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TEROFFICE

OUTE SLIP
A. M.

ApRKS
FROM

DATE

OFFICE SERVICE
MESSENGER SECTION

q- 924
DEPARTMENT
DIVISION
SECTION

-n-

Ivy

DEPARTMENT
DIVISION
SECTION

N. B. USE THIS FORM INSTEAD OF OFFICE ENVELOPE WHEN POSSIBLE,
TO INSUREPROMPT AND ACCURATE !DELIVERY ALL COMMUNICATIONS SHOULD BE DISTINCTLY LABELED




momtk.

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

DATE

Jan. 9, 1924.

1 92_

(Copy to Mr. Snyder)

Ir. Jay

SUBJECT:

Governor Strong

FROM_

VFFY CONFID r NT IAL

I have just been asked by d member of a committee of manegement of
very important organization in this country whether I

would prepare a sugges-

tion for a plank to gr lAo the Republican platform for this year's Presidential

election, which would et4te

the attitude of the Republican Party

towards

the

ederal Reserve System.

All that need be said is a brief word of commendation of the System
and something about keeping politics out of it.

Now as to the commendation,

it seems to me that the beefs of it would be the facts in regard to gold
imports, the volume of credit, and

prices, - in other words,

notwithstanding

the continuous flood of gold, credit has continued ample but stable, and the
fluctuation of prices

i6 gradually being minimized.

It

should be very brief

indeed and nothing like a popular appeal, but a bare cold statement of facts
which would express the fact that the

industry and

the commerce and the

agriculture of the country depends upon the protective end stabilizing functions
of the System.

Ae to politics in the System, I would like to see the

Republican Party pledge itself to discourage any attempt at

political

management, or influence over the Federal Reserve Board or any of

the

control,

Federal

Reserve Banks or their branches, and state it in an uncompromising way.

How would you like to take a shot at
those two lines?

BS. MM



preparing something along

MISC. 3.t 60M-4-22

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE. CORRESPONDENCE
To

Mr. Snyder

F.

DATE

Jan. 50, 1924.

192

SUBJECT:

Governor Strong
Every now and then some one suggests to me that with one-half of the world's
monetary gold in our hands, and more of it coming all the time, the day may arrive
when the nations of the world will adopt some other standard than gold and we will
be left with a handsome collection of dead sea fruit.

I have never regarded that as a menace to our position for a variety of
reasons, which are hardly worth enumerating;

but I have spent a good deal of time

wondering what sort of a development can be expected in the future as a result of
this situation, and I am gradually coming to a conclusion which it might be well
worth while figuring on.
Personally

believing as I do

that the tradition

of

gold is too deep-

rooted in the human mind to be uprooted by acts of governments, it now looks to me
as though we must expect this gold to be used as the basis for world
finance.

banking and

In other words, there will be a gradual but constant drift to this

country of banking transactions upon a gold standard
ready always to pay gold.
standard country.

basis

just because we stand

Investments will he made, preferably in the gold

Loans will be placed in the gold standard country.

In course

of time a greater proportion of commercial credits will be opened with us.

The

country will occupy the position of the world's reserve banker, and this situation
will continue indefinitely.

Even though effort

currencies to stability, it will likely be predicated upon some application of the
gold exchange standard, and there will be gradually erected in this country a
structure of credit of foreign origin far beyond anything which we have previously
anticipated.

Expressing it differently:

instead of being able to return this

gold to the countries from which it came so that they may have a domestic gold



MIS,. 3.1 6031-4-22

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

DATE

Mr. Snyder

Jan. W, 1924.

192_

SUBJECT:

Governor Strong

FP

2

standard, we will hold it as a reserve for a world gold

exchange-standard, we being

the custodian and reserve agent.
I hear stories from many quarters of the extent to which foreign capital
is being invested in this

dliffit47,11140''
-t;

I have described.

country.

It is simply another manifestation of the

It contains possibility of

peril in two respects: (1)

that inflation will be forced upon us by our being forced into the position of
banking for the rest of the

world;

and

(2)

that once our gold

reserve is

pretty

well engaged in that respect, when the gold movement does start it will be a little
more troublesome to finance.
How does this all strike you?

BS.MM




MIS, 3.1 60M-4-22

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Jan.
an.

Mr. Snyder

SUBJECT:

Fr

Governor Strong

2

standard, we will hold it as a reserve for a world gold exchange-standard, we being
the custodian and reserve agent.

I hear stories from many quarters of the extent to which foreign capital
is being invested in this country.

dtiffiet h971.010"

I have described.

It is simply another manifestation of the

It contains possibility of peril in two respects:

(1)

that inflation will be forced upon us by our being forced into the position of
banking for the rest of the world;

and

(2) that once our gold reserve is pretty

well engaged in that respect, when the gold movement does start it will be a little
more troublesome to finance.
How does this all strike you?

BS.MM




FEDERAL RESERVE BANK
OF NEW YORK

W8C.4,30M0-21

OFFICE CORRESPONDENCE
Mr. Snyder

DATE

Jan. 31, 1924.

SUBJECT

Governor Strong

FROM

Referrirg to your memorandum attached about the Bok plan, I am

really giving, it a good deal of thought and can't say that I am wholly for

the plan, and my general reluctance to write atout things of this sort, leads
me to refrain from voting.

BS

att.




How do you feel about it?

192_

FEDERAL RESERVE BANK

MISC. 4.1-30M 10-21

OF NEW YORK

OFFICE

CORRESPONDENCEDATE

Mr. Snyder

Feb. 2, 1924.

192

SUBJECT

Governor Strong

After further consideration I havd decided to vote in favor of the 3ok
plan.

My objection to it is that the movement for the adoption of some such

plan should follow the adoption of a formula for dealing with the debts, and I

will wager a ginger cookie or a little red apple that experience hereafter will
disclose that my fears about any plan proving abortive without the debt question
out of the way, are well grounded.

BS.MM

att.




-

mm,.16m-an

C;V:1'...Y4)1/*\

FEDERAL RESERVE BANK

OF NEW YORK

)FFICE CORRESPONDENCE
To

Mr. Snyder

FR(

DATE

Feb. 4, 1924.

_192_

SUBJECT:

Governor Strong,

Keynes' managed currency is hardly distinguishable from a gold exchange
currency.

He must realize this, and I have no fault to find with his proposal

of a managed currency, but a great deal of complaint for his defective and rather
selfish reasoning when he talks about our demonetizing gold and locking it up in
Washington.

He must think we are indeed very stupid people.

If we are going

to permit this gold, which does its initial damage the minute it arrives here, to
do further damage by permitting it to become the basis of a great inflation, he
(05.-Ateciepeet% ci
and others of his stripe are unconsciously looking to this country to indulge in
a great inflation for their benefit.

We are not going to do it if it can be

helped and if they would be sensible enough to get their own houses in order and
manage their own damn currency in a sensible, civilized fashion, they would shortly
be able to come over here and get the gold they need to present a respectable
monetary face to the world.

I am thoroughly tired and impatient of the ravings

of these inflationists who want us to play the part of cat's paw and pull their
chestnuts out of the fire when they haven't the courage to do it themselves.




MISC. 3.1 60M-4-22

FEDERAL RESERVE BANK

OF NEW YORK

,...iFFICE CORRESPONDENCE
To

Mr. Snyder

DATE

Feb. 4, 1924

1 92

SUBJECT:

Governor Strong

FROm

Your memorandum attached refers as mine did to the possible development
of the gold exchange standard.

It has already developed automatically and in

due course will be developed formally and more explicitly as the situation evolves,

but in the meantime the thing for us to consider is what the effect will be upon
our own credit structure.

I think it is safe to say that it will involve the

opening of credits in this country through loans, bond issues, and other credit
OGLAyi,

operations of that character, which will be held here at the command of foreign

A

government;land foreign banks of issue, and naturally will form the basis of some
expansion of our loan and deposit accounts.

Just how it will be worked out in

detail is difficult, in fact impossible to forecast.

I am not looking so much

to the development of commercial credits similar to those which London has
traditionally granted to the world, as I am to these more strictly financial
and monetary credits, and unless I am mistaken, if arrangements are patched up
between Germany and France as the result of the work of the Dawes committee, we
will gradually see this development get into full swing.

BS.MM
att.




AISC, 3.1 601,1-4-22

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
L'

To

192_

DATE

Mr. Snyder
Governor Strong

FRi

I partly concur in the last paregraph but not wholly.

A big

etock exchange movement could not possibly be brought about these days
by a few manipulators.

I do think, however, that

can be sustained for some period of time
conditions

a

big price movement

greater or less according to

by general sentiment, which may not be based upon actual

conditions but upon conditions which are assumed to be the case and are
nevertheless not always accurate.

It will take more time for discussion

than I can give it just now, but we can talk it over when I get back from
Washington.

BS.11MT

att.







FEDERAL RESERVE BANK

MISC. 4.1, 0M-3.23

OF NEW YORK

OFFICE CORRESPONDENCE

DATE_

Feb. 28, 1924

Mr.. Snyder

1

SUBJECT.

Governor Strong

Currency and Prices in France

FROM

The 100 per cent. quantity theory falls down in reconciling the
following facts about French currency with some theories about currency and

Nettie*?

credit:

No considerable

increase in G.e.pman currency.

A depreciation in its exchange value b
A price level aroun

50

about 130 points below the 1920

ALAMO

level, which heoretically should be somewhere around 800 or 900.

BUM

=Um=

att.

)1.0

3o

1

14Z,1-14

7,0

/9/1)




FEDERAL RESERVE BANK

..11M3.23

OF NEW YORK

Jan. 7, 1924.

-,FICE CORRESPONDENCE
TO

Mr. Snyder

DATE__

192_

SUBJECT:

Governor Strong

FROM

One of my farmer friends in Iowa has written me the attached letter, and 1
would like, if possible, to get some literature on taxation to send him.

It seem7

to me it should be some rather elementary discussion of tax exempt securities and of
the respective advantages and disadvantages of direct and indirect taxes.

BS.MM
Att.

60.4-22

FEDERAL RESERVE BANK
OF NEW YORK,

OFFICE CORRESPONDENCE
To

Mr. Snyder

ATE

Feb. 28, 1924.

192

SUBJECT:

Governor Strong

FRONf

It seems to me you were giving an mmemill interpretation of the article
in the Times, which I read.

Of course, to state that the war cost Germany

nothing is an absurdity, but on the other hand I understand the situation in
Germany now to be somewhat as follows, and here is where co much misunderstanding
of the situation arises.

The Government of Germany has repaid its funded debt held by the public
through the instrumentality of the Reichsbank, where it borrowed money and secured
by

issues of currencies, and paid for its public obligationseimply transferring the
debt from one class of citizens to another.

The public which formerly owned

interest bearing bonds, now owns worthless paper money.

German States and private

individuals and corporations took advantage of the flood of paper money so as to
repay what they owed in a depreciated currency, with the effect that the entire
public and private debt of Germany, - that of the State ()king to its citizens and

that of debtor classes owing to creditor classes - has all been paid off and is
now represented by depreciated currency, back of which is a Government debt owing
to the Reichsbank.

As the paper has become absolutely worthless and will be

repudiated as obligations of the State, it simply means that the State has furnished
the instrumentality or machinery for a gigantic swindle upon creditor classes.

But

the debt has not been extinguished in any way, shape or manner.- It has been vastly
increased as a matter of bookkeeping.

The implication of the Times' article

impressed me as simply a clumsy way of stating that all debts having been
metamorphosed, the last step in this swindle will be accomplished when the German
Government repudiates the currency, which it certainly will do by one or another
method.

The debt which Germany has not extinguished, however, is the debt to

foreign governments and citizens growing out of the war - presumably aggregating



4-4-22

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Mr.

Snyder

Feb. 28, 1924.

192

SUBJECT

-2-

'Governor Strong

FROM

DATE

it-00411

$33 billions --under the

terms of the London agreement.

German Government wipes out

domestic

At one stroke the

indebtedness of -all classes

an=itute

for it the Treaty debts, the result being the accomplishment of a swindle at
home and the recognition of just debts abroad.

On the whole, if Germany really

pays France and her other creditors, I don't know but what this form of taxation
of the German people is just as good as any other, considering the nation as a
whole, - but what get5

my goat is the fact that the operation has permitted a

small class of German industrialists to accumulate vast properties without paying
any considerable consideration for them,

and not only have creditor classes been

wiped out, but actual owners of property have had their investmaltSin it filched
from them not for the benefit of Germany's just creditors, but for the benefit
of s gang who have been industrially engaged in conducting for their privste
benefit one of the most gigantic
about it.

att.




swindles

of the ages.

That is the way I feel

MISC.. 3.1 60M-4-22

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Mr. Snyder

DATE Mar. 5, 1924.

192_

SUBJECT:

Governor Strong
FROM

I have just read your memorandum on the fall of the franc.

The cost

of living curve seems to extend only to about June of 1923, whereas the purchasing power of the currency and the exchange curves extend down to the very end of
I think if you had up-to-date figures on the cost of living in France

1923.

you would find the curve to be something close to what I have indicated on your
There has been a very sharp increase, as I understand it, within the

chart.

last few months.

If this is true, I am not sure just how you justify the

statement that there can be no sustained rise in the general level of prices
and wages without a corresponding expansion of currency and credit, because that

seems to be exactly what has happened in Francethat they have experienced a

constant

decline in the purchasing power of their currency and in the existing

value of the currency from the middle of 1222 - that is, for 20 months now that they appear to have had an increase in living costs from the low point
which extends from the latter quarter of 1922 to the present date, which would
Does not your chart refute your statement

be a period of about 15 months.

completely unless the word "Sustaiff means that you are considering five or
ten year periods rather than periods of a year or thereabouts?

It can all

be explained very readily if one takes into account the enormous hoarding of

cuirency by the French peasants which always means that potentially theeffeo
of eircula ion in France can he enormously increased without the Bank of France
A
That is probably just what has
increasing the outstanding notes at all.

"

happened - that this currency is coming out of hoardings and going into foreign
lnv'etalents in one form or another, and it is becoming more dynamic than it was.

, r4rrk
tUkt
44G4t-A itt4
circulation.1///
'
ittko 1"4. t V A I-44/1. t Am et-ct-Ax CA-r--. eAr

because it is again getting into

1

0-"trwv LA_


BS.MM
Ze.
http://fraser.stlouisfed.org/
att.of St. Louis
Federal Reserve Bank

,

,

-)1"" `'")

W., 3.1 60M-4_22
4-22

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Mr. Snyder

DATE

Mar.

L,

124

1 92_

SUBJECT:

Governor Strong

FROM

Is not the suggestion which I made in regard to the depreciation of
the franc pretty well confirmed by the chart attached to your memorandum?

socalled

Of course, the gold price level and world prices

are still

subject to better definition and understanding than is now thq4ase, but I

have a feeling that all commodities which are largely imported and exported
adjust to world prices, that is to say, in a measure to a gold basis, very
promptly,

as the international values of currency fluctuate

that other

adjustments take place much more slowly, but that neveltheless any very
sharp advance or decline in exchange does result

in

price readjustments tokkua.

world levels, subject to all the influences of increasing or decreasing
domestic cost of production.

Again we come to the interesting problem of

which is cause and which is effect.

BS.W1V1

att.




110

FEDERAL RESERVE BANK

MISC. 4.1-100M-5-23

OF NEW YORK

OFFICE CORRESPONDENCE
To

Mr. Snyder,

SUBJECT

Governor Strong

FROM

Attached is Secretary Hughes' acknowledgment of the data regarding
Japan, which I recently sent him, and which you will gather proved to be of
real interest.

Please return the letter.

I would like very much to have you and the others in the department
keep in mind that any important information respecting the Japanese situation
should come to me, as I like to keep Secretary Hughes posted, and have undertaken to do so from time to time.

BS.MM
att.



msc.4.1,mws-a

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To ATSnyder

DATE March 8, 1924.
SUBJECT-

Govern or Strong

FROM__

The attached articles in the The Nation end The Athenaeum are
certainly most interesting.

BS .MM

att.



I with our folks could write oB intelligently.

-1,001,4.3.23

FEDERAL RESERVE BANK

OF NEW YORK

i FFICE CORRESPONDENCE
Mr. Snyder

DATE_ Mar-4, 1924.
SUBJECT

192

Socalled "Orderly Marketing"

Governor Strong

=ROM

This is a good article and should get wide circulation.

There is

just one possibility of a flaw in the reasoning and that is associating primary
market receipts with prices.

It would come nearer to a true exhibition of the

relation if one could get at the rate of shipment from the farms as distinguished
from the rate of receipt, and would be still more accurate if one could get at
the rate of sale by the farmers and its relation to price in the primary markets.

BS.NIM

att.






FEDERAL RESERVE BANK

OF NEW YORK

?FFICE CORRESPONDENCE
To

Mr. Snyder

DAT

Mar-44

1924.

SUBJECT

Governor Strong

FROM

As Mr. Tucker seems satisfied with the resulte to date, why stir
the matter up any further.

If, on tbe other hand, we have offered to make

further inquiry, I suppose we mutt do so.

BS.MP
att.

FEDERAL RESERVE BANK

WIM.4.1,001.4.3.23

OF NEW YORK

f-.,OFFICE CORRESPONDENCE
To

Mr. Snyder

DATE__

Mar_e_44

4.

SUBJECT .

Governor Strong
FROM

My answer to your last memo on French exchange is that nobody
has any way of estimating what is the effective and what is the hoarded circulation in France, and my guess is that the hoarded circulation is an immense
sum - far beyond what anybody has ever realized.

BS .MM

att.




_192_

IS, 3.1 60 M-4-22

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Mr. Snyder

FR2thi_

DATE

March 5, 1924

192

SUBJECT:

Governor Strong

I am not sure whether it will yet be worth while to take the trouble
to prepare figures to show what could be accomplished by revision of the
classification of the reserve and central reserve cities.
Probably a great
would
deal could be accomplished, although it5eed to be done in a most judicious

way with the mind of the public prepared in advance so as to meet the storm of
protest from banks located in the affected cities.

You and some of your men might be considering the matter and if you
think it is worth while to get up figures, do so not with the painstaking
accuracy of the statistician but with the general methods of an architect preparing a sketch, so that we could get a rough idea before putting in a lot
of work on accurate figures.

Of course, the way to do it would be to see how

much reserves would have to be increased progressively through the creation of
more central reserve cities which would increase the required reserve of member
banks in those cities from 10 to 13 per cent., and by increasing the number of
reserve cities which would increase their required reserves from 7 to 10 per cent.
Obviously the cities to be classified as central reserve cities would be Boston,
Philadelphia, Cleveland, Kansas City, St. Louis and San Francisco.

The classi-

fication of such cities as Richmond, Atlanta, Minneapolis and Dallas as central
reserve cities would appear to be rather fantastic.

Bear in mind in this connection that the change could be made very
gradually indeed and still have the required effect.

It could be illustrated,

for example, by the case of Boston with the following hypothetical figures:
If the Boston member banks are now required to carry $100,000,000

of reserve deposits with the Boston bank, the

increase would presumably require

them to carry $150,000,000, and increase the discounts which the Boston banks



MISC. 3.1 60M-4-22

FEDERAL RESERVE BANK

OF NEW YORK

March 5, 1924

OFFICE CORRESPONDENCE
Tr

DATE

Mr. Snyder

SUBJECT:

Governor Strong

FROM

2

would have to make at the Reserve Bank by just that sum.

This would restore

the discount account through the Reserve System which would make the discount
rate

so much more effective and would obviate the need for pursuing an

investment policy which may ultimately have the effect of actually increasing
the volume of credit.

Borrowings by member banks to make good reserves which

become deficient by the increase in reserve requirements would not have the
effect of increasing the volume of credit.

On the contrary it

would tend to reduce the volume of credit because they would try and call loans
without borrowing.
To carry out
and let paper run off so as to accumulate the required reserve

any such program might, of course, necessitate at least a temporary reduction
in our discount rates during the period of readjustment.

I don't want you and Burgess to think that we are entirely without
imagination and resources in dealing with these matters because there are
other things that still may be done without asking legislation and some of
them would be indeed most effective.

.BS.MM




1 92_

MISC. 3. I-75M-9-Z3

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Mr. Snyder

March 8, 1924.

192_

SUBJECT

Governor

FR-

DATE

Strong

I think you must be careful in jumping at conclusions about the French
The French Government borrows for its needs in excess of revenues

situation.

on Treasury bills which are payable in three, six, nine and

twelve

months time.

These are sold all over France, and when they approach maturity - say
days - they are largely purchased by the large commercial banks.

within 90

The Bank of

France either by law or as a matter of policy stands ready to discount bills
secured by treasury bills when they are within 90 days of maturity for any
customer of the bank and practically without limit.
should decline to do so, the whole French fiscal system would collapse.

Now if

you will look at the last stetement of the Bank of France, you will observe that
there was no increase in Government borrowings, but there was an increase of
about one billion francs in circulation, and in the last two weeks an increase
of something like twelve or thirteen in advances and discounts.
with the collapse in exchange.

This coincident

The inference is simple and will explain what

has

transpired:

Holders of French treasury bills are getting uneasy.

those which are within 90 days of maturity to the Bank of France or borrowing on
them as the case may be, taking currency and using the currency to buy things.

The things they buy may be commodities, real estate, household furniture, or any
old thing--but undoubtedly a considerable part of what they buy has been foreign
currencies.

The decline in the franc exhibits that

clearly, and you will note

that sterling has been pretty steady during this period, which would indicate




FEDERAL RESERVE BANK

MISC. 3. 1-75M-9 23

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

Mr. Snyder

Marhh 8, 1924.

192

SUBJECT

Governor Strong
FROM

2

that they are buying both sterling and dollars.
in France (who are just now in this country; hut who have been recently in France)

that living costs are really going up at a tremendous rate.
that

but a

very few months ago--or the end of

last

One lady told me

year and early this year--it

cost her 8,000 francs per month to run her menage, and today it costs her 12,000
frans per

month.
I personally

very badly.

BS .MM

att.




don't think

the dam has bustedbut think it is leaking




FEDERAL RESERVE BANK

OF NEW YORK

or
To

E CORRESPONDENCE
Mr. Snyder

DATE__march7_Ep5_4924.
SUBJECT

Governor Strong

FROM

In a general way I am opposed to any program for publicity or anything
of that sort in connection with the opening of our new building.

I think the

best plan is for ue to go in and say nothing about it or as little as possible.
When we are in the building and everything is operating satisfactorily,
think we can invite bankers in groups simply to inspect the building.
reasons for this I will explain later.

BS.VM
att.

I

The

192__

MISC. 3. 1-71M. 9-23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Mr. Snyder

March 8, 1924.

DATE

_192-

SUBJECT

Governor Strong
FROM_

About the A. B. A. meeting in Chicago.

I am ver

opinion that the exhibit in Chicago is the job of the Federal
Chicago, and that we should not but in in

any way, shape

Reserve

or manner.

Bank of
If the

Federal heserve Bank of Chicago asks us for suggestions, let us make suggestions,
but do no more than that.

We simply cannot afford to continue to create the

impression that the Federal Reserve Bank of New York is the

whole

System.

It is

resented in Chicago now and this would simply add to the resentment if we dealt

with the Bankers Association in connection with an exhibit given in their home
city.

BS .MM

att.




FEDERAL RESERVE BANK

msc.11-75M-9-23

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

March 8, 1924.

SUBJECT:

Mr. Snyder
Governor Strong
FRGIY1

With this I am handing you e copy of the socalled McNaryHaugen bill,
together with some documents left with me by Mr. John R. Mitchell bearing on it.
I aave promised Mr. Mitchell that if an analysis of the plan justifies my doing
so I would write to President Coolidge about it.

T

ET1

going to ask you and Mr.

Burgess to make a study of it from the economic point of view and let me have
your conclusions in a memorandum in such form that I can send it with my letter
in case I write the President.

The farmers are facing a real calamity and need help just as much

as the Russians did two years agoand they are Americans and not Bolshevists.
I have no illusions in regard to special aid by the Government,
Wall Street bankers

etc., etc.

are just as ready to take Government

anybody else when they get into trouble.

As to privilege and oleos legislation generally, we have a good

deal of it on the books nowthe tariff is the outstanding example, and we may
have a bonus bill that will outshine everything of that character.

I would be glad to have something from you as soon as convenient,together with these papers which I will reed in connection with your memorandum.

BS.MM
att.




ww.3.1-7561-s,n

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATEMaroh IZ, 1924.

Mr. Snyder
SUBJECT:

Governor Strong

FROM-

Referring to your memorandum attached, I think the less

oJe monkey

with the reserves of the Reserve Banks either by amendment to the law or change
in our accounting the better off we will be.
alter the facts.

Changes

in

our reserve do not

We should have the courage and capacity to control the amount

of money we loan one way or another and if we fail in that regard no change in
reserve provisions will amount to anything.
of the commercial banks and trust companies.

The weak point i

They are constantly being en-

larged by gold accessions and until the gold flood stops we are almost helpless
to offset its inflationary effect.

Those measures which we have taken to

date seem to have been effective in part, but how long we can continue successful remains to be seen.

BSA
att.




FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Mr. Snyder
.s?

192_

DATE_ March 13, 1924.
SUBJECT.

Governor Strong

FROM

In regard to our surplus gold dealt with in the attached memorandum,
the treatment of currency in circulation other than Federal reserve notes may.

prove to be one of the most fruitful sources of relief, but I rather incline to
agree with the views expressed last night

that the redemption of National bank

notes is a more effective method of accomplishing this than any other.

I would

rather see the greenbacks retired, but it is a dangerous subject to attack.

There

are some $148 millions of Government bonds maturing next year, and the refunding

of these into a new bond without any circulation privilege would automatically
require banks which had this issue of bonds pledged as collateral for bank notes
to deposit lawful money in order to retire the bank notes.

Deposit of the lawful

money would by so much impair their reserves and to that extent require them to
borrow from us and in that way give us a further hold on the situation.

That is

the simplest thing to do and it is a procedure in connection with which the
Reserve System's operation would be so indirect as not to involve us in any
discussion about contracting the currency.

But even that involves dangers.

It is in my mind to get up a little program on this matter as soon as we can
get around to it, possibly for discussion in Washington next May.

BS.MM
att.




WX.11-75.1.13

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DAT

In__

March 18, 1924

SUBJECT

lMr. Snyder

Governor Strong
FROM

With this I am handing you a document which apparently came from Dr.
Foster preliminary to its publication in the April Harvard Business Review.

I

have only had time to read it through hastily and will be unable to write Foster
about it, but possibly you will care to do so.

The particular impressions left in my mind are that he sticks to the idea
that an index number can be a sole guide of policy for the Federal Reserve System,

that it is possible for the men who run the Federal Reserve System to manage the
whole rrice problem, and that as it is possible for them to do it they should undertake to do it avowedly and publicly announce it.

Now I am satisfied that it is

along this path that most serious trouble will develop for us.
takes no account of other influences upon prices than credit.

Foster's thesis
It takes no

account of the stupidity and selfishness of various classes of people in thinking
that the only prices that count are those in which they are interested.

It takes

no account of the unending warfare between the producing and consuming classes the former for advancing prices and the latter for falling prices.

And possibly

most serious of all, it assumes that it is possible for the management of the
Federld Reserve System at all times and under all conditions to be divinely wise,
magnificently courageous, and inhumanly intelligent.

He assigns to a small body

of men a responsibility which has never been assumed by any body of men in economic
history, and where its assumption has been attempted it has always failed, - that
is to say, the responsibility to so manage economic affairs that they can control
prices.

I am against it and against his thesis root and branch.

We must do what

we can to prevent credit developments getting out of hand and causing run-away




MISC. 3. I-7SM. 9-23

FEDERAL RESERVE BANK

OF NEW YORK

FFICE CORRESPONDENCE
To

DATE

Mr. Snyder

1924

192_

SUBJECT:

Governor Strong

FROM

March 1

2

prices and exhaust our ingenuity to find ways and means of meeting the present
menace due to gold imports.

But to calmly assume responsibility for prices just

as though we made prices or controlled the price level

we must never do.

I am

satisfied that a good many of the men at our dinner the other night are wholly
in accord with my views about that.

BS.MV
att.




MISC. 3. I-7M-9-23

FEDERAL RESERVE BANK

OF NEW YORK

"FFICE CORRESPONDENCE
To

Mr_Snyder

DAT

Maroh 19, 1924.

SUBJECT.

192

Governor Strong

FROM

Cheney's charts are not surprising, it seems to me, in view of what we
know- about the movement of wages.

Clearly these figures disclose that wages

rushed up with the general advance in the price level to the peak of 1920 when

fattu

prices fell away from wages, the reduction being but a small fraction of the
reduction in in the general price level.

What is a little surprising, however, is

that the little boom that we had in 1923 had the effect
industry

at least in the silk

of moving wages back to a level higher than the peak of 1920, while

the wholesale price level for silk is but little above the low point and even
the price of raw silk and of finished silk is not very much above the average
level of 1921

1922.

is coming to him.

BS.MM
att.




Certainly for once the wage earner has gotten all that




FEDERAL RESERVE BANK

OF NEW YORK

'ICE CORRESPONDENCE
Tt

Mraayder.

DATE

March 20, 1924.

SUBJECT

Governor Strong

FROM

Thank you for the attached.

I want to see such figures as are in

shape by tomorrow noon showing the actual trend of business.

BS. MM

att.

192_




MiX.A.1,0014-9-23

FEDERAL RESERVE BANK

OF NEW YORK

FFICE CORRESPONDENCE
Mr. Snyder

DATE

March 21, 1A24_

SUBJECT

Governor Strong
FROM

I have decided not to write the President in regard to the
McNary-Haugen bill, partly because if he displays an interest in the
correspondence I will not be here to follow it up for a while.

So I voided the letter you were good enough to prepare and
I am writing Mr. Mitchell as per attached copy.

BS.MM
att.

192_

March 21, 1924.

My dear John:

I have been through the McNary-Haugen

bill, read some of the

comment upon it, and have had some studies made in the bank.
Notwithstanding the earnest desire which we all feel in this bank to eee
some reelly constructive and helpful measures undertaken for the Northwestern

wheat farmer, I cannot believe that the MoNary-Haugen bill will accomplish the
purpose which we all desire, and I fear that in many

of years, it will
The difficulty

with wheat is a price difficulty.

We produce

which must be marketed abroad, not

wheat,

competition with wheat but in competition with the various cereals

produced in various

parts of the

world by methods of

with which the American farmer cannot compete in

the East

after a lapse

leave the wheat farmer in a worse situation than he is today.

200 million bushels of

necesseri/jr in

particulars,

cost.

that is true of a

are too low, and I think

farming and a type of labor

Standards of living in

very large part of Europe as

well.
This leaves the American farmer in the position of having a 100 per cent.
unprofitable wheat crop because 25

per cent.

sold in the world's competitive market;

of his crop, or thereabouts, must be

whereas everything that he buys is pur-

chased in a market where price levels are unquestionably affected by a fairly
high protective tariff.

In

conclusion that it is a

poor




the

face of this situation I cannot escape the

business venture, and in every way a bad project

2

March 21, 1924.

Mr. John R. Mitohell

to encourage the continuance and even the further

development of a

surplus produc-

tion shich will be a menace to farm stability so long as the world cannot absorb
it at prices which justify its production.

Very little consideration seems to have been given to one aspect of this
legislation which I believe is fatal irrespective of any other aspect.

If the

United States Government enters upon a vast program of dumping surplus wheat on
the rest of the world and finances such a project, it is bound to bring reprisals
in some form or another.

The advantage gained

for the

American farmer may be

offset by advantages sought by other countries for their own farmers, and that
sort of warfare can continue indefinitely until something breaks.

With some reservation, I think my own suggestion would be that legislation be undertaken - or that a plan be adopted without legislation - by which some
such organization as the Federation of Farm Bureaus, (which today covers subetan-

tially every agricultural county in the country) will actually make a survey of
wheat acreage and exercise a control over the amount of wheat planted during the
next few years.

Something of that sort is now done in India by the Indian

Government itself in order to deal with famine conditions which arise periodically.

They conduct an

absolute census of acreage and planting and production, which I

believe is of a highly scienttfic character, and an Investigation of it might
throw some light upon the possibilities of doing the same thing in this country.
Undoubtedly, information about it could be obtained from the Indian Office in London.

If a restriction is placed upon the acreage planted, it is probable that
a

smaller crop fetching higher domestic prices will afford profits to most American

wheat growers, where a larger crop say with 200 million bushels surplus will not
only produce no profit but in all probability a

definite loss. Notwithstanding

this, a reduction in wheat acreage would probably necessitate aid to many farmers




3

Mr. John P. Mitchell

March 21, 104.

in purchasing stock of one kind or another or teting the necessary measures to
introduce some diversification adaptable to the soil end climete where they are
To cover this I should suppose a program along the general lines of the

Noated.

Norbeck bill might well be made to serve the purpose.

Holding these views I think you will agree with me I could not well
write to the President any sort of endorsement of the McNaryHaugen bill.
I would prefer that you end Mr. *Peek consider this expression of my own

views as confidential.

re are so far from the scene of these difficulties that

auoh comment et I might make might well be a cause of criticism and feeling which

I would be the 'tot one to arouse.

I em simply giving you the beet views that I

can without having made any losel investigation on the ground.
Thank you very much for giving me the opportunity to study the el.-Ater

a bit.
Yours sincerely,

Mr. John E. Mitchell,
Capital National sank,
St. Paul, Minn.
BS.MM







1,m4-9-23

FEDERAL RESERVE BANK

OF NEW YORK

'1)FFICE CORRESPONDENCE
To

Mr. Snyder

DATE

May 16, 1924

SUBJECT

Governor Strong

FROM

The attached note from Mr. Basil Miles explains itself.

I think

you know Mr. Long personally and rather respect his ability and enjoy his
articles

.

Who do you think might be induced to take him on?
suggest the New York Times?

BS.MM
att.

Or what suggestion have you?

Would you

I 92_

MISC. 3. I-75M-9 23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

DATE

May 19, 1924.
tt

Mr. Snyder

SUBJECT

Governor Strong

FROM.

Referring to the attached memorandum, I have about come to the
conclusion that there is no virtue in credit operations for aid of the
wheat growers.

There has been a very large curtailment of exports, I hear,

the price is still most unsatisfactory, and I can't help believing that the
answer is - reduced production.

This might or might not be capable of

accomplishment through some scientific plan - say to be conducted by the
Farm Bureau Federation.

As to buying bills abroad, there are many very serious objections,
as I indicated in a memorandum to Mr. Jay.

Let me illustrate just a few

of them.

If we buy bills payable in foreign currencies we take all

the risk of exchange loss, and on any amount that would be of any aid
whatever in an international credit sense possibilities of loss are really
enormous.

Suppose we had purchased 25,000,000 sterling

the rate was 4.70.

of bills when

At the present time we would stand to lose 35 cents

per pound, or say, $8,00e000.

On the other hand, the guaranty against

loss on the other side would present equal difficulties

to the guarantors,

and I do not see how such a credit plan could be worked out except by the
intervention of governments and I don't see much likelihood of either the
British or American Governments going into a big exchange gamble either
independently or joint account.

There are notoommercial bills enough abroad that we could buy
to enable us to conduct a very large operation, and that is one of the
difficulties that we are going to encounter in the future in any attempt
to deal with the exchange situation by the use of Federal Reserve funds.




192_

MISC. 3.1 60M-4-22

FEDERAL RESERVE BANK

OF NEW YORK

WFICE CORRESPONDENCE
To.

Mr.Snyder

DATE

May_12, 1PP.4

192_

SUBJECT:

Governor Strong

FROM

Buying sterling bills or any foreignbills in the expectation
that those purchases will be reflected in additional-purchases of wheat or
financing of wheat strikes me as being somewhat similar to throwing a handful of chopped meat into the Gulf Stream which as you know i

densely

populated with the most voracious fish in the world - the big fish would get
the meat and the poor little wheat growers would not get a smell of it.
If we attempted any such program for the avowed purpose of assist-

ing the wheat grower, the unfortunate result would be that we would not really
assist him any and then they would just curse us some more.
Isn't it a fact that ycur own doctrine
the correct one?

repeatedly expressed to me, is

i. e. that we are growing an amount of wheat in excess of our

domestic requirements and the surplus must be sold abroad where wheat can be
grown cheaper at a profit than here, and in the meantime our farmer pays high
prices for everything that he consumes and uses on his farm.

In a broad economic sense I have always been opposed to schemes for
restricting or curtailing production.

It seems uneconomic, but under present

conditions is justified as to wheat, and that is the thing that our wheat
grower should do with or without government aid.

BS.MM




.

WK.11-7.1-9-23

FEDERAL RESERVE BANK

OF NEW YORK

FFICE CORRESPONDENCE
To

Mr. Snyder

DATE
SUBJECT

May 26, 1924.

