionc1 to you the east: of :or.vay: or aii I nay v.thich w :iot, T caiot r :71b r Lut r.c..; this aucstion. (after icri seems within thc,N lact wee:: or t-c:o to bo toiii; up, I a:a senednc you a 2.70:.lorazldur i. o:2. t:1C off ar.ft On :201' S1.1.10 C Ot ;7)" ) iojE1fl 110,3 tt an for your Daricular uce. Yourc most (CieNzo) Denjarain Ctronc, Esc. M. NORA/M.1'i. COPY S PRIVATE NORWAY For some years past we have been in touch with the Norges Bank, and in June 1927 the President wrote that he aid not look for any immediate return to gold parity, but that the moment was approaching when preparations must be considered. "Gne of the first steps in this direction will be to secure a credit abroad ... During the last year or two we have had numerous offers of stabilisation credits from foreign private banks and on quite acceptable terms.but, so far, we have declined to discuss the matter In the course of our preliminary ... discussions within the Bank, we have fixed upon an amount of some £6 millions". Last month Mr.Siepmann went to Oslo by arrangement to visit the Norges Bank. (1) He ascertained that: - Although exchange is now within 2 or 3 per cent. of prewar parity, the policy of the Norges Bank is still to go slow. (2) The President would prefer to stabilise de facto in the course of the next year or so, but to postpone de jure stabilisation until experience has shown that prewar parity can be successfully held. (3) Though general elections are pending, and the Norges Bank is a parliamentary bank, no change need be feared in the policy or Directorate. (4) No legislation is required in order to reestablish convertibility of notes for gold. is to repeal a Royal Decree. All that need be done l'aIVATE 111 (5) The question of a coin or bullion standard has not yet been considered: but the circulation of gold coin was very small even before the war and the Norges Bank is more likely to diminish than to increase its gold reserves in course of time. Economic adjustments to the improved exchange appear to be proceeding normally, though prices are still very high and wage reductions have been delayed. monetary situation well in hand. The Norges Bank seem to have the Foreign balances with private banks in Norway have been large but are now probably not dangerously high. Public finance is in fairly goon order: the weak spot seems to be local finance, especially as it affects the district banks. My general advice, for which I was asked, has been: (a) not to delay over long, (b) not to wait at de facto but pass straight to de jure stabilisation, (c) to avoid the expense of needless credits. This advice, especially on the last point, will not be very palatable to the President. He is being offered overdrafts by private foreign banks but would prefer to deal with Central Bankers, if he could do so on the same terms. He admits that the suggested £6 millions are for ornament rather than for use and I hope he will reduce his requirements to a manageable figure. 5th September, 1927. PERSOrAL. PERSONAL. 11/ Page 3. Benjamin Strong, Esq. 6th September, 1927. I have been giving you all the news I can think of so this is the end for to-day, and I am, Yours mo sincerely, On't-444. Benjamin Strong, Esq. PERSONAL. ;lank of 61011(1, jOndMI,E.C.2 10th September, 1927. ry dear Ben, As soon as your letter of the 31st August arrived, I telegraphed to Salter that you wished him to be careful as to the character of the Publicity about Jeremiah Smith's I also wrote to him the same day about your other appointment: suggestions and hopes in this connection. As yet there is no answer from Salter but it is more likely he will communicate direct with you than through me. 2. about Algeciras. There is just one point we must not forget I gather you have written to Moreau, Schacht, Vissering and Bachmann: that makes four or with us two six. Some of them don't speak our lingo - that needs an adeouate companion. I, for instance, would propose to bring Siepmann. But you cannot hope to collect six or eight fellows at Algeciras from all parts of Europe and from America without limelight and publicity. The reporters are certain to find out and will be stopping in the same hotel, and there will be no sort of means of escape in a public place of that kind as there would be in TTew Yar;.1c or elsewhere. Now I am all for meeting at Algeciras, but don't forget the danger and trouble of publicity especially if the numbers are increased. Yours Benjamin Strong, Esq. sincerely, JI1M101.1040% Fr, MISC. ISIS 2SM 8-17 FEDERAL YE SANK OF NEW YORK TIMIE INTEROFFICE ROUTE SLIP A M. OATS T0 DEPARTMENT DIVISION SECTION RE,MAR KS 7t .164 4A_A4.4-4-P 4_4, a t<4:z-4. FROM c; d_c ^'-c 4' A /ttYtu_g DEPARTMENT DIVISION SECTION M. 111. USE THIS FORM INSTEAD OF OFFICE ENVELOPE WHEN POSSISLE. TO INSURE PRONP`mr AND ACCURATE DELIVERY ALL COMMUNICATIONS SHOULD SE DISTINCTLY PERSONAL. 13 an I t or Citiland, Jondmac.2. 13th September, 1927. My dear Strong, A few days ago I received your personal letter of the 30th August covering another and longer personal letter about the article by Mr.Snowden which had appeared in the Mr.Snowden is now living 'Financial Times' of the 23rd August. in the country and from what I know of his movements is not likely to be in London yet awhile. And so after cogitating over your letters I decided that the best thing to do was to send your longer letter straight to him in the country along with the Press clipping to which your letter referred. what sort of a fellow you are; I wrote too, saying that you wanted to put him right as to the policy of the Reserve Banks; and asking him to read your letter at his leisure and for his own information. I hope this will produce the result you desire, and anyway I think it was almoiltithe only way now to deal with the matter. All the same I am not sure that you have judged Snowden's real attitude quite rightly: you may be making a mountain out of a molehill, for when I read the article in the 'Financial Times' I did not judge its intention or effect to be serious. It has raised no comment or discussion here. You must remember the position of the 'Financial Times' and of Snowden. PERSONAL Benjamin Strong, Esq. Page 2. Snowden. 13th September, 1927. He, I should guess, was commissioned to write an article on a chosen subject suitable for that particular newspaper. Now Snowden, though he is a serious man and an ex- Chancellor, is no banking expert: he is a poor man and finds the butter for his bread by writing articles here and there. When offered a good fee for a newspaper article, he has to make that article sufficiently irritating or intriguing for the particular paper and the 'Financial Times' (a second class sheet which prides itself on irritation and sore spots and tail twisting) would not have been content with obvious milk and water. In other words, the newspaper paid the piper and called the tune: the piper played the required tune, within limits, but in such a way I think that he could maintain vis-a-vis a critic or his conscience that he was raising questions rather than making complaints and that for remedy he relied on co-operation. Of course, it goes to show that politicians should not also be journalists. But taking things as they are, a politician such as Snowden need not be a bad or unintelligent man because being a journalist he wants some butter on his bread. So I hope very much to set your mind at rest sooner or later, and meanwhile Believe me, Yours very sincerely, AA/64144tAt Benjamin Strong, Esq. ,&-/e4 irrAf4 e g cre 13th Soptombor, 192?. .71y dear 3trolz, ';() have low.; boon on tho lookout for an opportunity to return ;four kindness in sendinc, us from time to tiro nowspaper clippin:Ts on subjects of interest. An opportunity has now occurred in connection with tho Chica,170 Rato controversy and, mach thoun I ro,--ret the cause, I aai none the loss 31ad to be ablo to be of sarvice to you by sendin: a number of clippings concornin7 the affair. As a counter irritant I send also a clippinc`, headed 'Blair v Lorgan', miz7ht amuse you. Believo me, Yours oincorely, Benjamin T6ron7, ::sq. likCopy of a hand,;ritten letter) Sept. 18, 1927 Thorpe Lodge, Campden Hill, W. 8. My dear Ben. Niemeyer has been with us for a couple of days (which you know marks a real change) T says everything went fine about Jere Smith. You will not find any bad reaction from Geneva. Salter it tied up there for 2 or 3 weeks + then comes to London for will try + fix his coming later to N.Y.-but it depends on his free time. a couple of daya: I am still wondering whqt Dr. Stewart 4111 be able to 4th aboyt this fall: you sent me a message from him + I have since written him, but it looks now as if we would not see him here till Jan.lst That of course is when he will really be free. Kindersley is in Brazil + making a deal of trouble by promising Credits + discussing Schemes for valorising coffee- Certainly more than we want to carry + probably poor policy. But his is a difficult firm to deal with +only seem to look on business from just one angle. Partly because of his absence (for another month() our internal plans are going slow. But it is certain that in a few weeks there will be a Report signed with seuv:ral recommendations to which most of'us'(your pals) will be wholly opposed. I dont know what will happen then. Its not a question that turns round my position for all seem 1,o want me to continue for a year or 2 years. Its a question of later administration rotation + all the points you have heard discussed. Peacock is going to Canada early in Octr. + will likely pass through N.Y. later: you shd. make a point of seeing him. McKenna is going at the same time as they are both Directors of the Can.Pac.- a nice paid!' heaven arm in arm with hell? McKenna is always chasing the lime-light + alwaysmaking things difficult forpe. he's a bad man. I had an idea that Cupid was shooting arrows at Phil + am glad this usual + welcome complaintts developing! Glad for him + her: ;but it will leave you - more alone than ever when he comes to marry. We (not you alone) must consider carefully what line of life you are going to choose. A squabble Seems to have sprung up between the Board + the Chicago R.Bank about their rate reduct1on.there are frequent allusions to it in our papers out I do not 'understand just what has happened. The fact is unfortunate because it has vather distrubd your rate plans which had been working out so v:very well + because it looks as if Crissinger had resigned in consequence. Lubbock is now coming back r,.fter his vacation + the rest of our party will follow him soon. Siepmann is in Paris 'just to keep toul. Our refunding is not easy but ;is making progress: of ro;rse Churchill(being hfself) cannot ever make such operations easy! With many thoughts + much affection I am MN Perhaps I have been sending you too ;many press cuttings + articles from the Bank?? Blame a renewed machine - not me! .Sept (S, tirp oakTHORPE LODGE, oitii,k.a.g< MPDEN HILL. 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Jeie.fantgov& ScArcLAR, .. r4. 43-4 . 9- JUKAA. 4 144.. 12c6,btivroAtatft4 CvskA (34(2) 41;IC s(L- 4Teiettii .v.:40t) s7.A.4.,;.y 40.4. eL mot S45-44, ,..k., 11,4, t 14 . 91's (p4Alt; c9( kt.4 CatlAzAvr-e, (OA% 4 ikt4s4A) 0444- ove-r-oLAt fax444.4 adtt, Asziu c..0, Sq0104etbet 94c4424 fiA-->i4, to 6LAL uycium-An 4,64, s4t-"Liteitiz. kto CL 4, ,uctoof nt4,51, 4.4:Lht, NOT-1)4,eke.04 k41 - C441 A5 4.44 4%2_, too 61- 41(VtOiLs.v% CSS A-LK. . vo6tA43 4AA/ lutv-;644 Cartigtuto 6&.c VAX ehtle a.)414ricryt. , rot:w(3 -let& ka ci Acuva 3.1; cc.,44 t&L.fi 5k;e(4462-) rea-teik, 3, CLAct eL, avagrvw:. Oeer 0, OD E, AMPDEN HILL. W.8. HORPE 011-Ci<L4A41/4.0. %0 jotAA ZIA.4iC4b Oka kztArcitt awl p Cl/VZ4 cLa.4e441/ 94:cA.A. Lwt fv%c SAda,L, ait,4,444, Actk epa_ PAZ o ct4ev sCa 41..a oltA44,rittab! l itaArfe ive ALoita WG 14-4 It.454 ymt aiovuo levi4i/( aft"- SP 544,4,4440 86-A.4--al gkALa, eg44L.,-7. c-iiio 4,40 aka- yr_4(vm4A4. o-teg 6-(4.4b 1-to Rd, fe,c4- u&toc4.4 tt4thAL,O.,k3 cr; kaLd *4., nat_ivut" i,ret" torrivitt4q 0,4 ka.d 44..,42.Ltt4g.. t,-(n KAG. *r41.t 9( 644.. -euzg,vx. total oarce_auk.u. ;t- (osio ca,0 Cit4.46i.ture fciL,1 vz-4wiiNs0 44441, e4 14.AC04t44: Aso cepc4AA.)rwAke..Q, aLAA, cor t;) traedv60:01 tcutti Ar;ta. (Fet° /..":...000.1. 