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William McChesney Martin, Jr., Papers
Box 16/Folder 1


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Series IV, Subseries B
General Correspondence

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MILATTACHE LONDON

FROM

:ma

NUMBER : SVC 538

SUBJEa

'BUSINESS SITOATtON AND GOVT SECURITIES

DATE

ACTION TO :

MARKET.

=0800202 JULY 49

RECEIVED:

op

INFO TO

SECURITY: CONFIDENTIAL

DECODED BY:

TYPED BY: JfRJ

Pis Pass to Seoy Snyder:
1HE FOLLOWING IS GEORGE HASS* REPORT ON THE BUSINESS SITUATION AND ffiE GOVT
SECURITIES MARKET.
INDUS 2RIAL AC!EVITr IH THE iARLY PAHT OP JULY HAS BEEH CURTAILED BY HOLIDAY
INFLUENCES, VACATION SHJTDOMS AND CURmiLED COAL OUTPUT.

A PARTICULARLY

SHARP DROP HAS OCCURRED IN STSSL OUTPUT, WI3H STEEL OPERATIONS ffilS WEEK
SCHEDULED AT OKLY 61*2

PERCENT OF CAPACITY.

CST THE OOHER HAND, INDICATIONS OF IMPROV^ISNT HAVE APPEARED IN SOME INDUSTRIES
WHICH HAVE UNDERGONE SHARP READJUSTS* IS, SUCH AS TEXTILES AND NONFB8ROUS
1IE3BLS.

FOLLOWING AN UPTORH IN OUTPUT OF WOOLEN TEXTILES IN MAY, TRADE

REPORTS NOW INDICATE THAT AN BJPROVMHHT HAS ALSO OCCURRED IN NEW ORDERS
RECEIVED BY RAYON PRODUCERS.

SIMILARLY, IN THE NON5ERROUS METALS DHXTSORY,

AN INCREASE IB THE DMAND FOR LEAD AND COPPER HAS BEEN NOTBD.

IN EdCT, THE

PRICE OF COPPER ROSE YESTERDAY FOR THE FIRST TIME SINCE ffiS DECLINE IN 3HE
PRICE OF THIS MET&L GOT UNDER WAY EARLY IN THE SHSNG.
A SUSmiNED HIGH LEVEL OF CONSTRUCTION ACTIVIST CONTINUES TO BE A SmONG
EBAURE OF THE BUSINESS SITOATION.

NEW CONSTRUCTION EXPENDUJRES IN JUH1

ROSE MORE THAN SEASONALLY, AND SLIGHOLY EXCEEDED OHE CORRESPONDING MONTH
LAST YEAS.
ENGINEERING CONSTfflJCTLQH CONTRACT AWARDS, AS REPORTED BY HIE ENGINEERING
NEWS RECORD, LAST MONQH ROSE TO 2HE HIGHEST LEVEL SINCE AUGUST 1942

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page two*

VALUE BASIS, AND EXCEEDED YEAR-EARLIER LEVELS BY 20 PERCENT.

HOWEVER, THE

VALUE OF CONSTRUCTION CONTRACT AWARDS (INCLUDING RESIDENTIAL) AS REPORTED
BY 3HE F. W. DODGE CORPORATION FOR 37 EASTERN STATES, FOR THE PERIOD JUNE
1-E2, WAS ABOUT 10 PERCENT BELOW THE CORRESPONDING PERIOD LAST YEAR.
BASIC COMMODITY PRICES HAVE STRENGTHENED SOMEWHAT RECENTLY, WHILE STOCK PRICES
HAVE RISEN ABOUT 5 PERCENT FROM THE LOW FOR THE YEAR REACHED 3 WEEKS AGO.
MEANWHILE, BUSINESS LOANS OF WEEKLY REPORTING MEMBER BANKS HAVE SHOW ANOTHER
DECLINE FOR THE TWENTJT*FOURTH CONSECUTIVE WEEK.
THE GB5BRAL PRICE LEVEL SHOWED A H7R3HSR DECLINE LAST MON1E.