192__

c).

Governor Strong
FROM

Will you kindly send me as promptly as possible a statement showing the
amount of monetary gold in this country on January 1, 1914.

As I recall the

figure was about one billion 800 or 900 millions.

T

annual increase in our gold each calendar year, including the amount received this

:1

year down to the latest date.

I would also like to have charts, if you can show them, giving the

3

fluctuations in the rates of exchange of sterling, francs, lira, Dutch guilders,

the Scandinavian currencies, and the Swiss franc, from, say, July 1, 1914 down
Then I would like to have a separate chart showing the fluctuations

to date.

47/ of these same currencies for a period of only a few years which might be described

as the normal fluctuation immediately prior to the war.

I want to bring out the

contrast of exchange fluctuations under the operation of the gold standard with
the fluctuations in exchange since gold payment was suspended so as to show
graphically the disabilities under which international trade labors with these
extreme exchange fluctuations.

I also want to have the mathematical formula which Keynes expressed in
one of his articles in the Manchester Guardian, or in one of his books, illustrating
his theory of the purchasing pater parity of currency, and if alongside of that
62,you can give a literal illustration in the case of sterling with a relative

general price level of any two countries to bring out the argument I want to

7 ,make in regard to the disparity in price levels between any two countries having the power

to

return to gold payment and that price levels require some

moderate readjustment before gold payment can safely be undertaken by anyone.




MISC. 3. I-75M-9-23

FEDERAL RESERVE BANK

OF NEW YORK

May 26, 1924

FFICE CORRESPONDENCE
To

va--Snyder

DATE
SUBJECT:

Governor Strong

FROM

2

I hate to have to send a call in such a great hurry but the fact is
I should have these for incorporation in a letter-, the final draft of which must

be ready tomorrow evening for final copying Wednesday morning, to take to
Washington Wednesday afternoon.
this whether this can be done.

BS.MM




Can you send word to Mr. Beyer on receipt of
The charts should be in three copies.

1 92__




WSTA.1,001-9-23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Mr. Snyder

DATE_

May 27, 1924

let

SUBJECT*
Governor Strong

FROM

I wrote Professor Bullock immediately in reply to his letter,

denying that the meeting at my apartment was called for the purpose of
delivering a spanking to anybody, and pointed out that the subject of
price control never would have arisen had not Warburg mentioned it when
we were about ready to go home.

13S

RITIVT

192_




ww..4.1,mws-n

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

May 28, 1924.

Mr. Snyder
SUBJECT:

Governor Strong
FROM

Referring to your memorandum on British and American
I am not satisfied with your
levels in the two

prices)

reply on

countries (I am

this subject.

not speaking of

must be substantially 11 per cent.

Certainly the

gold prices but of

apart on such articles

etc., because they follow the exchange rate so closely.

levels be
cent. in

BS.MM

att.

price levels,
price
currency

as cotton,

How can our price

identical in the two countries when there is a discount of 11

the English

currency?

per

In




FEDERAL RESERVE BANK

OF NEW YORK

FFI E CORRESPONDENCE
Mr. Sn d

DATE______Juna_g_v_1924
SUBJECT:

Governor Strong

FROM

Here is a translation of an interesting article
handed to Dr. Miller by the Belgium Ambassador.

att.,

which was

_192

THE DOLLAR AND THE POUND.
(From the Echo de la Bourse, Paris, May 30, 1924)

Ever
been going on

since

the war, as the initiated know, a sort of silent warfare has

between the two leading monetary types, the dollar and the pound.

Recent events have made this struggle apparent to the eyes of the general public.

This is a serious question which should be elucidated as muoh as possible, for
through the incidence of its

of Europe and
under

repercussions it may seriously affect the restoration

the payment of the

what aspects this

question

reparations.
presents itself

People when concerned nowadays

ask 'Tow is the pound?", and it
add "and the dollar?".

Let us

atterrt, therefore,

at the

present moment.

about the level of foreign exchanges

is only in

to indicate

the second place and

generally

not alwgys that they

This introductory remark is made to bring out the point that

the pound enjoys a standing which, in practice, if not in the minds of thinking people,
overshadows that of the

dollar, whereas logically the dollar should

attliat attention

first, since it is the true standard in money matters, whereas the pound convertible
only in theory, is not truly gold money.

The special interest which

attaches to the pound

dollar arises from the faot that England

of the broker and banker of :the world,

ive financial supremacy necessary for
United States that, by
possessor of gold.

and causes

continues to enjoy

umbrage to the

the traditional Donation

although it has lost since the war the effectthe exerolee of this function.

reason of well known circumstances, ha- become

Naturally it is her ambition to

It is the

the great

draw from this situation all

possible profit, which, however, in her opinion Great Fritain pockets at present
without

rendering

equivalent service.

Europe, generally speaking, continues
settling her international accounts.
this habit should be ceanged.

The

to calculate in terms of pounds when

In the opinion of our trans-Atlantic friends

dollar should take

its "authentic" place in

business and remove from the first place the usurping pound.



This argument, it

-2is evieent, is not an academic controversy but a "business" proposition.
Last week, as noted in our "Notes and Nefleotions" the Advisory Council to

th, Federal Reserve Board, the great institution which centralizes the American banks

of issue, issued a pronoanoement of which, upon
leadingpertionss

careful reading, we give the following

°Unless America finds ways and means to permit her excessive banking strength to

benefit other countries, partioularly those striving to bring their house

in order,

the

dollar cannot maintain its position as a world standard of exchange, and foreign
countries - and even American bahking and commerce - will, once more, in a Larger degree beoone dependent upon and tributary to

the

pound sterling.

The douncil,

therefore, recommends to the Federal Reserve Board to cooperate in every possible
manner in the exeoution of

been established
to

facilitate all

the Dawes plan, and when the new German bank shall have

the Federal Reserve Board

rediscounts

should

take all necessary steps in order

in America of properly protected gold bills."

The announcement adds that the Dawes plan provides for a

gold basis for

notes issued by the future eerman bank, but leaves the door open for

the

the ddoption

of sterling as a basis.

"But", continues the Counoil, "it is obvious that, if the new German bank is

placed on a sterling basis, the world must prepare itself to rennin on a JR046-ii. basis
of exchange instability for a prolonged
while the adoption of the

the end of which cannot be foreseen,

dollar basis would accelerate the return

Because of its importance the counoil deems it

world wide stability.

point

gold, that is

period,

out this alternative with all possible emphatis.

but one that

touches

the

future of all the world.

It is not an

its

duty

to
to

American problem

If there is any reason to assure

that success of the Dawes plan may be the means of putting an end

to

Europe's

sufferings and decline, it is a unique opportunity and duty for the United States to
lend a helpful hand to




the ea+ utrost

of its ability.

-3In recommending to the Federal Reserve Board the rediscount of Gernan bills

"- Oaancil concludes as follows:
"Measures of this character not only tend to bring our gold

hoard int* active and

healthy use, but by encouraging other countries to trade in terms of dollars they

facilitate the direct sale in dollars of our own products, instead of making foreign
countries and ourselves dependent in this respect upon Great Britain's acting as
broker and banker, as naturally she would, where the pound sterling would govern as
an exclusive basis of dommeree and trade."

By reading a little between the lines and bearing in mind what we said in
the opening one can grasp the true meaning of the annoaneement.

translate it, so that our readers

alight

flowever, let us

better understand the matter, into less

diplomatic language:

"Our tanking power, the Americans think, is actually the forenost in the world.

This is not without its inconvenience, mainly because all countries with depreciated
currencies

are in a position to

and commercial competition.

bring into play against us very annoying industrial

It is therefore only fair that we should seek to avail

ourselves of the advantages, of a position

points of view.

These

advantages,

which is detrimental to us from other

for the most part, are seized by Great Britain,

who has contrived to maintain the prestige whidh it enjoyed before the war and to
It becomes therefore our task to
which essentially she is no longer entitled.

prove to the world that there is no good reason why it should remain attached to
the pound, and that its syryathies ought henceforth to be turned to the dollar."
How is suob a result to be attained? The answer is very simple. It
behooves Americans to make use of their

"exoessive

banking strength,' to benefit

eoeereees7

countries which are on the up-grade road.W




And a country

-4-

helped by the doller will evidently not fail to accord to the dollar its !east distinguished consideretion; for to generously oblige people is elweys en excellent
meems of entering into business reletions with them. (Sew cen we, for example, not

help feeling reel sympethy for the dollar ever since it hes rushed to the essistzence

of the frenc agsinst the beer speculators.)
In connection with the execution of the Dawes pleat and the creation of e new

Germtn bank of issue the lesericene evidently think that now, if ever, the time hes
come, to undertake on e sort of "philunthropic business" basis the intervention which

It to give to the doller its ultimete and il-redeeming consecration. 4s000rdingly
they announce that they are reedy to Mice a great finencial effort towerd solving
the question of reperations,--of which the creetion of a German benk of issue is

prtprovided bewever (this is, of course, merely implied end not stetee explicitly) Want the dollar and not the pound sterling ekell eerve es the besis of ell calculetions, transactions, and transferg, -which the underteking my require. "If you

.ish us to put an end to the sufferings end decline af Crope", our trans-atlantic
friends sty, "take us your batkees", end this edvice seems eltogether justified.

There is only this little difficulty, nemely the Mewss report foresees thet al
the time of the inception of .the Germen Ilene of issue the situetion will temporari-

ly not allow of the epplicetion of the rule of convertibility". If therefore euggests that "a currency shell be created which shell be kept steble in relation to
gold and, es soon es conditions permit, be pieced on t convertible bests, if at the
time of the inception of the bani,, the eituation nuy be temporarily unpropitious

for the applicetion of this rule." This means, that in piece of the done: it my
become neceseery for Germeny end her sponsors to substitute at the beginning thee

pound sterling. i.nd such ection, if we are to judge by the announcement of the
Federel Advisory Council, mey give umbrage to



aerica.

It will be seen at once, where this leads us to.

At present we have not yet

pe-led beyond the stage of preparing for the loan of 800 million marts, provided for
by tae experts.

of it.

This loan is possible only if the Amerioane take a large portion

This loan will have to be used to finance the reparations in kind and also

establish the new German bank of issue.

to

If, in accord with the bank's by-laws, the

pound is preferred to the dollar, - that is to say, let us repeat it, if we, in Europe,
continue to regard England as the sole banker of the world, - will not the United
States show sorile coolness towards

the financial operations necessary for the

liquidation of the reparation?

This is

very important question.

are not exaggerated.

In our

opirion the alai:Ts of the dollar

On the contrary they seem to us quite legitimutei

a person that renders service is entitled to some benefit;
United $tates presort for its help "to the utmost of its
promise:0

in business

the claims whiob the

ability" - (what a beautiful

contain nothing "usurious", to 4a use an up-to-date expression.

These

claims however trespass upon the traditioeal profits which Great Britain has come to

regard as rightfully hers and to cut them off may prove quite a delicate operation

for those wno may be called upon to do it.-Let u$ therefore follow with care the further manifestations of rivelry
between the dollar and the pound.

This rivalry may cause us some worry, but it may

also prove of service to us, if we onlynplay the game right".







4,11

ww.cl-loord-9-23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Mr. Snyder
FROM

DATE

June 26, 1924.

SUBJECT

Benj. Strong

Please make an appointment through Mr. Beyer.

have a chat with you.

I would be glad to

The basis of any reply that I would make verbally to inquiries
such as Mr. Webber's is always the same -- The Federal Reserve System
does not make prices; neither does anyone else:

192_




FEDERAL RESERVE BANK

OF NEW YORK

3FFICE CORRESPONDENCE
T. Mr. Snyder
FROM

DATE

July 1, 1924

SUBJECT.

Governor Strong

My other memorandum in regard to your department really replies

to the one you sent me on the subject of new investigations.

BS.KM

att.

192

MISC. 3. 1-75M-9-23

FEDERAL RESERVE BANK

OF NEW YORK

FFICE CORRESPONDENCE
Mr. Snyder

To

DATiulY 4, 1924

192_

SUBJECT:

Governor Strong

FROM

Replying to your memorandum about the expenses of your department, I am
not sure, of course, what Mr. Jay has said to you about it, and besides that I have
never felt that it was a direct responsibility of mine to keep an eye on them.

On

the other hand, I think you already know just about what was stated to me in
Washington, which however you will easily appreciate is confidential.

I think

the impression is that we have the best department of research that has so far been
established.

More important than that, the view was expressed to me that it was

used more by the offiaers not only as an aid to the discussion and solution of the
various bank problems, but as a practical working department of the bank.

There

is an impression, however, that our studies are too much directed along the line
of price movements and not enough on banking and finance.

Possibly your own point

of view has been to look further into the future with regard to the longer cycles
and not to consider enough the day to day or month to month problems of actual
is that a more elaborate study of
management.
My own belief 4\ the New York money market and of the inter-district
molement of funds would prove to be of great benefit to the management of the bank,
and possibly some economy can be introduced which will permit us to develop this

work without any added expense by somewhat reducing the work along the lines of
price investigations and business reports.

I think if the department addressed its attention first to a study of
economy in operating expenses, which is imposed upon us by the condition of our
earnings, and then towards special studies of money market and credit movements,

it would meet all of the objections or questions which have been raised about the
department.

I can assure you that there is nothing personal whatever suggested

by the statements made to me.
great respect


I believe that your associates in Washington have

for your work and that criticism was intended to be heliful and

MX. 11-75M-9-23

FEDERAL RESERVE HANK

OF NEW YORK

._-'10gPICE CORRESPONDENCE
Mr. Snyder

To
FROM__

DATE

July 2, 1924.

192_

SUBJECT.

Governor Strong

Replying to your memorandum on sterling and P. P. P.

As you know, I

have been a skeptic as to some features of this theory ever since Professor
Cassel enunciated it.

Now let me express in my amateurish way just the way

this problem appears to me.
Changes in the general price level are too remote and indirect in
expecting
effect upon the exchange to justifyAthat the course of exchange will coincide

with the course of relative general price levels.

On the other hand,there are

commodities whose prices probably correspond in any two countries with the
exchange rate.

Let me illustrate:

Suppose you took a list of 10.or 20

commodities which conform to the following specifications:
actively
That they were /traded in between the two countries

England and

the United States.

That there are organized markets where quotations are actually
made and where, if possible, the goods are closely graded in quality.

That the volume of trade in those commodities between the two
countries is sufficient to justify the belief that the price reaction caused
by exchange rates is immediate.

Now the goods which I have in mind which conform to these specifications
are such as cotton, wheat, copper, some meats like lard, bacon, etc., zinc and

lead, rubber, pig iron, coal, possibly some standard grades of fabrics like
cotton (64 squares), lumber, sugar, etc., etc.

By taking these prices, workirg

out a weighted index based upon the volume of the trade in them, and comparing
the course of these prices in the two countries with the course of the exchange,

it strikes me that one would core as close to getting an exposition of the purchasing

power parity


as is possible.

On the other hand, there is this difficulty

Yr-

PAISC.11-75W1-23

FEDERAL RESERVE BANK

OF NEW YORK

_.FFICE CORRESPONDENCE

DATE

To',11Ar. Snyder

July g, 1924.192

SUBJECT:

Governor Strong

FROM

2

that those are goods which have a world market and consequently may fluctuate
in prices over a fairly erratic course compared to strictly domestic prices of
domestic goods which are not internationally dealt in, which prices as we all
realize are more

subject to

the influence of credit conditions, inflation and

deflation, interest rates, etc., than are those goods internationally dealt in.
Were I undertaking an

examination

of this subject, I would start from the

elementary beginning, such as I have outlined above, and see where it lands us.
Let me have your own views before putting in too much work on this.

BS.IN
att.







FEDERAL RESERVE BANK

OF NEW YORK

DA

OFFICE CORRESPONDENCE
To

Mr. Snyder

July 11, 1924

SUBJECT

Governor Strong
FROM

Thank you for your memorandum in regard to the cost of our indexes
of trade, production, etc.

Of course, the statement which Dr. Stewart made

to me was no more than a guess, but I am glad that you have straightened him
out as to the costs.

They tell me that the new line of work is under way

and I would like, at your convenience, to have a little talk with you about
it - possibly parly next week if we can arrange a convenient time.

att.

192_




411,

FEDERAL RESERVE BANK

,

OF NEW YORK

OFFICE CORRESPONDENCE
Mr. Snyder

DATE__Ju1y_1kv-1924,_
SUBJECT.

Governor Strong

FROM

I have read Dr. Schacht's remarks attached, and of course he
leaves the impression that he is a pretty sound man to have in charge
of the Reichsbank.

BS .MM

att.

192_




111sc.4.1,mw9-23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Tn

Mr. Snyder

TT`

DATE,Tu1y_14,_1924
SUBJECT:

British Prices

Benj. Strong

FROM

The chart is very interesting.
I am not sure that I agree with you
about the better balance of the price levels.

To my mind, one of the very few benefits which we have realized from
the war has been a general improvement in the wage level and standard of living
by various classes of working men.
It looks as though Great Britain was not
able to maintain its business activity except under conditions which mean fairly
low wages for their working population.

133.MSB

192_




;.;

FEDERAL RESERVE BANK

msc.4.1-mows-n

OF NEW YORK

OFFICE CORRESPONDENCE
,To Mr. Snyder

DATE

July 14, 1924.

192

SUBJECT

CS

FROM

Benj. Strom

I think we have all expected that there would be a certain number of
Just what charts, how they should be hung,
charts hung in the new building.
and where, cannot be determined without an examination of the roams of the
building where you propose to have them.
I wish you would arrange a time with Mr. Beyer when we can go over
This isn't a question that
to the building and look at a definite proposal.
I can have an opinion about without being on the ground.

BS.MSB

--

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To Mr. Snyder

DATE___July_14, 1924-

192_

SUBJECT:

Benj. Strong

FR,

I have looked over the charts accompanying your memorandum of July 3,
but there are too many of them for me to get a conclusion without more time to
study them than I will have for a week or two.
But I presume that you sent them
to me as evidence of the fact that a lot of work has been done along the line of
our discussion.
The difficulty is to put this information in such shape that
it is of real practical value. That is what I need personally more than anything
else just now.
Let me make the following suggestion as a lead:

In 1922 the System made large purchases of Government securities. AI
the same time we were receiving gold from abroad.
Then, at t
early in 1925, we made large sales of securities.
purchases, and have now accumulated $400,000,000.
Du
What effect have these operations
time, gold has been coming into the country.
that is to say,
had upon the country's credit position, considered statistically;
What effect may it have had upon interest
on the volume of loans, deposits, etc?
rates, and what effect does it have upon individual districts, - New York being
Istarted important, probably?
the most
1

Your memorandum of July 1 bears upon this, and I noticed by the Times
on Saturday morning that the National City Bank has a theory to account for the
Is it a fact that gold
large accounts on deposit in the New 7ork City banks.
imports, and possibly our purchases as well, have the effect of inflating bank
deposits in New York at once, and that the expansion of loans and deposits does
not spread to the rest of the 'country for some time?
All of these things we should understand better in order to shape
For instance, we might determine to make a larger proportion of
our policy.
our purchases in other districts than in New York, or a larger proportion of our
sales in other districts than in New York.
This is a very complicated problem, I know, but one which we should
study, and get all the information that is possible to get.

BS. MSB







FEDERAL RESERVE BANK

MISC. 4. 1-100M-9-23

OF NEW YORK

FFICE CORRESPONDENCE

,-,

To

Mr. Snyder

DATE

July 25, 1924

SUBJECT.

Governor Strong

FROM

Will you ask Mr. Bendelari if there is any evidence in the literature
that those in the employ
that he looked over of a fear on the part of,Congress
in political matters
of the Federal Government would have too great an influence
and therefore should be excluded from voting at-the capitol.

att.

1 92_

FEDERAL RESERVE BANK

MISC. 3. S-75M-9-23

OF NEW YORK

\FFICE CORRESPONDENCE
Mt. Snyder

To

DATE

July 25, 1924

192_

SUBJECT

Governor Strong

There is no point in guessing about the increase in deposits as there

is a way to get at it if the reports are in sufficient detail, and that is to find
out what the corresponding assets are so as to account for the increase in liabilities.
I would assume that they are principally made up of the following items:
Increased loans

Increased investments
5.

Increased reserves either in vault or on deposit with reserve agents

or with the Federal reserve bank.
It makes no difference whether it is one bank or 700 banks.

I will

undertake to say that every dollar of increase in liabilities can be accounted for
by an examination of the various items of assets, and I suggest that that be done
if we are to get a satisfactory explanation.

It will probably be found that a

large amount of the increase on the asset side is shown either in reserves or in
"due from banks", in other words, that they are made up of balances carried by

interior banks with banks in reserve and central reserve cities, and banks in
reserve cities with those in the central reserve cities, while not counting as
reserve would appear as an item due from banks.

B.S.MM

att.







MISC. 4. I-mm-9-23

FEDERAL RESERVE BANK

OF NEW YORK

3FFICE CORRESPONDENCE
Mr. Snyder

To

DATEAug.
SUBJECT

1, 1924

Member Bsak Deposits

Governor Strong

F tri

It is interesting, as you say,
so is more important, however.

The question of why it should be

May it not be because of the concentration of

payments at this center in carrying out our investment policy and due to the
fact, also, that gold imports are all made to New York and consequently the
credit arises with New York institutions in the first instance.?

BS.MM
att.

_192_




FEDERAL RESERVE BANK

WSCA.1-100W9-23

OF NEW YORK

1FFICE CORRESPONDENCE
Fo

Mr. Snyder

Aug. 6, 1924

SUBJECT.

Governor Strong

FROM

DATE

Brokers' Loans

The figures which you have just sent me and which .I am returning,
impress me as being based upon a plan of calculation which should give us
as nearly an accurate estimate of the loan account as by any method that
we could adopt.

I hope you feel as I do that this is one of the really important
must influence our policy from time to time and that, therefore, we ought to use as accurate a method of estimating as can be devised.

figures which

I am sorry to have caused you so much bother.

BS.MM
att.

192_

MISC. 3. I-75M-9-23

FEDERAL RESERVE BANK

OF NEW YORK

\TFICE CORRESPONDENCE
To

DATE _____1118,7_._.111-11124,1,192____

Mr. Snyder

Price Levels

SUBJECT

Governor Strong

FRO .

As an intellectual speculation in regard to the future, I should say

that the best bet would be that in the long run we cannot expect tomaintainstable
general prices in the face of continued gold imports even though our policy may,
by good fortune, be capable of considerabledevelopment beyond what has so far been
possible.

In a way it was fortunate that we were able to acquire securities at

a time when the general price level was declining.

Were it advancing with

speculative tendencies abroad, we would soon enough discover the embarrassment
of our position.
The question now is:

What may effect a change of sentiment of such

character that people will be in a mood to buy rather than to sell things, to
contract ahead rather than from hand to mouth, etc.?
of the whole question of prices just now.

That is really the nub

Around a year

ago,

I thought that time

was coming because I felt that Mellon's tax plan had been received with sufficient
enthusiasm to insure its passage, that the bonus bill was killed, and that the
European situation was going to have a housecleaning.

Mellon's bill failed,

the bonus was passed, and the European clean-up was considerably delayed.

Now,

however, we have a good prospect for a settelement abroad, the bonus bill has

been forgotten for the moment, there has been some tax reduction of moment to the
country, the crop situation has developed an astonishingly improved outlook for

a large section of the farming community, and it may well be that the turn of
sentiment will take place after the country gets reassurance as to the outcome
of the elections.

Of course, that is the one specisl doubtful factor just now.

I do not regard the figures as to reserves, bank deposits, money rates,
etc., as being so important just now as a guide to the future as I do the develop-

ment of sentiment from time to time and its bearing upon the willingness of



WkAJ-75ws-n

FEDERAL RESERVE BANK

OF NEW YORK

Aug. 11, 1924

.1AFFICE CORRESPONDENCE
To

DATE

Mr. Snyder

SUBJECT.

Governor Strong

FROil

business

men to make commitments.

ating, and to me are

192_

Price Levels

2

But the index figures are exceedingly illumin-

convincing that

even allowing for errors in judgment which

are unescapable, the policy of the Federal Reserve System has been sound and I would
not be ashamed to defend it against critics.

BS.MM
att.







.

MISC. 4. 1-10M-9-43

FEDERAL RESERVE BANK

OF NEW YORK

)FFICE CORRESPONDENCE
Mr. Snyder

DATE

T-'-'ug. 12,

1924

192_

SUBJECT

Governor Strong

FROM

Ahere is that memorandum you were going to send me about the
ventilation and temperature in the new building?
it up right away, in case we have some more hot days.

BS.IVLIVI

I want to take

'

MISC. 3. I-ISM-9-23

FEDEAL RESERVE BANK
OF NEW YORK

4"--IFFICE CORRESP 111 DENCE
To

Mr. Snyder

DATE
SUBJECT-

Aug. 18, 1924.

192_

Excess Reserves

ernor Strong

Fi,

Does your memorandum of August 15 in regard to excess reserves

indicate that you have some doubts in your own mind as to our policy?
what has brought about the change of view?

If so,

$86 million is about 4 per cent. of

the required reserve, and as the reserve would average,say,around 10 per cent.
of all deposits, the excess is 4/10 of 1 per cent, of the deposit liability, and
in percentage is not very much.
I have myself in former years, when bank deposits in New York City

were but a fraction of what they are now, seen excess reserves of the New York
Clearing House banks alone in excess of $86 million.
in the

vws,

My recollection is that

Syceceo difirdwo
90's the excess reserve at one time was in

.3

1QmgjETs., and after

the panic of 1907, as I recall, the excess reserve of the New York Clearing House
banks at one time exceeded $80 million.
But after all it is the last few bales of cotton that make
of the whole crop, and I suppose the same applies to credit.

BS.MM
att.




the price




MISC. 4. 1-100M-9-23

FEO,RAL

OF NEW YORK

OFFICE CORRESPONDENCE
To

DATE

Aug. 18, 1924
192_

Mr. Snyder
SUBJECT
'

FROM

Govemor Strong

I think

we should have a

his apprehensions.

him for some day

BS.M0
att.

talk

If you would care

this

week, I would be

with Mr. Roberts and endeavor to allay

to make

an appointment for

glad to go along.

lunch with




FEDERAL RESERVE BANK

MISCA.1-1001-9,3

OF NEW YORK

OFFICE CORRESPONDENCE
Mr. Snyder

DAYE

Aug. 18, 1924

SUBJECT

To

Governor Strong
FROM

Dr. Burgess has been good enough to prepare for me an analysis
of the article in the Chase Bank Bulletin which criticized the policy of this
bank, and conceraing which you had some conversation with Mr. Roberts.
I wish you would read his memorandum attached and return it to me
discussion with
as it is along some such line as this that I propose to have a
Mr. Roberts.
BS. MM

att.

192

71M1111011MAIN..,

AU.A4

CONSIDERATIONS OF BANK POLICY

In some quarters there has been a disposition to question the wisdom
of the latest reduction in the discount rate to a 3 per cent basis.

This

appears maialy to be upon the grounds that this latest reduction especially

has tended to promote extremely low rates of interest, at least in the New York
market, and that this is dangerous and unwise.

This appears to arise through a misunderstanding of the functions of
the rediscount rate.

Following the worldwide collapse of prices and of trade in 1920
there were many predictions of severe and difficult times.

This has proved to

be true for most other countries, but in the United States there came, towards
the end of 1921, a marked recovery which has not been since seriously interrupted.
We now possess reliable measures of the volume of trade and business
r

conditions, and from these we know definitely just what the position of trade
has been.

Our new indexes show that trade was back to normal by March of

1922, and has since been belot normal only one or two months.
words, this country, almost., alone of any important country, has enjoyed an

unusual degree of prosperity for two years and a half.

And in marked con-

trast to the war and post-war periods, we have had also a fairly stable price
level

When in March of 1923, and again in February of this year, the business averages rose rather sharply and then suffered a subsequent decline,
there were again multiplied predictions that we were entering upon a serious
slump. Especially this year the building boom and motor car production had been
going at a high pace, and a considerable reaction would have been not unnatural.



2

But in June, or July, the decline which, in iron and steel and the
cotton trade, and some others, haa become quite serious, appears to have been
arrested and since then business has been generally on the up grade.

Now,

in the present year, this bank's rediscount rate was reduced first on May 1,
again on June 12, and finally on August 8.

Throughout this period interest

rates tended to decline up to August, but not since the last reduction of the
rediscount rate, notwithstanding that during this period the Reserve Banks'
investment holdings have been moderately increased.

The rediscount rate being essentially in the nature of a regulator
or governor of the business machine, what, under these conditions, was the
clearly indicated policy?

If, as so many believed in the spring, the re-

cession in business was to be serious, obviously the discount policy should
have been directed towards mitigating this as much as possible.

If, on the

other hand, as many believed, the opposite danger existed and the steady in-

flow of gold must inevitably result in another heavy expansion of prices and
a consequent boom (such as inevitably attends a rise in prices) it was desirable that the Reserve Banks should be in the best possible position to mitigate
A low bank rate and a considerable investment holding was clearly the

this.

vantage ground.

The business of the rediscount rate is not to stabilize interest
rates or maintain high interest rates.

In stable interest rates there appears

to be no economic advantage whatever; quite the contrary.

Their chief social

function essentially involves the Widest movement.
As the long experience of England has shown, the interest rate is
the surest and safest regulator of trade that we possess.
can

Unless this rate

move freely and widely this regulating function is lost.

Tendencies to

overexpansion will not be restrained by a 5 per cent bank rate or undue
apprehension relieved by a



3

4 per cent

rate.

If the rate can move freely between, let us say, 3 and

7 per cent, this influence is correspondingly augmented.
can swing between 2 and 10 per cent, the influence

If the rate

clearly still stronger.

The Bank of England, the oldest anvost ably conducted of all
central banks, has never hesitated at these latter ranges.
1909 the dank of England rate was at 2i per cent.

In 1908 and

In 1914, at the opening

of the War, it was swiftly raised to 10 per cent.
There are

fe.a economists who do not believe that if the rediscount

rate in this country could have been raised to 7 per cent, or possibly
8 per cent in 1919, a large part of the subsequent boom and collapse might
have been avoided.

In the same way a declining discount rate should be

the accompaniment of declining trade, unless, indeed, we regard the stability
of interest earnings as of greater moment than the stability and prosperity
of the nation.

There are many who feel that the tremendous and redundant inflow
of gold into this country, amounting now, since August of 1920, to over
1600 millions, is fraught with great peril to our economic stability, and
especially to our credit position and price levels.

This may well be.

But

the frequently predicted heavy rise in prices has not yet appeared, nor is
there as yet any beginning.

This Bank's index of twenty basic commodities,

which has shown itself such an excellent forecaster of the larger and more
slowly moving indexes, fell last week to 141.3, the lowest point in two
years.

It is true that the last six months have seen a quite remarkable

a/A
expansion in bank deposits, and that the total net deposits of ViftAlmber

Banks of the Federal Reserve System are now more than 3i billions above the
highest point of 1920.

And such a rapid expansion is usually the precursor

of a corresponding increase of business activity and of rising prices.



4

But the remarkable fact about this increase in deposits is that
about three-fourths of

has been in the form of time deposits

it

and the larger part of this has gone into bank investments rather than into
an expansion of bank loans.

And experience has shown that there is a quite

notable if not radical difference in the effect of such an expansion, as
compared with a rapid increase in bank loans to customers, and, as is usually
the' case, a corresponding increase in demand deposits.

The business of the country is largely carried on by means of demand
deposits, and it is the relation of these demand deposits to the volume of
business, the ratio between thes2and the volume of trade, which chiefly determines the general level of prices.

The increase in demand deposits in

this country in the last two or three years has just about balanced the increase in the volume of trade, and we have had, therefore, a fairly stable
general price level, as this Bank's new index of this general price level
has so clearly shown.

There have been considerable fluctuations in the averages of
commodity prices at wholesale, both up and down, but in such times of perturbation as the last ten years this is a distinctly different thing from
the movement of the general level of all prices, including therein wages,
rents, retail prices and other elements which make up the total of payments
for goods and services.

But if our redundant gold really threatens an overexpansion of bank
credit, clearly it is the business of the Reserve Banks to be in the best
possible position to meet this.

And against any long and slow expansion,

as in the twenty years preceding the War, experience clearly shows that
neither the bank rate nor the interest rate is any effective counteragent
whatever.




On the other hand, if a recession in trade and a decline in bank

5

11,14

bor

wingw presents an excellent opportunity to the Reserve Banks for ac-

A

qui 'lag a sufficient holding of investments, this can become a very potent

factor in checking expansion in a time of need.
Member Ban'

If the larger part of the

reserves of the country, say a billion and a half, was invested

in Government securities, this would provide a fund that would go far to
counteract the effect of even a billion and a half of redundant gold.
Whether this would promote cheap money or speculation in stocks
and bonds seems of little consequence.

Stock speculations are but a bubble

on the broad stream of trade and can never seriously affect trade conditions,
as we now have abundant evidence.
1Nor do very low interest rates in the Diew York market necessarily

foster credit expansion.

After both the panic of 173 and of 193 we had a

prolonged period of cheap money, but the credit expansion was long delayed.
But there is yet another phase of the question.

The United States

have a vital interest in the revival and the stability of world trade.

We

have equally a selfish interest in getting rid of this billion and a half of
redundant gold as

'as

possible.

of the world has a genuine need for it.

We have no need of it; but the rest
For every cent of it we have paid

the exact equivalent in goods and services.

A billion and a half of

lars is a good deal of money to throw away.

If we could help a general

dol-

return of the nations to the gold standard we should gain both ways.
Experience as well as theory has shown that, in a broad way, the
rates of foreign exchange under such conditions as now prevail correspond
broadly to the relative positions of the price levels of the different countries.

If our price level declines this tends to raise the purchasing

value of gold and to lower the value of paper currency; in other words, to
make the return to a gold standard very difficult.




It is highly to our

6

interest either to keep our price levels steady, or even that they might
somewhat advance.

And quite apart from all this, low interest rates here

promote foreign borrowings and set the tide of foreign payments in the
opposite direction to what it has been, which in turn would greatly assist
England and other nations in getting back to a gold basis.
And beyond all these considerations there are others of a more
general nature, of social and political significance.

There is no question

that the high discount rate of 1920 was generally connected in the minds of
the farming population and many others with the violent fall in farm prices,
greatly stimulating the prejudice against any form of central banking system
in this country.

Identically this kind of feeling made an end both of the

First and Second Banks of the United States.

If this prejudice were strong

enough it might be sufficient to wipe out all the great gains in banking
reform since 1913.

Clearly it ought to be said that if the Federal Reserve Banks can

make a high rate of discount they ought equally to be able to make very low
rates.

.4.

4$1,1441
There is yet another consideration, and that is that owommuipsii4ww.

the rediscount rate is largely determined by the prevailing interest rates

C0.444
and not the determinant of them. Ait is open to question whether prevailing
money rates would be greatly different at the present molgent if there were no

Federal Reserve Banks at all.

Ne have had extremely low interest rates in

New York in many periods before these banks were created.




WSC.3.14W-9-23

FEDERAL RESERVE BANK

OF NEW YORK

--4FFICE CORRESPONDENCE
To

Mr. Snyder

DATE Aug. 18, 1924
SUBJECT:

Governor Strong

FROM

II

see no objection whatever to your giving the lecture course on

"The Business Cycle" in the Department of Economics of Columbia University next
summer.

Of course, the only objection which could be raised would be that

the discussion might in some way involve a disclosure of the affairs of the
bank, but your own good sense in that respect is sufficient for me, and if
there is any doubtful
refer

it to

att.




your mind on that score, I am sure you will

me.

I think

BS.MM

point in

it is

a good plan to

keep these contacts

alive.

192_

MISC. 3. 1-75M-9-23

FEDERAL RESERVE BANK

OF NEW YORK

Or'FICE CORRESPONDENCE
To

DATE

Mr. Snyder
SUBJECT

Aug. 18, 1924

Street Loans

Governor Strong

FROM

The explanation of the ch,inge in proportion between loans for

account of correspondent banks and loans for the account of New York reporting
banks is a fairly simple one.

The New York banks are forced to take these

loans over when the call money rate gets so low that there is no profit in
lending the money over what is received on ,a_.-deposit balance.

It saves

the out of town correspondent a lot of bookKeeping and bother in figuring
interest just to call the loan and let the balance remain in its account.
I have no doubt a lot of that has taken place.

at t.




192_

11.11

om,2.oA,,4

IMMINMMMMIIMMIMPIJPINIP
MOW
INTEROFFICE

FEDERAL RESERVE BANK
OF NEW YORK

ROUTE SLIP

TIME

P. M,

OFFICE SERVICE
MESSENGER SECTION

DA1E

Mr. Snyder
DEPARTMENT
DI v IS ION

SECTION

Please note,....
__o.C._and send any
REMARKS
suggestions, to be ready for Mr. Jay on his return.