01 444&43.0. cif Cou.vag, 0,444"C malozoLcA iktuk.f.,3 Y-3.0o v.Ant nixt, 0.-41:cAtra fe ge-A4tv2) a- NT-A rer S.S."Ieviathan" - 19.9.27. P7:3o:jfki. 19th September, 1927. My dear Strong, I am sending you a copy of the Protocol just PERSONAL Bank of ChOanA 361thrit, E.0 . 2 22nd September, 1927. My dear Strong, You may perhaps wonder what has happened to the photographs which you sent to me for signature at the beginning of August. their return. here; A number of things have delayed They had to be dried on their arrival then Schacht was ill and unable to sign; Rist is in Switzerland. and now But the photographs have come to no harm and your copies should be on their way back to you in about a week's time. 4 Yours very sincerely, Benjamin Strong, Esq. PERSONAL. Ban 11 of anOnd. 1111(101LEX.2. 23 d September, 1927 10).7 1,:y dear Strong, I have been much interested in reading OW. your letter of the 12th instant (Personal and Confidential) which gives a good account of the differences which have arisen between the Board and the Reserve Bank of Chicago, and which also explains your loss of gold and your discounts. also for sending the Mialey-Eaton Letter, No.471. Thank you I hope to goodness your money market will straighten itself out and certainly money rates have been satisfactory during the last ten days. Since your letter was received, the appoint went of I:r.Roy A.Young to succeed Crissinger is announced, and this I hope will help to smooth out your difficulties. His name is new to me. So far as our position is concerned, I cannot add much to my cables of the 13th and 15th, especially the latter (No.169/27). Owing to repayments and conversions our market will be upset until the second week in October and you need not pay too much attention to the rates which may happen to be quoted between now and then. our short money rate should run along at 3 Generally speaking, with three months' Bills about 44i, but there is so great a demand for the latter that F. 4 PERSONAL. Page 2. Benjamin Strong, Esq. 23rd September, 1927. that the rate always tends to weaken if short or call money You already know becomes abundant even for a couple of days. our dollar position, which shows good balances in hand with the First National Bank and December maturities. I hope our and European importers have largely covered their known dollar requirements for the Fall: but this cannot be ascertained. Our Reserve position is satisfactory but our gold holdings are meagre as they continue to suffer, directly or indirectly, from the strong Argentine demand as well as by the normal dribble to many countries which occur almost every day. As regards conversions: the maturities of the 1st October have recently been satisfactorily dealt with, but a current atte.vt to deal in advance with next Spring's maturities - a total fo some i',200 millions - has net with a poor response. The fact seems to be that as all these Bonds (which were issueL during the War) come to their maturity, more and more of the holders wish for short Bonds or Bills and fewer are willing to refund for 20 or 30 years: of course the Treasury's object all the time isto bring about the latter. Yours mos incerely, 6 , Benjamin "1444L44 StronL, Esq. CONFIDENTIAL 110 MEMORANDUM 1. The Bank of England would certainly be willing to give its ful moral support and assistance to any plan of financial reconstruction for Portugal recommended by the Financial Committee of the League of Nations. An essential part of such a scheme would be Currency reform, including the legal stabilisation of the Currency unit. 2. The Bank cannot undertake to support a scheme other than a League of Nations scheme, particularly in view of the political uncertainty in Portugal. As London is a free market Lazard Bros. & Co. are of course at liberty, so far as the Bank of England is concerned, to provide here some portion of an international Loan under another scheme. 3. As regards the modalities of the League scheme for Portugal, it is impossible to say in advance of investigation what mig be needed. The League has no cut and dried formula: and, as the many variations in the details of past League schemes show, each case not only needs to be but, in fact, is considered on its merits. 4. On the hypothesis that the real position is neither better nor worse than it is believed to be, it may be conjectured as follows:- It would be necessary for the Portuguese Government to obtain the approval of the Financial Committee for a program designed to secure permanent Budget equilibrium, whether by - 4 411 7. 40 If Portugal wished for a League investigation with a view to Budget and Currency reconstruction, she would have to apply accordingly to the Council of the League which meets early in December next. Such an application would be referred by the Council to the Financial Committee who would, between then:and their March Meeting, collaborate with the Portuguese Government in working out a scheme of reconstruction. 30th September, 1927. anh of (6ntiland, 00(IMLEX.2. 30th September, 1927. L dear Strong, I think that your letter of the 19th instant about Philip Snowden's article in the "Financial Til:les" only needs a brief acknowledgment. I dealt with it as it were in advance on the 13th September, and though I have since had no word from Snowden himself I believe his article should not be taken too seriously. here certainly take the view that it is better, as you say, to "let the Heathen rage". The exchange position continues to be quite satisfactory with the help of your easy money rates. Thus I am glad you are able to carry out your wish to liquidate still further your sterling holdings on the lines of the cables which have passed since the 26th instant. You will have gathered from my cable (No. 178/27), even if you have not heard from Dr.Stewart himself, that to our great regret he is not able to pay us a visit this Fall, and we therefore await his coming about the hew Year with patience and great pleasure. In five or six weeks' time you are 11:ely to have a visit from E.R.Peacock. You know him so well that I need not ask you to open your arms wide. He sails for Canada within a PER.64 \,,11 Benjamin Strong, ESQ. Page 2. 30th September, 1927. a couple of days, along with McKenna, to attend a meeting of the C.P.R., but afterwards he will spend a few weeks in Canada and then go down to New York; while McKenna with his love for limelight and propaganda will be giving addresses and generally stirring the pot in several of your cities! 5. The weekly cable as to your conditions, which reached us yesterday, contained a piece of information with which I am unfamiliar. TT . . It reads as follows:- Labour demands smaller than last year and "labour turnover small." Does this mean that the shifting of working men from one place to another and from one industry to another is smaller than usual and what economic or financial deduction should be drawn? I assume it does not imply unemployment but perhaps more settled conditions. You need not trouble about this yourself but ask- Dr.Burgess to send a couple of lines on the subject. Yours most, sincerely, 1414441.44. Benjamin Strong, Esq. ROM!" / I PERSONAL troll of ofliglalul. Sondon,E.c. 2. 5th October, 1927. my dear Ben, I just write to say that your three letters of September 21st have been received: the two about Blair v. Morgan and about Mr.Snowden's article require no comment. I shall be sorry if your plans about Algeciras have to be changed owing to the disturbance which may arise from the rate dispute between the Board and the Reserve Bank of Chicago. Generally speaking, I shall stick to the Algeciras plan for January unless and until you say it is impossible from your standpoint: but in any case the meeting needs to be conducted with great caution. I do not Know to how many European Bankers you have written or how many of them you expect would travel to Algeciras? But whether you come to Earope for January and February or for a longer visit, I am sure that you and I (with such others as you :nay select) should meet at the earliest possible moment: once at Algeciras we could decide about migrating to some other place in the French Riviera or elsewhere. Anyway, please keep me informed of your plans as soon as ever you know them. Furthermore, I have yor letter of September 23rd acknowleding the Midland Bank reviews. My impression is ME% Benjamin Strong, Esq. Page 2. OP 5th October, 1927. is that the articles in the end recommend firstly co- operatior between Central Banks on money policy and the like and In my view, as we have agreed many secondly publicity. times, salvation is likely to be found only through such On the other hand publicity as to decisions co-operation. resulting from co-operation might imrease the profits of the Midland Bank and others but would mace a public target out of the decisions and would leave them much more difficult to achieve. Therefore, with that unfortunate British shrinKing instinct of which you sometimes complain, I am against all publicity: I take this opportunity also to thanK you for pulling my leg in your letter of September 27th. The meeting went all right but not nearly as far as the reports have indicated. With Kindest regards, Yours m t sincerely, 4e450444014404-0-AAP. Benjamin Strong, Esq. p IN U Unlit.) L. place about next year till early in Nov.": a month hence V J. -L J 9 Oct. 1927 Thorpe Lodge Illikampden Hill. W.8. My dear Ben. 0 I am in the country on Sunday + have none of your letters here to answer. But I have often written to you lately +there is not much left to tell you. The question of our internal arrangemets has been gradually coming to a head - finFllly by a recommendation from a Come that we return permanently to the old system of rotation after a couple more years, during which time I should be expected to make everything ready for the return. In principle this prospect is attractive to our older colleagues who were brought up on rotation + have hardly realised the inwardness + permanence of the gulf between now and 1914. It also seems to be attractive to Kindersley + you know the reasons well enough. In practise those of us who realise the gulf(or think we do) believe that rotation may be attractive as a prospect but in reality So I guess the recommendation will be is impossible (-at least in our lifetime) turned down - after it has somewhat cleared the air - + we shall continue to develop on the present lines... i.e. with Harvey, Siepmann, Niemeyer, Stewart + so on: + Any way no perhaps with the difference that some of them may become Directors. changes are likely (in the ordinary course) so far as Lubbock + I are concerned for a couple of years a so. I tell you all this, but dont write to me at the Bank about it - address to Flodge. IN case you do not find it possible to go to Algeciras, let me know if Its for you to say: but I hope for the former. I should come to N.Y. about Jan 1st. And you You have not said much about Phil but I like to think his bky is clear. GiVe my love Shall I take no news as good news? never say a word about yourself. to Harrison in case he should forget met. + with the same I am yours[signed] MN ikro .444µo cUK4s444A4lit tah.. JAJT,A q. 0 ot' t a7 Ot444 1023.k `0244 fat LAAtbrUA# t ilkOtAtts fwAkot No4e. , THORPE LODGE, CAMPDEN HILL. W.8. Ae-d4 atvt) ?t,OttD, leeotk_ Y644- 4ealt. \i/O-UR a/CAA 4 1d AculrA-J OfX51-AA lkfi-Md o CkAAAratc faeAtivi-J c,a fLCA elAALck 64-1 6o eStrai :5t/L-Cs./ Leo 49a44.4t (9<A___TZtAi.,(9,}y vL-ADLAN- m;%, cut,xolu.stAtASIAAko Acmt, crtgAaco-k, Of owt kit7c5L ecja 6:e 0. 