HOWEVER, THE

DECREASE IN THE WEEK ENDED JUNE 28 WAS VERY SLIGHT, WITH THE BLS ALL* CCMMODITY
WHOLESALE PRICE INDEX RECEDING ONLY 0,1 PERCENT TO 153.1.

THE DOMINANT

mCTOR IN SHE DECLINE WAS A DROP IN THE PRICES OF FABM PRODUCTS, ALTHO
PRICES OF ALL COMMODITIES OTHER THAN FARM PRODUCTS AND FOODS AGAIN DECREASED
SLIGHTLY.
BASIC COMMODITY PRICES HAVE STRENGTHENED SLIGHTLY RECENTLY, BUT SHE RISE
IS ffiE BLS INDEX OR 28 BASIC CQyMODITIBS SINCE THE MIDDLE OF LAST WEEK HAS
BEEN RELATIVELY SLIGHT.

AN INCREASE 3N THE FOODSTUFFS COMPONENT WAS THE

PRINCIPAL FACTOR IN THE SMALL ADVANCE, ALTHO THE INDUSTRIAL RAW MATERIALS
GROUP ALSO ROSE SLIGHTLY.
A SUBSTANTIAL RISE IN WHEAT PRICES WAS THE OUTSTANDING FACTOR IN THE ADVANCE
IN THE FOODSTUFFS GROUP, WHILE A RISE OF 1 CENT PER POUNB IN TH8L?&IflSoQ]fc469-2506

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COPPER CONTRIBUTED IMPORTANTLY TO THE SMALL INCREASE IN THE INWSTRIAL BAW
MATERIALS GROUP.
KB RISE IN THE PRICE OP COOPER IS ESPECIALLY SIGNIFICANT, SINCE IT IS THE
FIRST PRICE INCREASE IN THE NONFE8ROUS MET&LS GROUP SINCE THE DH3LINE IN
NONFSRROUS MET&LS PRICES GOT UNDER WAY LAST MARCH.

REFLECTING THE INCREASE

IN THE PRICE OF COOPER, A LEADING FABRICATOR HAS RAISED THE PRICE OF COPPER
AND BRASS PRODUCTS.

FURTHER EVIDMCE OF AN UNDERLYING IMPROVEMENT IN THE

MARKET FOR COPPER IS SS5E IN A RISE IN C OPPER SCRAP PRICES.
THE DEMAND FOR LEAD ALSO HAS IMPROVED CONSIDERABLY IN RECENT WEEKS AND THE
MARKET FOR LEAD HAS A FIRM UNDERTONE, ALTHO NO PRICE INCREASE HAS OCCURRED
THUS FAR.

ON THE OTHER HAND, THE MARKET FOR STEEL SCRAP OS STILL WEAK, WITH

ANOTHER REDUCTION OF $1 PER TON IN STEEL SCRAP AT PHILADELPHIA LAST WEEK.
STOCK PRICES HAV E SHOES PE&SISTEKT STRBJGTH RECENTLY, AND HAVE RECOVERED
SLIGH3LY MORE 1HAN HALF OF THE LOSS SUFFERED IN TBS DECLINE FROM MIEMIAY TO
JUNE 13,

WHEN PRICES HIT THE LOWEST LEVEL OF THE YEAR.

SINCE THAT DATE THE

DOW-JONES AVERAGE OF 65 STOCKS HAS RISM ABOUT 5 PERCH! T.
THE DOWkJONES STOCK AVERAGES HAVE CLOSED HIGHER IN THE LAST 5 TRADING SESSIONS
OHUS SHOWING A STEADY RISE SINCE JUNE 28. 3 IT IS OF INTEREST THIS WAS THE DATS
OF THE RECENT ANNOUNCB1ENT OF THE FEDERAL 0PM MARKET COMMITTEE.

THE ENSUING

RISE IN PRICES OF US GOVT SECURITIES AND HIGH-GRADE BONDS UNDOUBTEDLY HAS
BSE2I A COUmiBUTING FACTOR IN RECENT STOCK MARKET STRMG3H.