FROM

W. R. Burgess
DEPARTMENT

DIVISION
SECTION

N. B.
Digitized forUSE THIS FORM INSTEAD OF OFFICE ENVELOPE WHEN POSSIBLE,
FRASER
TO INSURE PROMPT ABS ACCURATE DELIVERY ALL COMMUNICATIONS SHOULD BE DISTINCTLY LABELED


COPT
FEDERAL RESERVE BANK

OF NEW YORK 4111.

OFFICE CORRESPONDENCE
Messrs. Jay, Case, Kenzel and Sailer

To

DATE
SUBJECT

August 21.

_1924.

Governors Conference

Benj. Strong
FROM

The Federal fieserve Board has called the fall meeting of the Governors
and Federal heeerve Agents for Monday, November 10, 1a4.
conference may be a profitable one., it is necessary to

11

In order that the
ve the

rojrnms prepared

and submitted to the various Geverncre well in advance at th-t date, in order that
they may have time to consider and prepare any necessary date in connection with
the questions to be :resented to the conference.

Rill you please, therefore, give to the various deoartments within your
jurisdiction an opportunity to sugLeet to you any topice which they may wish to
have presented for consideration, and :ubmit any topics of eubstnntial importance

to Mr. Earrison, who till

undertake; the preparation of the programs, not later

than October 15, 1924.

Please observe the usual custom of aubmitting each topic seeeratelv and

in duelicnts, stating enetner it is intended for consideration at the separate
Governors sessions or the joint eessiens, slel giving a short title for use on the
progrum, followed by

4

concrete recommendation if actien is reeuested, and by a

brief explanation of the point mined if duscuesion only is deaired.







FEDERAL RESERVE BANK

WW.4.1,00W9-23

OF NEW YORK

OFFICE CORRESPONDENCE
Mr. Snyder

DATESept-9, 1924_ 192_
SUBJECT

Governor Strong

FROM

Owing to Mr. Roberts' illness, I
and probably will not do

FO

have

before leaving for

been unable to see him,
the West.

With this I am returning Dr. Burgess'
might be a good plan for you and Burgess
and without

emphasizing it too much,

memorandum

at some

to have a

and think it

convenient opportunity,

talk with Mr. Roberts

and confidentially clear up his mind of any doubts which he may have along
similar lines.

PS.W.

att.

MISC. 3.1 60 M-4-22

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
. Snipler

DATE

9e
_

/-t

10

'924
_I

.

192__

SUBJECT:

Governor Strong

FROM

The addition to your memorandum in the par clearance suit seems to me
quite well worth while for Mr. Baker to consider,

Of course, we don't want to

direct him too much in the character of his defense of this litigation, and there
is a very nice question which will cause some difficulty as to whether any evidence
of this character upon which an argument can be based has a proper 21ace in the
trial of the case iwhich of course is confined to the allegations in the bill.
I think you and Dr. Burgess had better discuss this with Mr. Baker when he comes
to New York on the 20th or thereabouts.
As to the charts.

I shall be in Colorado then.

It seems to me a pyramid is graphic and will explain

to an uneducated person just what transpires, but it will only be complete by
the figures of the
showing theAbanks through which these credits pass and accumulate, putting in the
letual figures for purpose of illustration and then adding a little description
of the process of lending and of the way the deposit is transferred fror one bank
to another and thereby the reserves transferred in a decreasing quantity until
the theoretical limit of expansion is reached, which of course is a logarithm
with no end to the calculation.

I like the larger chart in pyramid form better

than the smaller one, although I see no reason why we should not prepare a
variety of them and give Mr. Baker his choice.
This is a situation that iE worth all thr work that we can put into
it.

B.S.MM

att.




MISC. 3.1 e0M-4-22

'FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
To.

1r.Snyder

DATE

Sept. 15, 1924

SUBJECT:

Governor Strong

FROM

There is no reason for you to be in the dumps about the index or
anything else.

Don't forget that the educational value gained from a study

of past experience must be supplemented by some sort of judgment in its
practical application, and the reason why I want the figures along the line of

our recent discussiOn as to credit, is because the first is not complete without
To tell you the truth, I think your index will prove to be the

the second.

most valuable one that we can have for such use as indices serve,tar.better. than

an index of wholesale ,rices or a selected list of sensitive articles or living
which
-show
costs or any other index fails in comprehensiveness, wh4ch-=-71just one small
-

A

item in a big picture; and I have always felt that your index is the most
comprehensive.

If it is at all open to criticism, from my point of view it

to

would be on two grounds: (1)
index, and

(21

I

is7

criticism which applies to every weighted

t ia, as to the judgment with wtich the weighting is done, and

is as to whether the calculation of a trend, in order to find a true

normal, is definitely sound..

I don't know enough about it to be able to

criticize intelligently, but it seems to me there may be a weak spot there.
I should be glad to learn of any new suggestions you and Burgess

may have about banking figures, because I do attach corwiderable importance
to work along those lines.

BF.' AN

att.




192_

mix.3.1-75w9M

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Snyder
FROM

DATE_ November-3r 1g24_192___
SUBJECT

Benj. Strong.

I have read the attached memorandum and draft letter to Mr. Knox, and
this i.e my reaction:

A personal letter to Mr. Knox serves no broad purpose unless he

is permitted to circulate it, or to publish it.
As this is a Federal Reserve System matter, as distinguished from

our own bank, I am unwilling to make a statement for the System on so important
a matter at least without some understanding with our Washington associates.
5.

This matter is on the program of the Governors Conference for

discussion, and my own recommendation is going to be that a statement of our
policy be prepared at the earliest possible date and printed in the Bulletin,
and that either the statement

in

full, or an epitome of it, be put on the back

page of each of the twelve monthly reviews.

If possible, I would like also

to see such a statement appear in the journal of the American Bankers Association.
Incidentially, I was delighted to have Colonel Ayres tell me on
Friday that while some of his colleagues in Cleveland would not agree with him,

he was, personally, very glad that we had accumulated such a large investment
account, as he believed

it was about the only means available to us during the

past year to protect the country against an inflation.
can help US immensely.

talk, and a frank one.

Such fellows as he

And so can your friend Chandler, with whom I had a long
Likewise, George Roberts, whom I hope to see in a few

days.

Does not this same statement apply with equal force to the article
which accompanies your letter of September 26, which I assume was written to go
 Colorado
to


and held up on account of my desire to have no mail out there?

W.A.1-1N1.9,3

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To
FROM

Snyder

DATE

November 17la4_192___

SUBJECT:

Governor Strong

What, if anything,

are we able to do in order to get a good line on the

amount of "forward" contracting.

contracts have a

very

This ia the period when

inventories

in forward

important bearing upon our policy.

I doubt if it can be approached statistically, but if discreet

inquiries

can be made by our investigators so that this matter can be constantly watched,

I think it could be of value and I would like to know the results.

BS.LS

(Copy to Dr.




Burgess)

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Mr. Snyder

DATE-Aovember 18, 1924.
SUBJECT:

FROm_Gav_ernar_Strong_

I have been invited to address the Army War College on January 22,
1925.

I wrote General Ely that my throat did not permit my doing so, but

offered to suggest some substitute if he desired me to do so.

His reply is attached. Do you feel that it is worth while for you
to undertake this?
Att.




_192_

M.A.1-10.1.23

FEDERAL RESERVE SANK

OF NEW YORK

'

OFFICE CORRESPONDENCE
Mr. Snyder
-ROM

DATE_
SUBJECT:

November 22, 1924.192_

Forward Contracting.

Governor Strong

I did not have in mind a statistical treatment of forv,ard
contracting, but simply such private, unofficial inquiry which would
disclose whether the tendency was developing and whether it was con-

siderable or slight, dangerous or harmless, etc.

BS.LS




.MC.3.1-794-9-23

FEDERAL RESERVE BANK

OF NEW YORK

C.'PTCE CORRESPONDENCE
To_ Messrs. Snyder and Burgess
FROM

DATE_

November 29

1924.192

SUBJECT

Benj. Strong.

Referring to our talk of a program in connection with recent criticism
of the policy of the Federal Reserve System, please note the careless analysis
on page 2527 of The Chronicle (Nov. 22, 1924) in the middle of the right hand
column, where it says:
"since when trade again improves the securities
can be sold and the funds released placed at the
command of trade" etc.

This merely exhibits the loose jointed way in which this matter has
been discussed in the press.
As to the criticismsthemselves, I think they fall within three
categories:




Unremunerated services.
An analysis of this will show that they are all
services of the charc-cter required in order to give effect
to the principles of the Act, and the answer, if one is made,
must be an attempt to justify performing necessary services
without charge. And that, I fear, is one of the weak joints
in our armor.
That investments are made in order to
produce earnings which are needed to meet
the heavy cost of these unremunerated
services.
While the Governors of the Federal Reserve Banks
have for the past year or two been definitely on record
collectively as opposed to investments just for earning
purposes, there is, nevertheless, a feeling in the minds of
some of the Reserve Banks that they must earn most if not
all, the expenses and the dividend, and here again is a weak
We in New York know that the whole
joint in our armor.
purpose of the operations of the Open Market Committee is
credit control and not earnings at all, but an exact and
fair picture of the attitude of some of the Reserve Banks would
probably be that they have Agreed to a policy as to credit
which is agreeable to them because it does produce earnings
And the real test
as a sort of by-product of the policy.
of their attitude will come when the time arrives to sell
As this time is approaching, we will soon
these securities.
know more.
5.

The General Subject of Policy.

Here we come to a System matter of such moment

A-9-23

FEDERAL RESERVE BANK

OF NEW YORK

--)FISkE
0_

CORRESPONDENCE

DATE_

WIssra Snyder and Burgess

November 297-4424_192_

SUBJECT:

-2-

Benj. Strong

ROM

or writings lest we invade the field of the Federal Reserve
Board and lay ourselves open to the criticism that we are
not "playing the game."
From the above you will observe that further reflection leads me to
hesitate a bit about going into this matter ourselves and in our own name.

On the eleventh of December a big banquet is being given to Mr. Owen
Young. I hear that the applications for seats will result in filling the
Waldorf-Astoria banquet room to the roof.
I wish you would ask Mr. Jay how
he feels about preparing a very brief, conservative statement to use in connection with his address at that banquet, which would deal with Federal Reserve
policies somewhat from the European standpoint and along the line of our recent
discussions with Anderson et al.
This is just a thought based upon my belief
that almost anything that Owen Young says just now will be regarded as gospel
and coming from the world's greatest financial strategist.

BS.MSB




3. I-75M4-23

FEDERAL RESERVE BANK

OF NEW YORK

JFFICE CORRESPONDENCE
ro___

Tr. Snyder

DATE

December, 1924

192__

SUBJECT:

Benj. Strong

FROM

I know Mr. Boles very well.

He is sympathetic and a good friend.

We must bear in mind that a meeting of newspaper men bears some
resemblance to the strength of a chain, - which is no stronger than its
weakest link.

A meeting of the character you suggest is limited

in

freedom of discussion by the limitation imposed by the degree of trustworthiness
or untrustworthiness of the least trustworthy person present.

I had a talk

with Mr. Noyes about it yesterday, while Dr. Stewart was in the bank, and
they both agreed with inc on this point.

My suggestion is, therefore, that we pick out a very small group
of the very best men and most reliable of the newspaper men.

My suggestion

at the moment would be Boles, Noyes, Woodlock, Schneider, and, of course,
we might add Roberts, Chandler and Anderson.

Willis and Seibert at such a meeting, and I am not well enough acquainted
with the others whom you name to take the responsibility of making any suggestion.

Dr. Stewart would attend such a meeting.
If you and Mr. Jay agree that it would be worth while, I will be
glad to have these men dine with inc some night, and would submit to your judgment

and his the question of whether anyone else should be present.
We must not mix the white sheep and the black sheep;
we have a mixed party of newspaper men and business men.

If we are going to

have a party of business men such as you suggest, they should all be of that
type, for the discussion would be of a wholly different character, and, in my
opinion, would be subject to limitations which would not apply with the members




ne

. 3. 1-75M-9-L1

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

- 4r.- -Snyder

SUBJECT:

Benj. Strong

FROM

DATE_Decesiber .5_,_1924_ 1 92_

-2-

of the press.
Won't you go over this with Mr. Jay and get his reaction?

BS.MSB




FEDERAL RESERVE BANK

OF NEW YORK

iFFICE CORRESPONDENCE
To

ur. Snyder

DATE

December-5, 104

192_

SUBJECT:

Benj. Strong

FROM

I cannot answer the two problems you suggest, except that it
may be that during the peaks of industrial activity caused by the war,
very large sums of surplus earnings were plowed in in all the industrial companies,:

which benefitted by the war activity.

This certainly was true in various

branches of the steel industry, and possibly others.

It was notably not

the case both with the real] roads and with the public service corporations,

which were subject to the very high costs of operation and control of rates.
They suffered while industries benefitted.
outstanding example.

BS. MSB




The steel corporation is the

,M-9-23

FEDERAL RESERVE BANK

OF NEW YORK

,-)FICE CORRESPONDENCE
0
ROM

Snyder

DATE_ December_4,_1924-192___
SUBJECT

Governor Strong

here is a note from Miles.

Can you ascertain from our files

what the Allied and Colonial debt is to Great Britain?
As to the second question, do you not feel that the maintenance

of the arbitrary ratio between the Reichsmark and the Rentenmark was
due to the following causes:
The steps which were taken to prevent the export of
the Rentenmark and its use abroad in settling foreign
payments to Germany;
To the very high discount rate of the Reichsbank;
To the element of convenience, and
To the general shorta6e of all forms of currency for
making money payments.
Are there not other points?

At t.

BS.LS







FEDERAL RESERVE BANK

MISC. 4. 1-2.004- -LI

OF NEW YORK

OFFICE CORRESPONDENCE
Tc

Mr. Snyder

FROM

DATE

December 84 1924

SUBJECT:

Benj..-__Strong

Before I write Miles, are you able to advise me of anything that
is known in regard to what, if any, payments are being made by the dominions
and colonies on the loans made them by England, or of any payments being made

on the loans of the allies?

19;




1-100M-9,3

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Mr. Snyder

FROM

DATE

December 22

E '70

Governor Strong

SUBJECT

.

The remarks in regard to theAmerican'llgitic

J.

qually

to the article in the Annalist.
I might suggest that Noyes might be able to help_ ou with

the Annalist, if it is worth paying any attention to at all.

Att.

192_

10010,

FEDERAL RESERVE BANK

n1104,

OF NEW YORK

liFICE CORRESPONDENCE
ro

ROM 111

Governor

_Strong__

DATE

January 4,

192 4

SUBJECT :

Mr. Snyder

"A Tract on Monetary Reform," by J. M. Keynes, will be published
here by Harcourt, Brace b

Company, on January 17, end we have sent them an

order for twelve copies as soon as issued.




n.11c oo

FUNERAL RESERVE BANK

_3

OF NEW YORK

arFFICE CORRESPONDENCE
To

Governor Strong

FRO

DATE

January 4,

1 92

Mr. Snyder

SUBJECT

Just as recalling a little incident of 1921, you may be interested
in a little paragraph on page 4 of the enclosed, and the matter to which it
refers.




4

MISC.3 I STAT.9/00-10,1

FEDERAL RESERVE BANK

OF NEW YORK

IIDFFICE CORRESPONDENCE
To
FR




GalLernor Strong.

DATE
SUBJECT:

January 8,

192 4

Bok Plan

Mr. Snyder

I am much interested to know that you purpose to vote
on the Bok plan, for, like yourself, I had the same impulse to
break a fairly steady procedure in that regard and do the same.

I don't know how you feel about it, but it seems to
me that our Senate today was never more misrepresentative of
With sixtyAmerican interests or enlightened nublic sentiment.
four of its ninety-six members drawn from the sparsely settled
West and South, containing but two-fifths of the population, it
is now unrepresentative in fact.
It is simply gr
a few thousand populations amid the sage brush of Nevada, Arizona,
Yew Mexico, Idaho, and the like should be able to out-vote ten or
twenty times the population of New York, Pennsylvania, Ohio, etc.
It seamed to me that the egregious Bok had really hit
upon a plan to give voice to the better sentiment of the country
and to bring some real pressure to bear upon a dismally donee body
of back numbers.

Would there be any objection to at least pass the word
around to all the Bank that this is a matter of sufficient interest
that everybody ought to say their yea or nay about?

FEDERAL RESER

OF NEW YORK

"FICE CORRESPONDENCE
0

Awornor strong

DATE

SUBJECT

January 8,

Bank Deposits and Prices

Snyder

FROM

I should like especially to have your consideration of the chart
of gold stocks, deposits, and the general price level in this morning's
Business Summary.

It seems to me of rather curious interest.

If we had taken the average of commodity prices at wholesale the
spread here shown would, of course, have been still wider.
Does it not give the impression that this spread cannot long continue?

And I take it that there is no probability of a great decline in

bank deposits.







ir,.'

14111C 3

I STAT.3000-10-11

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
To
i vernor_Strong

DATE
SUBJECT:

i92

January 11,

4

F. R. S. Pamphlet

Mr. Snyder

The pamphlet, "Of Service to Banks and Business," is very attractive, very interesting, and very effective.
All the more reason why, since it deserves and probably will
have very wide circulation, it should not contain erroneous statements
or inaccurate information, as is the case on page 7.
The :larvard "Index of Business," here used, is not, as I think

we now know, conclusively, a correct report of the course of business or
trade.

It is essentially an index of prices merely.
Vie have found such strong confirmation of our composite index of

the Volume of Trade that we may now say confidently that the volume of
business and trade in the 1910-'20 boom reached :As peak, not as here represented, in the middle of 1920, but a full year earlier.
The Harvard index wan so clearly erroneous and so far from the
reality, that it had to be radically revised last summer.
As it is, furthermore, based, as T believe, upon an erroneous idea,
I do not think that it ought to be used in this book.

045---kaut

)063A,F_

ckaluce

t'aftx.
&Li'

a491.,J

ca
tikie

lug




Attr;_

(/

truk2rt/It 1>
tsoyuc_

4(rntA_

factrie
614-Ak

ItteAk

,SC

1

1

y.v 3

FEDERAL RESERVE BANK

.

OF NEW YORK

OWECE CORRESPONDENCE
Governor Strong
FROM

DATE:

SuBJE-c7

January 11,

Letter to Logan.

Mr. Snyder

An admirable exposition, and most important I think is the
note which you stress on page 14, that the morale of Germany must be restored.

But, outside of reparations payments, I see practically only
one reason why Germany should have adverse trade balances for more than
a brief period, and that is simply that her scale of prices was above
the levels of her competitors.
Next:

It seems to me th,t the idea that Germany cannot mobilize
(1)
the 5 or 6 per cent, of her income that would be required as taxes,
to sustain the government on a moderate scale of expenditure, is
absurd.
I believe that the German capitalists and banks have
(2)
ample funds to provide the government with a temporary loan, sufficient to tide it over until the taxes come in.
Therefore, I do not believe that they need any foreign
(3)
loan, or any further inflation, or to do anything but to get back
to sane economics and sane finance.
All the rest of it seems to me pure subterfuge and evasion.
And I believe that if you were to spend five weeks of travel and investigation in Germany you would share fully in this view.
Is not the real trouble that the Germans themselves have no
faith in the honesty of their own government?




Why should we have any more?

1924.

811.0

3

FEDERAL RESERVE BANK
OF NEW YORK

1.1131 31.33

R

OFFICE CORRESPONDENCE
To_

Governor Strong

F

DATE

January

12,

Mr. Snyder

m

SUBJECT

Federal Reserve Pamphlet.

About that Philadelphia pamphlet:
As I understand it, some 20,000 or 30,000 of these pamphlets
have been printed and are to be distributed.
and the cost of distribution will not be lees, with labor and all, than
4 cents more, - say 15 cents each.
If there are 30,000, this is an expenditure of $4,500 enou41 to make it worth while not to include half-baked and misleading
stati sties .

On page 22 is another chart which gives the impression that
retail trade in 1923 was below and wholesale trade far below 1920.
I don't think the Federal Reserve System ought to father such
things as this .

clitt(Li 90




A4Ar

ocid

det-xx

Of,
r-

1924

4,44'

44,447

40044-10 24

FEDERAL RESERVE BANK
OF NEW YORK

SPFFICE CORRESPONDENCE
lay _

To

Ff.

Ur.

_.(Copy for Gov. Strong)

DATE

January

1924

SUBJECT

:Ittydsr

You will note by the enclosed that still another service stci
in thi

:laming, with rn index prnctir_ally the same as we hove had in

this Bank now for the last two or three yrs.
I oepecially call your attention to its reference to the index
published by the Ti'ederal 14sserve Board, and likewise its use of the word

ti
"normal."

"Iractically spoakin,;, T know of no competent statisticsl service

in this country now which does not make use of the concept,ok thin wore in
some form practically the same na our olsn.

This includes, among others, the harvard l'ureau of Business

ae-

search, the hmerican T. 6 T. Statistical Department, end the Standard '.wily

Trade .service (whose economic vdviser now is Prof. B. J. Davenport, of
3onnell University.

It is protty discouraging to have this sort of thing happen year
after year to it han ever since I came here.
,n index of the Volume of Trade.




And I suppoee the next will

IFAIM . 3

I STAT.900-10-21

FEDERAL RESERVE BANK
OF NEW YORK

IIIFICE CORRESPONDENCE
To

FR*

_chiernor

strong

DATF

January 29,

192 4

SUBJECT

Mr. Snyder

George Harrison has shown me the kind of an index digest pre-

pared by tr. Hamlin, of the Board, as to the differences between the
Aldrich flonatary no-omission Bill and the Federal Reserve Act as passed.

As it stands it does not seen of much use.

But it occurs to

me that an analysis by mxallel paragraphs might be of service to some
future historian of the System, the which I might be myself mono day.
Do you know if anything of this sort was ever *repared, and if

not do you happen to have any extra copies of the original Aldrich Commission Bill and of the Tederal Reserve Act as originally passed*

Pos-

sibly, also, o' the original draft of the bill by the Glass Committee, as

submitted

to lovngress?

It happens that Miss Davidson would be free for a few days to do
a job of this kind, if we vented to.




3118C 3 I STAT.3600-10-31

FEDERAL RESERVE BANK
OF NEW YORK

410DFFICE CORRESPONDENCE
To

_Governor Strong_

FRS

DATE

February 1,

19 24

_lir. Snyder

(1)

SUBJECT

The Bok Plan

Isn't some kind of a court better than any kind of vigilance

committee and lynch-law sort of mob rule, and isn't the appeal to war
always more or less of that emotional type?

In other words, isn't any

kind of a scheme that will make the countries sit around a table, no matter how senseless the babble they indulge in, better than trusting to the
conferences of a lot of cookie pushers in white spats that we call diplomats?
(2) Won't the League of Nations tend to set up some kind of a centre
of interest that would be antagonistic to the militaristic political centres;
and, therefore,
(3)

Isn't it better to vote for the Bok plan and get our folk interested

a little than to go with the jingos, the know-nothings, and the blatherskites?
That is my feeling.




IAISIC 9

I STAT.9000.10.31

FEDERAL RESERVE BANK
OF NEW YORK

°OFFICE CORRESPONDENCE
To

Anvernar Strong

FR

DATE

SUBJECT.

February 2,

Outlook_fOr the Gold Standard

_Jar. Snyder

(1)
I share your view that, as yet at least, there is no serious
menace of a general abandonment of the gold standard by all the other nations
of the world, leaving us to hold a bagful of four or five billions.
And I
have the same view that you do, that more or less we are kind of utilizing
this gold as a sort of international fund and that, while the external appearance is a great difference from pre-war conditions, the reality of
everyday business and banking practice is pretty much the same.

(2)
I also believe that the gold tradition, as you call it, is
very deep-rooted in the human mind, and that in the present state of public
intelligence there is very little likelihood of a general abandonment of the
But do you not feel that there has been a good deal of real
gold standard.
progress in the last six or eight years away from a slavish adherence to the
theory of absolute gold control of the price level?

C0/4"

Over long periods, of course, the cost of gold production will
le"
average out, so as to control the trend of production, so that, up to the
world war, the average of prices has not greatly varied from the average
of the preceding century, although I am not too sure about this.
But within the century there were very wide variations and I feel
as though Wesley Mitchell put it very well when he said that it was not
creditable to our intelligence that we should have been able to devise no
better method.
But
(3) /I have a feeling that the "return" will not be to an absolute
gold standard, but rather for most nations, at least at first, the establishment of the gold exchange standard, i.e., simply the use of gold for settlemerit of international balances; in a word, that we shall no longer have a
gold currency in the several countries.
Pretty certainly France will not devaluate, at anywhere near a
feasible figure, and of course a return to the old franc par would be fantastic, with its present load of debt; so France can have no stable exchanges except on a gold exchange standard.
And is it not likely that the same thing is true of Germany, and
perhaps, also, for the present, in England?
You have noticed that little Finland
states, like Czechoslovakia, Austria, etc., in
and if things get straightened out in Germany,
should imagine that almost all the paper money
over to this basis.




is joining the rest of the
establishing just this scheme,
and they do the same, then I
regimes would be changed

MISC S I STAT.3130-10-41

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

FRS

DATt-

SUBJECT

Governor_Strong

February 2,

Outlook for the Gold Standard

2

_lbr,w_Sayder

(4)

But as to the effect of all this on this country, I am more

There has been probably a quite heavy reinvestment of European
dubious.
But I am wondering
funds in this country in the last two or three years.
if a large part of it did not come from much the same type of people who
were accustomed to investing here, and had large investments here before
the War.
I don't see much evidence of progress towards making New York the
Mr. Jay makes the point, and I think it is a
international money centre.
good one, that England is habituated to the idea of large capital exports,
We can still use pretty nearly all the available funds
and we are not.
we have in this country.
It is very clear that even such a colossal investment as three and
a half billions in a few years could not give us a successful merchant marine.
They are rarely successful as a
Those things have to grow, of course.
measure of force majeure.
Now, I imagine a large part of sterling bills and loans for international trade arise pretty directly from the sources of the trade, and, with
our exports rather dwindling than enlarging, I do not see much likelihood that
we are going to supplant London.
(5)
But I do think that England has
fact of her wildly wobbling sterling rate, and
like Sir Charles, are beginning to weaken.
I
who spent several months over there last fall,
interesting conversations.

been feeling of late the efthat even cast iron die-hards,
talked to Ohandler about this,
and he tells me of some very

Probably the Keynes group are as extreme in the one direction as
the uncompromising back-to-par-ites in the other, and that the compromise
will be on something like a gold exchange basis, as I have suggested.




Does this sound reasonable to you?

OMS 2 30M C 23
FEDERAL RESERVE BANK
Or %NEW YORK

TO
ARKS

M

111

OFFICE SERV.CE.
MESSENGER SECTION

INTEROFFICE

ROUTE SLIP
DATE

A M.

TIME

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DEPARTMENT

DIVISION

[

SECTION

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DIVISION
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NSTEAD OF OFFICE ENVELOPE WHEN POSSIBLE.
D ACCURATE DELIVERY ALL COMMUNICATIONS SHOULD BE DISTINCTLY LABELED




DOW, JONES &

CO.

NEWS BULLETINS
TUE WALL STREET JOURNAL
ELECTRIC PAGE NEWS TICKER
Telephone One Broad
44 BROAD ST., NEW YORK

Saturday, February 2, 1924

No. 21

THE NEW FINANCIAL POLICY OF ENGLAND
BY HERBERT N. CARSON
written for THE WALL STREET JOURNAL

The first two weeks of the new year began in England

with a renewal of the discussion on the gold standard;
and it seems now evident that a definite policy will soon
be adopted.

The policy suggested by the Cunliffe Committee was
abandoned during 1923, because of the industrial depression. Lord Cunliffe's advice was to deflate and return as
quickly as possible to the gold standard.
This opinion is still held by many bankers. It is still
being defended by Harold Cox and Lord Inchcape and Sir
Charles Addis. But it has ceased to be the opinion of the
merchants and manufacturers of Great Britain.
The prevalent opinion is now in ,favor of a stabilization of prices, by means of a managed currency, based
partly on gold and partly on the Board of Trade's Index
Number of wholesale prices.

No one knows clearly how this can be done, except a
few theorist, who have complete and elaborate schemes
all worked out. But the drift of English opinion is undeniably in this direction.

The central idea of the new policy is that for every
rise of 10 points in the cost of living, the bank rate should

be raised a half of 1%; and for every fall of 10 points,
the bank rate should be lowered a half of 1%.
EXPANSION AND CONTRACTION OF CREDIT

In this way, the expansion and contraction of credit
would depend, not on gold reserves, but on the prices of
the principal commodities. The aim is tesecure a direct
relation between prices and the supply of credit.
This plan does not involve the debasing of the currency. It does not mean the free use of the printing pre:s
to create an artificial prosperity. It means a regulated
currency, but regulated by other commodities as well as
gold.

It is now an open secret that the government had
adopted this policy and was about to put it in action,
when a cabinet minister let the cat out of the bag.
Sir Montague Barlow, the Minister of Labor, who was
defeated in the recent election, declared in a public speech
that the government was about to try a little inflation.

This announcement at once caused a roar of protest
from the daily press. The Daily Mail used the word "inflation" as a club and hammered the government until a




Continued

DOW, JONES &

CO.


THE WALL STREET JOURNAL
NEWS BULLETINS
http://fraser.stlouisfed.org/
Federal Reserve Bank ofELECTRIC PARE NERDS TICKER
St. Louis

-DOW, JONES &

CO.

THE WALL STREET JOURNAL
NEWS BULLETINS
ELECTRIC PAGE NEWS TICKER
4 BROAD ST., NEW YORK
Telephone One Bro.I

Saturday, February 2, 1924

No. 23

Continued

tion of British Industries, have changed English opinion
with regard to the gold standard.
Also, the swing away from gold has been accelerated'
by the slump in sterling. The English people had hoped
that the funding of the American debt would lift sterling
up to par. The reverse has happened. It has dropped
from $4.68 to $4.30.

It is now thought that Baldwin made a great mistake in promising to pay in dollars; and this decline in
sterling has quite changed English public opinion about
the importance of keeping pace with the dollar,
England expected sterling to rise to par alid gold to
flow back to London. Neither of these expectations has
been realized. The English pound has depreciated 8%

and the flow of gold to America in 1923 was greater than
in 1922.
In a word the new English monetary policy will ba
based on profit rather than on pride. It will ahn, first and
foremost at a stabilization of internal prices and a stimulation of trade.
NORTH DAKOTA LIGNITE
NEAPOLIS-Production of lignite coal in the
kota mines, in 1923, reached the highest figures

story of the mining industry in the state, ac-

o J. P. Mellon, state mine inspector. Production
5,605 tons, compared with 1,057,823 in 1922;
n 1921, and 502,028 in 1922. The value of the
mining is placed at $3,742,413. There were 259
al mines producing in the state. Although the
production over 1922 was 73.6%, it is estimated
00 tons were mined and not reported.
THE DRAIN OF TAXATION

of every $8 of our national income, $1 goes

federal, state and local.
boy whose living expenses are $8 a week pays
s, in the form of prices made higher by taxation.
man who pays out $24 a week is paying $3 of
man expending $48 pays $6, and so on. And
his,,- even if he does not own one dollar's worth
e property.
ays it in cost of living and he cannot pass the
to anybody else.

OMPARATIVE INCOME TAX TABLES
Leach & Co. have published and are distributof comparative income tax tables. One table is
e to any revenue law which may be passed.



O

seri be

of regulat
of producin
every one wit
do prices is an
be desired.

ym

e ime t t ere was a
very considerable expansion in the

Mr. Keynes. however, does not volume of credit as measured by

propose to adopt the system Advocated by Professor Fisher of varying the amount of gold contents ol
the dollar. He proposes to separate the Dote issue altogether front
gold. and to allow currency ix) be

bank deposits, and vet trade de-

pression cont,inu,A and the prices
of commodities fall steadily
These considerations surely seem

to indicate that many other influ
created freely in accordance
(aces besides the volume of money
the expansion of credit which may and the price that is paid for the
be required in order to keep pike.,
use of it have to be cow,idered bestable.
fore we can attt-rnpt to Oiabilite
PROBLEMS OF SYSTEM.
prices in a "scientific" manner.
But, with all respect to the high And seeing that the gold standeconomic authorities which nave ard that we used to work under beproposed to regulate currency anu fore the Far was extremely suecredit in order to keep prices sta- fessful in providing practical stable, it may be suggested that, as a bility in prices and almost complete
matter of practical politics, the sys- stability in rates of exchange there
tem is by no means as simple as it is surely much to be said for the
appears to be when they put it view that the United States is right
forward with the persuasive les- in endeavorivolo maintain this
soning with which Professor Cassel, system in sot.
Mr. Ilawtrey and, above all, Mr. ience which it atKeynes himself. are so we -In that. Env'

ui

ed.




inconvonent
v r

CH S

'SCIENTIFIC
CURRENCY

At,

Reforms Proposed by Different
Economists Present Many

ftet
(Now that the United States, as

the world's foremost holder of gold,

more than one-half of the
to the use of the metal are of spehas

world's supply. questions relating

cial concern to Americans. J. M.
critic of the Versailles

Keynes.

Peace Treaty and subsequent arrangements to collect German reparation& in a new book., entitled
"A Tzar" 011 Monetary Reform,"

er, 1922, was accompanied during

the last eighteen months of its

course by a fall in bank rale of
seven per cent, to three per cent.
Bank deposits in the United King-

recommends that America and Eng- dom, which may be roughly taken
land, abandon the gold standard. as a measure of the extent of
fearing that the present system will credit, were just under £2,000,000,-

give the United States too large a 000 at the end of 1918 and continportion of the
economic ued to expand until the end of
world's
power. Mr. Keynes's scheme is 1921. when they were over £2,500,criticised in the following article 000,000, thus Ignoring the bidding

by Hartley Withers, special London
financial correspondent of the New of bank rate to contract when it
.-Financial went up.
York Evening Jou
Contraction only happened in
Editor.)
1922, when they came down to £2,360,000, and this was the .yeal durLONDON.
ing
bank rate came down
In a former letter, a brief sketch from which per cent to three per
five
was given of the proposals by which cent, showing that a very ccosidJ. M. Keynes, in his recently pub- erable fall in the value of money

lished "A Tract on Monetary Reform." desires to revolutionize the
monetary system of the United
States and of England. through the
practical demonetization of gold
and the erection of a "scientific
currency system, under which the

may be accompanied, not by the
expansion ce credit, which the ad-

vocates of scientific stablization

would expect from it, but by a considerable contraction.
And if it be urged that the recent

is quite abnormal and is
volume of currency and credit shall period the influence of after-war
be deliberately regulated with a under
conditions which are never likely
view to secure stability of prices.
we may answer
As f need hardly tell you, this is to be repeated, another example.
have yet
a subject of which much has been that we the period from 1890 to
heard lately, especially in your During
country. Professor Irving Fisher, 1895 the Bank of England discount
ale University, might be de- late came down from five per cent

per cent and stayed there
e the pioneer of a system to twoabnormally long period.
g currency with a view for an
stability in prices, and DEPRESSION CONTINUED
agree that stability




Iffrideing and trac

that has to be done to chec

-Ise in prices and stop the boom a
to put up the price that is charged
for money, that is to say, to raise
ihe official rate of discount.

Further measures may have to

be taken. such as the sale of securi-

ties by the Central Bank. in order
to increase the rapidity with which
the system works. But it may be
objected in the first place that

sales of securities by the Central
Bank may very easily upset the
nerves of the Stock Exchange and
make it quite impossible to sell,
and further that a mere rise in the
price that is paid for accommodation to producers and traders cannot be relied upon to check them if

they forsee a rise in prices which

will certainly bring them profit.
DANGER OF PANIC.

If the price of money is put ub
high enough and fast enough, it
wbuld certainly work ultu.,atery,
but it may very easily produce a
panic incidentally.

Still, it has to be admitted that
as a check on rising prices and a
too exuberant trade boom, raising
the rate of discount, will at a point,
be an efficient weapon, but even
so we have to admit the danger
that when once it is recognized
that the volume of credit and consequent activity of trade are things
that can be regulated by Govern-1
meat there is a danger that very
strong political pressure may be
brought to bear in times of trade
optimism against any Government
which thought it nece.:, ary in the

interests, of sound finance to check
the movement.
On the other side of the proposi-

tion-the idea that in times of de-

pression it is possible to raise

prices and stimulate trade by lowering the price of money-we have
definite historical examples which

show that this system cannot be
relied upon to work, at least for a
very long time. This is more especially the case in England which,

owing to its dependence for prosperity on its foreign trade, is especially liable to acute trade depression, owing to causes which are

outside its borders, and are altogether beyond its control.
FAILURE OF PLAN.