49_ 0. oG ____ esr 4c, 34 A oca iti_ebatAtO-ovk tA4-- wc, vtektkAt-F-- ils-NiAca_AARA co (cLA0,..d -9(tA5 CeeacikAG;*ki J Sttc)tk9_4t__ -6e &t.C2eit.9-4, 0 ii^4a41/ evert/Auks Ito-97\/6tita-eACtA;C telu-stri 60 ditAk 0-e/Iter 1144 a-6acty,tcL,4 iire40 opt.Atic4vcxx, atLekCA.PC. eo .v4 ()(A-V4A- t n/ZAkIct. cet&gia ik.,t4MCLANWAe_ C5). t 81A-efre$Q1110-Qail filt)-tk) to_ Ves-a etz,o NrtAk/ o 3 4kCel 9k434sleix vc (i ki,tu,,tredi, rtwk, kAA-64 (SYcLciU0 40Q-c- (ti40 it-e-cs-G,is2, 4. co44. Czy,c4Giiic ooe ,9to 14-4 do) era201A,:c Cd- cr-Act.4 COAL cit,i /Kam, 60 1`611 - 144/91 etAt.th-C9J SI1/40:54 ck- A/ a 14, cAt4 ta, lkeeeakvvvit4cie.«;.1, ie.4G & O.Atklek,ta 40 _ c-;i1V0 I ?vow.: 04(04v - 44 :it 401.1 LA,t'e sLtA6 (6 44"6"flr :46 Gra; ttruzsvev4 Atuue.ger it A 44! \ ck34c, lan,vr7, . . . : oc g6e4Aycot.- 1,vvevApa &ya cL4P-02-Y-ook..--Q, d AAR, - ik64.464, Cettu-/-6 6c, a - P dt AA. ?"--'60 ate ejta_io fiLk; ttc.A.Pvt (itch, CD /6,(001/4clenek J k.oc29 -7 lo say: &At f-tv .,/,0 k ct,t4AaN ctA eta- (t ;Aitz ktila 2'41 ttrue.4 a4 (AZ qt-teD ? 4 tip, cg-oe. yeA c(x) N-4/11(-44z yc, ctt o ta. itt,t rx ti cothit-esi is( sauce 6-40. (14 nu_ 0.4t-evid ICf a.60vtt 9 o4.4-1J- Ylx.ct 40-,7140_ fal-rvv.4 / ce-vt-tirkg-Z cszus - %LA COVC4.0 4o AL OS-1.11A,Lahtt C.4.A AerptA. arvA 63 owsl. di- &it yom aAL ak vt 041 4,te. et'AiSL .91( 4t-tAArrA)-cuy 61-0kcApt_4tAivi (.;cdaitte 4'./ii24(A4. caa.(zs. g- 16D (45. wricozif ; ettica, Aft.tz y&v., Skoat Ytaik, "C 5v44: AN/ e.t.,-WLAO k'a-Nitta; <3". kkl ION4iti Via, saAkit, akt,t ltsAAA/Q PERSO.LL. *WI of &OW. jondon,E.c. 2. 10th October, 1927. my dear Strong, Your letter of the 24th Septelaber raises raany points and asks many questions which no one could answer precisely: I can only do so very generally. Your account here has now been liquidated, which is satisfactory, and I realise that after the fall and winter demand for credit with you has run its course, your domestic portfolio and advances will need also to be liquidated. This would seem to be natural enough: I should suppose that, after the crop movements are completed, the credit which they have required would flow back and provide the liquidation of that normal seasonal expansion of credit. Any expansion which takes place here on similar lines is on a very small scale. Our derind is more to meet the importation of raw materials; and this demand, uhich usually weighs heavily on the Exchanges during the back end of the year, seems at the present time to have been so immensely lightened by the strength of sterling (follo%:ing your rate movements) that I hope it may be negligible. As to our money market i)osition, we seem generally to be in a satisfactory condition for the time of year: the IERSONAL Page 2. Benjamin Strong, Esq. 10th October, 1927. the Bank has complete control of the Market - aside from gold possibilities to which I will refer later. I have no means of knowing how great is the total of American balances in London, but I have no reason to think that it is abnormal, and the only excess, so to speak, to which one can point results from the Proceeds of the gold taken over by the Reserve Bank from the Bank of France and now a debt by London Bankers to New York Bankers. If I remember rightly the amount was about 212,000,000. I imagine that these balances, which are more or less continuous in the shape of term deposits, will have largely been fixed until the middle or end of November, and because they will roll along I should hope would then cause no inconvenience. With the exception of the French gold above mentioned, I do not think that London owes any more short money than usual to foreigners. There is of course always a large arlount of such money in London representing the claims on London of other countries; the greatest 'claimant' to-day is doubtless the Bank of France. But others, such as Holland and Germany, are Drobably lower than usual. Similarly I have no means of knowing how great is the total of American and other foreign investments in London: they are generally thought to be increasing but on no evidence that is convincing. If our tax burden on income is reckoned, I should PERSONAL Page 3. Benjamin Strong, Esq. 10th October, 1927. should think such sterling investments are only in speculative securities or to some extent in Foreign Bonds. Insofar as I can form plans for the suture, they are to run along indefinitely with a 4e0 Bank Rate: a full private rate of discount (I am trying to impress upon our dealers the need for a continuous and more or less rigid rate of private discount rather than a rate which fluctuates according to the passing value of short money): and short money averaging - 7 71'. As your call money rate has lately kept low no inconvenience has been felt by its pulling on London, as seemed possible a few weeks ago. Our Government is well supplied with Dollars for / its prospective needs and no purchases on that account are Llikely during the present year. I am holding our own Dollars in reserve and,if anything increasing them from time to time as opportunity offers. But it is far too early to forecast their possible use in connection with the amalgamation of the Note issues: that amalgamation continues to be remote rather than immediate. As to the gold position, you know that our holding now barely exceeds Z1t0,000,000 and that during the last few weeks practically all the golu that might have been available for London has been taken directly for Buenos Aires from Cape Town, together with a moderate amount taken directly from London to PERSONAL Page 4. Benjamin Strong, Esq. to Buenos Aires. 10th October, 1927. The recent shipments from these two points However, the Argentine aggregate about ;U0,000,000. demand seems now to have slackened and there is a prospect of more regular shipments to London beginning again from the Cape. Other than the continuous and regular loss from London for trade and hoarding and innumerable purposes all over the World, aggregating fully e,100,000 a week, I know of no early and insistent purchasers: the Argentine remains a possibility: Brazil talks of setting up larger gold reserves: not at all likely to purchase on any large scale: so to speak, off the map: is likely to be greedy. India is Russia is, and none of the European countries Thus a portion or any future arrivals from the Cape may well stick in London; and as I hinted to you in an earlier letter, we here will no longer be as chary as s d hitherto of occasionally paying over the minimum price o' 77/9 if it should seem wise to do so. Finally, I hope that you and I will both find it possible to retain our rates for months to come at their resent levels. It would indeed be a disappointment if the present dispute as to your discount changes should force upon you an unwilling rate policy. Similarly, I like to PERSONAL Page 5. Benjamin Strong, Esq. 10th October, 1927. to think that the recent advance by Schacht of his Bank Rate and the probable (I think) advance by Vissering before very long need not affect the general level. :;ith warmest regards, Yours mos sincerely, 0144_044 Benjamin Strong, Esa. . ant of (eivtaith 10th October, 1927. my dear Ben, The signing of the photographs which you sent me in August has now been completed and those allotted to you have been returned today. I hope they will reach you safely. With kind regards, Yours most sincerely, Abe144.4..40L44.. CO /4-cial 'c ikel*ar(g.) Benjamin Strong, Esq. Vault e 6vIatte 10th October, 1927. my dear 3en, The present moment appears opportune for sending you a further budget of cuttings regarding the Chicago controversy. The interest which the Press here took in the subject seems to have waned. Yours most s ncerely, 0.11A44"04A,.. Benjamin Strong, Esq. 11111 4an1i PERSONAL lb% 1 angland, Sonclon, E.C.2. 11th October, My dear Strong, The cable which I sent you on the 8th insta (No.191/27, paragraph 2) has really answered your personal of the 23rd September. Salter was here for an hour or two last Fri and we discussed all sorts of questions including in particu the possibility of his visitinr-- America this Pall. It was clear to me that Salter is not very that he needs a rest (which he ,;2111 not get) and that it wou be extremely inconvenient, even if possible, for him to go t Nev York in the near future. Therefore I am sute you will a. with me and with him in thinking that he should not go: that his decision, based partly on the above facts and partly on cable which he received directly from you last week. All arrangements, and especially the publicity, in connection wi Jeremiah Smith's appointment to the Financial Committee have so satisfactory that the need for Salter's visit has largely disappeared: and we have done no more than interpret your le under reply in reaching his decision. Of course I am more sorry than I can say t Dwight Morrow should have ceased to be a banker and that, in zeal for public service and sacrifice, his wonderful gifts .: - PERSONAL Page 2. Benjamin Strong, Esq. 11th October, 1927. be lost to all of us and, for a time at any rate, should be expended on those good-for-nothing Mexicans. All of this and much more I hope you have conveyed to him in appropriate language. With warmest regards, Yours mo sincerely, OtYkktJatot4 Benjamin Strong, Esq. PERSONAL. 1111ank of (Inglmul. PERSOI,AL. Page 2. S Benjamin Strong, Esq. 11th October, 1927. .110IMP.10Hus*s '0,s0T'TT *bUGI gaor.000 T0: a.cop tlq.ocr. o7TT 00S 09, O'19, pus cSuTuTamT v.7.7 pus O 1.cogus .ono .t1OJ fly zoo: .fv..s ITT_'_; on.:30TET soTzacui U0:74 U/P1 071 STITTIOd3 ;0 =nu. uTr;spuoa uT ZuTpxs2oa 1.() q.as:21onrpar7 ceTJcIoas S;UOM0r,171.SOTM 1107172 o.Isq 'pozz5odds pemaozgoTTA 9groE 1100q. ;asaofl,s*,..7c rup.. gEinrU0,70:1'42 s IrTncoz q.atmeq.00aa nc.17. oz4 ^ bss.guoaqs tIoTtl!A Sial 1.11:TozocuTs 0A7AT fera-Ju PERSONAL. 43allit o 611.11illtb Lltbillt,E.C. 2 12th October, 1927. I. y dear Strong, In continuation of my letter to you of the 13th September on the subject of an article which appeared in the "Financial Times", I have at length received a reply from Mr.Snowden. And now let me carry the matter one step further by sending you a copy of his reply - and a very nice reply too: As I said, I think you treated his article too seriously and he says much the same thing. Perhaps you need not worry your head any more about this. Yours v sincerely, Alt4.12./(4 Benjamin Strong, Esq. COPY Eden Lodge, Tilford, Nr.Farnham, Surrey. 7th Oct.1927. Dear Mr .Norman, I owe you a very abject apology, which I hereby humbly tender, for the long delay in thanking you for your letter of the 10th ult. and the enclosure of :.1r.Strong's communication. Mr.Strong has been too sensitive about the general observations I made in the article. If he had seen it all I think he would not hale been so upset. I am glad, however, that it has brourht forth such an extremely interesting and informing statement from him about the policy of the Federal F.eserve Board. the deepest interest. I have read and re-read it \ith It does not, however, reassure me altogether as to the usefulness either to America or Europe of the vast proportion of the rld's gold now held in the United States. In the hands, or under the control, of a man of international outlook Ilr.Strong the possible dangers may not arise, but it might be a temptation to others in changed industrial conditions in America. I am glad, as I have said elsewhere, that the two great Central Banks are in the hands of men who so fully appreciate their ^Teat moral as well as their financial responsibilities (Can we separate the two?) and I can sleep peacefully at nights knowing that all ill be done for the best. .11th all good wishes and kindest regards, I remain, Yours sincerely, (3d.) Rt.Pon.1:ontagu C.Norman, D..0. PHILIP SNODEN. Ruth of 60a10 .1030NAL 1-,th Octob,_r, 1c27. Yly dear Strong, I do not remember whether the "Banker" is a magazine which you see regularly but in case it is not, I am sending you, herewith, the September and October numbers as they contain some articles which I should like you to see. amin Strong, Esq. Yours ver sincerely, 14' CC 0 F Yi Oct 16. 