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538

TYpED BY.

THE ALMOST UNINTERRUPTED DECLINE IN STEEL OUTPUT SINCE MID-MARCH HAS BEEN
FOLLOWED BY A SHARP DROP OP 18,7 POINTS IBIS WEEK, WI3H OPERATIONS SCHEDULED
AT ONLY 61.2 PERCMT OF CAPACITY.

WILE THE INDEPENDENCE DAY HOLIDAY HAS

A CONTRIBUTING FACTOR IN THE DECLINE, IT SHOULD BE NOTED THAT THE DROP IN
THE CORRESPONDING WEEK LAST YEAR WAS CHLY 4.9

POINTS.

IN ADDITION TO THS EFFECTS OF SLACK DBIAND AND VACATION SHUTDOWNS, THE
NEARBY OUTLOOK FOR STEEL OPERATIONS IS CLOUDED BY THE POSSIBILITY OF LABOR
TROUBLES.

THE US STEEL CORPORATION YESTERDAY REJBCT3D WAGE AND OTHER DSIANDS

OF BBS CIO UNITED STBELWORKERS, AND A STSEL STRIKE MIGHT POSSIBLY DEVELOP
•
OS JULY 16 AS A RESOLT OF THIS ACTION.
AN BUaiENT OF STRENGTH IN THE DEMAND FOR STEEL CONTINUES TO 3E PROVIDED BY
A HIGH OUTPUT OF AUTOMOBILES.

AFTER RISING TO THE HIGHEST LEJTHL SINCE 1929

IN THE WEEK ENDED JUNE 26* ESTIMATED OUTPUT OF PASSHJGER CARS AND TRUCKS H
THE US AND CANADA LAST WEEK DECLINED ABOUT 6,800 UNITS TO 146*200.
A FACTOR IN THE MODERATE MOP IN OU1PUT LAST WEEK WAS THE CUREOIMHIT IN
OPERATIOHS AT SOME PLANTS CAUSM) BY THE HEAT.

DESPITE A07ERSE WORKING CCK*

DITIONS, HOWEVER, THE OUTPUT OF CARS AND TRUCKS LAST WEEK WAS 30 PERCS3T
HIGHER THAN IN THE CORRESPONDING WEEK LAST YEAR.
MEANWHILE, BUSINESS LOANS CONTIMJE1 TO DECLINE.

COMMERCIAL,

INDUSTRIAL,

AND AGRICULTURAL LOANS OF WEEKLY REPORTING MaiBER BANKS IN JOB WEM ENDED JUNE
29 SE01TO A FURTHER DROP OF fill MILLIOH.

THIS COMPARES WI5H A DECREASE OF

OHLY |10 MILLION IN THE CORRESPOND!^ WEEK LAST YEAR.

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THESE

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MILATTACHE LONDON
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WAR SVC 638

SHOWN UNINTERRUPTED DECLINE SINCE EAELY IN JANUARY, AND OH JUNE 29 HERE ABOUT
$1,160 MILLION BILOW LAST YEAR'S LEVEL.
REAL ESTATE LOANS OF TJEEKLY REPORTING MEMBER BANKS IN THE WEEK ENDED JUNE
29 SHOWED A SMALL INCREASE TO A NEW HIGH.

"OTHER* LOANS, MICH INCLUDE

INSTALUCEHT LOANS, ALSO ROSE TO A NEW HIGH DURING THE PERIOD, WITH AN INCREASE
OF $60 MILLION.
DEPARMEHT STORE SALES IN THE WEEK ENDED JULY 2 WERE 11 PERCENT BELOW 3HE
CORRESPONDING WEEK LAST YEAR IN DOLLAR VALUE.