It was shown in the experience

of 1920 and 1921 that the lowering

of the price of money altogether
tailed to raise prices of goods or
to expand credit,
 or to stimulate
trade. The fall in prices, which
http://fraser.stlouisfed.org/
terminated in EnglandSt. Louis
in BoptemFederal Reserve Bank of

MISC. 3.1-200.1 -0,20

FEDERAL RESERVE SANK
OF NEW YORK
"ok

IkFFICE CORRESPONDENCE
T

*WA.

OAT L

SUBJECT.

FIZOM

Q__P-K,

(-2:4-11

b
cr,-




I

2

2.

FEDERAL RESERVE SANK

OF NEW YORK
1.4IC

4

1-100M1-3-21

CE CORRESPONDENCE
Governor Strong

DATE

February 5,

SUBJECT :

Mr. Snyder

May I ask if you quite fully concur in the last paragraph of this
I confess I never thoult of it before in quite such concrete
page 3!
terms, i.e., that any sustained movement in the stock market now involves a
change in value of the total of securities listed amounting to billions of
dollars.

on

Of course the percentage of change is not enormous, but I nevertheless feel extremely dubious about the idea that mere changes of sentiment,
and still more in mere market manipulation, can really affect values to such
a tremendous extent as is involved in the actual totals.




4

ko.

ConfiL.ential

February 4, 1924
Ti E INDICATIONS OF THE STOCK MARKET

One of the surprises

in the mvilation of our new index of the Volun:e

of Trade was that in two instances out of three in the last

five years this index

distinctly preceded the major movement of the stock markets.
In 1919 the high )oint of our index of trade was reached in July, three
months before the peak of prices in industrialJstocks.

Similarly, in 1921, the

low point for the trade index was in J7.nuary, six months ahead of the low point of

the stock market.
In 1923 the index and the stock market reached their high points in the
same month.

This decisive evidence completely upsetsthe theory that the stock market
is necessarily a business forecaster.

What apparently it does forecast is

production of the producer type of goods, the metals, macninery, etc., which in

the past have been mistaken as accurate indexes of business activity.

Nevertheless, the stock market, taken broadly, is unquestionably an extremely good index of business confidence; but only recently have we had a really
reliable, comprehensive index of stock movements.
Such an index has recently been compiled by the Standard Statistics

Company, comprising a total of 202 industrials and 31 rails, weighted according
to the number of shares outstanding of each stock, and converted into index
numbers so that all the groups are instantly comparable, one with tne other, or
with the total.

It is,

in a word, tne first scientific index of stock prices

which has been compiled.

At the present time the combined index of the 233 industrials and rails
stands about five points below the high point of last March and about seven points
below the peak of 1919.
from 01.3 to 103.8.



The recovery from the low of last July to last week was

But much more interesting are the different groups.

- 2Of the twenty-seven groups into which the 202 industrial stocks are
divided, six groups are now above the previous high point of the last four years:
f".. chain stores, electrical equipment companies, food products, mail order houses,

telegraph and cable companies, and a group of 18 miscellaneous industrials.
More striking still is the fact that eight of these different groups
are now at their record high, i.e., above 1919.

These include chain stores,

electrical equipment, food products, railroad equipment, telegraph and cable
companies, traction, gas and power companies, and the 18 miscellaneous industrials.
In spite of the high average of the industrials a number of groups are
still far below the :high of last year.

These include auto accessories, chemical

companies, copper companies, leather and shoe companies, paper companies, textiles,
and tires and rubber.

These range from 16 to 30 points below last year's peak.

In other words, the list reveals how diversely different interests prosper
under

changing conditions, and how much of internal movement may be concealed

beneath any system of averages.
As to rails it may be noted that after a rise from the low point of 1921,
of 71, to a high point in 1922 of 102, they fell off last year to 86 and are now
only about 6 points above the low point of the last year.
The present upward movement in stocks has now outlasted a full three months
It seems scarcely possible to imagine a movement so broad and sustained unless the
underlying fundamental conditions were sound.

If the conclusion cited

true, that the stock market is never far away from actual business conditions, and
even tends rather to lag behind than to forecast, then we should expect to find
fairly general improvement in the different lines of business.

And this seems

to be the case.

One of the most disturbing elements of last year was the heavy overproduction of oil.

But this situation has been reversed and the present prospect

f'r this year's production is below rather than above the probable consumption.
result has been a sharp rise in oil prices and a greatly changed tone in the

industry.


The

111

e-

- 3The same is true in the steel and iron trade.

Recent reports indicate

a very general improvement in buying and prospects for an extremely good year.
As to railway traffic, if one had read only the newspaper headlines
one would readily have believed that railway traffic last year was at a very high
level.

As a matter of fact it was not much above the expected normal rate of growth,

and with present prospects might be much exceeded this year.

The car loadings for

January showed traffic well sustained.

The electrical companies report heavy forward orders and the immense
takings of copper in this country in the last year show at present no signs of
diminution.

Likewise the sugar companies have felt the effect of stiffening prices.

As to the general price tendency, otir index of 20 great basic commodities

has shown now four consecutive weeks of advance, and this week rises 2 per cent.
This is in line with current business conditions.

Measured in dollars, the rise in stock values in only the 233 stock issues
listed in the Standard Company's index, from the low point of last July 3, amounts
to about a billion and a half.

The present market value of these issues is only

700 million dollars below the high point of 14 billions reached on the 21st of last
March.

The rise from the low point in August of 1921 amounts to over 4 billion

It is these prodigious totals which give to the business man a real interest in stock market movements

,

and indicate how futile is the idea that such

1
movements could be brought about by a few market manipulators, or in the face of
adverse business conditions.

Even if we give up the idea that the stock market is

any wonderful "forecaster" of business, it still remains that it is a most excellent

and sensitive barometer of business, and, involving as it does such vast sums and
representing such extraordinarily diverse interests, seems far beyond any kind of
arbitrary control, however concentrated and powerful.



MISC

FEDERAL RESERVE BANK

I- 1001.1 S23

OF NEW YORK

OFFICE

CORRESPONDENCE
Governor Strong

To

DATE

February 7,

I94

summor-__!The Stock Market and Business

,0144

FROM

Mr. Snyder

Just as supplementing what I wrote last week on the idea that the
stock market is really a very close reflection of actual business conditions,
I was last night mulling over the Standard Statistics average] for 202 industrials, and was quite astonished to find that, just taking the deviations
of the averages from the five-year average, you get a line that runs
amazingly close to our index of the Volume of Trade--the composite of 56
series--so closely, indeed, that a three-months moving average of the two
sets of indexes would be almost identical in their trends, the only difference being that the ups and downs of the stock market in percentages are
about twice those of our line of the Volume of Trade.

Don't you think this is a quite extraordinary result, and could not
possibly be the result of chance?
I think I shall giv
week's Business Summary.

'LAI



Aid

CGOAA/14.4-1.-0-1

FEDERAL RESERVE BANK

I 10014-3.23

141111C

OF NEW YORK

FFICE CORRESPONDENCE

ROM

(bvernor Strong

J*

DATE

February 7,

1'_,24

SUBJECT

L'.r. Snyder

If you are to be in Vashington next week, it occurs to me that
possibly you might feel like going over to the War Collega and giving them

th,s.i talk on H jar Inaance," as originally planned.
orefer to have you and

They would infinitely

should be very glad to sidestep it.

The talk is scheduled for Friday morning, February 15 at ten

o'clock.

If you should find yourself in thy, wood, sill you kindly let

me know in season?




FEDERAL RESERVE BANK
OF NEW YORK

!OFFICE CORRESPONDENCE
o

Governor Strong and Mr. Jay

ROM,

DATE

February 21,

So-called "Orderly Marketing"

Mr. Snyder

SUBJECT

Hors is, it seems to me, an extremely valuable paper from
Prof. Boyle, of the Agricultural College of Cornell University.
His
conclusions agree with a careful investigation made by J. E. Pope,
formerly of the Census Department at Washington, snowing that we have
now probably as orderly marketing in grains and farm products as it
would be possible to obtain, and, secondly, that on the average the
farmer would gain nothing by carrying his produce for any longer period,
and therefore that the notion that the farmer loses by being "compelled"
to "throve his products on the market is just a pure delusion.
But I suppose our friends at Washington will continue to persevere in their efforts for orderly markets just the same.




192 4

PA IOC

A

IOW.' 3

FEDERAL RESERVE BANK

3

OF NEW YORK

FFICE CORRESPONDENCE
To

Governor Strong

FROM

DATE

February 21,

Mr anyder

SUBJECT

You will enjoy Keynes' latest on the gold situation, and his

malicious shots at the Euptian and (laldean bank directors.

Certainly

the man can write.

You will also be amused at the Nation's description of the new
"Labor" Cabinet, as mostly made up of old, rich and ageing




men.

192 4

AIISC 3

I

ST AT 3000.10-SI

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor strong

Fpno

DATE

February 21,

c.

Mr._ Snyder

SUBJECT

Currency and Prices in France

It seems to me that there is a great deal of internal evidence
to support your belief that large amounts of paper money in France have
been hoarded and that much of this has bean coming into circulation with
the usual effect.
Before the War the total of gold and paper circulation in France,
outside the Bank of France, was estimated at about 12+ billions--6 billions
of paper and about 6+ billions of gold and silver.
But a considerable amount of this could scarcely have been in
circulation, for the paper issue has not been above about 39 billions, or
a little over three times the estimated circulation of 1914.
But the general level of prices in France, the cost of living,
wages, etc., rose four times over the pre-war base, and commodity prices
at wholesale over five times, taking annual averages and not the peaks.
Then came, of course, a drastic fall in all prices, which, however, was not nearly so heavy as in England or this country.
Almost all
prices are now still below the 1920 levels, some of them very markedly.
For example, the index of commodities at wholesale rose to near G00 in
1920, and is now, as closely as we can figure it, around 470,
You will remember that 1922 saw a very sharp rise in the franc,
to above 9 cents.
This, with the rapid appreciation in its internal buying power, might readily have greatly increased the hoardings and paved the
way, when these hoardings came out, for another sharp rise in prices, and the
steady fall in the franc, without any great variation in the nominal amount
of notes in circulation.
The total Bank of France issue, however, as you have noted, has
And the discounts of the Bank of
now risen above the average for 1920.
France to private customers has gone up a full 50 per cent over the averages
for the last year or more.




4

.1111,

3

FEDERAL RESERVE BANK

2.

OF NEW YORK

.'OFFICE CORRESPONDENCE
To
FROM.

verrao r Strong

DATE

SUBJECT:

Electric

February 26,

1924

Power Production

Mr. Snyder

You will note that Wr. Dwight continues in his belief that electric
power production is a good "barometer" of

business,

although we feel here

that we have pretty definite evidence that it is not.
The most interesting thini,

about the

article, it seemed to me, was

the much greater growth in the last four years of electric production from
fuel power than by water power, in spite of the high cost of fuel prevailing
through most of this period.

61*

(avi

ali


itta.


0-s

It4-712.

MISC 3 I ST33.3600-10-1,

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
SUBJECT

Governor Strong
f,7.0KA but

DATE

February 26,

1924

The Dawes Committee

Mr ,k___Sny_d_er

I are wondering if you gave much attention to the report in

yesterday's Times, giving a resume of the supposed basis of the expert
report on German reparations.

I was particularly struck by the in-

sistent reiteration of the idea that Cermany is now free from debt, that
"the War cost it nothing," and that the German railroads are free from
debt, etc., etc.

This may be good politics, but is it rot pretty bad economics!

The evidence goes to show that, paradoxical as it sounds, the greator the
public debts of a nation, as a rule, the greater its effective wealth,

i.e., the wide distribution of a large body of securities SOWS to be the
most effective means,under existing economic conditions, of mobilizing the
savings of a nation.

And of course so long as the nation owes the money

to itself, this -is a "burden" only to the politicians and finance ministers

who must devise a taxing system.
The only real burden is the cost of collection and distribution,
which never amounts to more than a very small percentage.
Is it hopeless to expect that this question will ever be settled
on a "rational" basis!




141111C.

110011131.21

FEDERAL RESERVE BANK

OF NEW YORK

FFICE CORRESPONDENCE
to

Governor Strong

FROM

Mr.

February 28,

19211_

SUBJECT-

Snyder)




DATE.

When he went away, Mr. Young asked me if I would give him

impressions of the reaction in this country to the work of the Commi

The attached is largely the result of my talk with Prof. Mitchell ye
day, and I should be extremely interested to kpow how far you could
with it.

(N"

Of 0/Phil

Gfr

TI3

.111111,_

FEDERAL RESERVE BANK

BOOM 3 _3

OF NEW YORK

OFFICE CORRESPONDENCE

To
ROM.

Governor Strong

DATE

February 29,

SUBJECT

1.1r. Snyder

Mr. Jay has the February Que.rterly 3ournai of Economics which you

ask for.
If there was anything in the letter to kr. Young which you thought
had better be modified, I ±ouid be very glad to know it.

One reason I

wrote just qs I did was that, quite confidentially, I know that Mr. Young

arranged to get in touch with the wri-.er of the 'Ames article before he left
h ire.




FEDERAL RESERVE BANK
1.11414.

I

1,20.0

1 21

FICE

OF NEW YORK

CORRESPONDENCE

To

Governor Strong

41,4
FROM

DATE

February 29,

1924

SUBJECT

Ir. Snyder

We live in a changing world:
Here is your friend, James R. Howard, of the Farm Bureau Federation,
joining with Nat Murray, who was one of the best men the Agricultural Department ever had, and two other bright young chaps, in the making of an "Agricultural Business Service," at 0100 per year.
Of course it is not so much
for farmers as for the eeople who sell to farmers and make goods for them,
but it is mighty interesting how things ere being sifted and dissected,
For example, hero is an estimate that the cash in come of the
farmers of Texas this year will exceed those of Iowa, which usually runs
first, and that they will receive for their cotton in Texas an amount nearly
equal to the entire receipts by the wheat farmers for their wheat, over the
whole country.
Apparently the business and economic education of the nation is
proceeding at a very rapid rate.



II 0 WARD- NI OORHOUSE
INC.

AGRICULTURAL BUSINESS SERVICE
58

EAST WASHINGTON STREET
TELEPHONE CENTRAL 6970

CHICAGO

February 27, 1924.

kr. Carl Snyder,
Director of Statistical L)epartment,
Federal tteserve bank of iiew York,
New lurk,
Lear A.T. Smyuer:

have this morning a request from
your librarian for our bulletin concerning farmers'
sales income from 1909 to 1924, which has been
forwarded.
I am wondering if you would not like
to receive our regular service. 1 am enclosing
some of the reports to give you an idea of Ahat
we are doing.
I Shall be very glad if you decide
that you will want to receive these regularly.
Very truly yours,

liwk/HJ




VICt

1
1
T
h
e

Howard-Moorhouse Agricultural
Business Service includes frequent printed
reports, consultation, and special attention
to specific inquiries.
Some of the subjects covered are:

Cash Receipts of Farmers Estimated in
Advance
Estimates made at the beginning of
each agricultural year for the en-

suing twelve months
Farm and Rural Purchasing Power
For the whole United States
By sections, such as the corn belt
By states
Answer this kind of question: Will
farmers in Iowa take

HOWARD-MOORIIOUSE
Agricultural Business
Service

analyzes the outlook for expansion
of the industry

Prices and Markets (with charts)
A graphic comparison of price trends
this year and last

Analysis of market conditions and
outlook in grain, livestock and

other markets
Includes survey of world supply and
demand situation
Seasonal Distribution of Farm Income
Specifies percentage of income received

each month

Gives advance notice of the times
when cash will be flowing into
particular sections

Many other subjects, such asFarm taxes
Loans and Interest
Costs of Production

A
Consultation-

In order that we may meet your intimate needs we ask you to submit
to us special inquiries concerning




Agricultural Business Service

Established to:

ers in the particular industry and

business.

by the Howard-Moorhouse

in more

money this coming year than last?
Purchasing Power of Farm Industries
Such as the dairy industry
Appraises financial situation of farm-

agriculture as it

few brief facts about the men
responsible for the reports issued

relates to your

Interpret agriculture to industry

Appraise the financial condition of the
farmers
Correlate agricultural information from all
authoritative sources

Secure original facts through field contacts

Give advance estimates of farmers' cash
income

Serve in a national and international way
as agricultural business specialists.

H o ward- M oo rh o u se
Inc.

Agricultural Business Service
CHICAGO

IHI

1
I

1111111111111111111111111111111111111111111111111111111:11111111111111111111111111111111111111111111

The men who comprise the Executive
Staff of Howard-Moorhouse Agricultural
BuPss Service are: James R. Howard,

1

President;

Nat C. Murray,

Lloyd M. Graves, Secretary, as statistician of the American Farm Bureau Federa-

tion, initiated two notable pieces of work
which had never before been attempted.
One, the appraisal of the financial effects
of the tariff upon agriculture. The other,
an estimate of farmers' sales and cash receipts. This latter study gives the truest
picture yet drawn of the agricultural financial situation.

Vice-Presi-

dent; H. W. Moorhouse, Executive Vice President; Lloyd M. Graves, Secretary.

NAT C. MURRAY

Nat C. Murray, Vice-President, through
years of experience as Chief Statistician of

the United States Department of Agri-

culture, has come to know intimately every
phase of American agriculture. Previously
he had been on the staff of the Cincinnati
Price Current.
He is now serving as
statistician for Clement, Curtis and Company of Chicago.

1

JAMES R. HOWARD

H. W. MOORHOUSE

The President of Howard-Moorhouse,
Inc., is James R. Howard, the first president of the American Farm Bureau Federation, whose outstanding achievement
has been to interpret agriculture to industry and give new emphasis to the interrelation of the two. Mr. Howard super-

H. W. Moorhouse, who is Executive
Vice-President has a background of ten
years of farming and business experience,
and ten years of educational and economic

research work as Dean of the School of
Commerce of Oklahoma State College;

vises the operation of his Iowa farms.
His farm balance sheets have shown a
profit through the recent depression years.




LLOYD M. GRAVES

Lecturer in Economics, Northwestern University; and Director of Economic Research
of the American Farm Bureau Federation.

1
o
m
in
The Howard-Moorhouse Agricultural

Business Service includes frequent printed
reports, consultation, and special attention
to specific inquiries.
Some of the subjects covered are:

Cash Receipts of Farmers Estimated in
Advance
Estimates made at the beginning of
each agricultural year for the en-

suing twelve months
Farm and Rural Purchasing Power
For the whole United States
By sections, such as the corn belt
By states
Answer this kind of question: Will
farmers

in

HOWARD-MO ORHOUSE
Inc.

Agricultural Business
Service

Iowa take in more

money this coming year than last?
Purchasing Power of Farm Industries
Such as the dairy industry
Appraises financial situation of farm-

Established to:

ers in the particular industry and

analyzes the outlook for expansion
of the industry

Prices and Markets (with charts)

A graphic comparison of price trends
this year and last

Analysis of market conditions and
outlook in grain, livestock and

other markets.
Includes survey of world supply and
demand situation
Seasonal Distribution of Farm Income

Interpret agriculture to industry

Appraise the financial condition of the
farmers

Correlate agricultural information from all
authoritative sources

Secure original facts through field contacts

Specifies percentage of income received

each month

Gives advance notice of the times
when cash will be flowing into
particular sections

Many other subjects, such asFarm taxes
Loans and Interest
Costs of Production

Give advance estimates of farmers' cash
income

Serve in a national and international way
as agricultural business specialists.

Consultation-

In order that we may meet your intimate needs we ask you to submit
to us special inquiries concerning
agriculture as it relates to your
business.




.

4111111111111111111111111111111111111111111M11 !111IillNIIIIIIIIIIIIIIIIIIII111111IIII11111111111111111111111111111111111111111111111

1






And if it so happens that an increase in whole. Their figures include indirect
the charges ,coincides with decreasing taxes-customs duties and excises. We
sales, the farmer is caught and pinched as are here considering only direct taxes.
The burden of the latter, including both
between the two jaws of a vise.
During the past three years farming state and federal levies, do not seem more
has labored under a fixed charge twice as oppressive to the farmer than to the rest
burdensome as in prewar days. These of the community. But in the case of

state and local taxes on property the

charges averaged about 10 per cent of the
gross sales from 1909 to 1913. After our
entry into the war the ratio declined; but
in 1920 it rose to 16 per cent, increased to

farmer evidently suffers some discrimination.

In 1922 he paid out over nine per

cent of his total cash income for state and
25 per cent in 1921 and now stands at local taxation, whereas other classes surrendered less than six per cent of their
close to twenty.
income.
Rising Charges Is Falling Income
Farm mortgage loans in 1923 amounted
The severity of the depression of 1921 to nine billion dollars-the equivalent of
was greatly increased by the fact that one year's gross sales. The interest
fixed charges continued to rise for two charge we estimate at 675 million dollars,
years after income started its precipitate or seven per cent of sales. These figures
decline. The 14 billion dollars taken in are two to three times as high as pre-war
by the farmer in 1919 had by 1921 been levels. The great increase in mortgage
cut almost precisely in half ; but taxes and indebtedness came in 1919 as a result of
interest continued to increase, rising from land speculation after the armistice. The
1400 million dollars to over 1800 million. total amount on January 1, 1920, has been
Since that date taxes have remained prac- estimated at eight billion dollars which

tically stationary, but interest payments was more than twice the amount of ten
have fallen off and the total charges ap- years previous. Since 1920 there has been
pear to have become fairly well stabilized a further increase of one billion dollars
at around one and three quarters billion due to the funding of current obligations
dollars. As cash income is again on an incurred during and just previous to the
upward trend, the burden of taxes and in- depression.
terest is beginning to lessen.
Use Fourteen Per Cent of Bank Credit
Farmers pay about 900 million dollars
Interest on bank loans is a less imporin direct taxes. Ninety per cent of this is tant item than taxes or mortgage interest.
represented by property taxes for local Farmers require relatively less working
and state purposes. The farmers pay 17 capital than manufacturing concerns. At
per cent of the total direct taxes collected the end of 1920 farmers' personal and colin the United States. They pay 22 per lateral indebtedness amounted to 3,870
cent of the state and local levies. Their million dollars out of a total of 27,670
income is estimated by the National Bu- million short time loans outstanding. Figreau of Economic Research at 18 per cent ures for 1918 indicate a somewhat lower
of the total national income-which is ratio. Apparently the farmers utilize 12
probably somewhat too low, since the to 14 per cent of the bank credit of the
farmer pays no house rent and much of country in producing at least 18 per cent
his income is represented by food grown of the country's wealth. Nevertheless,
on the farm and figured in at farm prices bank interest is not of inconsiderable iminstead of the retail prices, which other port. The annual charges for the last two
classes have to pay.
Taxes Take Nine Per Cent of Income
Studies by the National Industrial Con-

years we estimate around 200 million dollars. In 1921 it was over 300 million. It

agriculture than on the country as

may be expected. Taxes, at least the gen-

has varied in recent years between two
and four per cent of the gross sales.
ference Board reveal that the total burLooking into the future it appears that
den of taxation bears more heavily on no material reduction in fixed charges




a
2

S




Estimated Charges for Interest and Taxes
Paid by Farmers, 1909-1923
In Millions of Dollars
1915

1916

$101

$10978 $116
$

$131

240

250

265

270

313

334

351

369

381

401

240

260

285

350

400

450

543

573

619

719

781

851

1917

1918

1919

1921

1922

1909

Bank Interest
Mortgage Interest

Total Interest
Direct Taxes
Total Fixed Charges
Bank Interest
Mortgage Interest
Total Interest
Direct Taxes
Total Fixed Charges




1910

$ 75

$ 78

220

225

235

295

303

225

520

1911

1914

1912

$298

$190 $225

$170
675

290

350

550

618

656

440

540

775

916

881

500

550

621

750

861

900

940

1090

1396

1666

1742

1745

4

1834

315

666
1920

$225

$150

1913

$318




more than twice the cornbelt's 125 million. But
it is very unevenly distributed. Texas, the
Carolinas, and Louisiana show increases of from

Florida the citrus fruit crops have suffered a
slump this year. In the other two states poor
cotton crops are responsible for the decline.
Arkansas shows a decrease of 15 per cent in
gross sales. The cotton crop was poor yielding
only 97 pounds per acre whereas the five year
average is 169 pounds. In northwestern Arkansas no cotton is grown, fruits and vegetables
being the leading products. This year's apple

ten to sixty per cent ; whereas in Florida, Alabama, Mississippi, Tennessee and Arkansas there
have been declines ranging from seven to sixteen
per cent ; with but little change in Oklahoma and
Georgia.

Yield of Cotton Rules.
The yield per acre of cotton rules the situation

crop is larger and the price somewhat higher
than last year, but the gain is practically offset

throughout the south this year. An increase of

by the smaller peach crop.
Louisiana, in contrast to the states just named,
will receive this year increased cash returns from

over four million acres, representing 13 per cent,
brought a total increase in production of but 250,000 bales, or two and one half per cent. The
yield per acre declined from 142 pounds to 129
pounds. Yields were very low in Alabama, Tennessee, Mississippi, Arkansas, Oklahoma, and
southern Georgia. In Texas and North Carolina,
on the contrary, they were good.
To get an accurate picture of conditions in the
cotton belt it is necessary to consider each state
separately. In North Carolina cotton and tobac-

both cotton and sugar, while the rice crop is
worth practically the same as last year. The
increment in cash returns from all sources will
be approximately 10 per cent over 1922-3.

Forty Per Cent Gain in Texas.
Texas is by far the greatest cotton producing
state. Over four million bales were produced
this year on fourteen million acres, an increase
of one million bales over 1922. The crop will
sell for 675 million dollars and represents nearly
four-fifths of the 850 million dollar cash farm
income of the state. All of Texas, except the

co dominate the situation. Cereals and other
field crops, as throughout the south generally,
are not important cash products. Livestock and
their produce bring in scarcely more than 10
per cent of the farmers' income. Cash receipts
from both cotton and tobacco will exceed those
of last year and, as a consequence, North Carolina farmers will have 15 to 20 per cent more
money. The cotton crop is worth 160 million

extreme western and Panhandle portions, is dominated by cotton. Considerable amounts of
wheat, corn and oats are raised, but these products are of minor significance except in the Panhandle where wheat is the leading crop. The

dollars ; tobacco 80 million.
South Carolina registers much greater increase,

western portion of Texas is range country and
cattle bulk large. Sheep are also of some importance. But all livestock and animal products
are responsible for but 15 per cent in the aggregate cash receipts. Due to the extraordinary
cotton crop, barely exceeded twice in the last
ten years, the farm income in Texas is over 40
per cent in excess of last year.

due not so much to a good crop this year, as to
an unusually poor one last year. Cotton will
bring in 130 million dollars against 65 million in
1922-3. Tobacco, which is of some importance
in South Carolina, on account of a larger acreage
is worth 18 million dollars as compared to 12.5
million last year.
In Georgia, on the whole, there is little change

Oklahoma is a state of varied agricultural con-

in the farmer's purchasing power. As a result
of the poor cotton yield in the southern part of
the state there will be less income than last year
in that section. The cotton crop will sell for

ditions. In the southern two thirds of the state
cotton is the major crop. But the wheat belt cuts
across the western half of the cotton section and
extends across the northwestern portion of the
state ; and the northeastern end of the commonwealth borders on the corn belt. Corn and grain
sorghums, wheat, oats, livestock, dairy and poultry products figure in the agriculture of the central and northern regions. Taking the state as a
whole, two thirds of the cash income is derived

about 100 million dollars.

Less Cash in Five States.
Florida, Alabama, Mississippi and Tennessee
will show losses in cash income, ranging from 10
to 15 per cent. Tennessee is the fourth largest
tobacco state and has also considerable livestock
interests, animals and animal products combined
yielding nearly half the total cash income. In




from crops and one third from livestock and
their products. Cotton accounts for forty percent.
2




Percentage Distribution of Farmers'
Sales Receipts, 1923-24
N. C.

S. C.

Ga.

AVa.

Miss.

69

Fla.

74

Cotton

50

73

61

Other Crops

39

21

23

80

15

12

Livestock and Animal Products

11

6

16

18

16

14

100

100

100

100

100

100

Tenn.

La.

Ark.

Tex.

Total

Okla. Total

Cotton

22

45

65

78

43

61

Other Crops

33

41

16

7

25

21

Livestock and Animal Products

45

14

19

15

32

18

100

100

100

100

100

100




Total

4

W9C.31STAY3800-10-11

FEDERAL RESERVE BANK
OF NEW YORK

fibFFICE CORRESPONDENCE
To

Governor Strong

FROM

DATE
SUBJECT

February 29

t

1924

French Exchange

Ur. _Snyder

In 1923 French imports wore lees than 30 billion francs, or, say,
under 2 billion dollars.
I don't imagine their percent of imports to total product is very
much greater than ourc--cnrely much under 10 per cent.

I don't just see, therefore, how exchange rates can very seriously
affect the general level of all prices, rages, etc., in France, any more
than they would in this country; do you (commodity prices at wholesale to
some extent, doubtless)?

Present exchange rates make imports very dear to the French and
their products very cheap to foreigners.

Witness the reports of a great

inrush of German buying of French goods.
Personally I don't believe that any sustained rise in the general
price level of a country can take place unless it prints money or bank
credit.

Therefore, I believe that the French franc must be highly depre-

ciated from its actual purchasing value, unless they have some subterfugeneous

means of augmenting their currency or bank credit which is not evident in
the bank of France statements or those of the big banks.

Does this seem to

you erroneous!

I attach herewith a chart showing the downward progress of the
franc.




t

10

EXEHANGEi PURCHASING POWER, AND COST OF LIVING.

nying diagrams compare,. the depreciation of French exdepreciation in the purchasing power of the'franc, and
f living in France and in the United States.

;

EXCHANGE

ING POWER

RENCY

8

19gr

3

/

-,/ COST OF LIVING
FR AYCE

COST OF LIV
LNITED STA

1919

1920




t

1921

1922

1923.




M 10,31 1.6TAT.91100-10-11

FEDERAL RESERVE BANK
OF NEW YORK

fVFFICE CORRESPONDENCE
To
Fti

DATE

SUBJECT

Go_v_ernor Strong

March 5,

1924

The Gold Question

mr.--SuArder

The Reserve Banks or Board have no authority in the law to imA441
P4A.
pound an excess of gold; and virtuall whAen
used Jodie discount rate
cuni.

and investment account to the limit,

'

wimr

played i4a legal line.

!!.r. John E. Rovensky makes the proposal that the Banks and the

Board shall be emnowered to do two things:
(1)

That they may at their discretion raise the required ratio

of gold against notes, to 100 ner cent or more if
(2)

need be.

That if this does not impound sufficient gold they may then

raise the required reserves of Member Banks against their deposits.

Both of these actions only after a majority recommendation by
the Advisory Council (representing the Reserve Banks) and a two-thirds vote

of the Federal Reserve Boardf.
In your judgment would these two proposals be feasible, and would
the second not nossibly lead to large withdrawals from the System'
I'd appreciate your opinion.

t4afArAzt




it/0

c,u,.4.-c_cfa
Cy

6.1111C 3

ETC71V4

I ST A?. 3400-10-11

FgriRialfi

FFICE
To
FRcit

BANK

4y,

CORRESPONDE

DATE

__ChyernarSitnng_

BJECT

March 7,

_1924

French Note Circulation

Mr. Snyder

WAR

Z4

With the billion end a half jump in the Bank of France note
circulation in the last two weeks, this brings the net expansion from
the extreme low point reached in the spring of lc;!72, up to 5 billions, or

about 14 per cent.

At that time the franc touched close to 9 cents,

This expansion, with perhaps an equal amount brought out of
hoarding and put into circulation, would about account for the increase
in prices and the cost of living.

But this would not account for the steady pressure on the exchange market throughout the entire period.

At today's low the franc

is rated at approximately one-half what it was when the French entered
the Ruhr.

Now, in spite of ell their violent protestatione, they have
expanded rapidly and just at a time to arouse the most extreme apprehension.
Is it not another instance of the monumental ineptitude which
seans characteristic of almost every kind of governmental action, everywhere in the world?







MIC

a

100,1613

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESP-ONDENCE
SUBJECT

To

DATE

March 3, 1924

192

Fall in French Exchange

Governor Strong
FROM




Mrs_ Snyder

Your observation cn the memorandum in thi s week's Summary is
quite just; it was clumsy not to have included any reference to the effact of hoarding and delioarding, which is, of cours e, exactly equivalent to
In a previous memo. I fully concurred
currency curtailment or expansion.
in your view as to this.

long

Buthas not the effect of this dehoarding a pretty clear limit, so
as the total amount remains unchanged?

And if so, must we not then consider that at the 1920 level of ,
cents the franc was greatly overvalued, and still more in 1922, or
is now much undervalued?
say, 7

Of course the whole question is confused by the fact that we don't
know the total amount of gold, silver and paper in circulation in France
before the War.
The nominal amount always seamed very high.




IBC

4

FEDERAL RESERVE BANK

1.1001,223

OF NEW YORK

"IF FICE CORRESPONDENCE
Toik

Governor Strong_

FROM.

DATE

r.ar eh 4,

Ir. Snyder

SUBJECT:

You may like to see the numbers containing the discussion of
Keynes, Strakosch and others, on the gold prospect.

I have given a

little resume of this in the I'usiness Summary this week.




192 4

MUM 1IOOM -. -2S

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

FROM

DATE

March 4,

1.r. Snyder

SUBJECT :

Masson Speech

7ertainly very clever and very interesting, as reflecting the
Trench mind.
As if there was no difference between an indemnity of
about a billion dollars and the trifle of a prcpcsed levy of around
40 billions:
Is it not very illuminative of the lengths that the human mind
will stretch?
It is interesting to note that the speech was so well thought of
that it is reproduced in Trench in the weekly Figaro, which, as you know,
is intended for American propaganda.




PAM,

a

1.

IOU

e.a,u

FEDERAL RESERVE BANK

OF NEW YORK

FFICE CORIRESLPONDENCE
_Go vernorlAtong_

To
11P"

DATE

March 4,

SUBJECT

Mr. Snyder

FROM

(Fcuile)

In the last weekly Figaro, for American consumption, the leading
A

editorial on M. Poincare's "great effort before the Chamber of Deputies,"

on the reparations situation, new taxes, etc., closes with the attached
'perfect gem.'

If this is the real sentiment of France---:

.....a



0-9/1.41.4.

ama. f-*

1924

MIS,

3

I

STAT 600 , 10-21

BANK

UFi

CORRESPONDrCE
To
FR

_Go_yernor_Strong

"\\J,

-3-,

0RK

DATE
e

usJEc-r-

March_?,_

k. B.A. Meeting at Chicago

Mr. Snyder

JAI
The next meeting of the American Pankers' Association will be
held in Chicago, and they have asked us for any suggestions we could make
in the way of exhibits, etc.
I think we ought to go out of our way to give than any help we
can, for they are a bungling lot.

if

Put, more than this, I am wonderinz

it is not a fine opportunity to drive home the detachment of the farm

industries of the Northwest from Federal Reserve policies.
I thought, for example, of some big charts or pictures which
would vividly depict the utterly opposite courses of corn, cotton, end

L cvi
dairy productsAfrom those of wheat and the smaller grains, throughout the
period of so-called "deflation."
There will probably be thousands of country bankers at the convention, and this would be a good chance to educate them.
a talk with you about this?




Could we have

1924

III

mom 3 I STAT.30 o.ib-e,

-..

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
To

GeYerner Strong

FRO,

Mr. Snyder

DATE

Larch _102_

__

_____ 192 4

SUBJECT: The McNary- Haugen Farm Exports

Bill

MAR 131924
In considering such a measure as the MINary-Haugen bill it sews
to me that due attention should be given to the following facts:
According to the recent census of farm population, of the
(1)
31,600,000 people recorded as residing on farms, nearly an even half (and if
we include Oklahoma a little more) reside in the states of the Old South.
Taken as a whole, the farmers in these States, through the high prices for
cotton. tobacco and similar Products, have been generally prosperous.
For example, the cotton raised in the State of Texas this year
was elual in December value to nearly the whole wheat crop of the United
States.
(2)
Dairy products have generally commanded good prices, so that
most of the farmers in the states of large dairy production, all the way
from New York to Iowa, have been generally prosperous.

The same is true of most of the fruit-raising states, save in
special cases when an over-large product has been withheld from the market
to force higher prices, and, as usual, the attempt has collapsed.
(3)
Our largest single crop, corn, has commanded in the last
year rather high prices, and while the prices for hogs have been much lower,
taken as a whole the corn-belt farmers have not suffered from the prices
received for their products.