1927 A, Thorpe Lodge Campden Hill. W.8. My dear Ben Your little note about Poland happened to have just arrived when G.McG. came in + sat with me for an hour, without mentioning your note. I explained to him the whole set-up of this Loan so that he might explain to you as he said he would do: indeed he seemed already to know quite a lot about the situation. I think the Prospectus reads very well - now that I have seen it + I will try to help along the Bonds in a quiet way. But what you are up against Oin what you write) is feeling- deep-rooted: to which figures are an inadeouate answer. Your friend Kiddy + the like are mild + impartial compared with i3-eeRliiial4seia with many many others: + and have not been unfriendly in what has appeared here. There are tiro particular points which I did not underline (or perhaps mentidii) to McG + which cannot help: 1st the omission of the League + 2ndissue by Lazards (after several others had originally discussed + considered it) And you know Kindersley: Dear old McGarrah was in fine form - friendly + communicative + nice about you: but he seemed to fear trouble later over this rate-controversy. I wrote you a week or so ago about ouI.Linternal arrangements. Our meeting always takes place round about Sept 20w1: Our decision as to next Governors is always published about Nov 8th Amy has gone away for a few weeks - prevention this time + not cure: gradually I am sure she is climbing up to the top. Ever affy yours [signed] MN THORPE LODGE CAMPDEN HILL. 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PERSONAL Vault of 60410 18th October, 1927. 1;ly dear Strong, Remembering your request about newspaper cuttings, I am sending you a number of extracts concerning the recently reported utterances of Senator Glass and others on the subject of the control of foreign loans. trong, Esq. Yours very sincerely, 46.1% PERSOHAL. 4P "Ar Vank of 6414410 7117010.011, E. C . 2 25th October, 1927. My dear Ben, Please read this letter and then stick it up and mail it to old Waddy whose address I cannot remember. Stephen Vivian Smith is a son of your friend Lady Sybil, and so if he should ever find his way to Mew York you, too, might like to shake him by the hand. Yours very incerely, 0/14.444 Benjamin Strong, Esq. , cjvacl limpv Bank of bylarth 3 V27 25th October, 1927. Dear Dr.Burgess, I have received your letter of the 13th October and am indebted to you for explaining to me the expressions "Labour demand" and "Labour turnover" about which I wrote to Mr.Strong. I am grateful too for your hind reference to our arrangement with Dr.Stewart: you may be sure that we are impatient for his c,..rival and we look forward with pleasure to his sojourn 71th us. Believe me, Yours :Icerely, "144.410401,. Dr.d.2.Burgess. PERSONAL. of (gligland, Soudan, E.C.2. 26th October, 1927. my dear Strong, I have had little to say to you these last few days, but in order to keep the ball rolling I should like you to know that courtship between the Dank of Italy and the Bank of England is proceeding as hopefully as if it were Spring rather than Autumn. I think that we shall shortly have quite a comprehensive and co-operative account and understanding. This echoes, as it were, what you wrote to me on the 25th August (paragraph 4) and recognizes that we cannot rightly or wisely rule out the Bank of Italy because of its dependence. stances, Considering traditions and present circum- I do not think one should complain, especially if, as seems possible, the measure of their independence is increasing. Italy is not a free country in the usual sense of the word, and certain things are lacking which in a liberal country like England are apt to be missed; for instance, freedom of speech, freedom of the Press, freedom of politics and so on. But the fact remains that she has made economic and financial progress and is probably making social progress too. It is difficult to know whether the present regime is becoming acceptable to Italians as a whole; but at any rate it has survived a period of strain and it continues. In PERSONAL. tot Benjamin Strong, Esq. Page 2. 26th October, 1927. In this connection :.:r.Beneducci, whose name of course is familiar to you, came and had a long talk with me last week. He is said to be a close friend of Stringher, and I only mention him for the sake of reporting to you a casual remark of his to the effect that Stringher had been disappointed not to find himself in New York among the other birds of his feather last July: 2. I just acknowledge your note of the 19th instant and some day will take the opportunity of telling Er. Snowden how much you appreciated his letter. Yours very incerely, 4116414.etvt Benjamin Strong, Esq. . PEaS0i;AL ilLutl: Jt Q_'n.t;latO 28th October, 1927. Lly dear Strong, You may like to see the articles which I am sending you herewith on the Dawes Plan by Professor Cassel and Sir Josiah Stamp, also some re ,orts taken from our Press of the proceedings at the Convention of the American 3ankers Association. Yours t sincerely, Asvt.a4A, erwman.. Benjamin Strong, Esq. . FERS01::AL. anh of en gland, Sondon, EX.2. 31st October, 1-:.27, Lly dear Ben, I just write to acknowledge the receipt of your letter of the 18th instant about the Greeks and their discussions in Washington. There is nothing new here to report on this subject, except that the Swedish possibilities mentioned in my letter of the 3rd October rather seem to have faded away. I have of course seen reports of grumblings about the control of foreign borrowings through your State Department but it all seems to be vague and inconclusive. A few days ago I received also your note of the 19th October, which provokes me to say nothing more than that I wish, as soon as you can do so, to have your views as to Algeciras in a more or less definite form. For the moment, I quite understand your plans must depend on what attempts may be made to tinker with the Federal Reserve Act towards the. end of the year. I am glad you saw Gaspard Farrer and Bruno Schroder: like yourself, I do not seem to have known that the latter was going across the Atlantic. Of course I am delighted to hear of Miller's satisfaction with your condition and am content to ignore the result of taking a tub! Yours Benjamin Strong, Esq. sincerely, 010440LAmovi.. 1Y,t_ tst 1 PERSONAL. 12-71 3A-1 Amh ofEngland, Sandell, E.C.2. 1st November, 1927. 1,:y dear Strong, Your letters of the 20th and 21st October were written, as you say, to keep me posted and cover a number of points, few of which really seem to require answers. But over the next few days I may refer to one or two of them and to begin with I will touch only on Portugal. Paragraph 4 (which occurs on the second page of your letter of the 20th) mentions a cable from Lazards, London, to the Guaranty Trust to the effect that we and others are pursuing the Portuguese negotiations somewhat actively. On the whole, I think the reverse would be a true statement of what has occurred. I wrote to you on this subject on the 29th September and since then nothing seems to have happened except that Lazards have received the report as mentioned at the bottom of my first page. I have not seen this report and have had no conversations about it with hazards or with the Portuguese: I should imagine Lazards were anxious to be quit of the business unless it can be directed through the League on proper lines and, personally, I doubt whether they or anyone could or should undertake the business except through the League. All PERSONAL. Page 2. 1st November, 1927. Benjamin Strong, Esq. Ott All I can do therefore is to enclose, for your confidential use, an estimate for what it is worth of the present situation in Portugal. Yours ve y sincerely, deNtAl>114.1LAAr Benjamin Strong, Esq. . PaRTUGAL (based on information received from confidential sources) Population about 64 millions, including adjacent islands. Funded Debt External - 2.30 millions net. Internal - 9 millions, excluding funded debt for a large amount held by Government Departments, Savings Banks, etc. FloatinE Debt External - Internal -238 millions, which will tend to be increased by Budget deficits. Present Budget deficit - £3 millions. Eo early prospect of a balance. Estimated requirements in the near future, several hundred thousand pounds a month, if the exchange is to remain stable' to deal with the situation comprehensively, at least £10 and possibly £15 millions. The Government is a ilitary Group Dictatorship, drawn from what are probably the t:st elements in the country, gut without administrative experience. It alreadi, has to its credit the settlement of war debts with England, the settlement of a long-standing dispute with Spain about the water-power of the Douro river and an improved administration of the Colonies. It is an open question whether the Government is or. is not constitutional; but it is the best the country has had for a long time. Poli Tics. The population is 1:onarchist in the country-side and Republican in the towns. The big- Commercial men have tended to be Monarchist, but are now showing a desire to cooperate with the present Government. Exiled Radical -2- 2oliticians intrigue continuously against the present Government and regard economic or financial disturbance as their best weapon. The late King Ilanoel does not intrigue and would not be acceptable to any party. Currency depreciation would probably bring down the present Government. The Colonies are a financial drain, but to a diminishing extent. The Home Government gave :C1 nillion to Mozambique last year and stabilised the currency at 24ku below par. Angola is a good proposition in the long run, but likely to be expensive for some time yet. Colonial resources would not be available for any scheme of financial reconstruction. Once the finances have been squared, a great need of Portugal is for roads, which would be an indirectly productive investment. The chief obstacle to financial reconstruction is the national pride, because it is perfectly certain that reconstruction could not be safely financed without external control. Given sucli control, in fact if not in name, there would perhaps be a fair chance. S P7RSOITAL 1st November, 1027. My dear Strong, In reply to your letter of the 20th October on the subject of Norway, I enclose one or t-:io Comments on the llemorandum you hcxe sent me: and also a confidential Note (prepared for you personally by Siopmann) on the general situation last August, which I hope may be of use to you. I will certainly keep you informed of any further developments. Yours very sincerely, (SIGNED) Benjamin Strong, Esq. M. NORMAN. COPY CONFIDENTIAL 0 NOTES ON A VISIT TO OSLO - 22nd to 24th AUGUST, 1927 If sterling had followed the same course as the Norwegian Crown, 1. we should have had dollar rates of $6.13 at the end of 1918 and 0.70 a year later. After fluctuating below this level for the next four years, the rate would have averaged $2.50 in 1924 and .$3.25 in 1925. From about $3.10 in June 1925 it would have risen steadily for two years to $4.70, and we should now be within some 3 per cent of prewar parity. fficult to contemplate any other uld be restored and maintained. l advocate devaluation, and both s introduced (ana overwhelmingly ing the deliberate depreciation of parties, which agree in little valuation during the election s doubtful whether, if they came they preach. M.Rygg said that the to say in the matter and that the tional Bank and the Government, f pre-war parity. It is ist has recently been elected to he has proved entirely amenable, ebrand. nk is said to be paramount in all which there are only a dozen or 2 local and specialised; so that some of the chief financial problems There is now a borrowing internally through the "Crisis Loan".