THIS COMPARES WITH A DECLINE

OF 7 PERCENT BELOW YEAR-EARLIER LEVELS IN THE FOUR WEEKS 5KDED JUNE 25 AND A
DECLINE OF 4 PERCENT FOR HE YEAR TO DATE*
A DISCUSSION OF 3HE GOVT SECURITY MARKET FOLLOWS*
ffiERE HAVE NOW BEEN SIX SRADIBS DAYS SINCE THE 0PM MARKET C<M£ITTEEfS
ANNOUNCEDT ON TUESDAY EVEHING, JUNE 28.

DURING 1HE FIRST FOUR DAYS, 3EERE

WERE SHARP ADVANCES IN ALL SECTORS OF THE OOVT SECURITY MARKET. IN 1HE LA^T
2WO DAYS, EOWKViat, BOND PRICES HAVE LEV3*ED OFF. THREE ISSUES HAVE SHOWN
NET DECLINES FOR THE TWO-DAY PERIOD* PRICES OF MOST OF 3HE RB4AINIBG BC«D
ISSUES, HOWEVER, HAVE SHOWN SMALL GAINS RANGING UP TO 4/32.
MR ROUSE TOLD ME 1HAT ffiE LEVELING OFF IN BOND PRICES CAME ABOUT BECAUSE HE
GOT IN TOUCH WIOH VARIOUS «OVT SECURITY DEALERS TO PROTEST 3HE FACT 1HAT 3HE*
HAD NOT BEEN COOPERATING IN OHE FIRST FOUR TRADING DAYS AFTER THE ANNOUNCEMENT.
MANY OF THE DEALERS HAD BEM S O&IEWHAT GREEDY.

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THEY WERE HOLDING BACK AND
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M1LATTACHE LONDON
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DECODED BY: P8*6

six

TYPED BY:

NOT FEEDING ISSUES TO THE MARKET FROM THEIR PORTFOLIOS.

THE LONGEST RESTRICTED &-1/2 IS NOW QUOTED AT A BID PRICE OP 102*15, A
NET GAIN OF —22/32 SINCE JUNE 28*

THE SHORTEST RESTRICTED BOND, THE

a.l/4'S OF 1959-62, HAS GAINED 31/32*
IS QUOTED AT 106.07.

THE LONGEST BANK-ELIGIBLE 3.1/2

A NET GAIN OF 1-7/32.

NET GAINS FOR SHORT AND INTER*

MEDIATE TERM BANKp. ELIGIBLE BONDS EXCLUDING THOSE CALLAGE IN 1949, RANGE
FROM 3/32 TO 14/32.
BECAUSE OF EASY MONET MARKET CONDITIONS CERTIFICATES AND BILLS HAVE NOT
SHARED THE BOND PRICE LEVELING-OFF WHICH HAS OCCURRED THESE PAST TWO
DAYS.

YESTERDAY'S ADVANCES WERE THE SHARPEST OF THE PRESENT MOVE.

ADVANCES WERE LESS EXTENSIVE AND THE LOWEST BILLS WERE IN CHANGED.

TODAY'S
THE LONGEST

CERTIFICATE OF BTDEBTSUESS GLOSS) AT A BID PRICE TODAY TO YIELD 1.03 PERCHHT.
SHIS COMPARES WITH A CLOSING BID OF 1.22 PERCENT OR TUESDAY OF LAST WEEK.
TODAY* S CLOSING BID ON THE LONGEST TREASURY BILL WAS 1.00 PERCENT,
COMPARES WITH 1.17 PERCENT ON JUNE 28.

THIS

THE AVERAGE RATE ON THIS WEEK'S

TREASURY BILL OFFERING IAS 1.052 PERCENT.

THIS COMPARES WITH AN AVERAGE OF

1.168 PERCENT ON THE LAST POUR WEEKLY tffii*S[JRY BILL OFFERINGS.
THERE HAVE BEEN NO SALES OF TREASURY BONDS FOR SYSTEM ACCOUNT SOLD #L4.3
MILLION OF BILLS AND $5 MILLION OF CERTIFICATE TODAY.
THE MARKET HAS BEEN ORDERLY AND GENERALLY THIN,
VOLUME HAS BEEN THE SCARCITY OF SUPPLY.