All these taken together include more than four-fifths of the
total farm population.
(4)
The latest Bulletin of the Department of Agriculture shows
that the weighted average of the retail price of thirty-two different farm
products was almost exactly the same per cent above the pre-war level as
the Bureau of Labor index of all commodities at wholesale,
a shade over
50 per cent.

The oft-repeated assertion that "the farmers
are facing a real calamity and need help," seems on the
available evidence, therefore, absurdly untrue for at
least four-fifths or more of the farm population.
(5)
Practically the only type of farmers suffering seriously from
the pricee of their products are the raisers of small grains, and of these the
chief are the raisers of wheat; and the facts regarding these are as follows:

Approximately two-thirds of our wheat is raised in
the winter wheat area, or in precisely that area in which diversification of crops is the easiest and most generally practised.




(a)

IISC 3

I

.TAY. 3000-10.,,

FEDERAL RESERVE BANK

OF NEW YORK

INDFFICE CORRESPONDENCE
To

FRA

DATE
SUBJECT:_Th 8_11

_Gni/Amor Strong_
Mr. Snyder

Maren_144

_ -- -_1924

rpaaug an Farm Exports

_

_

Bill

2

(b)
We have now had depressed fall or winter prices,
which largely determine the winter wheat planting, for four
In the face of this the acreage Boer, to
consecutive seasons.
winter wheat has only been moderrtely reduced from the heavy
expansion encouraged by war prices, and is still above the
average pre-war acreage.
(c)
If a clothing manufacturer or a plow factory
continued to turn out an immensely larger product than could
be sold at a profit, would this he generelly regarded as a proper
ground for the Government to buy up the entire product of clothing
or of plows!

Practically the only area in which the farmers ere facing
(6)
a real calamity is in the spring wheat area, and this has been brought about
by an unusual combination of factors.
These are, a succession of seasons of scant rainfall and low yield,
which, coupled with the prevailing low prices fcr wheat, has been disastrous.

All this has been paralleled by a very heavy expansion of the
spring wheat acreage in Canada, and, especially in this last year, extraordinarily hien yields per acre.
(7)
It is the opinion of early careful judges that a considerable
part of our spring wheat area lies in a semi-arid ruin belt, which never
ought to have been planted to wheat at all.
Prompted by the enormous prices
reached in the War, end by a fair run of rainfall, these areas were occupied
and cultivated.
But it was a hiehly hazardous risk, and the adventurers in
this field have paid the penalty.

verted to
But it is
siderable
products,
for wheat

It is obvious that this is not an area which can quickly be conether products.
Part of it, clearly, is only fair grazing land.
the belief of experts like Yr. P. T. Snow, of Chicago, that conareas of this type could be converted to cattle raising and dairy
if sufficient capital was supplied.
is not the remedy here.

Obviously

(8)
Taken as a whole, the farm population of the whole spring
wheat area does not exceed 10 per cent of the total farm population of the
country; and the proportion of those den_ endent wholly upon spring wheat
raising is very much smeller than this.
I believe, ther
be fair to say that the whole proportion of farmers "facing a real calamity"




34,SC

3

,T

,eok; 10 P

FEDERAL RESERVE BANK

OF NEW YORK

4ribFFICE CORRESPONDENCE
To

FRS

Governor Strorg
Ur. Snyder

DATE

SUBJECT

March 10,

192 4

The Mc.Nary-A-Iaugen Earm Exports.

Bill

is very much less than 10 per cent of the total; and for this 10 per cent,
or less, the remedy clearly seems to be aid and the supply of capital towards
the diversification of industry, and not encouragement and governmental aid
blindly to persist in raising crops which they cannot sell at a profit.
(9)
The writer was one of those called in the conferences of the
Department of Agriculture last summer and fall, to discuss the farm outlook.
Ir one of these conferences I sat as a member of the Wheat Committee.
The
views here expressed are partly those of others, of much more expert knowledge of the situation than that possessed by the writer, and are, I believe,
generally the views of agronomists who have patiently and carefully considered the situation.
Born and brought up in one of the richest farm
sections of the Middle West, it seems to me that almost my earliest recollections were some form of "demand for relief" by the farmers of some section
And it never ceases.
or other.

I am also attaching herewith the opinion of Mr. George E. Roberts,
former Director of the Mint, who is not only an economist of high standing
but e large owner of Iowa farm land, born and brought up in that section, and
probably as intimately acquainted with all the facts as to farm economics
and the present situation as any man in the United States.
(10)
The cotton planters of the South are receiving this year approximately twice the relative pre-war price for their product.
This is
for cur chief agricultural money crop.
Does anybody suggest that part of
this enormous excess income be taken from the cotton planters and given to
the wheat planters?
And if not from the cotton planters, is there any more
reason wh:, it should be taken from the dairy farmers, rr from factory workers, or from bank clerks and the rest of the population?

(11)
Without any one of these objections, it would still seem to
me that the McNary-Haugen Bill was & vicious and impractical measure for the
reasons stated by Mr. Roberts in his review.
Is it not perfectly clear
that the measure would defeat its own object, even if it were carried out?
Obviously the consumpterve capacity of the wheat-consuming nations is, to a
certain extent, limited.
If now we attempt to sell abroad more of our
wheat surplus than we are now able to sell, the effect of tnis would be to
still further depress the Liverpool or foreign price of wheat.
This, in
turn, would mean ruin to the wheat farmers of Canada, Australia, the
Argentine, and other countries.

Surely there could be no such undertaking by this country that
would not provoke similar action and a retaliation by other countries.
(12)
In brief, it seems to the writer that this Bill is just another of those fatuous and fantastic efforts to defeat the workings of




FEDERAL RESERVE BANK
OF

miliC 3 I S1AT.31113Q-10.11

NEW YORK

4314,.

pFFICE CORRESPONDENCE
To_

Governor Strong

FR14/ __

DATE

Mr. Snyder

SUBJECT

March 10,

The McNary- Haugen Farm Exports

Bill
4

economic law, of which we have had hundreds if not thousands of examples
through hundreds if not thousands of years.

It is a bonus bill of the worst type, and of the most utterly
futile.
(13)
Finally, would it gain any votes, on balance, for the
political party which sponsored it!
Over one-half the population of the
Under
country now resides in towns or cities of over 2500 population.
30 per cent of the population now resides on farms, and not all of these
are actual farmers.
The average or normal value of the wheat crop is not
much over 7 or 8 per cent of the total value of all farm products, and I
do not believe that to exceed 10 per cent of the population is vitally interested in wheat raising.

The present prices of wheat in Chicago now approximate those of
Liverpool, although the cost of freightage between the two points is around
In other words, wheat prices in this country are much above the
26 cents.
world level, and, for the 650 million bushels of wheat which the people of
This
this country consume, they must pay a correspondingly hiller price.
surcharge must be paid by other workers and consumers, who outnumber the
wheat raisers by I should say at least ten to one.
There are sane and rational methods of relieving the wheat farmers
But the Maary-Naugen Bill seems
of the country of their present distress.
to me to be as far from this category as anything well could be.




4

311111C 3

1 STA7.3000-10-11

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To_

FRC

__Cro_veraor__Strong

DATE March 12,
SUBJECT

4

Impounding Our Surplus Gold

lir. _Snyder

Federal reserve note circulation has now fallen to about two
billion dollars, while the gold certificates in circulation have risen to
nearly 600 millions.
Meanwhile, we nominally have outstanding some 721 millions of
National bank notes, about 294 millions of the old "greenbacks," and 357
millions of silver certificates, or a total of 1372 millions.
Against
these and some other accounts the Treasury now holds a total of about
343 millions of gold.
Now if Congress were to retire all of the National bank circulation, the old greenbacks and the silver certificates, and substitute for
these gold certificates, this would, after using the Treasury gold, reduce
available gold holdings by about a billion dollars; and if to this were
added the Federal reserve notes, the total reduction would be about 3 billions.
Deducting the gold held against gold certificates and the semimythical amount of "gold in circulation outside of the Treasury and the
Federal Reserve Banks," this would nominally leave little or no gold in the
Federal Reserve Banks.

But of course gold certificates could be used for Member Bank reserves just as well, and it is in no wise clear that anything like the full
amount of Federal reserve notes, National bank notes, greenbacks and silver
certificates could be recovered.
Aside from the considerable amount which has gone abroad, maybe
200 millions or more, there is always the inestimable amount that has been
lost, burned or stored away in stockings or other family hoards.
In brief, it seems to me that it would be perfectly possible to
do away with most of our nominal gold surplus and very simply, so that we
should no longer have any such high and growing ratio of gold to liabilities
as we have now.
Why would not this be much simpler, and safer, than to resort to
what would look like strong arm methods on the part of the Federal Reserve
Banks, that might very seriously endanger the future of the System!




rY

n

M1SC 3 1 3TP:1.3600-10-II

RVE BANK
OR4ONIV YORK

FEDERAL...4R

OFFICE CORRESPOND NCE
Tc.,116

_Go_v_ern,or Strong

FR*

DATE_ March

RaiBinglicober

12,

_Mk. Snyder

SUBJECT-

Bank Reserves

?AAR 131924
I am attaching some correspondence I have had with !:!r. Roveneky
and Mr. Catchings regarding the proposal to empower the Federal Reserve
Board arbitrarily to raise the reserve requirements for Reserve Banks (and
also the required reserve against Federal reserve notes).

I am wondering if the same objections would not apply with equal
strength to any roundabout way of achieving the same end, such as reclassifying the reserve cities, etc.
Of course if it could all be done now, when there is no great
pressure for expansion; and if it could be done with the avowed object of
impounding our surplus gold, then perchance it might be successful.
But what would happen if the big swing up in trade in February
should persist and we should again find ourselves, so to speak, in the midst
of a "healthy" (1) little boom, with rising prices and pressure on the banks
for loan expansion?
Is it not likely that no action would be taken by the Board until
a serious menace was apparent, and inflation was actually well under way?
And my question is, How would the 10,000 banks of the System, outside of
New York City, take it if they saw the other 20,000 banks not in the System
free to expand while they were being sharply curbed?
Would they stand for it?
I wonder if there is not a safer alternative that might be submitted
to Congress by the Board.
I attach a suggestion.




4

a

FEDERAL *E4ERVE BANK
OF NEW YORK

ibFFICE CORRESPONDENFE
To

March 14,

1,i 4

sueiEcT:Flutrtion in Wheat Acreage

Governor Strong?

FROM

DATE

Mr. Snyder

MAR 15

When I wrote the memorandum on the McNary-Haugen Bill I did not
have at hand the figures as to the increase in wheat acreage.
According to the attached statement by Secretary Wallace, the
wheat acreage for 1923 was still 24 per cent above the pre-war average.

Practically all of this was winter wheat acreage.
The spring wheat acreage has lost all of its wartime gain and
was this year below the pre-war average.

This means that this huge expansion was precisely in the area
where it would have been most feasible to change over to corn or some other
crop.

Does it not seam the last gasp of folly that the Government should
deliberately undertake to preserve this absurd situation by a huge bonus to
keen up a fictitious price for wheat?




i,TAT,16,,10-21

FEDERAL RESERVE BANK

OF NEW YORK

IllbFFICE CORRESPONDENCE
To

Governor Strong

FROM

DATr

March 18,

4

Mr. Snyder

SUBJECT

The Catchings-Foster Paper

1111

kith your permission I should very much like to forward your note
on the Catchings-Foster paper for the Harvard Business Review.
But I cannot help thinking that at least in one instance you
hardly do justice to the spirit of the paper.
of a proper guide for the determination of Federal reserve policies.

This is

)c) far from wishing to entrust the questiom of proper policy to
the judgment of any board or set of men, however wise, their proposal is,
as I understand it, directly the reverse.
This is that
policies being left to their judgment, wise or otherwise, these policies
shall, in the absence of any strongly deterrent factor, be determined
strictly with reference to an index number standard, and with a view to
maintaining a fair degree of stability in the purchasing power of the dollar.

And I cannot help thinking that Dr. Foster, or whoever it was the
other evening, was right in suggesting that, in the light of our present exchange, another such huge wave of pure credit inflation, such as occurred
from about the middle of 1919 to the latter part of 1920, would bring far
greater odium upon the Federal Reserve System, and occasion far greater disappointment, than any kind of an attempt to maintain some sort of credit,
business and price stability.
And I have gained the impression that this is
equally your own view.
Personally I don't feel able to see how the '-'ederal Reserve Banks,
or Board, or, if you prefer, the whole banking organization of the country,
can, in the absence of the natural coercive effect of the gold standard in
full operation, escape the responsibility of so managing their credit expansion as to avoid serious inflation; do your
And what other test of
proper credit control and of inflation is there save in a reference to some
form of index number of prices.

Of course if you will say that experience has shown that credit
expansion limited to about 4 per cent per annum will meet the adequate demands of trade and maintain a high degree of stability, and that the Federal
Reserve System shall therefore fix its policies with reference to this experience, you would have then an empirical and possibly safe guide to policy.
But it would be one wholly unfamiliar to the public and probably sharply
contested by every Anderson in the country.
I cannot get away from the feeling that in and since the -,,ar there
has been a tremendous popular education in the question of the relation of
money and prices, and the need of stability and restraint in the manufacture
of credit.
Doubtless you will agree to this.
And, so believing, and in
the face of utter chaos that most otherwise obtain in the absence of the old
restraints, under the gold standard, how can we escape the responsibility
of effecting some kind of a Rule of Reason; do your



FEDERAL RESERVE BANK
OF NEW YORK

libFFICE CORRESPONDENCE
To

DATE

Governor Strong

Mr. Snyder

SUBJECT

'.arch 18.

The Catchings-Foster Paper

2

It seems to me good policy to maintain friendly relations with
such intelligent opinion upon this subject as may exist-Prof. Mitchell was in yesterday and I should like to tell you
of his reaction to the dinner the other nitatit.




FEDERAL RESERVE BANK

MISC
1.100k11123

OF NEW YORK

SFFICE CORRESPONDENCE
To

Governor Strong

DATE

March 19 ,

192

SUBJECT:

Mr. Snyder

Please let me know if this letter is of sufficient detail, in
view of the memoranda to be attached.

I notice that your friend Sydney Anderson comes out this morning
equally strongly against the McNary Fill.




See attached.

4




UO v LetrItih ti

op

FtDERIM7
OF1.

COS/ 3. ...

OFFICE CORRESPON
TI

Governor.

FROM

Mr. Snyder

N

ESERyE BANK
YORK

DATE_ March. J.16

71!
_
-

s+ac-r: Wages and _Prices_

-Strong
MAR 18 1924

You will be interested in this comparison of the average weekly
earnings of the employees of the big silk firm of Cheney Brothers, and
You will see that their index, even last October, was
wholesale prices.
running around 260, which compares with average weekly earnings of factory
operatives in New York State of around 220.
And yet the striking thing is that the textile people generally
are complaining of the hill cost of materials and of the difficulty of
I wonder if this
mo'ring their goods freely at the corr-euporlding prices.
does not go some way towards explaining the present rather stagnant tendency
in the textile trades!




RS :;)

A7 ,,,10
FEDERAL RESE)14 BANK

OF NEW YORK

FFICE CORRESPONDENCE),
DATE

March 19,

192.4

BJECT:

,

wing bit about the Southern California boom,

there, is of interest.

the long boom of which the London Economist
to the attractions of the climate and to a
has struck the people out here.
I never
tion as is now going on, and I am looking
one of these days, and when it comes there
rupt souls floating around here than was ever
lies especially to the speculation in real estate.
ditions without end, and it doesn't seem to
w many or how far out they go or what are
newcomers jump for them.

say that there are 310,000 autos on the
every day in the year, and from what I get
judge that a large portion of them are still
fact does not seam to lessen the sales, as
eems to be about as automobile mad as in




,PC,1021

%AP

FEDERAL RESERVE BANK
OF NEW YORK

FFICE

CORRESPONDENCc

To___

Governor Strong

FROM

DATE

March 19p

192 4

Mr. Snyder

SueJECT:____TaelIpswing in February

2i

MAR

di&

They have just given me the computed index of building permits
for the month of February.
Taking into consideration the short month and
the usual seasonal tendencies, the index rises this month to 200, or even
higher than the peak month of March of last year, and the record so far as
the index extends.
This heavy increase compares with other marked increases in the
indexes of bank clearings, car loadings, iron and steel production, automobile production, and several others'=-all exactly contrary to the firm
expectation of the great majority that this year could not possibly be as
good a year as last year.
And yet I hear everywhere of business men complaining, and expressing grave forebodings-always, I believe, having in mind the fanciful
profits that they would like to make, and without much regard to the industrial and social service they perform.
It makes you wonder if one can ever trust anything that any
business man will say about his own industry or business in general.
I heard of one case of a pig iron manufacturer insisting that the
situation there was very dark, because they were selling below the cost of
production.
This in the face of the fact that pig iron production in the
last three months has increased by more than one-quarter.




1^1(A)( (4Am/iv_

LrA1)
_Yf

aLe,t4,

it:714-"±

e

Cf a-y

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IAN

061"t

a'"r744/6

1491/KAI r'r
7L-

10014

1111111C
I

FEDERAL RESERVE BANK

1

OF NEW YORK

1PF FICE
To

CORRESPONDENCE
Governor Strong

DATE
SUBJECT

March 20,

Pro f. Young' s letter

Mr. Snyder

I am puzzled by Prof. Young's letter and I believe his fellow
members on the Committee would be also.
Prof . Young accepted membership On the Committee a good while
ago, with full and definite knowledge of its purpose, its general ideas,
and its personnel.
Ho now seems to take a position opposed to any kind
of measure towards stabilization; and even of doubt of its desirability.

And I am staggered at his suggestion that in the face of production, construction, distribution and trade proceeding now close to if
not above a record point, that a ten or fifteen point inflation from the
present price levels would be beneficial.
From what little contact I have had I get the impreseion of a man
of unstable and nebulous opinions, but strong in opposition; and swept by
emotional waves in one direction and another; not a man to "go tiger hunting
with."




4

MISC

A.

I

GT., aeo,,,

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
To_

flavor/10 r :itrong

FROM

'r.

a

DATE
SUBJECT-

ilardr

1924

Trend e-f Duetweee

inyder

Attached are the latent figures ,sbtainable for the more important of the 58 ortrticular indexes of production, distribution and

trade now maintained by this department; figures for the last four
lonths as armoured with the high point of last year.
In the 600 `:sporting I anks, almost no change since the firEt,
little change from the high

!ALK CREDIT.

of the year in lonnn or deposits, and very
point o' lust year reached last ':ay.
11 ':ational I anks , date of

last cull,

loans and derosits a little hiller than t-,e hi r)1

December 31, shay

point of Jecember 2i,
1922, but in perceistagen the difforecee is very slight. In a word,
remarkably little expansion.

3treet loans, latest date, compiled Larch 12, still rising
millions above the low point of last r'ctober.

and about 200

about 260 millions below, the peak reached last lay.

Trend of our index of 20 great basic commodities still slightly upward from the low point of last July, but a very little change in
the last six or eight months; fluctuating around 150. L'ireau of Labor
index about the sane.

,PRICES,

A new weighted index of 32 different Fano comsoodities recently prepared by the AfTicultural Aeoartment shows an average of farm
prices at just about the same level in "ebruary an the F.ureau of Labor

index *or all coropditins.

our new index of the general average of all prices, including
eo-viodities, wages, rents, etc., now about 180 and tending steadily upwards f a the low point reariaed in 1921.

-oat of the wage indexes still orate:tidally at the peak of the

WAGES.

lard three years and ranging around 220.

.1tandard Daily Trade weig,ted index of 202 industrial stocks
slifOrtly below the hi41 point readied in !'ebruary, which in turn was
about 5 notate below the hilt point of 114.1 readied in "arch.

STOCK UAW T.

Almost all of our business prophet's have been repenting for
more than a year that the building boom, or the automobile boom, or the
railroad buying, eta., etc., could riot gr, on. lut they have.

PA05PZG73.

e havu easy money and a steady inflow of gold.

total recei ts

to date t is your about 100 million dollars, or at a higher rate than last
year.



'%he scandals of the Grant i.dministration were more serious than

TAT ,C0-10-21

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
To_ -

FROM

DATE
SUBJECT

governor Stftess
3nydor

tairtth

Trend of Business

2

411k

at the present Unto, ,tnd not nearly so unsettling to busii.ess as the waves
of greenbackism, populiam and the prolonged agricultural depression of the
nineties.
Low the prIrt of the farm population affected is very small, not
to exceed 10 nor cent of the population of the country, and the only part
of this Population very seriously hit are the boortstors who bought land
and rsortgaged it to the hilt in the post-war boom.
don't pee !""l'oundli for apprehension, and still
there is more danger of undue expansion than of a slump.

believe that

I would like to recall that just before I went away last Aurust 4

I wrote you expressing sty belief that July would prove the low moutis in the
reaction, and en it has proved thus far, alike for voltam of business,
coarvdity Pricey and stook prices, (Ind I an inclined to think it will so
retain for none tine to emne.




1924

FEDERAL RESERVE BANK

MiSC. 3. 1-7)M-9-:1

OF NEW YORK

IPF'FICE CORRESPONDENCE
To
FRONAIK

Governor Strong

DATE

May 16,

1 92_4_

SUBJECT:

Mr. Snyder

Mr. William Butterworth, President of the Deere Company in
Moline, Illinois, was in today and very deeply concerned about this
McNary-Haugen Bill, which he regards as a vicious and impractical
Their Association of Agricultural Implement Makers has
measure.
unanimously gone on record as opposed to the Bill, in spite of George
Peake's advocacy of it.
But it appears that in Washington the Congressmen and Senators
are afraid to vote against the Bill because they have no adequate substitute proposal and are under heavy pressure to "do something."
As you perhaps recall, it seemed to me that one practical
measure would be foarthe Reserve Banks to exercise their legal powers to
buy bills in foreign markets, which would, of course, be tantamount to a
Such a procedure would probably not be welcome unless the
foreign loan.
way was very carefully prepared for it, and Mr. Butterworth's suggestion
was that the Proposal might originate from the Farm Bloc or the Farm
Federation themselves, as perhaps an alternative measure to the McNaryHe would especially like to present some sort of proposal
Haugen Bill.
to Senator McKinley, of Illinois, who is much opposed to the Bill but in
the embarrassing position of having little to offer as an alternative.
Can you see anything embarrassing in any way if such a proposal
were to come from the farming influences and without any assiotance whatPersonally it seems to me that it could be
ever from the Reserve Banks*
made an extremely popular idea, it would require no legislation whatever,
but might need to go no farther than the introduction of a brief resolution
by Senator McKinlay or Senator Capper, or someone, proposing or urging or
commending such a course.
This is suggested wholly and solely by Mr. Butterworth's appeal
to me for any suggestion that he could make to his friends in Washington
to stem the tide that seems setting in towards the support of this fahtastic measure.




I,16C

I

FEDERAL RESERVE BANK

I0,,,1

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

FRO




DATE
SUBJECT:

_

May 19,

192 4

' 1 etter

Mr. Snyder

Two years ago Hartley Withers gave me a letter to Mr. Robert

Crozier Long, in Berlin, and I had a very pleasant visit with him and
formed a very fine impression of the man.

I think he has a quite

unusual rriAge of 1.r, formation an(' I sholl be very glad to see what I

can do with ome of the papers in the line that you suggest.




MISS.

I-75,49-?3

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Olvernst_Streng

DATE
SUBJECT.

May 21,

1924

_

Purchasee_ol Foreign Bills

Mr. Snyder

It is perfectly true, as you say, that there has been a
(1)
heavy curtailment of our wheat and grain exports, but there has also been
a steady decline in our other exports so that, as a whole, our exports now
are, as we estimate them, well below the line of normal growth.
This is almost wholly due to the reduced purchases of Europe,
since our exports to other countries have grown steadily.
(2)
If purchases of foreign bills were protected by forward purchases of exchange, dollar for dollar and date for date, would there to any
possibility of any loss except from the cost of the forward
According to one of the best experts in
that is to say, the insurance?
this field there would be no difficulty whatever in making these purchases
of forward exchange up to perhaps as large amounts as we should ever think
This wes the whole point of
of dealing in, at least at the present time.
my memorandum to Mr. Jay; but perhaps there are other difficulties of which
I am unaware.

If the amount of commercial bills available abroad was not
(3)
very large would not this suggest that even moderate purchases would be of
For yNmpl!i2onglidlro,10 imconsiderable help and advantage to them:
portance was attributed to the mere flotation of a five-million-dollar
credit through Mr. Warburg's bank and the twenty-one associated with him.

Moreover, would it be necessary to restrict purchases to the
London market?
Sweden is practically back on the gold basis, and there is
little reason why Switzerland, Holland and several other countries should
not also resume.
I can't help thinking that cheap credits extended to some of these
countries adjacent to Germany, Poland, etc., could be used by these solvent
countries as a direct aid to the others in a very advantageous way and perhaps with much more ease and advantage than would be possible from direct
dealings by us.
(4)
I don't feel quite so sure that foreign credits would not
help very considerably, even if the influence was indirect.
For example,
would it make any material difference whether the stimulus was indirect, e.g.,
whether, for example, Europe could buy more wheat of the Argentine or Canada
or elsewhere?
So far as the international price is concerned, would not
this be exactly the equivalent to us of the actual buying of our wheat here?

As you know, our gold imports this year are threatening to
surpass all but war records.
For the four months of the present year we
received net imports of gold of 157 millions, as against 45 millions for the
corresponding four months of last year.
Except, of course, payments on




(5)

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

May 21,

SUBJECT ,__Purchases of Foreign Bills
FrAJN.

Mr. Snyder

2

the British debt and on other indebtedness, we are paying for this gold in
And of course our foreign customers, and especially those of
goods.
Europe, are necessarily restricted in their purchases by a corresponding
Would not a wise policy seek to break up this vicious circle,
amount.
since of course all this incoming gold is utterly of no use to us?

We have, it is true, as you say, some overproduction of
(6)
wheat, and this must naturally be corrected.
But this is not the root of
the difficulty of the farmers of this country, for their difficulty is that
of the farmers of the whole world, via., reduced buying power on the part
of the industrial population of Europe.
I think you agree that the
McNary-Haugen Bill is a foolish and useless measure, but it is evidently
going to pass unless something is offered in its stead.
Now, does it not seem to you that it would be wiser to propose
something that, so far as it went, could scarcely be otherwise than helpful and could apparently do little harm!
Thanks in part to the tactless methods of some of the interior
bankers, the Federal Reserve System has incurred bitter criticism from the
farmers, and the situation does not, as all of us had hoped, improve.
On
the contrary, in the recent weakening of commodity prices, food prices
have been foremost.
It is not merely the wheat grower, but the hog raiser
and many others, who are securing less for their product than before the
War.
Does it not seem to you that if we could do something, however
slight, that it would be in every way advantageous?
I attach a memorandum from Prof. George F. Warren, of Cornell
University, that you may be interested in looking over.




1924

'

T

oWtsi.. -

n-rwist-

THE MAJOR CAUSE OF THE AGRICULTURAL DEPRESSION
A number of minor causes contributed to the agricultural

111

panic, but the major cause was the financial policy.

I have

found no historical records where the effects of inflation and
deflation were not similar to the present experience.

The pre-

sent depression is the worst ever experienced in America, but no
greater than would be expected following such rapid deflation.
I am not here mentioning the various good results of the
as meaning
This is not to be interpreteu/that I do not
financial policy.

reconize them.

I think that the Federal Reserve System has a

chance to develop into a much better thing than is generally reThe very fact of its power for good makes any Listake

alized.

far-reaching.

Mistake No. 1.

Up to 1218, we could have had less infla-

tion without hindering the progress of the 7:ar.
Mistake No.

2.

After the armistice, a moderate deflation

could have been browTht about without serious consequences.
was expected and was lar.D;ely discounted.

this policy, we continued to inflate.

It

Instead of followirg

This secondary inflation

was accompanied by the rise in land values, rise in prices of
machinery and tools, and by the spread of the belief that deflation was never going to come.

This toether with the return of

oum: men to farms led to an enormous increase in the number of
This secondary inflatio
/
laid the
)urchases by young men who went heavily in debt.
foundation for the agricultural panic.




-2:istake No.

3.

Having gone wild on inflation, the pol-

icy of deflation was equally frantic.




When things were going not to
to rapidly it was
+11.

rate would immediately be

creases came at too late
rapid and too drastic.

when the momentum is grea
gradually.

They may see

but a steady pressure brin
Mistake No.

4.

A

pressure should have been

a part of the last violenc

been done by loerin,; the
of ^.overnment securities.

Mistake No.

5.

I

ing made to-day by assumi

such drastic deflation sho
stabilize.

The financial

building boom.

There wou

any event, but had wholesa

more of the income would h

ing boom would have been l

cities would have been les
needed in cities.

This h

that will not involve very

pity persons are as blissf
as farmers were in 1920

-3-

Prices of food as sold by farmers showed a slight tendency
toward improvement last year when the wholesale price level began
They are now set back to the bottom again.
The index
food
of prices paid to farmers for 5.11/products for April is 118.
In

INILto rise.

only two months of the panic Period has it been lower.

To attempt

to i.et labor, taxes, and other charges which are at the 200 level

to come into adjustment with wholesale prices at a level of 150,

and pries of food as sold by farmers at 118 is expecting too much.
IThis could only be brought about by violent periods of unemployment
and a violent smash in city real estate -orices.

The disruptive forces set in motion by an attempt to hold
wholesale prices at the present level are likely to result in
Mistake No.6, that is, another period of inflation.

Nothing will

so surely bring inflation as a persistent attempt to deflate too
rapidly.

We have gone too far in bringing about mal-adjustment to
have any hope of an easy way out.

I believe, however, that the

soundest thing to do at any sta7e of the pro-tress is to stabilize

the situation as quickly as possible and for this purpose the following steps are necessary.
1.

Find to what price level conditions are now most nearly

adjusted.

This cannot be done by arguing - it must be done by extensive statistical studies.

It should not be done for banks, or

for cities, or for labor, or for farmers.

All of these and other

interests should be considered.

I believe that this is as little understood by bankers
as by farmers.



Bankers deal with thinzs that have a very short

turnover.
110

Farmers deal with thin7s that have an exceedingly long

turnover, about once in eiht years.

Each of them tends to think

his philosophy is sound and that the other's philosophy is unsound.
To properly answer the question, consideration should be given to
the present wage level; nay of school teachers, and other public
service; public and private debts; prices of commodities; prices
of city homes; prices of farms; etc.

The ideal result is the

one that gives the smallest alc.ebraic sum of injustice and economic
confusion.
2.

Determine the best means of adjusting. to the nrice level

determined in No. 1, and the best means of holding things at that
level.

Thile you were lecturing,

I noticed your sugstion that

I was interested in the Mc Nary-Haugen Bill.
case.

This is not the

I made no reply because there were too many other things

to discuss.

That bill is merely an attempt to tide matters over

far a short time.

My interests are in nermanent policies.

ho:ever, led to the following conclusion

I am,

concerning this bill,

that if all of the efforts now being expended by city agencies for
the defeat of this bill ,end the additional efforts exerted in the

attempt to prove that there is nothing the matter with ariculture
were expended in attempting to find solutions, we mi7ht make some

proress.
7e are followin

the policy of high tariff which favaws

city industries; the policy of imnizration restriction which favors
city labor; the policy of control of the gold supply which holds
prices down.

re have -revented the free movement of goods; pre-

vented the free movement of labor; and are following. a very




diferent policy with our gold supply than the policy that would
110

be followed if the Federal Reserve Banks were operated for profit.
In each case we are controlling either the supply or the demand.
However, the farmer is told that the only way out for him is to

let the law of supply and demand work without restriction, and
that there is no solution except time, and that he is unsound if
he asks for any solution.

Personally I am in favor of the three

restrictive policies mentioned in this paragraph.

The world is

in such a turmoil that I do not believe a laissez - faire policy
should be adopted by this nation.

to be followed the entire nation should he considered.

If
I be-

lieve that the wise handling of our financial policy can furnish
the basis for solving the agricultural problems but if handled
unwisely we will be in danger of legislation that is really radical.




MIS

..1 -100M-9-23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Gavernor_Strong

Fpnm

Mr

Snyder

DATE
SUBJECT:

Pro t Bullock's_ Letter

_

Prof. BulloolOa letter is very interesting.
suggests that hie meter limps a little.
did their index last year.




May 23,

Dr. Burgess

So also, as you will recall,

192i

MIST, 3 I-75M -9-23

FEDERAL RESERVE DANK

OF NEW YORK

OFFICE CORRESPONDENCE
GoyernorStrong

DATE
SUBJECT

May 26,

German Bank Director

1111111.-

FROM

Mr. Snyder

As to the American member on the Council of the new German bank:
I should think that by far the ablest and most experienced man
that could be named would be Mr. George E. Roberts.
He has both banking
experience and high standing as an economist, and the clearest understanding of the problems that would face the new German bank.
induced to consider it, his seems to me the foremost name.
If not, how about Dr. Miller?
He is of German origin and his
experience with the Board should be highly valuable in such a position.
If neither of these, Mr. Rovensky would be a very able, energetic
and reliable man, but I doubt very much if he could be induced to leave his
present position.
Another name that comes to mind is Mr. F. A. Delano, formerly of
the Federal Reserve Board.
And there is Mr. J. S. Alexander, who might possibly consider it.
Is there any serious objection to an academic man?
It would be
hard to find an abler or more experienced man for such a position that
Prof. Kemmerer or Wesley C. Mitchell.




sw
MISC.3.1-7W-9-23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Governor_Strong
FROM

DATE__JAWAN54___

192

Foreign Finameialkdvisers

Mr. Snyder

As to the Austrian and Hungarian positions:

Undoubtedly the ablest and most experienced American in this field
His standing is, of course, of the highest, and he has
is Prof. Kemmerer.
In all his dealings
had a range of experience that no one else has had.
ho has shown himself not merely a very able organizer but an adroit and
suave negotiator, and, I think, universally popular.
of first rate ability it seams to me it would be a great pity to pass such
a person by, as is usually the case when it comes to any kind of Government
appointment.
Dr. Chandler was on the American Commission in Mexico with
Prof. Kemmerer, has spent a great deal of time in recent years in studying
European conditions, has a wide acquaintance over there with economists and
bankers, is sound and clear-sighted in his views and has now had four years
of commercial contacts; he earned his way throut: college and has had an allIt would he hard to find anyone better qualified.
around experience.
Dr, Stewart has had a more academic career so far, but he comes from
the West; he has a cool head and many of the qualifications that, it seems to
me, are absolutely necessary for such a post, if it is not to be a failure,
Dr. Foster has been a successful college president, after a long
experience in Bowdoin and Harvard, is an administrator and a negotiator, and
equally has the right qualifications of clear financial understanding.
Another very able man is Prof. J. H. Rogers, formerly of Cornell,
now of the University of Missouri.
He was trained abroad, has a wide
acquaintance with European economists, bankers and others, has the advantage
of a first-hand knova edge of conditions and a mind of crystal clarity,
With
his highly reserved personality he has not made the impress that his real
ability and the unusual incisiveness of his mental processes should command.
Compared with some of the bags of wind from whom you have had correspondence,
he is a piece of cold-chilled steel,
He is well worth considering.
John Williams is a very capable and competent person, but his views
upon the effect of paper money issues is essentially that of all the defenders of the German and other inflationary policies, and it seems to me that
it would be very unfortunate to put anyone in such a place as that who had
any tendency to wobble upon this point, because the pressure that will be
brought to bear by the inflationiete will be very heavy in every way.
I have mentioned only academic names so far, for the reason that it
is rather hard to find bankers or business men who have given these questions
serious attention, and whose instincts and impulses are usually in the direction




Whe

WSC.3.14514-9-23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE_

Governor Strong
FROM

Mr. Snyder

May 26,

192 4

SUBJECT:_ Foreign Financial Advisers
2

of the easy road, which, it seems to me, is precisely not the road that these
two countries can follow now.
Two very able men in the Bank of Commerce are Mr. Rovensky and
Mr. Broderick, either of whom has hilt qualifications.
Mr. Broderick has
specialized in the foreign exchange field, and Mr. Rovensky, as you know, is
a quite unusual type of banker.
But would it not be wiser to consider these
two for the other position?




11

I ST AT.3.00-10,1

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
_Governor Strong

FROM

DATE
SUBJECT

May 26,

1924

Exchange charts, etc.

Hr. Snyder

p

Your call for charts comes in the midst of closing up for the
Monthly Review and the Business Summary, and some extra charts for Mr. Jay.
May I ask how far the enclosed will answer your purpose and just what is
most essential to add:
1.

Gold statement is attached herewith.

2.
I attach chart of exchange rates for five countries, from
1914 to date, and charts for all the other principal countries into 1921.

Q.

Shall we try to bring all these latter up to date?