- balance and the real crux is whether this balance does not involve a tax burden and a debt burden which in the long run will prove to The Bucget has, roughly speaking, kept pace with be insufferable. the currency. It has been halved (Kr.367 millions for 1927/8 as against Kr.748 millions in 1920/1) while the value of the currency has been doubled. There is no reason to anticipate that the Norwegian Government will require to borrow - either at home or abroad - for a period of years. 8. The State undertakings, apart from Railways, Post, Telegraph and Telephone, are not many. a mill. There are some electricity works and There are no commercial monopolies. The State under- takings for the most part show a balance on the right side, but the Railways are estimated to be run at a loss in 1927/8, in spite of terrific fares which must certainly be reduced. 9. The concentration of Government balances with the Norges Bank would be of more importance if there- were any real money market to control. The normal system is for the Government to work on a cash balance, and the Norges Bank pays interest (now 3%) on Government money beyond a certain minimum balance. But for the moment the Government is rather a borrower than a depositor. The Norges Bank is precluded by its Statutes from making advances to the Government, ;;;)? Note The "Crisis Loan" of 200 million Kroner was intended to The idea was that the service of the be a kind of capital levy. loan should be met entirely by a special levy upon the owners of This was the reason for its being kept out of the Budget. property. The original conception has been now more or less abandoned by general consent. - 5 - A system of Treasury Bills has also been tried, but the Norges Ba nk 12. IP For two years the Norwegian wholesale index has been consistently abolle gold parity with America. The view of the Norges Bank is that the difference of some 20 points, which exists at present, is not due to any lasting circumstance, such as the constitution of the index or the choice of a base date. On the contrary, the Norwegian index, compiled only a few years ago, was deliberately made comparable to that of the U.S. Bureau of Labour Statistics and it particularly includes the articles which most enter into the international trade of Norway. The expectation therefore is that the purchasing power parity theory will in course of time be vindicated by the further approximation of the Norwegian to the American index. 13. Movements of the Note Circulation cannot be correlated with the internal or external value of Norwegian currency. The nominal value of notes in circulation is now roughly three times what it was before the war. But it has remained in this neighbourhood since the beginning of 1926, while wholesale prices in the same period have fallen from 214 to 165, the cost of living index has fallen from 216 to 201, and the value of paper crowns in terms of gold has increased by some 30 per cent. The whole subject of paper currency circulation is regarded by the Norges Bank as something of a mystery. There is no reason, so far as they know, for regarding the present circulation in Norway as abnormal, though it looks too high. The best justification that can be furnished is the experience of other. countries - e.g. Switzerland and Denmark. of the Norges Bank, page 42). (See the Annual Report 7 9 adopted. To my first question I got a not very precise answer. The level of wages (now more adaptable) and the level of prices would certainly be determining factors. But in any event, the distance that now remained to be covered was so small that the question hardly arose. As to the means applied, I was told that the method of the Norges Bank is much rather to influence exchange by way of credit policy than to control credit conditions by interfering with exchange. The items in the Balance Sheet of the Norges Bank directly subject to the influence of its credit policy may not be very important, but the items in the Balance Sheets of the other Banks indirectly subject to such influence are decisive. 18. Intervention on the exchange market has, of course, been directed mainly towards preventing a too rapid appreciation of the Crown. Hence the loss of about £1 million which the Norges Bank will have to suffer, although two thirds of the total loss are borne by the State. (In Denmark, the total loss amounted to about £1 million, all of which was shouldered by the National Bank). There is no unofficial or "free" market in exchange. Before the formal meeting at which official rates are fixed, there is daily an informal consultation between the Norgcs Bank and the Exchange Banks, at which the guidance of the i\lorges Bank is in practice accepted in regard to the official rate. 19. The State share of the loss on accumulated foreign exchange should have been met at the end of 1926. There was an agreed post- ponement, until the 15th September 1927. while I was in Oslo, the Treasury negotiated with the Norges Bank for a further postponement, and were met with a blank refusal. It is therefore to be expected that two thirds of the loss will be paid in cash next month. The - 10 - remaining third, I gathered, has already been covered by writing down AI the assets of the Norges Bank. For the future, the Norges Bank will no longer be partner with the State in its exchange transactions. - It will deal solely for its own account. At present, the Bank has not, on balance, either to buy or to sell foreign exchange; but if the return to parity is delayed, the winter season may involve the Bank as a buyer. 20. When exchange has been restored to parity - Mr.Rygg said he thought this ought perhaps not to happen for a year or more, but that circumstances might force the pace - the gold standard can be reintroduced without legislation. It is at present held in suspense by a Royal Decree, which only requires to be revoked in order to reintroduce the status quo ante. Before the war, very little gold was in circulation, because there were Kr.5 notes that took the place of the Kr.5 gold pieces which, under the terms of the monetary union, might have been minted in gold, but in Norway never were. I was told that on the subject of gold there is really no public opinion. 21. The present regulations regarding gold cover for the note circulation date from 1892 (see N.Rygg in "European Currency and Finance", Serial 9, vol. 1. edited by John Parker Young, Government Printing Office, Washington 1925). The contingent system was then adopted, after some 80 years of hesitation, and the Norges Bank may now issue (apart from the supplementary circulation, in abeyance since the beginning of this year) notes for Kr.250 millions (say £14 millions) more than its stock of gold held in the vaults of the National Bank or of the Royal Mint. 22. Before the war, the gold reserve of the Norges Bank amounted to rather more than £2 millions - it is now roughly £8 millions, and the Bank therefore has the right to issue £8 plus 14 = £22 millions of notes. Its present issue amounts to about £17 millions, or £6 per head of the population, as compared with £2 before the war. The strictly necessary gold reserve is therefore upwards of £3 millions, or roughly £5 millions less than what is actually held. But the tendency of legislation has been to aiscriminate against gold held abroad and still more against the inclusion of foreign exchange, reckoned as the equivalent of gold, in the "metal" reserves. Conclusions 23. Assuming that .the policy of a return to pre-war parity will be carried out, with the support of the Government and of public opinion, and given; (1) a strong Governor in the Norges Bank with security of tenure, (2) a sufficient control by the Central Bank over monetary conditions - including rates of interest, the exchange market, commodity prices, and the total volume of credit, (3) the prospect of sufficient political stability to ensure the adoption of a consistent monetary policy for a period of years, (4) a balanced budget, not likely to be thrown out of equilibrium, in spite of a heavy burden of debt and taxation, - 12 - (5) a satisfactory balance of international payments, not likely to be upset, except temporarily, in which case effective L/\ )/3-- 1S PERSONAL. :111h of 3: 0 Ild011, E.G. 2. 2nd November, 1927. 17.y dear Strong, In continuation of my letter of yesterday, I refer again to yours of the 20th October, paragraph 3. I do not properly understand what you write of your enquiry from Lazard Freres, but it seems to be in contradiction to what was arranged by Kindersley while he was in South America so far as my information goes. At one time or another I think I must have written you a note on this subject. The transaction of last August in which Lazards were interested was surely not with Brazil but with San Paulo: its object was not currency but coffee: it was, had thought, unconnected with any gold transactions: I it was not really an acceptance credit but a cash advance (which does not of course prevent one long draft for acceptance in accordance with the usance of South America and for that matter of the Far East). I do not defend the transaction: on the contrary, I disliked it from the beginning, and I suspect it was undertaken largely as a forerunner of some form of valorisation loan next year. I think the answer you gave was wise and, so far as I au concerned, kindly. But there perhaps has been some confusion between this San Paulo one-year advance and the Brazilian 6e Loan issued by Dillon in 1ew York and by-the usual Bankers PERSONAL. 2nd November, 1927. Benjamin Strong, Esq. Page 2. Bankers here in the second week in October. may cover any Brazilian needs of gold. The latter obviously But in this matter of gold the Government of Brazil might of course do some juggling with the State of San Paulo and thus confuse the respective objects of the two transactions. 2. Let me interpose here a -paragraph on a totally different subject. A cable from Washington dated the 31st October, which appeared in the Press, purported to give an recommendations to the Ways and 'Jeans outline of Committee of the House as to tax reductions aggregating 0225,000,000. The cable went on to say that 1.r.Mellon's pro- gramme included "the exemption from taxation of income derived "from American Bankers' acceptances held by foreign Central Banks "of Issue." I should be interested to read any remarks on these prospects. Yours ve sincerely, 41404LARAA, Benjamin Strong, Esq. of england, PERSONAL. Sondon, E.C.2. 4th November, 1927. :".y. dear Strong, I have waited a few days before replying to your letter of the 20th October on the subject of your buying price of gold, as the question is one of great interest and importance and I wished to take counsel with some of our friends before I sent you an answer. I realise tnat your proposal might be of some temporary advantage to us, by making it slightly more difficult for gold to flow in your direction; to you for considering it. and I am grateful But I feel strongly that on general principles the interests of international commerce and finance are best served if the spread between gold points is as narrow as possible: the reduction of your buying price would tend to widen them, and I should therefore view it with regret. In my opinion, a better way of obtaining the object you have in view would be for us to increase our buying price, and, as I have already told you, we shall in future be prepared, when the occasion arises,to pay practically up to s d 77/10i for bullion. s d In old days we took in bullion at 77/9 and s d gave out sovereigns at 77/10-2, the difference being based on an estimate PERS011.1. Benjamin Strong, Esq. Page 2. 4th November, 1927. estimate of the cost and delay involved in taking the bullion to the Mint for coinage. coin, But now when no one here can demand and when we are required to sell bullion and not to give out sovereigns, the difference of 1 d. has no longer any reason for existing. Such a difference might be logical in your case, and in the circumstances it is a curious anomaly that we should have it and that you should not, but for all that I hope that you will remain as you are, and that we shall bring our practice nearer to yours. Of course the difference between buying and selling prices, due to considerations of coinage, is an internal question: for international purposes gold is gold whether it is in the form of coin or uncoined bullion, and, in my opinion, the less difference there is between buying and selling prices the better it will be for all of us and the smoother the working of the gold standard. Yours most e incerely, 'tttonita-ot, - Benjamin Strong, Esq. a-PM of (Angland, PERSONAL Joncion, E.C.2. 