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THE LIMITING FACTOR ON

THE DOWNTURN IN YIELDS OS GOVTS
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page seren
HAS MET HfLTH PROMPT RESPONSE -IN TEE PRIVATE LENDING FIELD.
ICIPAL BOND PRICES HAVE ADVANCED.

CORPORATE AND MUN*

IN VIEW OF THE BETTER MARKET SITUATION,

UNDERWRITERS AND DEALERS HAVE MADE StJBSIfcNTEAL PROGRESS IN REDUCING

HEIR

INVHSTORIES OF UNSOLD MUNICIPAL AND CORPORATE BONDSQf OHE DISCOUNT CORPORATION,
ON TUESDAY, REDUCED BANKERS* ACCEPTANCE RATES BY 1/8 to 1/4 OF A POINT*


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•
signed

fQLET

TELEGRAM RECEIVED
id—37113-1

From:

ACTING SFC TREASURY

Date:

OPO

JULY 2?, 1949

No.:
Code:

CLEAR

Received:

JULY 23

840AW

SECRETARY CF THE TREASURY SNYDER.
UNITED PRESS SAYS PRESIDENT HAS DELAYED SENDING
TO CONGRESS PROGRAM! OF $1,450 MILLION FOREIGN MILITARY AID.
SUBMISSION PREVIOUSLY FORECAST FOR TODAY FOLLOWING SENATE
RATIFICATION NCRTH ATLANTIC PACT VOTE 82 TO 13. OF TWELVE PARTICIPATSNG NATIONS WE SEVENTH TO RATIFY. FORECASTS ON MILITARY
*m AID PROGRAMS AID $1,030 MILLION WOULD GO TO PACT SIGNATORIES.
HOUSE DEFEATED B R A N N A N FARM SUBSIDY PLAN, TTTEN
REPEALED A! KEN FLEXIBLE PRICE SUPPORT SYSTEM WHICH WAS SCHEDULED
TO GO

NTC FFFFCT NEXT JANUARY, AND VOTED ONE YEAR EXTENSION

PRESENT PRICE SUPPORT LAW. UNITED PRESS SAYS SENATE WILL LET
B R A N N A N PLAN DIE BUT OPPOSES EXTENDING PRESENT LAW.
WASHINGTON POST SAYS SENATOR ELMER THOMAS DROPPED EFFORT TO H A V E STOCKPILING LIMITED TO ONE YEAR SUPPLY AND NO
LONGER EXPECTS RESCINDING OF $600,000,000 OF CURRENT STOCKPILING
APPROPRIATION.
SYLVIA PORTER COLUMN SAYS TIME HAS ARRIVED FOR
CUTBACK IN WARTIME EXCISES. HOLDS TREY M A K E NO ECONOMIC OR
SENSE WHEN WE ARE TRYING RESTIM.ULATE BUYING. REPORTS MOUNTING RR
PRESSURES MAY BRING ACTION THIS SESSION. CITES UNEMPLOYMENT FUR
INDUSTRY.

TYPED: FSP/1130
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JULY 23

THE SECRETARY OF THE T R E A S U R Y
WAS H I NGTO N

December
Twentieth
1949
Dear Bill:
Each day of our association makes me more and more
aware of the excellent service you are rendering in your
capacity as Assistant Secretary - not only to me personally
but also to the Treasury. At this time, I wish to thank you
for the many thoughtful things you do to lighten my burdens,
and, in addition, I wish to commend you on the outstanding
job you are doing in supervising and directing the operations
of the Office of International Finance. I realize that a large
part of the credit for the successful way in which that organization is operating is due to your able leadership, and that
your advice and cooperative assistance has aided materially
in the solution of the many international monetary and
financial problems that arise daily.
As the Christmas season is now approaching, I wish
to extend to you and your family my best wishes for a very
pleasant holiday. It is also my hope that you will enjoy the
best of health and happiness in the New Year.

Honorable William McC. Martin, Jr.
Assistant Secretary of the Treasury
Treasury Department
Washington, D. C.