3.
Fluctuations of exchange under the gold standard before
the War were, of course, within the "gold points," i.e., in variations of
under 1 per cent, which is not representable on charts giving post-war
fluctuations, i.e., it would be just a straight line.
This could be just
indicated on the "par" line as "pre-war average fluctuations."
See charts
in hook enclosed.

4.
The mathematical formula used by Mr. Keynes for purchasing
power parities is on page 106 ff. of his "Monetary Reform," which I believe
you have.
This is, of course, taken directly from nessel and credit is
due to the latter and not to Mr. Keynes.
5.
It is extremely difficult to show conclusively this p. p. p.
relation by means of any existing indexes, so far as ws have found, as is
evident from the attached chart showing this for England, France and Italy.

You will note that in the case of England the price index ratios
for more than a year were above par, but the exchange did not follow, i.e.,
there sewed to be other forces at work, which I call bill pressure, for
lack of a better word.
I attach charts for six countries carried only into 1922.
Will you please look at these and see if any will serve your purpose?




6.

We can have the three photostats
of any of these ready Vi'ednecciay

morning, if you will advise us
tomorrow morning.

mmilSCAA-100W-g-n

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To
t

FROM

_

Governor Strong

DATE
SUBJECT:

__Kay_27*__

Conditions in Iowa

Mr, Snyder

I an sure you will be interested in a rather remarkable letter
which Mr. George E. Roberts has received from a friend of his in Iowa.

I imagine it paints the picture rather black, but it is none the less an
interestin' view.




192AL

mi3C.4.1-1004-9-23.

OF NEW YORK
a




FEDERAL RESERVE BANK

OFFICE CORRESPONDENCE
Governor

FROM

Strong

SUBJECT:

Mr. Snyder

This seems to me as intelligent a cr
as I have seen.

,gio-nAL




3

FEDERAL RESERVE BANK
OF NEW YORK

flpFFICE CORRESPONDENCE
To

a/VerZIOr Strong

F RA

DATE__may 264_

1924

Mr. Snyder

SUBJECT

Rats Programme

With reference to the programme you outlined the other morning it
seems to me that present tendencies should be pretty carefully considered.
The dark wave of pessimism, you remember, rolled in in the
(1)
March saw some recession in business from the unearly part of March.
seasonably high point reached in February, and our index of the Volume of
Trade came down from 111 to 104e
The average for the quarter was 107.
In spite of all the continued gloomy talk and gloomy predictions,
the recession apparently did not continue in April, save in a few notable
Our index for April will be about
lines like, especially, steel and iron.
103.
(2)
The stock market, which is supposed to anticipate business
movements, but which seems generally to run pretty well with them, equally
The averages, just like our Volume
show no evidence of an impending slump.
of Trade index, came off somewhat from the sharp little run up in February,
but the decline amounted to only about 7 points for the industrials and
Both rails and stocks are still well
practically nothing for the rails.
above the low point reached last July.
(3)
The same way with brokers' loans.
very slight decline from the high point reached in March and are now about
half way between the record point of April of last year and the low point of
last November.
(4)
The same way with commodity prices.
As you have doubtless
noticed, there has been some decline from the high point in February, but our
average of 20 basic is still well above the low point of last July (see
Business Summary),
(5)
The same way with the banking situation.
The statement for
National Banks for March 30 ohowed loans and discounts at a peak since 1921.
Demand deposits ran off a little from the figure of December 30, and so did
total deposits, very slightly; but both are now practically at a record
point, and higher then at any time in 1920.

In the Reporting Member Banks total loans are at a peak since 1921,
and demand deposits last week made a new high for the year.
evident in the banking field are in the Federal Reserve Banks, not in the
commercial banks.




They

.0E3ISTAY.361.-

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
To

GO ran= _Strang

FRO

Mr. Snyder_

DATE __MaY_Zag_
SUBJECT

192 4

Rate Pro gnome

2

(6)
In the general business situation we have, of course, a continuance of the building boom, and that in the minds of some spells surefire disaster.
But we had a large deficit to make up, running back five
years, and mith the enormously high wages being paid and full employment I
see no reason for anything more than a steady easing off as the demand
abates.

We have had some slump in steel and iron, but even at that, if you
have noted our index of Production, you will see that both March and April
for pig iron were above the computed normal and the average in steel for the
two months the same.
There has been a sharp cut in automobile production, but this was
largely part of the programme to stock up heavily in the winter.
For the
first three months of the year General Motors sales were less than 3 per cent
below a year ago, which does not indicate any very serious depression there,
in spite of all the wild and foolish talk.
Bank clearings outside of New York City, an excellent index, was,
estimated, about 3 per cent above normal for April, and that meant
about 6 per cent for the first four months of the year.
as

(have
ALI.

We have had a boom in some lines but a quite notable depression in
others, as in textiles, leather goods, hides, etc., to say nothing of the
very serious and persistent depression among the grain farmers and livestock
raisers.
This, I regret to say, shows no improvement, and this will have
its political effect.
(7)
To sum up then, we have had some little decline from February,
just as we had a little run off from the high peak of business in March of
last year, but this year as last year business was at high tide and running
steadily above normal and not below.
This is a definite and incontestable
fact, end yet you would imagine, from listening to nine-tenths of the business men, that business was poor.

They seem utterly unable to discriminate in their minds between
profits and volume of business and productions
Our index of the General Price Level stood in April at 180,
a decline of 4 points or about 2 per cent from the high point reached last
October.
This compares with a low point of 166 reached in 1922.
This is
a weighted average of all kinds of prices, tages, rents, etc.
It represents
the only accurate measure we have of the purchasing power of gold; and now
stands at only about 15 per cent below the average for 1920, and is at practically the same level as when the Armistice was declared.




(8)




FEDERAL RESERVE BANK
OF NEW YORK

EFFICE CORRESPONDENCE

DATE___may_22,_

To

Governor Strong

SUBJECT

FRAIL

Mr, Snyder

192 4

Levels

As to the present position of price levels in Great Britain and
the United States:
It seems to me extremely difficult to make a very accurate and
trustworthy comparison.
There is no index of the general price level for
Great Britain similar to the one we have compiled for this country.
But we find that the index for the average cost of living comes
very close to this general average, as a rule, and, taken on a pre-war
base, this index for the two countries is apparently somewhere near the
For this country the computation made by the Industrial Conference
same.
But there is no wide
Board differs a little from the Government averages.
disparity.

The Federal Reserve Board tries to compute relative prices on a
gold basis, and you will see that, dividing the price indexes by the current
rates of exchange, the two levels are now very close together (F. R. B.
Bulletin, May, p. 433) .
On the next page you will see, also, that the F. R. B. indexes of
export prices are likewise not very far from our own, that is, between
I do not know how good theca
80 and 90 per cent above the pre-war level.
indexes are, and hawk j ust started a little inquiry into this question.
Ae to wages, Prof. Bowley computes a composite index at about
75 per cent above pre-war levels, but this is rather heavily weighted by
ship builders and agricultural laborers, end if our weighted index was made
up on the same basis I doubt if it would to very much higher.
In a word, the available evidence seems to be that, relatively,
the general run of prices--commodity prices, wages, cost of living, etc.- have risen about the same in percentages in England as in the United States.
Now, you may say that if British exchange is depreciated by, say, 11 per
cent, then, speaking very roughly, measured in gold pumusgmtmengsmtmstoplathe
prevailing level of prices in England was 11 per cent below that
of the
United States, relative to the pre-war relations.

But a good part of this difference, it would seem, is dueto what
I call bill pressure, the pressure of payments, and therefore you might say
that, at the present time, British exchange on the United States is artificially depressed, and does not represent any true difference between price
levels.
I am having our Library files searched for anything illuminating
on this question, tut personally I have not seen anything with very much
sense to it on this subject; so I have ventured to give you the available
facts as far as I can.




Briti

FEDERAL RESERVE BANK

OF NEW YORK

110FFICE CORRESPONDENCE
o

Governor Strong

DAI

SUBJECT:

May 28,

English and American Prices.

FRom Mr. Snyder

If you think that my presentation of the subject was incorrect,
pleaee note a very careful article upon the question in the attached
number of the Economist, evidently written by Mr.40eightoli-or some exL
pert upon these matters.
You will see that this writer has the same difficulty in
ta4gzutzulg
price index ratios and the actual exchange rates that anyThere are
one will find who examines into the question carefully.
For example, as you probably know, wheat is
all sorts of anomalies.
today selling in Liverpool at about the same price as in New Yort, lespite a normal spread of bout 26 cents on freight rates.




FEDERAL RESERVE BANK

OF NEW YORK

ICE CORRESPONDENCE
T

DATE

June 2,

192L

SUBJECT: Buying of Labor Saving Machinery

cb varnor_Strong_

Alr,Snyder,

Attached is an extremely interesting note on conditions in the
machine-tool industry.

It contrasts rather sharply with Mr. Woolley's idea

that there has been an unusual amount of new labor-saving machinery introduced in the last ter. years.

But without the latter it seams very difficult

to explain the apparent increase in factory production per man which seems
suggested by the comparison of factory production and the amount of factory
employment.

Another instance of how difficult it is to make en accurate gen
eralization


t

anywhere.

OF

FEDERAL RESERVE BANK

NEW YORK

OFFICE CORRESPONDENCE

Tn

4g.

FROM

Governor Strong

DATE.

SUBJECT:_

June

5,

Mr. Robert Crozier Long

Mr. Snyder

T. have been a'ols to make littls headwey in finding anything for
Ur. Robert Crozier Long.

He writes, or did write, for the Journal. of

Commerce, and for e time mu Berlin correspondent of the Standard Statistics

ronmany; also fora time for the lilvtning Post.

.

r.

letanz

Schneider, of the

Evening Post, le considering the matter, and also the 7 ributie.




4




MISC. 4.1-100M-9-13

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE
To N,

yr.

CORRESPONDENCE

Governor Strong

FROM

DATE
SUBJECT:

Economist of

June 16,
Jiang, 7, 1924

. Snyder

This seems to me an extremely interesting sidelight on German
industrial conditions in and since the War.

A-014

<f)-

itolv AuGrl



325

tovi

(A

Sofa\

)(/)A-c-,-




MISC. 41-10014-9-Z3

FEDERAL RESERVE BANK

OF NEW YORK

)FFICE CORRESPONDENCE

DATE

16,

-rte*

Governor Strong

SUBJECT:

FROM

Mr. Snyder

_ 1924_

of the Japanese-American

Ltitter

to :,rinuvrsary Dumber

lhould you like to add to the 3 etter, after the first full paragraph
on page 2, the following, which I have just turned up this morning:

"An interesting sidelight upon this quite astonishing development
is that Japan is now third among the nations of the earth in the amount of
electricity consumed, erceading in this regard even such large countries as
Great Britain and France, and surpassed only by the United :states and L)ermany."




MISC. 4.1- 100M -9 -?3

FEDERAL RESERVE BANK

OF NEW YORK

O3FFICE CORRESPONDENCE
To
FROM __

Govern za_strotig

DATE

The 23.

SUBJECT:

Mr.-Savior_

I have had a number of letters and questions very similar to the
attached, not about this Whaley-Eaten atuff, but the supposed new policy.
T'd rather like to have a word with you as to just what should
be the tenor of a reply.




192i

I

'POO 10-21

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
0o_
FROM

_Goy ornor Strong

DATE

SUBJECT

192 4

Jure

Remarks on "Monetary Reform"

Mr. Snyder

You will be entertained by the observations 0 Prof. Cannan-he is always amusing--and Sir Charles, who can never say die.
Also, by the naive beliefs expressed by Mr. Keynes, and still
(/, z

more notably by Yr. Hawtrey here and in his revis -f Keynes' bock ,Athe.t
there is on this side of the water an august body with a clear and definite

program, boldly carried out, and in full control of credit expansion, price
levels, and other fortunes of the nation.




4.1-1001-9-23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Try

Mr. Jay

FROM

DATE
SUBJECT:

Auks_261

_192_4

Mr. Snyder

Index Agures of Volume of Trade

We have a steadily increasing number of requests similar to this,
and it is becoming a real burden to reply to them all.
e publish in the Monthly Review regularly some fifty odd different
indexes, computed in terms of normal, a considerable part of these now for
a number of years.
it you think there would be any serious objection if
without further ado or even specific mention of it, we simply added to our
fifty odd indexes the composite number for the Volume of Trader
Only the
scant few who are interested in such matters would ever notice it, or even
know what it meant, and it would save us a great deal of trouble.




MISC.

.1-toom-9-n

FEDERAL RESERVE BANK

OF NEW YORK

)FFICE
To
FROM

CORRESPONDENCE

_GOY er 310 r

a_trong_

DATE__
SUBJECT:

June 26,

192_4

British and American parities

__ir, Snyder
IC

0-Lai(

-i(7"6-

Since none of the ratios of indis.xes of prices between this country
and Great Britain yield a continuously oems-taitt comparison with the actual
course of sterling exchange, and as you did not feel very well satisfied
with the results so far obtained, we have undertaken the construction of a
new index of the General Price Level of Great Britain on exactly the same
lines as our new index for the United States--that is, a weighted composite
of all kinds of prices, including commodities, wages, rents, and the elements
of the cost of living, or, if you prefer, the average of all kinds of payments.

This is in the hope that comparison of this with our United States
index may yield more satisfactory results.




misc. .1.1-loosi-9-23

FEDERAL RESERVE BANK

OF NEW YORK

41bFFICE CORRESPONDENCE
To*

Governor Strong

FROM

DATE

June 27..

Mr. Snyder

SUBJECT:

Prediction of Business Recovery

At our business Luncheon today Colonel Ayres predicted very

definitely that the :,lump woulu la et until late in the year, and, as he
put it, that the turn might come about Election 1)ay, with a very slow
recovery and business not buck to

normal

krguing from past performance,

before the middle of next
is would ruggest z

year.

,oli ti cal

overturn, that is, in most cases where the election takes place in a
severs Blume, with falling prices, the Administration ehe_nges.




__192_4

But personally I doubt very much tY0 emmtinuance of the slump.

FEDERAL RESERVE BANK
OF NEW YORK

iFFICE CORRESPONDENCE
To
FROM

_Go error Strong

r.

/MO 274

DATE
SUBJECT

192

Pieter:win the Librim

Snyder

r

V/hen we laid plans for the new Library of the Bank, we thought

it might be a real embellishment if We could obtain some interesting pictures
of bankers, economists and others.

So three years ago, when I was in

London, I raided the second-hard shops and bought quite a collection, and

at astonishingly swall expense, of old prints, caricatures, etc., of former
Governors of the Bank of Phgland, of Adam Smith, Ricardo, and the like,
adding to a collection I had previously made myself.

,'any of these cost

only a sixpence or a shilling, possibly, but I think are well worth framing.
But I maw find that there is an order against any wall decorations.
Do you wish this to hold against pictures

in

the Library?

e had thought,

also, to out up quite a collection of our chart pictures, and the like, so
that it might be rather a show place for visitors when they came.




The expense of this would, of course, be extremely slight.

4

I STAT.3600-10-*1

EFFICR

FEDERAL RESERVE BANK
OF NEW YORK

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DATE

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OMS-2 150M-9-20

FEDERAL RESERVE SIAMK
OF NEW YORK
ti

TIME

INTERSFFICE
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A. N.
P. N.

OFFICE SERVICE
MESSENGER SECTION

DATE

DEPARTMENT
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DEPARTMENT
DIVISION
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N. B. USE THIS FORM INSTEAD OP OFFICE ENVELOPE WHEN POSSIBLE,
TO INSUREPROMPTANO
http://fraser.stlouisfed.org/ ACCURATE DELIVERYALL COMMUNICATIONS SHOULD BE DISTINCTLY LABELED
Federal Reserve Bank of St. Louis

MISC.

FEDERAL RESERVE BANK

.I.-1001-94.3

OF NEW YORK

SFFICE CORRESPONDENCE
T041

Governor Strong

FROM

DATE
SUBJECT

_Lune 30,

1921

New Investigations

Mr, Snyder

When Dr. Stewart was over here last time, in May, he renewed his
urgings that we undertake more detailed studiee of the New York money market,

the movanent of funds, etc., but had no definite proposals at the time.




I wrote about this after his visit, also the attached.
No answer from either letter.

MIK A. -100?4-9

FEDERAL RESERVE BANK
OF NEW YORK

4IbFFICE CORRESPONDENCE
To4

Governor Strong

FROM

DATE

June 30,

_19 4

Mr. Snyder

a "bawl."

SUBJECT:

Memo. from

Hoover

It is very reassuring that you think this sort of -stuff is just
That is just what it seems to me.

There is undoubtedly a rather sharp recession in a number of lines
of industry, just about like there wra last year.
Our bank clearings for
June, with four days estimated, indicate something like 4 per cent below the
normal rate of growth.
But I have an impression that this will not last
long and that July or August till ahoy n marked improvement.

As for Europe, it seems to me that it is plugging along in the
face of great difficulties,
slowly improving.




MISC.

J-1001-9-21

FEDERAL RESERVE BANK

OF NEW YORK

-14FFICE CORRESPONDENCE
Toi
FROM

Governor Strong

DATE
SUBJECT:

192A
June 30,

British Prices

_Mr. Snyder
You sill be interested, I think, in this plotting of the
prices, wages, and the cost of living in Crest t4ritain

According to these figures there has been a wholesale deflation of
wages as well as of prices over there, ro teat on a 1913 ease their wholesale
price and wage levels are pretty close together.
welch might vs interpreted
to mean that actually tnere is a better balance or price levels in uree.t.
Pritain at the present time than in tee united States.

The red line is the computed general price level or average of
made up in exactly the same way as the same index for

kinds of payments,
country.




all
this

course OT

MISC 3

I

STA7.3800-10-21

FEDERAL RESERVE BANK
OF NEW YORK

iFFFICE CORRESPONDENCE
To

Governor Strong

FROM

DATE __1_141218_30.

192

Mr. Snyder

SUBJECT:

Sterling and P.

The attempt to work out a theoretical value for sterling, from a
In the past three
comparison of price indexes, has not been a success.
years we have tried out several combinations, and one of than worked
Then came the divergence which I
beautifully for a good long stretch.
pointed out some weeks ago.
Here are two new ones:

The chain line is the comparison between our Bureau of Labor index
and the new Board of Trade index for Great Britain.
These are quite distinctly the two best indexes of commodity prices at wholesale in their
respective countries.
You will note that, from the end of 1919 to the middle of 1922,
this line crosses and recrosses the sterling exchange line repeatedly.
Then, like all the rest, they took a wide swing apart, and only made a near
approach again last summer.
The solid line is a comparison of two indexes of the average purchasing power of the two currencies.
That for the United States we had
worked out for quite another purpose, and, having done this and determined
the needful constituents, we found that it was a very easy job to make a
similar computation for Great Britain.
Prof. Bow ley had made a carefully weighted composite index of
wages in Great Britain, and the other indexes for wholesale prices, cost of
living, and rents were at hand.

You will note that this comparison shows wider divergencies from
the actual course of sterling than the ratio between prices at wholesale.
I may add that I know of half a dozen other attempts in this country, and
two or three abroad, to solve this problem, all with equally little success.




4

0

10

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
To

Govarner_Strang

DATE

SUBJECT

June 30,

Expenses of this Department

4111+

FROM

Mr. Snyder__

I have been very much disturbed by the statement reported by
Mr. Jay, as made to you in Washington, that our Index of Trade had cost
Dr. Burgess
something like t75,000 (if this was correctly the statement).
has gone over the records and estimates the actual cost at around t15,000 at
Personally I think this figure is much too high.
the outside.

Our Index of Trade was the outgrowth of some incidental work on a
monthly Index of Production, undertaken at a time when nothing of this sort
When Dr. Stewart became Director of the Research Division he at
existed.
once began the preparation of such an index, utilizing, as I understand it,
some of our material.
The actual composite Index of Trade has not taken the full time of
more than three or four people, and has been done incidentally to other work
in the Department.
T believe it will come to be recognized and accepted as
the first really reliable and accurate measure of trade, and therefore of the
real credit needs of the country that has ever been compiled, end may prove
in time of need worth many, many times its cost.
If, for example, we had had such an index as this in the summer of
1919, with five years or more of experience behind it, as we now have, it
mi jnt not have teen so difficult to prove that the great rise cf prices which
then began was pure inflation and not the result of business expansion.
May I add this:

Both in number of employees and in its total expense this Department
represents less than 1.9 per cent of the total expense of the bank.
Mr. Morgan's computation was that the Research Department, entire,
takes about one-sixth of this, or .3 of 1 per cent.
In other words, if the entire division was abolished it would mean
that, in the total number of employees or the total expense of the Bank,
something more than 99.7 per cent would still remain.
The continued criticism of our expenditure from Washington is discouraging and can, I believe, have but a single object.




4

SIBC. 4.1-1001-9-13

FEDERAL RESERVE BANK

OF NEW YORK

"IDOFFICE CORRESPONDENCE
Governor Strong
FROM

DATE
SUBJECT:

July 1,

macron.. in New York Deposita

Mr. Snyder

In trying to get at the sources of the extraordinary increase in
deposits in New York banks in the last four or five weeks, I thought it
would be of interest to sample several of the interior districts.
As you will see by the attached, in the last three months Chicago
gained a little, and the Atlanta, Minneapolis and Kansas City districts lost
a little. /
In the same period the total of outside bank balances and outside
bank loans to this market has varied little.
In other words, the gain here does not seem to have been at the
expense of the rest of the country.




1924.

MISC

,77 1.00-10,1

FEDERAL RESERVE BANK
OF NEW YORK

iFFICE CORRESPONDENCE
To

Governor Strong

July 1,

DATE

SUBJECT:

4

John R. Commons

ANIL

FROM

Mrs __Snyder.

I am glad you will have a little talk with Prof. Commons.
as Wesley Mitchell said, a very unusual and remarkable

person.

He is,

he has

probably had a wider practical experience with legislators and the

framing

of legislation and working with committees, etc., than almost any other
And his despartm Ant of ocercmics

American.

v is cz

sil^

ver,-:ity has

sixty-two prof essors and instructors and some four thousand students enrolled annually.

He knows the West, and his point, in a nutshell, is this:
The mass of the people in the test believe that the :ederal iteeerve

Board and Bank were at least the chief active agents in the deflation which
cost them so dearly.
this belief.

That it is hopeless to try to dissipate or eradicate

Only one way he thinks to meet the issue.

it squarely to than; "Do you want another period of inflation, or do you
want stability?"




FEDERAL RESERVE BANK

1,115CAJ-100h1-9-23

OF NEW YORK

S)FFICE CORRESPONDENCE
Governor
FROM

Strong

DATE
SUBJECT:

July 2,

Caleulating P P P'

Mr. Snyder

I quite concur in your exposition of the problen.
But the
further difficulty is that just those goods which are actively traded in
between two countries will have in general, and barring obvious exceptions,
practically the same gold price, i.e., the price in one country will
correspond almost exactly to the exchange rate, e.g., the price of cotton
in

Liverpool.
It aeons to me the geners.l theory,that the average and long-time

exchange rate between two countries must be a ratio between the average
But I
internal purchasing power of their rempectivo countries, is sound.
doubt very much if we can get much further than we Lave already in demonstrating it by index numbors.

But, so far as it goes, it some to me that the evidence is that
sterling, for a year or more, has been uaduli depressed, s.nd really feels
the effects of the -iery heavy gold payments.



19A._

4.1-1001,4-9-23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

FROM

DATE

147

34-

19 4

Mr. Snyder

SUBJECT:

Out-cf-town Balances Before 1919

The beet barometric figure for out-of-tern balances back of 1919
we have is the due-to-other-banks account in the National Bank calls.
Those
for New York City shown herewith.
You will note that, after the heavy jump in 1915, there has been a
pretty steady secular decline, and the variations from this do not seem of
great significance.




rwict

,TAT ,P00-10-2i

FEDERAL RESERVE BANK
OF NEW YORK

EFFICE CORRESPONDENCE
To

Ctovernor _Strong

FR..

Mr.

DATE

July, -_-

192 4

SUBJECT

Snyder

In the last four years we have made scores of large wall charts
for addressee by Mr. Jay and others, and some of these are very striking
and interesting.

They represent a quite rane.rkable range,(s.nd I think

would disabuse your mind of the idea that we have devoted any special attention to price movements, etc., although such charts have been among
those most often called for by the officers?

One of my thoughts about the new library was that we might make
a big display of these, on the walls, perhaps twenty or thirty of them,
that could be brought up to date from time to time, when pressure els cir.ened

a little, although it seldom does.

I believe that these would give visitors a fine idea of the range
of inquiry and information at the disposal of the officers and directors of
the bank, and especially might be very impressive to any whilom critics of
expenditure in this department.




Would this meet with your approval?

Displa

uni,,

..,TAT 3000 10.21

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
To
F

RIP

_CoTeniar_Strong
_UT

Snyder_

DATE
SUBJECT

July

34_

1924

Interdietriot llovatent_of_Ands_4_

etc.

The material for a detailed study of the New York money market and
the movement of funds to and from the outside is rather scant, and not much
Most all of this material has, of course, been
of it extends back of 1919.
The
charted continuously from the time this department was organised.
attached chart brings out the most salient features.
The first thing you will note is how steady have been the demand
deposits, and to a considerable extent also the total of loans and rediscounts,
From a
of New York City banks within the last five very tumultuous years.
straight average for the whole period the demand deposits have varied scarcely
more than 10 per cent.
This is the more remarkable in view of the fact that the investment
account has varied quite widely, both down and up.
The variations in out-of-town bank balances have, es you will see,
likewise varied but little, ranging around a hundred millions above or below
In other words, a kind of gold exchange fund kept at a fairly
the average.
constant level.

Out-of-town street loans, like local bank street loans, vary more
widely, but swing largely with the demands of the Stock Exchange and not, apFor example, through 1920, while the inparently, with the interest rate.
terest rate was rising to the highest points known in the last fifty years,
street loans were steadily falling.
Out-of-town street loans fell lees rapidly than local street loans,
sc that the stringency which developed could hardly be regarded as the withdrawal of outside funds.
Perhaps the most striking fact of all is that the interest rates in
New York should have varied so enormously within this period, while the actual
amount of demand deposits varied so little.
And unless we imagine that large amounts of unreported outside
funds flow in and out of the New York market, then must we conclude that the
remarkable rise and fall of interest rates was due to the varying pressure of
demand, against a nearl inelastic supply!_
And, theoretically, the supply was highly elastic.
I should be very much indebted for any suggestions for further inquiries

As to our studies of price movements and the like, I can assure you
that these have formed but a slender part of the total of our work.




02'

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong
FRC,M

_Mr,

auger

DATE

SUBJECT

July 10

192 4

Coot of our Indexes, etc.

-

Dr. Burgess and I went over to Washington Tuesday, at Mr. Jay's
suggestion, and I had a chance to have a very agreeable talk with Stewart
about the remark he made to you about the cost of our indexes of Trade,
Production, etc.
He says that his estimate was "from $50,000 to $75,000,"
but I found that this was almost purely a guess from the cost of some work
in his own department.

I tried to show him that we had never had more than three or four
people engaged upon this work, and these not continuously, and that I
doubted if the actual cost at the outside could have been over $12,000 or
$15,000, or much less than one-third of his lower estimate.
I explained to him that a good deal of the computation had been
done in the Tabulation Division when they happened to have slack time, so
that this part of the work really cost nothing.
I would also like to point out that this would include the cost,
not of one index of Trade, but of three separate and distinct indexes independently calculated and yielding practically the same results.
I doubt if all this work has ever run to as much as 10 per cent
of the annual expenditures of this department, and, as I pointed out to you,
the total of our expenditures now represent about 1.4 per cent of the total
expenditures of this Bank.




STA, 3100 -10-ti

FEDERAL RESERVE BANK

OF NEW YORK

'OFFICE CORRESPONDENCE
To

Governor Streft

DATE
SUBJECT

hay 11,

19`'

the Rapid Facpansion of Deposits

Felt___Nra inydnr
Perhaps the very rapid expansion of Reporting limber Bank deposits
in the last four months may be very easily explained, and if so it is ex-

tremely interesting.

The situation is this:

The low point for the year in these bank& deposits was about the
first week of :.!arch. Since then demand deposits have expanded, to July 2,
by about e20 millions, and time deposits by about 220 millions, which with
Government deposits practically unchanged yielded an increase of deposits in
these banks of around 10/0 millions.
In the sane period total loans and discounts increased by 216 millions, total investments by about 554, or a total of loans and investments
of about 670 millions.
In the same period reserve balances with the Federal Reserve Banks

increased by 110 millions, and as the cash in banks changed but little this
meant a total expansion of around 780 millions.
This leaves about 260 millions to account for.

In this period net imports of gold amounted to about 140 millions,
and we also know that from the end of February to the end of -lay deposits in
!Jember Banks in the smaller towns, under 5,000 population, declined by about
100 millions. As the Member Banks represent nearly three-fourths of the
total resources of the country, we may inagine therefore that the total gain
to the weekly Reporting Banks from the smaller banks of the whole country
might possibly have been on the order of, say, another 140 million dollars.
We also know definitely that some of the larger banks in hew York

City have very substantially increased their foreign deposits since the
first of the year, one of them by 50 per cent. This conceivably might
easily total 100 millions or more.

These three sources would suffice to explain the balance of
260 millions indicated above, even after a reduction of about 72 million
dollars in the total earning assets of the Federal Reserve Bank in the same
period.

But this of course does not explain the source of the funds nor
the increase in loans and investments. As these could not have been derived from the smaller banks of the country by withdrawals, nor, in any
probability, from increased foreign balances, we are left to the supposition
that they were built up by the banks themselves on the strength of their
excess reserves at the Federal Reserve.




4

.4

I sC db, I

S7 AT 9600.10- 21

c`

FEDERAL RESERVE BANK
OF NEW YORK

1111PFFICE CORRESPONDENCE
To

Governor Strong

FROM

Mr. Snyder

DATE
SUBJECT: _The_ Rapid

July 2.16
Zxpansion

192

of Deposits

2

If there were no demand for new currency, end in this period there
was little change, and this excess amounted to as much as 100 million dollars, over the amount required in March, this amount with the Weekly Reporting Banks would expand their loans or investments by, roughly, about
900 millions, or considerably more than the actual expansion.
how, in the old days the banks were largely left to the whim of
customers, as to whether they could expand their loans quickly or not.
Now, we hove had in this
Heavy purchases of investments were not the rule.
period relatively small increases of loans, and those chiefly with stocks
and bonds as collateral, and a very heavy increase in investments.
In other words, the expansion now is largely under the arbitrary
control of the banks themselves, and practically without recourse to the
The other thing of interest is that in this same
Federal Reserve Banks.
period the amounts reported from these banks as "all other loans," i.e., the
Business generally was underso-called commercial loans, declined slightly.
In other words, this heavy
going a slight recession and not an expansion.
expansion of bank deposits took place without any increased demand for
commercial loans whatever, and in the face of a general tendency to curtail
It is not the less interesting that this was a poscredit commitments.
sibility which has for some time been foreseen.
I am wondering if this is not part of the explanation of the considerable degree of stability in business which we have had in the last two
and a half years.
The steady inflow of gpld, in cooperation with the possibilities of elastic expansion under the Federal Reserve System, had brought
it about that the credit movement may be at times temporarily against the
general business movement, which in the case of the decline of the latter
means a kind of' automatic resistance, leading to a rather ready reversal of
the business trend.
If this is the fact it would give additional support
to the idea entertained by many that such a reversal might now soon appear
again.




I ...TAT Of r 10 2'

FEDERAL RESERVE BANK
OF NEW YORK

ODFFICE CORRESPONDENCE
(bvernor Strong

DATE

SUBJECT

July 15,

192 4

The Increase in Deposits

Snyder

Part of your suggestions as to a possible inquiry had been
covered in the memo. I showed you yesterday, copy of which, with corrected
chart, is attached herewith.
A less successful attempt to show the same thing is also attached
(they did not keep to the same scale).
I see no further light on the rapid increase in deposits in the
first half of this year, save possibly in the unusually heavy gold imports.
These gold imports for the six months reached a net of 222 millions, or
very close to double the amount for the same period in either of the two
preceding years.
Closely corresponding to this has been the increase in the
Member Bank deposits in the Federal Reserve Banks, which have gone up from
the February average, low for the year, of about 1900 millions, to an
average in the last four weeks of 2047 millions.
This is the most rapid increase in Member Bank reserves that we
have had in a long while.
In the absence of any increased demand for hand to hand currency,
and apparently this demand has fallen off slightly instead, this increase
would suffice for an average expansion of deposits for the System of around
a billion and a half instead of the billion that has taken place.
Would this, and the further fact that the increase in deposits
has run so far ahead of the increase in loans and investments (by about
350 millions), suggest that there is still a considerable slack to be taken
up--i,e. , room for still further expansion without rediscounting?
I have to go on Thursday up to Cornell University, but I hope
next week we will have some further analyses for you.

4-6-49

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FEDERAL RESERVE BANK
OF NEW YORK

&FFICE CORRESPONDENCE
ilrfAbyder

DATE July 15, 1924

192_

SUBJECT:

:Ilk M. E. Rose

Gold Certificates in Circulation (outside Treasury and
Federal Reserve System)

Jan. 1,

1922

173,701,274

(Federal Reserve Bulletin)S?3 4.s19,

Jan. 1,

1923

302,743,899

(Circulation Statement )

Jan. 1,

1924

582,029,209

)

June 1, 1924

779,159,139




te

It

)

98- 8, S-57

3, 73 t
4,02-10..teroy61

4

..01/;'MNT OF REMSCOtJNTS AND INVTSTMEN TS IN THE FEDERAL RESERVE BANKS

In the chart below is given the month to month changes in the
amount of rediscounts in the Federal R ;serve ranks, compared with the in-

crease or decrease of investments.

In a broad sort of way there has been

since 1922 a quite remarkable correspondence between the decrease in the
one and the increase lirthe other,

The figures are given in three-months

averages.

+180
3

0 NTHS

AVERAGE

+160

4 INCREASE IN I NVE ST,NTS
DECREASE IN DISCOUNTS

-

+140

+120
.-

+100
11

+ e0

DISCOUNTS
t

+60

+ 40

i
I

+20

AVERAGE

II

CliANGESR011---

lb'

PRE CEDING MONTH

0

IE NTS

- 20
v

- 40

r

jr

60

(CORRECTED)

-80
I

I

t

1923
-100




I

i

1924

I




Investments,
millions
of dollars.

Discounto,
nillions
of dollars

100

500

-

400

200

-

300




Con f idential

July 14, 1924

2

Since this low point of July of a year ago the investment account
has been increased by 356 millions, while discounts and advances have declined by 619 millions.

Here the decline in discounts was in excess, and

as a result the total of earning assets fell accordingly to a point 200
millions below the lowest point reached in the extreme depression of
1921 - '22.

But from the extreme low point of the investment account in

last November, to date, the increase in securities has very nearly balanced
the decline in rediscounts.
`7ith some slight divergencies, therefore, it may be said that

the expansion of security holdings has been balanced by a corresponding decline in rediscounts and vice versa.

Had the correspondence boon exact,

apparently the total earning assets would have beenheld at close to the

average figure of the two preceding years; while at the present time this
total is about 300 millions below this average.
Ordinarily arid

without the enormous accession of gold which we

have had in the last three years and more, credit movements in the Member
Banks of the System would necessarily follow rather closely the position of
credit in the Federal tieserve Banks.

17ith the incoming gold, however, this

correspaidence has been notably interrupted.

In 1922 there was a heavy expansion of bank credit in the country
over the low point of the preceding year, without a corresponding increase
in the expansion of credit by the Reserve Banks.

The same thing has been

taking place in the present year, as was pointed out in these pages last
week.

The rapid rise in deposits ard, to a less extent,

in loans and in-

vestments, has been in the face of the fall noted in total earning assets
of the Federal Reserve




Banks.

Last week saw another marked increase, bringing the total increase

3

A

of deposits in the weekly reporting banks up from the low point of March 5
by 1,049 millions, In the same period loans and investments increased
only 672 millions.

In the New York district alone the increase in deposits in the
same period was 655 millions, and in loans and investments 524 millions.

In this period there was a net gain to this district through interdistrict
transfers of 137 millions, so that the increase in deposits was about balanced by the other increases.

But this was not true for the whole country.

Here we must look

more to the other item of gold imports and the building up of reserve balances through this mesas.

Since

March the net of gold imports has been

145 millions, and the increase in reserve balances, taking the average for
the latest two weeks reported, was very nearly the same.

In the absence of an active demand for loans this excess of
reserves has led to a considerable expansion of Member Bank investments,

but this has not as yet been sufficient to account for the still larger
increase in deposits. Perhaps when we have more complete returns it will
be found that there has been some drain from the smaller colzrtry banks to

the city banks, and at the same time some accession in foreign balances,
which would be sufficient to account for the differences disclosed.




MISC. 1.1.

411111.