4th November,1927. My dear Strong, Vie ought perhaps not to have been surprised by the Polish gold requirements. :..aynarskits figures explain quite clearly why our anticipations were falsified, and why the Poles will need to import the £4 millions which they now hold earmarked here and to buy in London and import before the middle of They propose to buy £400,000 December a further £1 million. 1:1:' the 15th November and a further £600,000 between then and the end of the month. If we are lucky we may be able to buy half of this ;?..1 million on the market. The rest will be supplied from our own stock at the statutory price. Shipments begin next week and should be completed soon after the end of November. post, There is a detailed letter from Karpinski in the but I write now to let you know that the programme has already been fixed by cables of which I enclose copies for your information. Believe me, Yours ve sincerely, ACV /10$4...4019t. Benjamin Strong, Esq. CONFIDENTIAL. Decode of cablegram from MONSIEUR KARPINSKI, .7-- BANK POLSKI, WARSAW. 5.56 p.m. (tine) Weds. 2nd Novr.1927. (date) 4n447(7.7 10.15 p.m. (time) Weds. 2nd Novr.1927. (date) Despatched : (7489) 7/24-3000 INGOTISLI 275. GOVERNOR FORI:idi LONDOI :. Taking into consideration information your letter 28th ultimo request you to buy gold for £400,000 until 15th November further ..t600,000 until end of November. Please arrange for shipment gold held already and newly bought so that total amount will be available Warsaw not later than middle of December particulars by mail. PRESIDE2T KARP INSKI. CONFIDENTIAL. Cablegram sent in code to : _PRESIDENT KARPINSKI, Despatched : 5.45 p.m. BANK POISKI, (time) WARS/V:. Thurs.3rd Novr.197. (tha (7496) 8/26 -160Q 276. Your telegram 275 s 1. Will buy at market price or ourselves supply at 77/10-2 £400,000 not later than 15th November and further £600,000 before 30th November. 2. Gradual shipments gold already held and above amounts will begin immediately. GOVERNOR NORMAN . I V jamtk if 6t4020 Wonbolux.2 7th November, 1927. Lly dear Ben, I wish you, please, to make the acquaintance of the bearer of this note, Mr.Olaf Har.ibro, who is just sailing on his first visit to New York. With him goes another old friend of mine, Lr.A.John Hugh Smith, and for both of them I beg your kindly reception. Yours ve sincerely, 64AtAAA ILO Benjamin Strong, Esq. _D2 .D.,.101y.12ic"- 9.11.27. - 7:;11 4!y dear Len, :Toro is a CO3 y of a le to to you Olaf Eanbro and John augh Smith, who arc p-xtners, so to s7),._.1:, in 72.:-4bros Bank. The foriaer is now the guiding c:lirit; hrewd, ind=tricus and gradually becoming entfray orthoaox. (This, I think, for the same reason that your f:oicfla LI no stor7 ree:):171eaded hone:.:ty as the best -nolic7!) The business wr..s alaalgamated solae few years ago with a Ban:: ,n0. and e_tell- :andel has o-)ealone a.lo-_1:; in which had really ther-L.-law of Jour time with the will Live him a li-ence most of the is intelligent and 4 PERSONAL of 60a0 titatTlt, E.0 . 2 8th November, 1927. My dear Ben, 71e were pleased to be able to read the American Press version of Dr.Stewart's appointnient. I do not think we produced anything quite so venomous as the sting in the tail of a comment by the Journal of Commerce, nor anything so amusing as the account of the attempts to get into touch with me by telephone at Plodge. It is quite true to say that Park 3751 was a busy number on the night of the 5th October. Yours most sincerely, ....-11. Benjamin Strong, Esq. S Proof s, Subject to Change. $6,000,000 Kingdom of Norway Municipalities Bank (Norges Kommunalbank) External 5% Sinking Fund Gold Bonds Dated December 1, Due December 1, 1927 1967 Total authorized bonds of this issue $6,000,000. Interest payable June 1 and December 1. Principal and interest payable in time of war as well as in time of peace whether the holders are citizens of a friendly or hostile state, at the office of National Bank of Commerce in New York, Fiscal Agent, in United States gold coin, without deduction for any Norwegian taxes, present or future, except in case of holders otherwise subject to taxation thereon in Norway. Redeemable as a whole or in part by lot at too and interest on December I, 1930 or any interest date thereafter upon six months' notice. Coupon bonds of $1,000 denomination, registerable as to principal. Cumulative sinking fund, operating semi-annually beginning December 1, 1931, by redemption by lot, with the right to the Bank to deliver for cancellation to the Fiscal Agent bonds of this issue at their principal amount in lieu of cash. This sinking fund is calculated to retire all the bonds by maturity. The following is summarized from information obtained by cable from B. Stuevold Hansen, Chairman of the Bank, and from other official source,: Kingdom of Norway Municipalities Bank (Norges Kommunalbank) is the central banking institution which the Norwegian Government has established for the purpose of granting loans to Norwegian municipal bodies. The Bank was established pursuant to provisions of Norwegian Law of February 12, 1926 and commenced business September I, 1927. The Bank has foundation capital of $5,360,000 (Kr. 20,000,000), and reserve fund of $8o4,000 (Kr. 3,000,000) fully subscribed and paid in by the Norwegian Government. Principal office of the Bank is at Oslo, the capital of Norway. Operation of the Bank is by the Government through a Board of three members, the Chairman of the Board being appointed by the King of Norway and the other two members by the Norwegian Storting. The Bank operates under the supervision of the Ministry of Finance. The Bank's resources will be increased beyond the foundation capital and reserve fund mentioned above by any undivided profits, which must be added to reserve fund, and by any issuance of participation capital shares as described below. Organization: Operations: The Bank grants loans only to Norwegian municipal bodies and similar political subdivisions in Norway. Norwegian Law provides that when the Bank grants loans out of funds borrowed by it in foreign currency, it must make such loans in, and such loans must be repaid in, the same foreign currency. The proceeds of this loan, therefore, shall be loaned to Norwegian municipal bodies only in United States Dollars and both principal and interest of such loans must be payable to the Bank in United States Dollars. All loans applied for must be approved by the Ministry of Justice, and prior to granting loans the Bank is directed by Royal Decree of August 5, 1,927, to assure itself that the financial and economic condition of the borrower is satisfactory. The Bank enjoys certain powers of restriction on further financing of municipal bodies to which it grants loans, including power to prohibit with the consent of the Ministry of Justice, as a condition of the loan, such municipal bodies from future mortgaging of their assets. The Bank retains 5% of the face amount of every loan granted by it, subject to the right of the King to regulate or limit this contributory duty, issuing to the borrower an equivalent par value of participation capital shares in the Bank in the form of registered non-negotiable certificates; a maximum of 5% per annum dividend is payable on the participation capital shares, at the discretion of the management. A sum equal to at least two-thirds of the foundation capital of the Bank, plus its entire reserve fund, must be kept on deposit in banks or invested in interest bearing obligations of the Norwegian Government or guaranteed by the Government. These bonds are the direct obligation of the Bank, which covenants that if in the future it shall sell, offer for public subscription, or in any manner issue or dispose of any bonds or loan or create any obligation, secured by lien on any revenue or asset of the Bank, the bonds of this issue shall be secured equally and ratably therewith. These $6,000,000 bonds are the first series issued by the Bank to grant loans as described above, and constitute its total funded debt. The law creating the Bank Security: limits the aggregate amount of the bonds issued byi it at any time outstanding to eight times the sum of its foundation capital and that part of its participation capital which exceeds $1,340,000 Note: All (Kr. 5,000,000) conversions of kroner into dollars have been made at par of exchange ($.268o). Application will be made to list these Bonds on the New York Stock Exchange Bonds are offered when, as and if issued and received by us, subject to the approval of legal proceedings by our counsel, Messrs. Cotton & Franklin, of New York, and by Norwegian counsel. It is expected that delivery will be made in the form of temporary bonds on or about December 15, 1927. Price and accrued interest, yielding Ofering is made on the condition that no statement herein constitutes any representation or guaranty by Ill; statements made, however, have been accepted by us as accurate. November, 1927. Form 8 D 1-M 411/ WHITE. WELD & CO. 14 Wita."...STREET NOIlleORK KIND= OF NORWAY YUNICIP;kLITIES BANK FUPPIinFARY DJ.,t4. National governments, as well as those of provinces and municipalties, are accust"med to engace in various non-governmental activities wnicla are believed to benefit their country or territory as a whole, and which, for various reasons, have not In tne been cr cannot be undertaken by private enterprise. Uniteu States we have the F.daral Tieaerve System with its board at Washington and the twelve regional banks, a central banking organ:ezation controlled by the Government, entirely different in conception from the S'rk o- England, for instance, which is a private institution, Other examples are the United States Shipping Board and Emergency Fleet C6rporation, the Hydro-Electric Power Commission of Ontario(suppl7ing current to the smaller municipalities) the Canadian National Railways Company, tne Belgian National Railways Company and the German National Railways Company. Among the functions of this kind which have teen extensively developed in foreign countries is the provision of credit facilities for certain large and important elements of the populaPerhaps the folaiign examoles most fainiliar here are the tion. Central Bank for Agriculture in Germany, the Murtgac;e :tank of the Kingdom of Denmark and the National Mortgage Bank of Argentina, but there are scores of similar institutions, especially in Europe. For the conduct of such non-governmental activities, it is usual for governments to operate through a corporate oc4.4, whose capital stock is entire_y owned by the government, or which is Such fully controlled by the government by some other method corporations are, in effect, departments of the,governnent which Tne Policies of such corporations are the operates tiaroue,n them. policies of the governmeet and of the people the government represents; the reeonsibility of such corporations to the public the credit o. such coris the responsioility of the Govarnmen porations is the credit of the government. To the Furopesn especially, it is unthinkable that a government chcuid leil to support, financially and otherwise, a corporation whicn it nes created and wnich it controls and manages. The Kingdom of Norway Municipalities Bank is a corporaIn its oranization, financial tion of 'this general type. structure and mtheds of operation, it rather closely parallels Perhaps the greatest difference the Cradit.Cemrtunal de Belgique. _hit Conmural was created by the between the tro is that the Belgian:Government in 