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Dear Bill,
This copy of my letter to
Secretary Snyder is for your information.

S. H. B.

cc Mr. Wm. McC. Martin

BOARD OF TRANSPORTATION
THE CITY OF NEW YORK
NEW YORK 13, N. Y.

S

H. B I N G H A M
CHAIRMAN

June 5, 1950

Hon. John W. Snyder
Secretary of the Treasury
U. S. Department of the Treasury
15th St. & Pennsylvania Ave., N.W.
Washington 25, Q. C.
Dear Mr. Snyder *
I want to thank you for the opportunity I had on Saturday
to discuss some of the problems confronting the transportation industry in this country. It was a most
stimulating and enlightening meeting.
As you know, I have been in the city transit field since
1915, in all capacities from surveyor to Chairman of
the Board of Transportation of the City of New York.
My appointment by Mayor O'Dwyer was the first
appointment to the Board from the ranks. I have also
studied main line railroad operations here and abroad.
I was in the military railway service in both wars,
serving as Assistant to the Director General, Military
Railways, ETO during the last war, and spent three years
prior to the invasion on the planning and design of equipment. Your intimate knowledge of this highly technical
field was most impressive.
As promised, I am sending you, under separate cover,
copies of some of the reports and studies I have made.
To make these studies my services were loaned by the
City of New York. I would be pleased to assist you and
Bill Martin on the same basis. I am certain that a
request for my services made to Mayor O'Dwyer by
your office would be very cordially received and honored.
I hope that you will find this material of interest and that
the opportunity to continue our discussion will arise.
With kindest personal regards, I remain


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Sincerely,
S. H. Bingham
Chairman

G
0

I
T

Birch-Seville Apia.
fort Lauderdale, florida
December ?» 1950

Bear Secretary Snyden
Bespit© the "beguiling and beneficent beauties of florida sad
ay need for the rest I aa having, I have "been unable to keep
my aind from the present world crisis (including Korea) and
the threat it involves for the security and the strategic position
Of the TJnited States and for the free, civilized vorld we wish
to retain and build. I know there is all too little I can do
about it (or perhaps all too little I know about it), but I have
nevertheless allowed my concern to find expression in a few notes
on what I think al-ht be done, I am sending them oa to you for
whatever worth they may have.
Many of these thoughts I have discussed vith Bill Martin over the
past several months, fhey are certainly not strikingly original,
and 1 know they are not fully rounded or complete, or written
with full knowledge of th^ strategic and political situation. I
believe, however, they are shared by responsible people who are
no more interested than I as in political recrimination or crying
over past mistakes, but who are deeply concerned ov<;r the survival
of the United States ant'i who wish to avert ejiy further deterioration in our weakened strategic position. If at any point they
may soxind critical of past policies, it is only to point the way
to what I, at least* regard as essential to our future and the
future of a free, civilized world,
So, for what they are worth, I send them along. If they have no
other use, they will &t least have served to express som« of Wf
concern*
With every goofl wish to you in the noble struggle you are mstking,
I smt as always, admiringly and sincerely yourtt


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A PBQgHAM fOB tf.3. IBA2JKRSR2P II.THB TO§I