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

kRom




DATE
SUBJECT:

192

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
TS
Governor Strong

4.1-WOM-9-23

FROM




192_4
SUBJECT:

lir. Snyder

About my "temple":

The kind of work I have to do here is distinctly promoted by
reasonable quiet and freedom from interruption. There is a good deal of
distraction o7 your attention ii people con3teL_ tly co:nini; up to the door
d looking in, and we have, first and last, u good many visitors.
It would help a good deal if the room were enclosed as was
originally intended, for you Can hoar all the telophones,Euiu people talking
V.y F x 12 coop up on the 25th floor of the
clear across tho
Equitable was a good deal more comfortable plr.co to ticri
dif 'erence.

add in the fact of no rrivecy frr.m :!_nterruption me.kes a real

I'd like very much to talk to you about it.

MIS!.

-

-17 480, 10 2,

FEDERAL RESERVE BANK
OF NEW YORK

eFFICE CORRESPONDENCE
To

Governor Strong

FP

DATE

July 17,

19"c 4

Mr. Snyder

SUBJECT

Studies of the Money Market

Just so you will not think us stupid or asleep, I wish I might
draw your attention to the real difficulties in getting at the determinants
of the market mov3r.ente.
It is so easy to build theories.
but these are
the facts:
As i pointed out tc you in my memorandum of July 3, net deposits
in New York City banks have varied from a straight average by scarcely more
than 10 por cent
extreme.
Mere has beau, no secular increase in

at

five and a half yao.rs.

For the whole .4a"..;an dapoe:..ta are now pi.o..4.s.bly 4 billions higher
than the average of 1920.
They were 3 billions higher on March 31, and
probably a billion more than that now.
the:;e five year:, dad a half there
the V0.1111218 of production,
has been smut} ino like the normal rate of
::ow,

1:nott defir.:I.tely that

grcwth it

distributim, end trade.
an expansion of betwean 15 and 2U per cent.




This vculd ries.sn, for the five years since 1919,

FEDERAL RESERVE BANK

110 c.4.1-Insi-9-23

OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong
FROM

DATE
SUBJECT:

Isly_18.

Robert Crozier Long

Mr. Snyder

As I advised you, I wrote several letters and had a talk with
There
Ur. Franz Schneider, of The 1hvening Post, but with little result.
does riot seem to be a great deal of call for financial news from Germany
I am very sorry not to be able to
here, such as Mr. Long could supply.
do more, for I liked him very much.




1924_

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong
FROM

DATE_
SUBJECT:

JulY

192i

22a

Now York Money Market

Mr. Snyder
If we wish to get a really accurate picture of the flow of funds
in and out of the New York banks, it would be of much interest to know the
amounts or percentages that are loaned by these banks to distinctly out-oftown customers, not to other banks nor on cornnercial paper.
Would this be of sufficient interest to send a letter along the
lines of the attached to six of the larger banks to see if we could get
estimate of these proportions?




tb.
N

itioq tett

)1Lt.

etkrv\2N

Afr




0

'C. /.t- 100M -9 -23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

it

FROM

Governor Strong

DATE__

SUBJECT:

x1924 -_192_

Brokers' Loans

Mr. Snyder

I have been looking into our records and find that the difference
between the street loans as reported by the daily Tienorting Klanke and the

brokers' loans,
long as they were reported to us, did vary a little in
amount, thou: r.ot no much in percentage; and the actual total now is
probably a little hipper, by possibly 50 millions, than the estimate
`:sr. Cooper has given you.
I have eu3geste0 to him that hereafter he make
an allowance for this variation in such fashion as to give you a little
closer figure.




FEDERAL RESERVE BANK

MISC. 1.1- IOOM -9 -23

OF NEW YORK

Or/OFFICE CORRESPONDENCE
To

a

FROM__

Governor Strom

DATE.

SUBJECT:

Za-dr_24A__11024

Voting in the Distriet of

Ir. Snyder

The anger to your inquiry auout the withholding of the ballot
in the District of Columbia took quite a little looking up at the Fublic
Library to get it straight.




As you will see, it was rather a long story.

192_

41151C 3

1 STAT.3000-10-11

FEDERAL RESERVE BANK
OF NEW YORK

iFFICE CORRESPONDENCE
To

Snyder

_

FRO

Bendelari

DATE
SUBJECT

192

July 24, 1924

Suffrage in the District Of

Columbia

In the loag dispute over Whether the United States should have
a particular district for their capitol, and where that district should
be, the chief fear on all sides was that the Government might be influenced by the adjoining State or States.
Therefore, t
was made to read, Art. I, Sect. 8, Clause 17: "The Congress shall have
power to exercise exclusive legislation in all cases whatsoever over such
Later there was much discussion as to how far "exclisive"
district."
went; whether it included the inhabitants of this district, too, as
President Taft held.
In practice the inhabitants did not vote in kational matters,
as no place was provided for then, but did vote in municipal matters from
the beginning to 1874.
Several attempts have been made to amend the
Constitution so that they could vote for Presidert, etc.
After the Civil
War citizenship in the District vas given to all who had lived in it one
year, and in 1871 tha District was made into a Territory with a Governor.
At the same time a Board of Managers, of whom "Boom" Alexander T. Shepherd
was one, began to expand Washington recklessly, with the result that in
three years the city was bankrupt, and Congress appointed an investigating
committee.

The report of the Committee was drastic in its effects.
By
the act of June 11, 1878, the territorial force of government was done away

with and three Commissioners took its place, while the it of suffrage
was taken away from the inhabitants, not only in national but in muhicipal
affairs likewise.
And that is the condition of matters now.
The material in the Public Library that deals with the suffrage
is very widely scattered.
The books that have been consulted are:




G. ta Hodgkin, "Political Scieuce Quarterly," Vol. 25, p. 257.
F. Dodd, "The Government of the District of Columbia"
W. Tindall, "The Origin and Government at the District of
Columbia"
V..

02

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong

DATE

July 25,

192 4

SUBJECT.

Snyder

You will note by this morning's statements that the very unusual
excess of Member Bank reserves appearing last week ie cut down by only
10 millions this week, i.e., as closely as it can be estimated by the returns from the weekly Reporting Banks,
this amount is around a hundred
millions above the required reserve.
Following this big jump last week comes a corresponding jump in
both the demand and time deposits of the weekly Reporting Banks, amounting
to 184 millions for the two.
This brings demand deposits in these banks up by 998 millions
over a year ago this date, and time deposits up 500 millions, or a billion
and a half for the two, with little change in Government deposits.
This big increase in deposits is not supported by any corresponding increase in loans and investments.
This increase for the week of
July 16 amounted to only 67 millions, or much less than half the increase
in deposits.

As compared with a year ago loans and investments in thejk.T,3.2)'
are up only 783 millions, or, again, less than half the increase in ditevw,,
posits.
kfff'

Total earning assets in the Federal Reserve Banks, despite the
purchases for investment account, were off by 276 millions and have been
continuously dropping for some months; yet this astonishing gain in
Member Bank deposits continues.
At the present time this would mean a total of over a billion
dollars to be accounted for whose origin must be sought outside of the
Federal Reserve System, since we have no indications as yet that there
has been any heavy drain from the smaller banks to the larger banks; i.e.,
we must account for an increase of 783 millions of deposits and a decrease
of 276 millions in F. R. B. earning assets, or a total of 1060 millions.
The larger part of the deposit gain in the W. P. B. for July 16 was outside of New York City.




ries

4144

MIX. 4. 1-101M-9-23

FEDERAL RESERVE BANK

OF NEW YORK

A;

fibFFICE CORRESPONDENCE
T

FROM

\4(bvernor Strong

DATE_
SUBJECT:

Jlllya5}-

French Debt

Mr. Snyder

You may like to see the latest figures on the French debt

situation and some comments thereon.

It does not seen as if the

situation had materially improved since last spring, and that a failure
of the London Conference might easily precipitate another slump.




)r

°l09

192A_

1,0-20

FEDERAL RESERVE BANK
OF NEW YORK

FILE CORRESPONDENCE
410

Mr. Snyder

DATD

SUBJECT

July 25m 1924

French financial conditions

* F. Rose
There does not appear to be much data to add to that contained in the
Economist relative to financial conditions in France.

Miss Frankenstein reports

that the French magazines contain nothing on the subject.
The Statist (July 5, p. 15) and the Stock Exchange Gazette (July 3,
p. 1311 and July 10, p. 1348), contain articles very similar to that in the
Economist.

More emphasis is laid upon the unwillingness of the public to con-

tinue to subscribe to bonds.

The three milliard franc issue offered by the

Ctbdit National in January brought in less than half that amount, this being the
first time that Credit National offerings had failed.

The Departments of the

Nord, Aisne and Somme desire to float reconstruction loans, but have been unable
to find any French banker willing to attempt to offer the issues.

M. Clementel,

Minister of Finance, declares that the disaffection of the Yrt.nch public for

securities with a fixed yield is due to lack of confidence in the franc

.

Ha

proposes, since the Treasury has no cash and no means of borrowing from the
public, to pay war claims in ten-year bonds and thirty-year annuities, leaving
the recipients to obtain cash, if they can, by rediscounting at a considerable
loss.

The public, however, continues to subscribe heavily to National De-

fense Notes, which are no longer subject to taxes of any kind.
Th3 Stock Exchai

points out that in order to avoid exceeding

the limit of advances whiel the Bank of France may make to the Government,
(23,200,000,000 francs for 1924), the Government has borrowed one milliard from
other banks, making a total indebtedness to banks of 24 milliards.




OFFIC
MESSEN

OMS-2 150 M-9-20

FEDERAL RES1,..-- BAN'S
OF NEW YORK

INTEROFFICE

kgUTE SLIP
A. M.
P. M.

TIME

REIVRKS
FROM
N. B.

USE THIS FORM INSTEAD OF OFFICE ENVELOPE WHEN PO

TO INSUREPROMPT AND ACCURATE DELIVERY ALL COMMUNICATIONS SHOULD BE DISTIN




V




FEDERAL RESERVE BANK
OF NEW YORK

MKAA-100.1-9-23

FEDERAL RESERVE BANK

OF NEW YORK

°OFFICE CORRESPONDENCE
Governor Strong
FROM

DATE
SUBJECT:

J1404_284AL924 L192__

July Atlantic

iMr. Snyder
ect

C\.;

If your eye has not already caught it, I am sure you would be
much interested in a very thoughtful and well written article in the
current (July) Atlantic, by Arthur D. Little, the well -known engineer.
Stimulating.
One thing it set me thinking about was how far, alongside o' the
remarkable progress in physical lines in this country, we had made similar
progreus towards a rational or scientific banking policy.
You know one man in thirty or forty thousand isn't very many.

,d

*11




tti_to

--th

cft,

MI3C. 1A-1004-9-23

FEDERAL RESERVE BANK

OF NEW YORK

°OFFICE CORRESPONDENCE
Governor Strong

T

FROM

_

DATE July 28, 1924_
SUBJECT:

Books from

192

Governor Norman

Mr. Snyder

The Library is greatly indebted for the gift of the two books
It was my impression that the sketch of the

from Governor Norman.

"Intended Bank" was by Patterson himself, and asked Mr. Bendelari to look

it up, and his finding is as follows:

"T. A. Stephens, in 'A Contribution to the Bibliography of the
Bank of Fzgland,' 1897, says of 'A Brief Account of the Intended Bank of
England,' 1694: 'Most probably by William Patterson, to whom it is attributed
by Banister in his edition of Patterson's works, published in 1854.'
"Michael Godfroy, in 1695, published 'A Short Account of the Bank

of .1.1gland,' which is praised by Stephens, who gives more than a page full of

q'uotations from it.

"No attar:pt is made to give the authorship of the other pamphlet,
'Some Useful Reflections upon a Pamphlet called "A Brief Account of the

Intended Bank of igland.""


MISC. 4.I-100M-9-23

FEDERAL RESERVE BANK

OF NEW YORK

tOFFICE CORRESPONDENCE
TAP

Governor Strong

FROM

DATE

:uly 30,

19.

Mr. Snyder

SUBJECT:

Books for Economic Reading

r. Roberts :-.as already sent you a quite admirable list of suitable
books for a small economic library; and I am strongly of the belief that a
few of the ablest works, deeply studied, are worth infinitely more than a
smattering; of all the babble and chatter which make up about 90 per cent of
economic writing.

About the only book I would add to the hat would be one of my
old standbys, Simon Newcomb's "Principles of Political Eccnowy," which has
always seemed to me the ablest American book on Economics yet written. I
should prefer Prof. Fisher's "Purchasing Power of Loney" to his work on "The
Stabilization of the Dollar," which is merely a popularization. I should

add onP e f Keynes' books, say his tract on 'onetary Reform," if only for the
crispness and lucidity of his style. he is the lineal heir if J. S. Mill in
that regard.



4

MISC.

FEDERAL RESERVE BANK

loom-9-n

OF NEW YORK

°OFFICE CORRESPONDENCE
To

-31(

FROM

_Gov erzar__Strong

DATE
SUBJECT:

July 31, 1924

Estimation of Brokers' Loans

Mr. Snyder
What I said about the current estimates of the total amount of
brokers' loans outstanding may be illustrated from a definite analogy.
In the four and a half years from the middle of 1919 to the
beginning of this year, total street loans reported by the daily Reporting
Banks, and the "loans on stocks and bonds," reported by the weekly Reporting Ranks of New York City, showed a fairly consistent relationship, as is
disclosed by the red line on the attached chart.

But you will see that this relationship was broken in the present
year, so that an attempt to estimate street loans from the reports of the
weekly Reporting Banks at the present time would be out ty several hundred
millions.
Zi-ei6.."(110

Mr. Cooper has worked out new estimates,,by a method of average
dif ferences, which, with the limitations indicated above, is probably as
reliable an estimate as can be made from the available data.




192.

MI SC.

.1x114-9-n

FEDERAL RESERVE BANK

OF NEW YORK

,OFFICE CORRESPONDENCE
To

DATE

July 311 1924

Governor Strong

SUBJECT: Heavy Enrollmont in Banking

Mr. Snyde

Classes

:Joky

FROM

A little item of interest.

I had a call yesterday from Prof. Wright, professor of Banking
in the University of Illinois, at Urbana.
He tells me that the total
resident enrollment for the year (no mail order students included, as in
the rolumbie figures), was over 12,000, which probably makes them the
third largest in the country.
Of these over 2500 were in the School of Commerce, e large part
of whcm are graduate students.
And of these over 1,C00 were enrolled in
the classes in Banking.

Economics.




Of these latter, all of them had to have previous courses in
All of which seems evidence of a changing world.

199

NIIC 3

fl

STAT.3000-111-21

FEDERAL RESERVE BANK
OF NEW YORK

.FFICE CORRESPONDENCE
To

Governor Strong_

FR(740

DATE

_August-Ls_

Mr, Snyder

SUBJECT

ii_mVor Bank Depositor

As you have doubtless noted, Member Bank reserves deposits this
het
week covered the alight loss of last week, which puts them back to the
hi gh point of two weeks ago.
This seems to indicate that the estimated excess of around a
hundred millions of Member Bank deposits is not just a freak jump, but
something to be reckoned with.

The remarkable thing is that, of the total gain of something
over two hundred millions since a year ago (213 millions for July 30),
practically all of it has come from the weekly Reporting Banks and apparently none from the other banks of the System.
Further than this, on the average about three-quarters, or
around 150 millions, has come from the New York City banks, leaving only
something like 50 or 0 millions for all the rest of the System.
In the same way, taken from a year agc,ebout three-fourths
of the increase cf loans in the weekly Reporting Banks has come from New
York City, and likewise of the total loans and investments; while of the
billion and a half increase in demand and time deposits less than half
has come from New York City.
Which is interesting.




1924

FEDERAL RESERVE BANK

OF NEW YORK

1.11WAJ-1001-9-23

DATE

FFICE CORRESPONDENCE
SUBJECT:

August 4,

Banks
Gains by Clearing House

Governor Strong

FROM__

Mr. Snyder
gained 216
clearing house banks have
In the last four weeks,
their loans by 323 millions.
demand deposits, and expanded
millions in
continue very high.
Excess reserves

46.0 °?IlleAk:"

4440L



f"t7k.2

1921







miC 3

I

570.7 3000.10-21

FEDERAL RESERVE BANK
OF NEW YORK

oliFFICE CORRESPONDENCE

DATE

Governor Strong
111

FRom

SUBJECT:

August 6, 1924

Movement__of Business

Mr. Snyder

As to your Question:

The stock market made a new high for industrials this wek, and
I have
thirteen consecutive weeks of this is a rather long stretch.
wondered if this was not going considerably stronger than the recovery of
business, so far, would justify, and if a considerable reaction might not
soon be due.
I should not expect to see the stock market culminate before a
strong upturn in business, and irobably towards the peak of that upturn,
If this was the case,
which letter might net come before no,t spring.
But,
the 'resent policy might readily and safely realize the ends sought.
as I said the other day, I should think it might net be amiss to suspend
further purchases for a while, and see what haypens.

As to your suggestion as to the causes of the heavy increase in
Member Dank reserves, I should be quite in agreement, as you will see from
the maJled paragraph on page 2 of the attached.




'

;

1

192

Confidential
August 4, 1924

4

THE PIVOT OF THE RECENT EXPANSION

The remarkable fact about the notable expansion of bank credit
since early in Marco is that by far the larger part of it has centered in
New York City, and, up to the latest dates available for the whole System,
had not, apparently, been shared by the rest of the country.

The latest date for wnich we have full returns as to deposits in
the 9,785 banks of the whole System is June 25.

This showed that while the

banks of the New York district had at this time gained 576 millions in demand
deposits since March, the remaining banks of the System outside this district
had lost slightly.

Demand and time deposits in the New York district had to-

getner gained 639 millions, while the whole System had gained but little more.
As in this same period the 750 weekly Reporting Banks had gained
in total deposits nearly as much as tne whole System, tnis meant that the
smaller banks of the System had hardly gained at all.

Since June 25 the gain

in the weekly Reporting Banks outside of New York City has been greater than
in those of New York City.
large centers.

But the most of-this has been in Chicago and other

Apparently the "wave" is expanding outwards in about the usual

fasnion.

The focus, however, is still New York City, as is evident from the
reports of toe Clearing House banks, which have gained 216 millions in deposits
in the last four weeks, and expanded their loans and investments by 323 mil/ions.
Parallel to the tendencies indicated, it is noteworthy that since
March the total earning assets of tnis Federal Reserve Bank nave gained slightly, while those of the other Federal Reserve Banks have declined by about a
hundred millions.




Zne source of this change lies, of course, in the increased

investlents, since the discounts and advances of this Bank nave now fallen
litto

an almost negligible amount, while those of the System are still around

300 millions.

Undoubtedly the heavy increase in investments nas likewise contributed to focus activity in New York City, since the larger part of such purchases is necessarily made bore and the deposits so created appear first in
the New York City banks.

That the expansion of tne total deposits in tne

commercial banks, however, shown in the last year, and especially in the last
five months, is a real gain, and largely from external sources, is evident
from the fact that in this period the total amount of credit extended by the

Federal Reserve Banks has steadily declined.

This notable expansion in deposits is reflected in the generally
buoyant condition, alike of stock, bond, and commodity markets.

In the New

York stock market the average of industrials last week made a new high for the
twelfth consecutive week, while bonds and railway snares maintained the strength
tney have shown.

It is in line with these developments that bank clearings in New York
City in the past two montns nave been well above the estimated normal, while
for the country at large, outside of New York City, they have been very slightly below.

The revised figure for outside clearings, or debits, which is as

a rule an excellent forecast of the composite index of the Volume of Trade for
the same months, is 93.9 for July, as against 98.6 for June.

The revised

figure for the total Volume of Trade for June is 95, or somewhat below the
indication fromcutside bank clearings.

The course of these indexes is depicted

on a preceding page.
Vlitn rising commodity prices and expanding bank deposits it is quite

possible that in the recent recession the low point in the trade oftne country




Digitized forwill be found
FRASER

great deal of

- 3

to have been reached in June, althougn July will not snow a
improvement,

4111r 1-1001-9-23

FEDERAL RESERVE BANK

OF NEW YORK

O

ICE CORRESPONDENCE
Governor Strong

To
FROM

DATE_ _A4g, 61, 1924_192_
SUBJECT:

Robert Crozier Long

Mr. Snyder
MUJ

Although I never had any answer to my letter to the Editor of
the Annilist, regarding Mr. Robert Crozier Long, they seem to have taken
him on as their correspondent; and, as you know, he sends a regular letter
on such subjects to the Times.




FEDERAL RESERVE BANK

r.,.:-.4.1-toord-9-n

4ir

OF NEW YORK

OarICE CORqSPONDENCE
Governor Stroh

To
FROM

-

Mr. Snyder

DATE_ Aug. 7, 1924
SUBJECT

Review of Keynes' Book
fn

Wesley Mitchell has often remarked on the admirable book
reviews which the English write, as contrasted 'ith those we do over
here.
In the attached Journal is a review of Keynes' book, by
Sir Josiah Stamp, which is an example, and, as it seems to me, a gem
of shrewd observation and good sense as well.
You will be interested in what he says of the Federal Reserve.

r
f

L.)




192_

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
To
era

Governor Strong
y

DATE
SUBJECT-

August 8, 1924.

192

Excess- ieserveB

Mr. Snyder

I have had lass Hicks draw off the total of excess reserves
for all Member Banks of the System, available only by calls; and put
this with a rough computation of the probable excess reserves at the
present time, as nearly as we can compute them from the returns of
the weekly Reporting Banks.

/f'hi

It is interesting to note that the heaviest reserves shown,
at the end of 1921 and following, were just preceding and during the
big expansion of 1922.

Contrasted with this are the low averages for the last year
or more, the average excess for the last four reported calls being
23 millions for the System.

The returns from the weekly Reporting Banks for July 30 show
an increase in the reserves of these banks of 22 millions, while the
increase of the reserves for the whole System for that week were reported as only 12 millions.
As compared with a year
teresting to observe that the weekly Reporting Banks' reserves were up
195 millions, while the whole System for the same week was up only
2v7 millions.
In other words, practically the whole of the excess is in the
larger city banks.
Loans and investments, you have observed, in the weekly Reporting Banks jumped about 93 millions, and demand deposits by 97 millions.

As compared with a year ago this brings the net increase in
demand, time and Government deposits up to 1622 millions.




WIC 3 1 3333.3000-10- St

FEDERAL RESERVE BANK
OF NEW YORK

apFFICE CORRESPONDENCE
To

Governor Strong

DATE

SUBJECT

August 8, 1924

192

Price Levels

-Snyder__

Since about the end of 1922 our new index of the General Price
Level, a composite of wholesale prices, retail prices, wages, rents, etc.,
has been fluctuating narrowly around 166, taking 1913 as a base of 10C.
The range has been from 177 to 184, with the latest month 179.
In the same period the Bureau of Labor index of wholesale prices
Its centre of fluctuations
has shown something of the same stability.
has been about 152, with a range in the last two years of from 147 to 159.
The latest figure is 145.

From the end of 1922 our composite index of Wages, which includes
factory labor, unskilled labor, clerks and teachers, has ranged between
The latest figure is 212.
197 and 214, with an average around about 208.
It
The index of food prices at the farm in June was around 12C.
is very interesting how completely this is a reversal of the relations of
Then the index stood:
the earlier part of 1919, just before the big boom.

Composite of Wages
wholesale Prices
Fcod Prices at the Farm

174
203
221

General Average

181

In other wcrde, the general level is now just the same as five
years ago this time, but the relationship then subsisting in the different
types of prices has been inverted.

Now consider that the 1919 indexes measured the change from only
six years precedieg, i.e. in 1913, when all the groups were taken at a
common level of 100.
In the last six months we have had an increase in the
Now.
If this should continue
total of demand deposits by around 7 ler cent.
much further it would probably mean some rise in the general price level;
and I have been wondering about the effect, on the several groups.
(1)
Farm prices, having been so violently depressed for new four
years and more, would it not seem likely that they would rebound the most?
(2)
If farm prices rise sharply, so too probably would commodity
prices at wholesale.

(3)
This would carry some increase in the average cost of living
and rudely interruit the heyday which the urban and factory worker has enjoyed within the last two years or so.
(4)

Would not this bring an urgent demand for an increase of
wages, and, if business should also sharply revive and trade prospects we
e
good, is it not pro able that these demands
would be granted?




SI! SC.

4. I-200Y-I-14

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong
FROM

DATE
SUBJECT'

August __1`3.4 19at

Ft, edi BC ount Rate Chan/zee

Mr. Snyder
_

It occurred to me that a complete record of our rate changes

by dates would be of interest, and I have suggested that this be used
in the next number of the Monthly Review.




Do you approve?

1415E

4. 1-200M-1-24

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

Agplet_154_1924

192_ )

SueJEC

Governor Strong
egkom_

Mr. Snyder




You may have seen this In the New he

and well written article, I imagine fibm Dav

of the articles on Banking and Finance in the

WISC. 1. I-ZOOM-1-14

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong

44Nom

DATE__ August 151924.192
SUBJECT:

Bank Policy

Mr. Snyder

I rode in cn the train this morning with Mr. George E. Roberts, and
talked to him about an abstract of the Chase Bulletin article on present
policies, and was interested to find that his o fhnd reaction was that the
1.
ideas in the Bulletin were right, that is to sa 7 armrehensive that all this
/ i
cheap money might raise hob and that the situation had been a good deal accentuated by the heavy purchases.
He was just back from Chicago, and I
wondered how far all this reflected a rather widespread feeling among bankers.
I talked to him a little bit about the various problems involved, and he
readily agreed that it was very complicated and difficult.
For that very
reason it seems to me that any kind of attempt to offer explanations might
do morn harm than good, save perchance in conversation with a few men of
large understanding, like Mr. Roberts.
I had thought a little of a private
memorandum that might be on tap, just setting forth the real difficulties of
the situation, that would be available for private use with any critics.
This need not enter definitely into actual policy, but merely make clear the
problems that such a policy must consider.
iihat do you think?



M'SC

FEDERAL RESERVE BANK

4.I- ZOOM -I -24

OF NEW YORK

OFFICE CORRESPONDENCE
sir
FROM

Governor Strong

DATE

Angunt_154_19A4L.197

SUBJECT:

Mr. Snyder

This invitation to give a course on "The Business Cycle" rather
interests me: first, because the students in this course are largely teachers
of Economics drawn from all parts of the country; second, because I rather
like to keep in touch a little with the academic world; and thirdly because
doing this sort of thing rather stands you up to give definite shape to your
ideas, and sometimes to revise them.




mould there be any ohjection?

M' SC.

4. I -ZOOM .1-24

FEDERAL RESERVE BANK

OF NEW YORK

.11111 OFFICE
srxto

FROM_

CORRESPONDENCE

Governor Strong

DATE_Allg US t_1.5
SUBJECT:

1924 ,___ 192_

Street Loans

Mr. Snyder

It is very interesting to note the very rapid rise in the street
loans of the New York Reporting Banks, in the face of a decline in these
same loans placed here for correspondents.

The street loans of the New York banks are now far higher than
at any time in the last five years, while the out-of-town street loans
are considerably lower than the record.
The total loans outstanding, as you have observed, are now very
close to the peak, reached in 126.
This was the record.




MISC. 4. 1- ZOOM -1 -Z4

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
T,

Governor Strong

DATE_
SUBJECT:

_Auguet, 16,_

Excess Reserves

-

FROM

Mr. Snyder

Miss Hicks' computation of excess reserves for August 6 shows no
change from the last four weeks, which means that the high excess which
began to show in the week of July 16 is something definitely to be reckoned
with.

As you know, this compares with about 2U millions on March 71, and 15
millions en December 31.

You have doubtless noted that iractically all of the large increase
in "all other" or commercial leans in the Reporting Member Banks came from
New York City, as did the major fart of the expansion in deposits.
Last week's increase in deposits brought the increase in total net,
that is, demand, time and Government delosits, up to about 1825 millions
over one year ago.



MI., I 4-14) ./1

FEDERAL RESERVE BANK

1

OF NEW YORK

OFFICE CORRESPONDENCE
Togo
FROM

Governor Strung

DATE_

August 20,

SUBJECT:

Air. Snyder

Is not this an interesting map in the circular which you sent over another vivid instance of how much diversity may be buried under a phrase or
under an average, as, for example, in the talk about "agriculture" and the
farming depression.
The hen is today of more economic imrortance th"n all our wheat farms,
we hear of depression there:

but how little




W.X.3.1M14-9.-M

FEDERAL RESERVE BANK

OF NEW YORK

1110FFICE CORRESPONDENCE
Governor Strong

FROM

DATT
SUBJECT,

August 20,

_4.

Dr. Burgess' Memorandum.

Mt. Snyder

I have talked over at length with Dr. Burgess his memorandum
The most of it I agree with. (7
on the Chase bulletin article.
It seems to me that the main thing to be met is the proposal thatWiplAct4knii.
lays down on page 21 and 22, that the present Federal Reserve policy
is all wrong, and secoipdly that the main business of the Federal
Reserve Banks is to 84'4 money rates and money markets.
It seems
mr4 a44,
to me that these ought to be the wide variables and must be ta-tliwe4
to have anything like stalee credit and business conditions.
41
The
Anderson ieea is essentia y the banker's idea of keeping rates up so
that the banks will earn plenty of money.
That is the strength of
his position and probably the reason why the Chase Bank was willing
to publish his criticism.

It seems to me that this is an issue which has got to be squarely
met and it along the lines of broad policy, of public interest against
bankers' interest.
I think that Mr. Roberts and all economists would
strongly support this position, and that it would be much more effective than attempting to controvert Anderson's typical exaggerationSand
overstatements.




/

WKA.175M-9-23

FEDERAL'RESERVE BANK

OF NEW YORK

*FFICE
T aita

CORRESPONDENCE

Governor Strong

DATE

August

20,

Excess Reserves.

SUBJECT:

ter'
FROM

Mr. Snyder

My memorandum of August 15, on the prevailing excess of
reserves was simply to draw your attention thereto and indicated no
change of mind whatever.
I do think, however, that there is a
great difference between heavy excess reserves at the present time,
when the tide of business has been very strong, and at about the
estimated normal, and the recession even from the winter's high points
very slight, save in a few lines, and the situations which used to
develop after one of our drastic: panics;
arft.--rt-fkreac..*mo--411..a.--3Fesy
akftenimi., and that it might be misleading to think of it, as the
Harvard Service and some others have merely the usual piling up of
funds in the central PO&O-TX441-. W-izt,Irtf-brol,djf94(7

MINK

uch a view springs from the old obsession
a
As a matter of fact,
iron is 8 good barometer of business.
clearings index for outside New York is about normal for July
w 'ch clearly indicates
not been below 98 in recent months;
have had no serious depreeLat4aFp.




I

?1441

%-2,
c"-t-e

0,

c

that
our
and has
that we

4.

MISC. 3

FEDERAL RESERVE BANK

175 M-9-23

OF NEW YORK

*OFFICE CORRESPONDENCE
To

Governor Strong

DATE

SUBJECT

August

21,

Mr. Breck's Monograph.

ilk

FROM

Mr. Snyder

I should like very much to draw your attention to a really fine
monograph prepared by Henry O. Breck of the San Francisco Reserve Bank,
recounting his investigation and compilation of a new Index of General
Business in the 12th Federal Reserve District.
The quitH extraordinary part of it is revealed in the two charts
VI and VII, following page 7, comparing his results for that district with
our Index of the Volume of Trade snd with Bank Debits Outside New York City.
As it follows very closely the ideas and methodP, wee have pursued here,
I
am naturally very much pleased to see this sort of thing done, particularly
in view of the strenuous opposition of our friends in Washington.




101

aiA_

18-Li?

FEDERAL RESERVE BANK

4

OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong

To
14/

FROM

DATE_
SUBJECT

August

22,

A Forecast of the Bond Market.

Mr. Snyder




am interested in the attached because it coincides with
a very good indicator which we have developed,
six years of life.
which has worked very well in
This points
to an upturn in money rates within perhaps a month or two.

the prophecy of

its

4.

Il10,

FEDERAL RESERVE BANK

NI'llSC
1

OF NEW YORK

FFICE CORRESPONDENCE
To
FROM

Governor Strong

DATE
SUBJECT:_

August

22,

Excess Reserves.

Ar. Snyder

For the fifth week, the estimated excess of reserves, as nearly
as we can compute it, was on August 13 about 80 millions.
Jou have
doubtless noticed a further heavy increase both in demand and time
deposits, bringing the total for the two, as comear-d with a year ago,
up nearly 2 billion dollars.
It is interestino. to note that the week's increase in the reserve balances was all from New York City, but the ex,,ansion of demand
deposits in the member banks was very widely distributed.




192_4.

FEDERAL RESERVE BANK

OF NEW YORK

IIVFICE CORRESPONDENCE
To

Governor Strong

FROM

DATE

Sept. 5, 1924

Mr. Snyder

SUBJECT

Excess_ Reserve Deposits

The weekly Reporting Banks this morning disclosed
a
sharp increase of nearly 20 millions in Member Bank
reserve
deposits, as contrasting with a decrease of nearly 13
millions
the previee..

On the
System as of June.

1..
.5J, data received this morning, Misrli
basis or tilt,

,

estimates that the excess of reserves for August 27, the latest
available date, in the weekly Reporting Banks, was around 50 to 55
mill Ions, supposing, as is apparently the case, that practically
all of this increase in reserve is contributed by the 750 Reporting
Banks and that something like half of it is supplied by the New
York City tanks.

For this same date, August 27, the gain in demand deposits
in the weekly Reporting Banks over the previous week was nil, so
that unless there was an unusual expansion this last week the
excess of Member Bank reserves for the whole System might be somewhere around 75 millions.
This would rake about six or eight weeks now that the
excess has remained at around this high figure.

(

/

ii

hith the data for the whole System received today it will
now be possible to make a detailed study of conditions up to
June 30.
But my impression is that it will continue to show that
the expansion of about a billion and a half in demand deposits and
half a billion or more in time deposits, shown by the weekly Reporting Banks, over a year ago, represents nearly all cf the expansion
for the whole System; in other words, that the smaller city banks
and country banks have contributed to this very little.




t;ei sriearry_

C4.

192

W4C-11fW.

FEDERAL RESERVE BANK
OF NEW YORK

AFFICE CORRESPONDENCE

Scpt. et 1,24

DATE

Governor Strong

192

The Prayers of the Bill
SUBJECT:

111

Mr. Snyder

FROM

It is plain that in the Bill of Complaint are two separate issu s
which have but little direct connection:1

es\

The demand of the first pray-r, stet d in more direct t rims,
(1)
is that the Reserve Bank of Atlanta, and therefore all R. s 'rye Banks, shall
at one - give credit for all uncollected checks and drafts drawn against any
other Member Bank in that F. drral Reserve District.
It is tru- that thFederal Reserve Act contains no explicit mandat- or prohibition as to this
question.
But in view of the debat s 1 ading to th' final amendm nts on
this qu stion there does not 9,-m to b any question as to the meaning and
intent of the,Act, as is w-11 set forth in the opinion of Led, Couns 1,
in the letter to Governor W. F. G. Harding, of the Boston Resery bank,
cited as exhibit herewith.

The plaintiffs in this case seek to revive an old issue that was
fully discussed in th conferences and debates that led to the amendments
of June 21, 101.
It relates to what, in technical banking parlance, is
known as the "float;" and obviously involves the whol, question of sound
banking theory and practice.
Bank reserves must be in lawful money which can legally b- paid to,
and must be accepted by, every d positor in every bank.
It is perfectly clear that no bank could force its d positors to
accent repayment of their d posits in, for example, the banks' on bills
or promis s to pay; still less in th promises of othr r banks or other
individuals to pay, or in checks or drafts of unknown vale.
A reserve
must be a real reserve and uncollected checks and drafts cannot, "manifttstly,"
as the Federal Reserve Board lays down in its fegulatione, be considered
real or lawful reserves.
The whole object and th.ory of reserves is that a bank shall
always have on hand suricient funds with which to pay the ordinary demands
of its depositors without question.
Th
amount of such r-serve s which will
be required is not a matter of theory but simrly of long y-ars of banking
experience, alike in this and other countri-s.
In other countries this experience has established a rul or custom
that has all the sanctity and force of an actual statute.
It was this same
experience which, in this country, led to the establishment of the so-called
"legal" reserves which se- today and have been for more or 1 es of a century
the established banking practic, of this country.
To insure this ability to pay at all times and upon all occasions,
not merely the ordinary demands but even the most extra-ordinary d mends of
the d.,positors, the Federal Reserve Act made elaborate provisions for means
by which the Member Banks of the System should always, within the limits of
the total re-8 'ryes hrld by the System, be able to replenish their depleted
reserves by discounting eligible pap-,r at the several Reserve Banks.