1850, whereas the Yeaniolpallties Bank is a main G.overnment, purpose in the creation of both present year. stablished cy the eT:ae Norwegian in the new-institution, ti3Onaat howev;r, was the eam, namely, to supply capital smaller municialities, to stanaf',_iz.,! and secilizc the Tunicipalitde-3 can sorrow capital and under wnicn a certain measure or supervision and cJntrol over the fi these municibaliti2s. (.3 The law creatinL, the Municipalities Bank and it ances approved by Royal resolution of August 5, 1927, ar what L?ss rigid in their limitation of the bank's activit in their stipulations as to the precise methods by w.,-,icra snail op:crate, than is the case Stith the Credit Communal gigue.. The rason for this probably is that the Credit C I, In_gma 1 This information and these statistics are not guaranteed, but have been obtained from sources we believe to be accurate. of. loans to Belgian municipalities and has evolved methods of op_ration which are particularly suited to Belgian conditions and the requirements of Belgian municipal borrowers; whereas the panties Bank of Norway, engaging in what for the Norwegian Government is a new activity, is given treater latitude by statute, although its operations at every step are under the immediate direction and supervision of the Royal Government. The purposes in the creation of the Municipalities Bank are stated in the Royal Resolution above referred to as follows (literal translation): "The Community Bank of Norway shall in its activity contrioute to carry through a sound economy of the financial administration of the communities. "In that respect the bank's management shall in its decisions regarding applications for loans duly take into consideration whether the loans concerned are in accordance with the claims that may be made on a rational cond*o.ct of the communal finance management. "The management shall in its considerations of loan applications follow banking and businesslike principles and prior to its decisions have made clear whether the loan applicant's economic In this respect condition offers sufficient security for the bank. the management shall in connection with the loan application, which is made out according to a form approved by the concerned department, demand that there oe laid before the same the material necessar:ifor thorough information about the loan applicant's economy. "The management shall, as far as possible, try to have the lending activity equally distributed over the entire country." The new method of supplying capital to Norwegian municipalities is expected greatly to improve the conditions under which they have done their borrowing heretofore. To finance municipal improvements electric light supply and the like, the smaller municipalities have been accustomed to borrow from banks, issuing later small bond loans which have been negotiated locally or, if large enough, placed in the Oslo market. Such borrowings and bond issues, pro,iided they were made in Norway itself, have been sibject to little or no supervision or restriction, some of the municipalities have borrowed too heavily, others on terms considered disadvantageous to them. Under the new system municipalities are not co:epelled to finance through the Municipalities Bank, and the larger cities such as Oslo, Bergen, etc., will probably not do so; but the smaller communities will undoubtedly find that the terms and conditions imposed by the Municipalities Bank will be :Lore favorable to them than they can obtain independently, because of the higher credit which the Bank is expected to enjoy. This has been the development in France, Belgium, Spain, Italy and other countries. An important feature in the constitution of the Municipalities Bank is the provision of liquid resources. It is stipulated that a sum equal to et least two-thirds of the foundation ca;)ital of the Bank, plus its entire reservL, fund, must be kept on deposit in banks or invested in obligations of the Norwegian These resources, accordGovernment or guaranteed by the Government. ing to the law, are to be drawn upon in case of default or delay in payment of obligations due to the Bank from municipalities which have borrowed from it. Another noteworthy feature is the provision in the law that when tae Bank grants-loeils-fr,7rm funds _.sorrowed-by_i_tin---foreign currency, it must make such loans in the same foreign currency, and the borrower must pay interest and repay principal in the same currency. This eliminates-cuzrency-risk, so far aa,condholders of the BtInk_a-fe_co-no-erned. A. W. KIMBER New York, November 19, 1927. PERSONAL. ct., And of engiand, u/A.41-4-4"a I 3101111011, E.C.2. tkut- _L0.4,(_11L..+4'11"."4 15th November, 1927. 1:y dear Strong, Since I wrote on the 1st November about Norway, the story has been carried to the end of a chapter. At that time there had already been desultory correspondence on the general question of a Credit and the Norges Bank then wrote to say that this question did not require immediate consideration or solution. Then came the Parliamentary elections which caused some nervousness in Norway and to some extent affected the exchange. Lr.Rygg, however, wrote that in his opinion the nervousness would subside promptly and would not recur; but that as from the 1st instant the Bank Rate was raised. Therefore it was with some surprise that I received, a few days later, a further letter stating that the ide of a Central Bank Credit had been abandoned and that they had found it necessary to go elsewhere (evidently to private Bankers but I do not know which). Mr.Rygg explained that he could only have dealt with Central Banks on the basis of immediate stabilisa tion which evidently he was not ready to face: he wished in the meantime to be able to deal effectively with the disturbance of the Norwegian exchange, due, as he put it, to "emotional" causes. Thus this immediate chapter is at an end. Although it is perhaps not difficult to see his point of view, I insisted PERSONAL. Page 2. Benjamin Strong, Esq. 15th November, 1927. insisted in my reply that I believed it to be best in such cases for Central Banks to deal only with one another and I hoped that (on the expiry of his present arrangements) he would return to the original idea. Yours vg77 sincerely, Benjamin Strong, Esq. is ti PERSONAL. Vanh of O'Ailland, Iondoo, E.C.2. _roveLiber, 1927. 1 1.:y dear Strollg, As to a Loan for the Irish Free State, you realise that here in London it is t a simple Tiroblem. The sug:estion in your cable of the 4th I:ovember (No.129/27) is, of course, perfectly right, but I have an idea that these Irish would sooner get money in HEQQ, than in London. `le, here, are always in touch with the Bank of Ireland: ever so long ago I aizreed with them to do anything possible to help the Free State Government, either with regard to a Loan or with regard to the rote issue. 1.:y feeling has been that whether or not the Free State solution was wise and whether or not its Government is good, it has come to stay and we here should help it all we can. But somehow the Free State GoverL- ment does not seem free, officially, to do anything but quarrel with us or others in London. Individually we may be the best of friends, but when it comes, e.g., to borrowing money, I do not think they would feel free to make the statements which would be reauired in a Prospectus here. Similarly, it is difficult for me to convey to them any suggestions as to where and how their Loan negotiations in ilew York should be conducted. eVYours mo Benjamin Strong, Esa. sincerely, AO 4a1T13 of 6gland, PERSONAL 401p Jondon, 15th November, 1927. My dear Strong, A propos of your letter of the 27th October and in the hope that 3nu will allow me to supply your need, I am sending you the November number of "The Banker", which contains a further article on the Federal Reserve System by Professor Parker Willis. I think that this article will answer your question as to the necessity for writing an antidote: on page 413, paragraph 2, Professor Willis seems to condemn himself out of his own mouth. As to "The Banker", it is not a paradox to say that it is improving in quality and, as far as I can ascertain, it is increasing in popularity within the radius of its coArioci, it &PICA ;OP k I ilagine that it publishes Professor Willis specilised publics quite disinterestedly, just as it publishes Elynarski, Caillaux, Snowden, Graham, Pease, &c. For your entertainment I am sending you a short story entitled "A Gold Mystery", which appeared recently in the Financial News. Yours most sincerely, 1)11/Ult,44 Benjamin Strong, Esq. PERSONAL Ilanh of (g ngIand. JORd011, E.O.2. 21st November, 1927. My dear Ben, I just write a few lines in answer to yours of the 9th instant which arrived this morning and in which you say that, subject to what may happen in Congress, you expect to ::'each Algeciras on the 11th or 12th January. I therefore propose to leave London for Gibraltar on the 7th January by the "Otranto", whence I will make my way to Algeciras and await you after your visit to General Munro. If your plans should be altered by anything that may happen next month, I count upon you please to send r_e a cable without delay. We can leave later plans to be settled once vie are at Algeciras: and meanwhile I shall say nothing to any possible visitors whether or not you are already in communication with them; nor shall I make any sort of announcement in the newspapers. 2. You were doubtless informed when Mr.Dewey sailed from New York and you therefore know that he has been in Paris for a few days. To us here there has been some gossip and a good deal of mystery about his movements which at first were wrongly reported and since then do not seem to have been reported at all. He has not been to London and even Kindersley is quite unaware of his plans. But Siepmann happened to be in Paris where he met Mr.Dewey, who PERSONAL 4* Page 2. 21st November, 1927. Benjamin Strong, Esq. who left Paris for Warsaw yesterday afternoon along with M.Quesnay of the Bank of France. Er.Dewey seems to have spent most of his time at the Bank of France, to have seen the official Poles and Poincar4, but none of the Bankers. All of which I assume is in accordance with the understanding he must have reached with Prosser or yourself in New York. tittle-tattle tv.A: --''r-a'I't °I I merely pass it on as 43''""'G Yours most s ncerely, en44.44A I=Nomm....."""1111. Benjamin Strong, Esq. }vt-i4A 11( c Co-0,1A . M. 1,7 (-)A stLg4 Inuit of angland, 4ondmE.C.2. 22nd November, 1927. 4-. fel Ly dear Strong, During the last few days I have received from you several letters, most of which are merely acknowledgments of earlier letters I had written to you. case of your personal note I make an exception in the of the 9th instant as to the probable funding of the Greek Debt to your Government. This is most satis- factory, especially as I guess from your very few words that the negotiations are likely to :,roduce a definite result. keep me informed. Please The issue of the Greek Loan, which has already been authorised by the League, may be discussed early next month at Geneva, and, subject to the above, the only difficulty now standing in the way is an uncertain and very controversial settlement bet::een the Greek and French Governments where there are claims and counter-claims. I also make an exception in the case of another letter of yours dated the 9th instant concerning the Bank of Italy; and I may say that when the time arrives to face the question, we here will be willing in principle to join with you in aiding the Bank of Italy towards de jure stabilisation. This refers particularly to your third pararaph and is the outcome of the understanding with the Bank of Italy which I mentioned when writing to you on the 26th of last month. Yours Benjamin Strong, Esq. t sincerely, 11,1ja611,1, Ccovux.k. A_LL/q. 1/4"et-) .11A05 JJair, , I:asoN.1L. 4anh of Ctgland, jondmw2. _ovember, 1927. dear Strong, In continuation of my letter of the 1st instant on the subject of Portugal, I am now able to enclose a copy of a Memorandum which has been prepared for me by Messrs. Lazard Bros. and which will, I think, give you the latest - the very latest - information. I understand that the Portuguese Government gill indeed make formal application to the League at its meeting next month, in which case a scheme night possibly come before the League in March. I fear you will not have time to mention this to Jeremiah Smith, but he will of course be fully informed once he gets to Geneva and I am for,:iarding letters with this object to Sir iirthur Salter and to Sir Otto Lliemeyer. Yours mo Benjamin Strong, Esq. sincerely, COPY 22.11.27 P ORTUGAL 1:_essrs.Lazard Brothers & Company Limited have been negotiating for the last six months with the Portuguese Government with regard to the possibility of issuiniz large external loan for Portugal in London and other financial centres. Lessrs.L.B.