fhe present crisis facing the United States (la its "broad sense and not limited
only to the ismediate Korean situation) should make olear that our war and post*
war policy, i.e., our political (diplomatic) policy, has been found wanting, for
ire are now confronted with the threat and fear of another world war, which is the
failure of diplomacy*
In considering the security of the tSaited States and our present strategic position,
we find there has occurred during the past ten years a substantial alteration in
the world "balance of power - to onr serious detriment - arising from the following
factors, among othere:
I* fhe defeat of Germany and Japan*
2» fhe weakening in the power of the British Bspire and Commonwealth.
the "building up of the strength of Coniraunist Bussia, through means
including external aggression (absorption of the Baltic States, the
Balkans, Sastera Germany, etc*) and internal aggression designed to
weaken other countries (subversion, spies, capture of control of labor
unions and media of public opinion).
fhe displacement of Chiang Kai-shek fey the Chinese Communists - thus
converting China with its vast aillicms fro» a nation friendly to the
Hoi ted States and the Western powers to a nation which is openly hostile
and is eabarked upon aggressive expansionism akin to that of Coanranist
Bassia (e.g., fibet, Korea).
Our future policy Eust be designed among other tilings to restore some balance of
power throu^i building uy offsetting blocs of power (our Allies, Oenaany, and Japan),
through underainin? the power of Cofiraunist Bussia and Cosaaunist China, and through
rolling bm«k the Iroa Curtain*
It seems clear that the policy of containment of Bussian CosKmnism which ve hare
pursued has not prevented further successful aggression and penetration by Cocnaunist
Russia and Communist China* It seems equally clear that a defensive policy is 'bound
to fail and thsit we must evolve an offensive policy which will in fact roll "back
the Iron Curtain*
In formulating future policy, it may "be helpful to review recognizable elements of
our paet policy which have "been found wanting!
1. Attempting to cooperate with Coasmunist Bussla in the belief she
could be persuaded to peaceful policies.
2. Primary, if not virtually exclusive, emphasis on Barope in our
foreign policy and efforts to curb Coiawonist lussia.
3* Secondary eisphasis on, if not virtually abandonment of, China
and the rest of Asia*
.

Defensive or containment tactics against Comaranist Bussia«


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5«

la our policy and propaganda, always trying to catch tip with
the last Communist lie*

6. Working with and throit^i a United Hatioas organisation which
includes Communist Bassia.
**• premises of a Hey. Policy*
It in submitted that the present U.S. strategic crisis demands a reorientstion of
our forei^ political policy - oa the diplomatic, economic, Informational and
psychological warfare fronts - based on somewhat different and realistic premises.
These premises would Include, among others, that:
1* 3$e Common!3t expansionist offensive started years ago oa all
fronts - in the Baltic States, the Balkans, Central Burope, Western
Surope, Middle last, Asia, Latin America, and in the United States that the offensive is world-wide and not restricted to Europe, and
that the outbreak of the Korean war was the dramatic manifestation of
a war which had Been waged for years.
2. Btxssian Communist aggressive expansionism is revolutionary, dynamic,
Ideological, conspiratorialt subversive, oriental (with complete
disregard of human life), and ruthless "beyond Western "belief, and is
coupled with traditional Russian nationalistic expansionism*
3. Communist aggression is made up of external and internal aggression
against other countries - and is world-wide in its scope and activities.
*fr.

The Busslan Communist "bureaucracy, living oa a higher standard than
Russia produces, will attempt to absorb and live off other countries
and will feed its own people hate, violence and terror as part of
its power program.

5* Chinese Communists are not primarily agrarian reformers but are
puppets, stooges or allies of Moscow - their leadership largely
Moscow-trained and oriented.
6. Our policy and approach mu«t be world-wide to meet and counter the
world-wide policy and approach of Communist Russia.
?. We aloae cannot compete on a military manpower basis with the Communist
BUBsian and Chinese millions.
Ill* A Program for U.3« leadership in the fret World.
A program for U.S. leadership in the free world should include, among other things,
the following!
1. file urgent build--up of U.S. military potential and the military
potential of like-minded, effective and willing Allies.
2. Shifting our policy to the •political offensive la the diplomatic,
informational and psychological warfare fields and working out *
detailed program to "be implemented day after day in successive waves
of political attack to roll back the Iron Curtain.