& Co. have from the commencement informed the Portuguese Government that in their opinion no such loan was possible or should be made without being accompanied by a comprehensive plan of budgetary reform and currency stabilisation. For some time the Portuguese Government, being approached from several other quarters, were not prepared to consider a scheme of this character. A few months ago however they approached ressrs.L.B. & Co. again for their co-operation and agreed to the latter sending an expert to make a preliminary investigation into the financial situation. This investigation was carried through by 1.1r.Binder of 1:essrs.3inder, Hamlyn Company, who spent more than a month in Lisbon in preparing his report. The report confirmed Eessrs.L.B. & Co. in their view as to the situation, although it did not reveal any difficulties so great that they could not, in their opinion, be dealt with satisfactorily by a comprehensive scheme of reform. Meanwhile, :.:essrs.L.B.& Co. had approached the Governor of the Bank of England to know what the Bank's attitude would be with regard to any such scheme. Mr.Norman stated that while he was anxious to do everything he could to help towards a scheme of reform being carried through, the full support and co-operation of the Bank of England could not be counted upon unless the Loan were to come through the usual channels of the League of Nations. Er.Brand 11±.Brand of Yessrs.L.I2.& Co. paid a further visit to Lisbon again to inform the Portuguese Government of the position. He stated to them that while in the view of Messrs.L.B.& Co. the Portuguese budgetary and currency difficulties might be remedied by a comprehensive scheme, no loan of the amount and character required could, in. view of the fluctuating political history of the country in recent years and existing political difficulties, be issued on the international markets without every factor being favourable and in particular without the support of the Central Banks. Messrs.L.B.& Co. could therefore continue their negotiationg with the Government only if the latter were prepared to invite the co- operation of the League of Nations. The Portuguese Government have now decided to take this course and are making an immediate application to the Council of the League to be considered at its forthcoming meeting at the beginning of December. The Government hope that a scheme of reform might be drawn up and agreed to between December and the next z.eeting of the Council in Earch, so that an issue could be made in the course of the summer. If the negotiations are successful and a loan is issued, the Portuguese Government have agreed, in consideration of the assistance they have given, to entrust the issue to Messrs.L.B.& Co. and through them to their associates in other financial centres on terms to be mutually agreed. Eessrs. L.B.& CO. have invited, so far as New York is concerned, the cooperation of the Guaranty Trust who have expressed their interest in the matter. It is impossible to say at the moment what would be the size of the loan required, but it would appear as if anything from eight to ten million pounds would be wanted. PERSONAL Illanit of otogiand, Ionflon, III: E.C. 2. 26th November, 1927. My dear Strong, I think the best way for you to judge the reaction here to the publication of Gilbert's memorandum of the 20th October is to send you some cuttings and this I now do by way of answer to your letter of the 15th 7ovember. The effect of publication here, as perhaps in Germany, was somewhat spoiled by the discussions which had oreviously taken place in the German press on the assumed contents of the memorandum. But the reception here was very good, even if not very wide: and while few papers could publish so long a memorandum in full, there was general support and practically no criticism. The German Government's reply received little attention and was, I think, nowhere published i1 full in our newspapers. But you must not think that because our newspapers have thus, supported Gilbert that all individuals are of the same mind. There is a small but thoughtful and well instructed body who take a different view: they ,rould probably hold that in several of his communications to the German Government, including the last, Gilbert has not been really wise or prudent: he has meddled with German internal affairs: because because he has implicitly (if not explicitly) hinted that e::cessive foreign borrowing has deliberately endangered future transfers: and because PERSONAL Page 2. Benjamin Strong, Esq. 26th November, 1927. because his criticism of the German Government may bring disunion between the creditors and on the Reparation Commission and increase the difficulties of an ultimate or early German settlement. I do not hold these views: I believe our duty is to support Gilbert through thick and thin whatever he does and I am quite sure he knows better what he ought to do than I do. But it is right that I should mention to you that such views as the above exist contrary to Gilberts: only someone of much wider knowledge than myself of the whole subject can really judge between the two views. This, of course, is intended for no eyes or ears but your own. Yours nost incerely, 40 6 Benjamin Strong, Esq. Cank thviatO 23th November, 1027. 71ith the Governor's Compliments. Supplemental to the newspaper booklet sent on the 26th 7ovember, 1027. PERSONAL :Inh ogngland, 3511d0U,E.C.2. 28th November, 1927. My dear Ben, Please read this in continuation of the earlier part of my letter of the 21st November. I an not sure that I shall go by the 'Otranto' on the 7th January: I may go a few days earlier via Toulon and thence by sea to Gibraltar. But anyway, I count definitely on meeting you at Algeciras about the middle of January unless you cable to the contrary within the next week or two. 2. But you have never told me whom you expect definitely to be visitors at Algeciras - see your and my personal letters of 31st August and 10th September. Let me therefore please repeat that if any Central Bankers :_re likely to be there who do not sreak our lingo fluently, it might be wise and would, I think, be very helpful if I '::ere to get Siepmann to come along, at lest for Dart of the time that we Algeciras. re at I shejl not do or say anything about this until you cable me. From a totally different angle I have another suggestion to make regarding Algeciras. Perhaps the chief uncertainty or danger which confronts Central Bankers on this side of the Atlantic over PERSONAL Page 2. Banjamin Strong, Esq. 28th Novenber, 1927. over the next half do-Len years is the purchasing power of gold and the general price level. If not an immediate, it is a very serious question and has been too little considered 1.11) to the present. Cassel, as you will remember, has held up his warning finger on many occasions against the dangers of a continuing fall in the price level and the Conference at Genoa, you will also remember, suggested that the danger coulL be met, or prevented, by a more general use of the 'Gold Exchange Standard'. This is a very abstruse and complicated problem which personally I do not pretend to understand, the more so as it is based largely on somewhat uncertain statistics. But I rely for information from the outside about such a subject as this not, as you mi;tht suppose, on I.:cKenna or Keynes, but on Sir Henry Strakosch. Origin: I am not sure if you know him: many years in Johannesburg: a student of economics: interests: Austrian 20 years in this country: a gold producer with general financial perhaps the main stay in setting up the South African Reserve Bank: a member of the Financial Committee of the League and of the Indian Currency Commission: public spirit, genial and helpful... and so forth. full of I have ,robably told you that if I had been a Dictator he would have been a Director here years ago. This PERSONAL Page S. Benjamin Strong, Esq. 28th November, 1927. This is a problem to which Strakosch has given much study and it alarms him. He would say that none of us are paying sufficient attention to the TA)ssibility of a future fa_l in prices or are ta]:ing precautions to prepare any remedy such as was suggested at Genoa, namely smaller gold reserves through the Gold Exchange Standard., and that you, in the long run, will feel any trouble just as much as the rest of the Central Bankers will feel it. My suggestion therefore is that it might be helpful if I could persuade Strakosch too to come to Algeciras for a v.eek: his visit could be quite casual ana you would not be committed to any intrigues with him. So far I have not said a word about this to Strakosch or to anyone else and I shall not do so until you cable that you agree to this: so it follows that I am quite uncertain whether he could come at all. Then your plans are clear, you must please send a word by cable on (1), (2) and (6): and also (4) overoage. Yours very sincerely, tlYb44..440%.. P.S. (4). Benjamin Strong, Esq. And PERSONAL. Page 4. P.S. 4. Benjamin Strong, Esq. 28th November, 1927. ,And while I am at it, I must add another suggestion, viz., that it might be helpful if Dr.Stewart, too, were to come to Algeciras on his way to London. Vie intend, do we not, that, generally speaking, in the future he shall be an ally. I would not like Dr.Stewart to arrive in London while I were away and therefore (assuming you have not many other visitors) I would be glad if you cared to ask Dr.Stewart to accompany you to Algeciras, whence he could make his way to London with me. I shall be writing to him in a day or two just to say that we shall be ready whenever he can turn up at or after the Yew Year. r, 6"1 :707. 1I:7, 040 1144C 1. Dr.r,achmarsa hopes th.:;.t. the :looting betwee Central Banks early not year will no euoestod) a series of individual me but a regular Conference. Ye feels :F Vissering - and, if necessary, interests, as smaller Central Banha, and he proposes to consult with the The Swiss have no particular fear of a s but Draachmann is anxious that the =mooted with gold should some up f the Governors meet, more esrcoially in an exceptional position. The dis Latin Union has thrown the .1:ss bac 1050 which is clearly unworl:able. T be, befere long, a new currency Law; important that this Law should repr considered plan. The suspension of system is authorised by law only in its consequent disturbances. It is late in the day to plead this excuse the anomalous state of affairs which Anti, in the meantime the 1rational L pressure of private banks (who desir circulation) and of other influence possible to withstand much longer. for a definitive settleuont ana t day - the Uational LanIc wishes to b considered solution, reached in con Central L'ariks. 3. The reply to our letter isms been delaye concerns Bone, not Zurich. The re DA, but has not yet been translated from the Ger:Aan. Dr.Baehmann would fin it easier to eorresfond in German and I told him that if he earea to send letterc eiTaally to no in Ger:mn they would reach the Governor well. 6th Deeenber, 1927. ,,,,c