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3* Begin by publicly proclaiming all Communist Russia's violations of
International agreements and under standings during the war and postwar periods (it ia understood they number over fifty violations in
the post-war period alone).
**•*

la view of these violations and the demonstrated external and internal
aggression of Cocrauaist Bassia, repudiate forthwith U.S. adherence to
and obligation under the Potsdam, Yalta and Teheran agreements with
CoiaiBunlst Bussia. (fhis will in part reestablish our moral position
with the non-Coiar^unist peoples of the Balkans and Asia,)

5* Intensify a sira-ole informational and propaganda campaign throughout
the world on Russian (and Chinese) GomEiunist ai&sv purposes, actions
and performance eorrpared with U.S. aims, purposes, actions and performance*
(Besponsible observers in other countries report our present informational
and propaganda campaigas are too hi^-brow and ineffective to combat
simpler and cruder Bassian techniques*)
6*. Intensify direct subversive campaigns (met excluding bribery) ia the
Balkans, Eastern Germany, China and other parts of Asia, and in Hussia aiding and financing anti-Consminlst underground and opposition movements.
(Dollars and lives invested in these activities are many times more
effective than general economic aid or subsidies, as the fiassians well
know and have consistently practiced to our disadvantage aad strategic
loss.)
7* Organize and help equip and finance a volunteer international brigade
for freedom recruited fros escapees and refugees from Communist terror ~
teles (including General Anders and his thousands of loyal soldiers),
Czechs, Hungarians, Sumaaians, Bulgarians, Latvians* Isthonians,
Lithuanians, Russians, Chinese, and others, including volunteers fros
other countries, willing to fight Coaaaunist oppression aad to restore
freedom* Use these forces wherever necessary to engage aad repel
Communist troops.
8. Permit and assist the Germans aad Japanese to rearm as rapidly as
possible, since we must not over-commit our manpower or try to engage
the Bussians or Chinese or other Corastinists on a manpov/er basis*
9* Discontinue cur quarantine and immobilisation of the Formosa Chinese and
allow them to fight where they wish - oa the Chinese mainland or elsewhere,
to engage, tie down or divert Coscaunlst forces and aid guerilla forces in
China.
10, form an alliance, if possible, with the fi^httra of Asia aad the Middle
last - I.e., the forks, the Iranians, the Pakistanis, the Siamese, the
Filipinos and others. In the Moslems we may well find effective, active
allies. India may or may not formally join such an alliance, but may, la
fact, cose along. Although this alliance probably could not be selfoperating (as is the Forth Atlantic Treaty), we should commit ourselves to
furnish military arms aad equipment.


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11, In Europe we should put our emphasis on the need for an effective
demonstration of their recognition of the world-vide character of
Communist aggression and of their readiness to rearm themselves and
undergo sacrifice on an equal "basis. Our help should "be almost
exclusively in military arms and equipment provided there is a demonstrated will and ability to
12. Sxeept for aid through the permanent institutions (international Bank,
International Monetary fund, Bxport-Import Bank), special economic aid,
which has not conspicuously succeeded in creating the required determination now so sorely needed, should "be reduced to a minimum (possibly
for Austria, Greece, Western Germany temporarily). Self-reliant allies
operating on an economically competitive basis will generally be found
to be stronger and more dependable than subsidized or procured allies*
13* la the United Rations, we should go on the offensive, charging Communist
Sussia and Communist China with aggression - both external and internal*
fhe U.I?, to date has been very much to Comimnist lussia1* advantage as
& convenient and effective propaganda forum. We must, in the U.$. and
elsewhere, give up the game of always trying to catch up with the last
Communist lie. We must go on the offensive in telling the truth and
beating the Communists to the propaganda punch. (The United Nations
should represent a moral and spiritual force for peace, freedom and
civilization,. Communist Hussia and her satellites have perverted the
U.I*, if their presence there may not indeed be said to make a travesty
of it. The departure of Communist Bus si a and her satellites from the
U.N. would not be a tragedy to be feared; it mi^it well serve to clarify
and reestablish the moral position of the U.I.)

The only way to combat the Eussian and Chinese Communists is to go on the political,
propaganda and subversive offensive against them and to avoid, if possible, engaging
our limited II* S* manpower against them la wars which wold bleed us white*
alternative to the positive policy enunciated above may well be to lose Asia to
the Communists, to be thereafter obliged to abandon Barope, and to go strictly on
the oasis of a defense of the United States with our limited XI. S* manpower*


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