.111111.'

MI5C.3.1-90 1-20

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
TO

DATE

Governor StAsag

SUBJECT

Sopt. 8, 1924

The Prayers of the Bill

AIL
FROM

Mr. Snyder

2

Th, Ant further provided. that in extromis, as where such extraordinary d-mends should be general, as in a period of panic, the Fedral
Reserve Board might suspend the minimum nquirelments of the Reserve Banks
themselves, in order that accommodations of dis6ress-d Member Banks might
not be dcni -d.

Furth rmore, by the establiehmAlt of the F-deral E-serve System
the minimum lawful reserves for th.- differ-nt clasaa of banks therein
-stablished w-ro radically lowered from what had ben th- legal requireIt was part and parcel of the
ments and r th- old National Bank system.
theory u;.on which this radical roduction was accomplished that the reserves
r al reserv-s and not in part fictitious
thus set up should be actually th
reserves, se would he tho cav if uncollected checks and drafts w.re allowed
to b- counted as a part of th- latter.
Und.r the old banking syst m it had '--en th practice to allow th
country National Banks to count this "float," or uncollected chcks and
drafts, as a part of th it lawful rraerves, owing to tho much greater av rag
tim- r-quired for collection of country bank business than of city bank
But under the Federal heservP Act the 1%lgal r-s-ry .8 of the
business.
country banks were reduced from 15 per cent of their lawful d omits to
If, a s might easily be the case, the outstanding uncollected
7 per cent.
checks and drafts comprised a consid-rable part of this minimum r-quirement
of 7 per cent, the actual reserv-s of lawful money carried by these banks
would be reduc d far b- -low the limits of safety.

It is true that the plaintiff in this issue mak a demands that
only such checks and drafts drawn against other Member Banks in the samBut why
F-deral R-serv District shall b- so counted as lawful rese7v.
If it is good banking theory or practice that this
such a discrimination?
confined to
uncollected "float" should be so count d, why should this b
Th- limits of the sivIral
checks drawn on banks in a certain district?
Federal 'It:servo Districts are pur ly arbitrary, -stablish-d by a committee,
and may be changed or abolished at th- discrAion of the F-derilEesry
Any or all of the tw-lve Reserv: Lanka may be closed by orthl. of
Board.
th- Federal Eeserve Board, or on may be consolidated with that of som oth r
district.
This is
states in twain.
district lin a divid
case in the particular district tp which the complaining
siecifically th
In th- districting of Ulf: Federal ;eserve System th- State
bank b- longs.
The upper part of it
of Mississippi is divided almost ,cactly in half.
b.ongs to tho eighth, or St. Louis, district, the lower half is jointed with
But the
the lower half of Louisiana to th sixth, or Atlanta district.
district,
other part of Louisiana, for oxamr1-4 is joinNi, not to th
but to the -leventh, or Dallas, district.




Snm of th

141190.3.,90164-1-20

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
TO

FROM

DATE-

Governor Strong

Mr. Snyder

SUBJECT:_

Sept. 6, 1924

The Prayers of the Bill

3

It is perfectly pat-mt that, for th Pascagoula National tank,
the uncollected checks and drafts from the loirr part of :iississippi cannot
b- counted a more valid, lawful r-serve than, for uxampl-, checks or drafts
drawn against the banks of, let us say,New York, Chicago or San Francisco.
It would b- grotesqu( to offer such a cont,ntion and it would be difficult
in daily practice ro mak' such a segregation.
If "float" is legal reserve anywhr-, that part of it th"rived from
arbitrarily established district is just as valid as that from another,
and th re is no provision in the law which would confine, the amount of the
"float" to be counted as reserve to that arising within the particular
district in which a given bank is locat d.
on

In plain t rims, th- proposal is simply that the Fed ?ral Reserve
Banks shall, in effect, buy all uncollected checks and drafts in transit,
by giving credit for the same on th'ir books.
The whole of the current
"float" is estimated at something like 50U or 600 millions.
If this
enormous sum w-r- included as a part of the Member Bank res-rves, the effect
at any
than unh-althy, and at the present time
might even b disastrous.

Ae hay 1.arned from severe and in Isom cas e hitter experience,
in and since the late Aar, the results which may flow from currency and
credit"inflation,"
-ven though it may b. based, as it th-n was, upon the
otherwise sound foundations of ample gold r fr\rv-)s.
hat we term inflation
is nothing more than an undue expansion of bank credit and its attendant
increase of currency beyond the actual needs and requirements of legitimate
business.

lo ca rry on the vast trade of the country there ar, under existing conditions, certain fairly definite\ requirements of credit, the vastly
larger part of which is supplied by the 0,000 banks of the nation.
And
between the two there is a certain d-finite: balance which is express d in
the general average of prices.
For example, in the late
volume of bank credit was in th, space of °our or five years approximately
doubled.
In this same period the increase in the total amount of goods
The
bought and sold and offer d in exchange increas d relatively little.
result was that the general level of prices also approximately doubled.
Now this vast expansion of bank credit under our existing cyst -gym

was possible only from the inflow of something like a billion dollars of
gold, since no other means then existed for any considerable increase of
th- lawful money of reserve of th- country.
This gold found its way by deposit into the banks, and in the case
of the Member Banks of the System was promptly redeposited in the Federal
Reserve Banks, and there became the basis for a corresponding increase of



MISC.3.1.00M-1-20

FEDERAL RESERVE BANK
OF NEW YORK

ROM

FICE CORRESPONDENCE

DATE

governor Strong

Mr. Snyder

SUBJECT.

Sept. 6, 1924

The Prayers of the Bill

4

It was these bank loans which augmented the deposits of thbank loans.
country, which constitute for us the main sources of circulating credit.
Th- possible expansion under the existing requirements of reserves and the
ordinary accompanying need for hand to hand currency is on the order of
That is to say, every dollar of gold
something like 10 or 11 to 1.
d-posited in the Federal Reserve Banks bacon's the basis for the creation
The process is,
of som thing like ten or eleven dollars of fresh credit.
roughly, as follows:

If, for example, in a Mimber Bank of the Byst,m a d-rosit of a
million dollars of gold is mad , it may, taking the average of the reserve
requirements, immediately loan out nine-tenths of this deposit, keeping
This loan promptly becomes
back only an average reserve of 10 per cent.
This new deposit
a deposit either in the loaning bank or in some other.
basis for fresh loans, to the amount of nine-tenthe
in turn becomes the
of the amount, one-tenth again being held back as the required reserve.
A nd this process may be repeated until practically the full expansion of
1- to 1 is exhausted.
Under th' provisions o f the F d-ral Reserve Act it is at least
literally possibl- to carry this expansion almost three tines further, owing
to the fact that in th'ir turn the Federal heservo Banks are required to
keep on hand against Member Bank deposits only -5 per cent in gold.
ThReserve Banks may in their turn make- loans to the Memter Banks, which, by
becoping Member Bank deosits, afford the basis for a corr sponding further
credit expansion; so that in theory, at least, every gold dollar might, if
there were no limiting factors, become the basis of thirty times
bank credit.
As a matter of fact, th' business of th- country is carried on
And long
both by means of checks and of actual hand to hand currency.
experience has shown that between these two there is a fairly fixed and
For many years this ratio between th total amount
definite relationship.
of demand deposits in the banks of the country and the total amount of
actual money or currency in circulation among the people, outsid th
Treasury and the barks, is around 5 to 1.
It follows, therefore, that in the long run an expansion of, say,
five millions of bank deposits will ntail eventually the demand for an additional million dollars of actual currency; and as this new currency can
supplied either by importation or from the banks themselv s, a
only t)
c.2rtain part of every fresh addition to th- lawful reserves must b7 8 t a: art

in this hand to hand circulation.
for
http://fraser.stlouisfed.org/ us
Federal Reserve Bank of St. Louis

MI9C.3.1901.11-20

I FEDERAL RESERVE BANK
OF NEW YORK

Pik

8. 1924
DATE- Urt

/OFFICE CORRESPONDENCE
TO

FROM

Governor Strong
Er. Snyder

SUBJECT

The P_rayers_of_tko Bill

5

In one of the ablest sp,!=ches in the debate upon the Federal
reserve Act, when its passage was pending, made by Senator Elihu hoot, of
New York, he advanced the objection against certain provisions of the
measure, that they were essentially inflationary and would result in the
creation of unutilized reserves of between a hundred and two hundred milImagine,
lions; and these objections were generally held as of weight.
then, what would have been the force of the objection if the amount of
release or addition to reserves had been on the order of
this. possibl.
5,,c) or 6,,C millions.

It° total required reserves at the present time for the M.ter
And on this
banks of the Federal heserve System are under Mr millions.
Th- arbitrary
is positmd a total of bank credit close to 20 billions.
millions to the reserves would, therefore, have the effect
addition of
of an immf.diatc possible expansion of not less than five billions of dollars.
Already our Reserve System is staggaring under a heavy load of
r-dundant gold and only th'- good s:ns' ans caution of tho bankers and
business men of th nation has prev,?.nt.rd a h,avy inflation of bank credit
To add 5(.4J millions or more of available reserves
from this source alone.
to the existing burden might easily be to court a disaster greater than
In other words,
anything this country has known in the last half century.
th- social and economic consequences that would be involved in the inclusion of the current "float," as lawful bank reserves, would he as reIt
iugnant a s these proposals are to sound banking th-ory and ;ractice.
would not alone dangerously weaken the position and the actual solvency
of the banks of the country, but invite all the long train of evils invarriably attendant upon an undue and rapid -xiansion of the purchasing
medium, out of all proportion to the existing supply of goods.
This country has had many long and strenuous battles over the
question of a sound currency, and has attained to its present unrivaled
position among the nations only at the cost of many arduous struggles.
Ina smuch as the actual business of the country is largely carried on 1-y
means of bank credit, it follows inexorably that sound banking practice and
sound banking conditions are as vital to the nation's business and -conomic
life as a sound currency.
That such a Froi)osal as this, standing as it do s on all fours
with th- wildest proposals of cheap money inflationists, should yet come
from a National Bank and from an association of bank=rs, is evidence of how
needful is the vigilance necessary to maintain our banking institutions upon
a sound base.

There is yet another phase of the question which illustrates
involved in this suit.
They r..ppertain

how farreaching ar T. the question




MISC.3.1.DOM-1-20

A

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
TO

DATE.

Governor Strong

Mr. Snyder

SUBJECT

The

September 9, 1924

rayers at the B111

6

FROM

not alone to the economic an social equilibrium of this country but,
by a peculiar train of circumstances, to Eome extent involve international
The abandonrelation. ana the economic balance of international trade.
ment of the gold standard by the chief nations in the world kir, still
continued with but a single exoeption,hae led in the last four years to
The result is that we
an u:precedented flow of gold to this country.
now have something approaching one-half of the monetary gole of the world.
In a sense this i, an investment, a matter of over four billion
We have no need of this colossal hoard of gold.
It is at
the present time a deep embarrassment, an
matter of grave concern that
it may not, in following the ordinary course of events, create another
vast expansion wh ch in turn must inevitably bring with it another
enormous rise of pric s, another orgy of boom and wild speculation, and,
as always, the coneequent crisis and collapse.
And with all this must
come all the deep social diFtur-ance that inevitably attends a great rise
of prices, all the iisturbanees over wages, the outcry at the high cost
of living, the futile warfare upon the "profiteers" and the speculators,
and then the deep resentment of those who do not well foresee what has
happened tnd make commitments and partially paid f r investments at the
top of the boom.
dollars.

hut, far beyond all this, the United States is in some sense
the custodian of this excess gold and, to an especial degree, deeply
intereetee in the suceeenful working of the gold stenderd.
And as
matters stand the purchasing power of go1J, or the buying vane of a
cold dollar, is largely dependant upon the amount of cree(it baser upon
this gold in the United States.
If the billion or more of excess gold
were allowed to become the base of another 10 billions of bank credit
in this country it would bring about another price upheaval here and the
purchasing power of gold would suffer another violent decline.
If we were now to add to all this the burden of another half
billion of "float," arbitrarily to De counted as fictitious reserves, it
would be difficult to foresee the consequences.
It is to be hoped that the working out of the new European
agreements will bring a return there to economic st9bility and that the
continued drain of gold to the United States will cease.
Otherwise,
Europe would lose practically all its gold to the United States and would
have little further interest in a return to the gold standard.
Present plans for economic rehabilitation in hurope may well
lea' to a considerable return of gold to Europe.
In ny event, it is
the hope that the Federal Reserve System may be able to cope with the




M19C.3.1-00M-I-2o

-

Pata.

4-

FEDERAL RESERVE BANK
OF NEW YORK

)11)FFICE CORRESPONDENCE
TO

Governor Strang

FROM

Yr. :-.1!lyder

DATE

September 9, 1'124

SUBJECT:

7

existing situation, and the present Jan er of another wave of heavy inflation be avoided.
It seems practically certain tbA, this inflationary expansion
could not be avoided if the prayers of the petitioners were granted and
the coArts were to force half a billion or more of uneollected checks
and drafts to be counted a part of the la;a1 reserve of the Memter 'anks
of the :Iyatee.
It seems doubtful if any court e}uld make effective such
an order, involving such serious economic and soAal consequences.
And
if to all this be aade(i the fact th..t the intent of Congress in the
final amenclments seems unmistakable and plain, there Ivuld be no let,;a1
grounds in equity or in the economic welt _re of the country for such a
decision.




MIIC.3.1.001A-1-20

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
TO

FJOIll

Govc.rnor Strong

DATE-

SUBJECT

_Reft.-811.9124-

Pascagoula-Suit

Mr. Snyder

As to th© question of "float":

It do-s not s--m to m- that on th- pur-ly technical Bid
gr-at deal can t-

a

added to the very clear and r-ally quit- convincing

presentation mad- in th,- letter of Mr. We=d to Governor Harding.

On thD economic and giv-ral Bid' I 'nclos

a bri=f outlin-

which can, of course, b= expand -d by citations and specific discussion
as far as may b- desired.

On the par claranc- question 1

afire

with Dr. burg 'se that

not a gr-at d al can b- added to th- material that has alr-ady been
brought out in th- various suits, and on th© question of Fublic utility
and d sirability that this has h' n pr-tty well at forth in lir. Jay's
m-morandum.

S v-ral schemes for graphic rprosentation of the process of
cr-dit pyramiding ar




submitted herewith.

11

FEDERAL RESERVE BANK

Si!SCA.14WWI-U

OF NEW YORK

OFFICE CORRESPONDENCE

To*

Governor Strong

FROM

DATE___Sept._94_1924,

Mr. Snyder

SUBJECT:

Par Clearance Suit

Burgess spoke of Mr.Baker's desire to give the case
the broadest possible base, and I have added the paragraphs
which begin at the bottom of page 5.

Perhaps some others would

suggest themselves to you.




Do you approve of this chart in its present form?
I append a second from Mr. Roberts.

1921

M1SC

4. 1-2001-1-21

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong
ROM

DATE
SUBJECT:

Henry

Sept. 11,_194_

Ford_ Hospital

Mr. Snyder

Will you slip this memo., with the magazine containin the
article to wale: it refero, into your bag for possible perusal on your
journey?
It ie an idea which has interested me very deeply and I
believe is one of the coming things, and well worth considering for the
Dank.




19

L




OF NEW YORK
FEDERAL RESERVE BANK

OFFICE CORRESPONDENCE
Governor Strong

FROM

SUBJE

Mr. Snyder

I

do not know, Sir, how to answe

to remind the philosopher and the sage tha
is no end.

FEDERAL RESERVE BANK

MISC. 4.1.

OF NEW YORK

OFFICE CORRESPONDENCE

192_

DATE

Sept. 12, 1924
SUBJECT

Governor Strong

Call Rates and Gold Movement

Mr. Snyder

The correlation between the call money rate and the change in
the rediscounts of this Bank, and the gain or lose of gold by this
Bank, is very notable, just as you suggest, though, as you will see at
the end, there are periods when the connection seems to be lost.
But there appears to be little or no lag in these relationships, and therefore they do not offer very much opportunity for prediction.
And that, of course, w)uld be the really valuable thing.




M!SC

FEDERAL RESERVE BANK

4. 1- ZOOM -1 -24

OF NEW YORK
411

OFFICE CORRESPONDENCE
TAR

Governor Strong

DATE

Sept. -ceih-fieViii-

Price Indexes -

SUBJECT:

4. /47423;

192
°-'l

t
Rors.,

Mr. Snyder

.

fa, Z-$

Well, if one piece of work we did here will help the railroads
to din some sense into that idiot.,c Railway Valuation Board, maybe it
will have been worth the doing.

Actually there are a number of economists who seem to think that
this particular index

which we made was something very original and new,

and a real contribution to economic science.

But I don't suppose that

counts for very much.

But I wish I could show you by figures what a very small part of
the work we have done here has had to do with price

various


demands we have made many charts of the price

indexes, although upon
indexes of other people.

OMB -2 -30M -1.24

FEDERAL REFFRVE
OF NEW YORK

4INIVEROFFICE

-,ROUTE SLIP

S

OFFICE SERVICE
MESSENGER SECTION

DATE

DEPARTMENT

DIVISION
ION

MARKS

FR

['EPA TMENT
DIVISION
SECTION

N.

.

USE THI

FORM INSTEAD OF OFFICE ENVELO

TO INSURE
Digitized forPROMPT AND ACCU ,ATE CZLIVERY ALL COMMIINIC
FRASER


SIBLE.
ONSSHOULD BE DISTINCTLY LABELED




MI9C.3.1.001.11-1-20

FEDERAL RESERVE BANK
OF NEW YORK

4kFFICE CORRESPONDENCE
TO

Mr. Harrison

DATE

SUBJECT

Sept. 16, 1924

Governors' Meeting

13E43 E IV
FROM

Mr. Snyder

SEP 18 1924
cl L., 14
I laid on your desk a pamphlet from the Federal Reserve Bank of
San Francisco, describing what seems to me a fine piece of work.
It is
an index of the variation in tracie for the twelfth Federal District, and
as it follows closely the lines of some work we have been doing here I
naturally feel that it is a valuable contribution and one that will come
to be highly regarded by the business men of that district as they become
familiar with it.
This work was done in the department of Mr. Henry Breck, but if
he was not to be on for the November meeting it occurred to me that probably Mr. Perrin would, and that he might well be asked to give an account
of the work and acquaint the officers of the other Federal Districts of
the possibilities in this direction.
It would be very hard to prepare just such an index as that for
this Federal District, for the reason that, New York being the financial
centre of the country, an index of clearings would scarcely be a reliable
index of business conditions throughout the district.
It would be essentially just New York City.
But I see no reason why each of the other eleven districts should
not work up a similar index which would be a really accurate and reliable
measure of business conditions in each of them.
And these indexes could
be compared then, one with another, and finally with the general index which
we have developed for the whole country.
As there is some disposition on the part of our friends at
Washington to discourage this sort of thing in the several banks, I think
it would be well worth while to have the question brought up in this form.
I also left with you proofs of an article which appears in the
next number of the "Harvard Business Review," describing our new Fifty
Years Clearings Index of Business, based upon the results which we obtained
from our composite index of the Volume of Trade.
In the next number of the "Harvard Review of Economic Statistics"
I shall also describe a parallel investigation, developing a second index
of Business Conditions through half a century from variations in the
velocity of bank deposits, in the same way that we have worked these up for
the last six years, and compared with our index of the Volume of Trade.
These two indexes in general support each other in a quite remarkable way, and we have other confirmatory material in the shape of indexes of pig iron production through fifty years, and likewise of the stock
market; so that I think we may accept our results as the best measures of trade
that have ever been possible over so long a period.




MISC.3.1.00m-E2o

FEDERAL RESERVE BANK
OF NEW YORK
DATE

4111)FFICE CORRESPONDENCE
Mr. Harrison

TO

1,
FR OM

Mr. Snyder

SUBJECT.

Sept. 16, 1924

Governors' Meeting

2

I do not know how much interest there really was in the presentation
of our index of the Volume of Trade at the November meeting last year, but
these are things that sink in slowly and it occurred to me that it might well
be worth while to give another presentation of our new indexes and show how
they fit in with and are derived from those that I presented last year.
Outside of the Federal Reserve Banks this work has aroused great
interest and won the recognition of the most careful investigators in this
It seems to me it is a mistake that it should be so little known to
field.
our own people, because in time, as confidence slowly grows, my feeling is
that it will prove of great value to the System, and those who conduct its
affairs.







F,FTEEN NASSAU STREET




FEDERAL RESERVE BANK

MISC. 4. 1-200111-1-Z4

ir

OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong

DATE

Oat,. 24, 1924

SUBJECT

>

FROM

Mr. Snyrier

I don't know if you have yet seen the full text of the
Resolutions passed at the recent meeting of the American i3ankers
Attached
Association, relating to the Federal Reserve System.
herewith.
It seems to me that the misconceptions PApd mal-intent exhibited in the last paragraph should not go unnoticed, and at Mr. Case's
suggestion I have drafted a letter which is probably far from what is
wanted, but might serve as a basis of discussion.




Attached herewith.

192

M!SC. 1. I-200111-1-U

FEDERAL RESERVE BANK

OF NEW YORK

°OFFICE
ro
FROM

CORRESPONDENCE

DATE

Governor Strong

SUBJECT

Mr. Snyder

Oct. 27, 1924

19

Condition.

Report on European Currency

You may have further information as to just what this Commission
is about end what it is
at, and therefore wbbt kind of a letter
they would like to hey's.
If not, possibly I can find out further about it.




111
FEDERAL RESERVE BANK

PC5C.41.11400W1-ti

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

Governor Strong
FROM

SuBJEcT-

Mr. Snyder

Octob

Robert Morris Convention at

Et. Louis

Attached herewith is an invitation from the Robert -orris Convention,
St. Louis. I am not averse, but our Mr. J. L. Morris, who is active in
this organization, has raised the question as to expenses, whether
You
Bank here would regard it as of sufficient interest to do this.
could judge much better than I can as to whether this seems worth while.




192_

M!5C. I.

FEDERAL RESERVE BANK

I -2IXIM - I -Z4

OF NEW YORK

111
wilittir)FF

ICE: CORRESPONDENCE

DATE

Governor Strong
FROM

SUBJECT:

Mr. Snyder

Oct. 271 1924

Reserve Systas

A. B. A. Resolutions on

I met Mr. Sisson, who is Chairman of the A. B. A. Committee on
Resolutions, at dinner tla other night, and the matter of the
resolutions naturally cnme up.
He says that that last paragraph
was insisted up,)n mainly by M. A. Trainor, of the First Trust &
Savinu, in Chicago, and his assistant, Dr. Walter Lichtenstein, and
some of the interior :lem7.,ers.

Mr. Fred Sent was not present at the drafting of the Resolution,
but agreed to it later.
Mr. Sisson said that he tried to have it
canned, but that ths rest of the c=ommittee believed cometning of the
sort should go in.




The paragraph was actually drawn up, I believe, b

Lichtnstein.

,92__

teSC. 4. I-ZOOM 1-24

FEDERAL RESERVE BANK

OF NEW YORK
OFFICE CORR E: E5 FD C) P4 E) E: r4 (. E:
liPil

FROM

Governo_r Strong

DATE

(lc t--30_,_1924_

Business Cycles

SUBJECT:

Mr. Snyder

I did not mean to ask you to sign the letter to Governor Crissinger,
but merely to ask if it was (rite all right that I should send it.
But as
you did sign it, best thanks.

As to the subject of discussion for the
relation of price changes and the business cycle,
Prof. Fisher's view of a causal relationship, for
against it, as I have set forth in the brief note




Statistical Dinner, on the
I don't at all share
I think the facts are
to him today.

192_

A National Association of Financial Credit Men

THE ROBERT MORRIS ASSOCIATES
The National Association of Credit Men
Affiliated with

Dir
Me

President:

FREAS B. SNYDER
Upper Darby P. 0., Pa.

Merchants National Bank

le Trust Company

Directors-Ter

Research Director:

J. N. EATON

T er ms expiring .925

UR F. BARNES

A

V. C.

Columbia
Pittsb

Boston.

Louis, Mo.

First Vice-President:

S. L. EDDY

J. F. CRADDOCK

Ladd and Tilton Bank
Portland, Oregon.

Continental & Commercial
National Bank, Chicago.

J. J. GEDDES
Illinois Merchants Trust Co.
Chicago, Ill.

H. WARNER MARTIN

Secretary-Treasurer:

JOHN

ALEXANDER WALL

National Bank
Philad

Lansdowne. Pa.

JOHN

Second Vice-President:

First S

Assistant Secretary:

F. S. SIBLEY
Rhode Island Hospital Trust Co.

R. W. DUNING

Providence, R. I.

Lansdowne. Pa.

Detro

E. N. VA

Atlanta and Lowry National Bank
Atlanta, Ga.




American
St. Jo

HARVEY E. WHITNEY

C. W.

Bankers Trust Company

Commonwealth-A
Bosto

New York City.

LANSDOWNE, PENNA.

October 24, 1

Mr. Carl Snyder,
General Statistician,
Federal Reserve Bank,
New York, N.Y.

My dear Mr. Snyder:

The Robert Morris Associates are planning to
hold their Mid-Year Meeting in St. Louis on November 17t
18th and 19th.

As Secretary of the Organization I am arrangi

a program, and we would very much like to h..J,ve you addre
us at either the morning or afternoon session of Tuesday
the 18th.

while -4e would be glad to leave the choice of
the actual topic to y..u, provided you can he with us, I
would suggest that our members would be very much intere
in a discussion in general on the t. rice index theory whi
I am afrlia is very superficially understood and often
Supplementing this we would apprec
imperfectly devised.
very much an analysis of the present business conditions

I very earnestly request that you give this
invitation as favorable consideration as possible as man
of our members are conversant with your 'Rork as a statis
of the first rank and as exactly the type of man whom we
would like to have with us. May I have your decision an
the exact subject of your toiic,if you can accept,as soo
as convenient because I wish to issue the program of the
convention and the notices to members at the earliest po
moment so as to insure as large an attendance as possibl
MID -YEAR MEETING -ST. LOUIS-NOVEMBER 17th, 18th,
D

litt

Ce:,-

PER CENT.

150

'6° VOLUME of TRADE AND
WHOLESALE PRICES

PERCENT

300

125

250
VOLUM Eof

TRADE

100

200

75

150
20 BASIC
COMMODITIES

50



P31,9

1920

1921

1922

1923

192,4

100

19C.3.tIi0141-20

FEDERAL RESERVE BANK
OF NEW YORK

'FFICE CORRESPONDENCE

1 Iar

ClovernarStrang

DATE

SUBJECT

Novembiem_4_1214

_

Business ,donditione

1r. _Snyder

I don not know if you woulJ care to see each month the computations
as to bank debits anu deposit turnover, attached herewith.
They are the
earliest monthly returns which dive sny positive report as to the drift of
trade.

The most important ie the index of outside bank debits, since this
ueually runs very close to our composite index of the Volume of Trade.
But
since July this index has been several vints cut of line with the composite
index, and for the last four months has run:
July

Auust
September
October

99
101
99
105

Me index of dpcsit turnover which usually also runs pretty close
to the Volume of Trade is no's distinctly out of line, owing to the very

heavy increase of demand deposits in the last six months.


CI-M*4-24

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To
FROM

Governor Strong

_____ 1

SUBJECT:

. Snyder

Your memorandum of November

7, in iN441.to forwar

I have never believed that it would b
much that the material along this line, fo
y reliable
cancellations varies so
to inquiries,
erent times.
to the type of industries you
the avenue of approach as to




Ali

i5114

contracting:
tain very

92_

hESC. 4. 1-200M-1-14

FEDERAL RESERVE BANK

OF NEW YORK

e OFFICE CORRESPONDENCE
_Mr. irtry's/
FROM

DATE Nov -. 21,-- 1224 -SUBJECT:

.ork of San Francisco Bank

Mr. Snyder

F4
I attach herewith an extremely interesting piece of statistical
work done by the Federal Reserve Bank of San Francisco, and with this a
I saw Yr. Perrin at the Harvard
copy of my note to Mr. Perrin about it.
Annual Conference last Saturday, and he expressed his very great appreciation
of the interest we had taken in it.
It is really a first class piece of intelligent statistical work,
and will provide them, t think, with a very interesting and valuable index
we are especially interested in it from this end
for the 12th district.
because it shows that the seed we have sown is beginning to bear some fruit,
even within the system itself.




Re.ceiveo
_c
P J.
.1v

1 1924

192_

M'SC

FEDERAL RESERVE BANK

4. I-NM-I-24

OF NEW YORK

OFFICE CORRESPONDENCE

Air

Governor Strong
Mr

FR

Snyder

DATE

Nov._21,_19.24

192

_

suBJE=:Letter_oflov-_1B from
.

Profeasor_Bullock
,\
r\,)

I should rather like to have you see the attached, just so you
may know of the very cordial relations we have with the Harvard folk.

RECEIVED BY
GOVERelliY8
K.

sirk2
:C


NOV 24 1924


_

1-71

MISCILI-2001-1-24




FEDERAL RESERVE BANK

OFFICE CORRESPONDENCE

OF NEW YORK

Governor StroPLAL

FROM

S

Mr. Snyder

I appreciate very much the sur;j

things inevitably use up a lot of valuab

they would much prefer hearing someone ne

If no other name presents itsel

Prof. .handler might undeAake it.

FEDERAL RESERVE BANK
OF NEW YORK

ICE CORRESPONDENCE

DATE

Nov. 24, 1924

-

Governor Strong

/VIM
kr:w

Mr. Snyder

L-11-11-1,4

SUBJECT:_

Concerning Policy

CTED,
13.

a

It seems to me there are two or three things that a chorus of
criticism from Anderson, Willis, the "Financial Chronicle," and the rest
The
are instilling into the public mind that are extremely unfortunate.
first of these is that the Federal heserve policy, and especially the low
discount rate and investment buying and its supposed consequence of cheap
money is dictated by the necessity of large earnings to meet expenses.
The second that these large expenses are created by the "free
services" that are being rendered by the Federal Reserve banks, and, by
inference, that these would be greatly reduced if the free services were
dispensed with.
The third that these free services are "competing" with 'r ember
Banks.

All of which has been highly accentuated by the very unfortunate
paragraph in the Resolutions adopted at the Chicago meeting of the American
Bankers' Association, which innulcated just these same ideas, and have
given the critics a splendid shillalah to lay about with.
Would it not be worth while to work out exactly what these free
services amount to in percentages of the total expenditure, second, as to
the exact amount of competing that this results in, with Member Banks, and,
because these services are relatively a small expense, relieve the banker
and the public mind of the idea that Federal Reserve policy is being used
to support an expensive organization?
You know it is
paper reader catches and
bits of conversation and
firmly fixed in the mind
by bankers quite as much

just little things like this that the average newsthat stick in his mind, and I judge from little
things I have heard that these ideas are pretty
average banker and are being disseminated
of the
as by the Vociferous Klan.

As to the effect of the Federal Reserve policy, is not the almost
complete answer thereto the simple fact that what looked like, and was so
freely predicted would be, a serious depression, has been averted and that
in the last four or five months trade has been on the upturn and has now
recovered to or above normal, in the face of the fact that the tendency of
commodity prices, and especially of the great basic commodities, has been,
in spite of the rise in farm products, rather downward than upward.
--As is set forth so succinctly in the chart that I attach.

Is not this a very good time to make use of what I believe is one
of the most effective weapons we could possibly have in answering these
As I should like
criticisms, viz., our Index of the Volume of Trade.



19C.3.1-90u-1-2o

FEDERAL RESERVE BANK
OF NEW YORK
DATE

Nov. 25, 1924

ICE CORRESPONDENCE
SUBJECT

Governor Strong

ROM

Mr. Snyder

Goncerning_Polioy

2

being used very widely by large
sometime to tell you, this index is already
It is the sort of thing that
corporbtions scattered over the country.
is so simple that anyone can understand it.
chart as the attached
And I can't help thinking that if such a
effectively knock the pack endwise.
was given wide publicity it would pretty
and other of our indexes
The interest that was shown in this index
St. Louis meeting which I attended is
at the Harvard Conference, and at the
that the business man can underpretty clear evidence that it is something
attention and interest.
stand and that incidentally engages his




NEWSPAPER REVIEW
Federal Reserve Bank of New York, Reports Department, Library
November 25. 1924

Tuesday

V01.5: No. 275.

FEDERAL RESERVE SYSTEM
/cicci:"
1, Criticism. The Reserve banks have gone out of their way to do things which
really belong to city correspondents, and the enormous expenses resulting
from their activities have had to be borne in Some way. Since member banks
would never consent to tax themselves, the Reserve institutions have taxed
them indirectly by an investment policy which-has IsaIeue down rates o71777
fei-est and been more than hazardous-for bliiinails

131,rge7-77. of C., Ed.,

157100
2. Discount rates.
The Treasury Department eees no occasion for a change in
Federal Reserve rediscount rate levels and believes no early change is contemplated.
(J. of C., p. 1.)
3. New York Bank. The resignation of Shepard Morgan as Assistant Federal
Reserve Agent at the Federal Reserve Bank of New York was announced by the
bank yesterday.
Mr. Morgan will accept an appointment on the staff of
S. Parker Gilbert.
(Times, p. 37.)

UNITED STATES
4. French debt. Secretary Mellon expects an early resumption of negotiations
with France for the funding of.that country's war debt to the United States.
There are ?respects of a moratorium of several years for France in the event
of funding arrangements'being concluded, although there has been no official
(J. of C., p. 1.)
discussion of the probable course of future negotiations.
5. French loan. The new 100 million dollar issue of French Repeblic external
loan bonds was sold yesterday at least two times ever and possibly five
times over.
The money will be turned over to the French Government on
December 9, When payment on the bonds will be made by subscribers, and will
(Times, p. 1.)
be placed on deposit in New York.

6. German securities,
G. Henry Schroder & Company, of London, and Speyer &
Company, of New York,have announced the purchase of 40 million gold mark
This represents 10 million dollars in American
shares of the Deutsche Bank.
money and consists of stock which the bank has held since the last increase
of its capital.
It is the largest investment in German securities since the
(Times,
international loan was floated a month ago for the German Government.
p. 31.)
7. Income tax.
During the four months from July 1 to October 31, the Government
collected in income taxes mere than 430 million dollars, a decrease of but
a little over 24 1/4 million dollars from the total for the same months in
1923.
Despite the 25% reduction in the tax rate, therefore, there has been
a decrease in actual returns of only a little over 5%, which suggests that
with a continuance of good business conditions the way may be opened in the
(Times, p. 1.)
coming year to a further cut in this and other taxes.



FEDERAL RESERVE BANK

OF NEW YORK
ACSC. 4. 1-200M-I-21

OFFiCE CORRESPONDENCE

To

Governor Strong

FROM

DATE

Nov. 262_1924

Mr. Snyder




SUBJECT:

associate in the
National Bureau of Economic Research, is coming in to lunch.
He sometimes writes on questions of banking policy in the
Federal Reserve system, and it 9ecurred to me that it might
be worth while to have a little talk with him if you were
free after lunch.
Dr.

ant

- 140V

s:

1..24

M!SC

4. 1-20444-1-.14

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
TOL__

FROM

DATE
SUBJECT:

Nov._214-M4

_192__

Concerning Policy

Mr. Snyder

It occurs to me that it might well be worth while to have a talk
with this Mr. William Justus Boles.
You remember that for some time he
wrote a very able weekly review for the former New York Sun.
He now
syndicates bank letters like the attached, which have a very large circulation,
I should imagine second only to that of Mr. Roberts' National City Bank cirI was told that at one
cular, and reaching a very fine clientele of people.
time he was making *30,000 a year out of this work, and I think his friendship
is worth cultivating.

I am wondering if it would not also be worth while from time to time
to invite in several others like, for example, Mr. Geoffrey Parsons, the Editor
of the New York Tribune, a very keen and able mine, Mr. W. P. Hamilton, the
Editor of the iall Street Journal, who writes very well, David Friday, who
writes often for the New Republic, Mr. James Clark, Editor of the Journal of
the American Bankers Association, perhaps Mr. Elmer Youngman, Editor of the
Bankers' Monthly, and possibly one or two others.



.4!SC. I. I-20014 9 -211

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

Gov ernor _Strong
FROM_

Mr. Snyder

SUBJECT:

NOV. 23, 1924 _192_

Concerning Poll 43y

2

And I suspect that Mr. Franz Schaeider feels that he has been
rebuffed severl times when he has end,lavoreJ to See you; and ha has a
lare:e and important following.




940;
eiz

fdh6J/t.

eZ74we4

TELEPHONE 3 610 BLOOMFIELD

November 22, 1924.

Personal.

Carl Snyder, Esq.,
Federal Reserve rank of New York,
New York City.

Dear Mr. Snyder:

It was very pleasant to receive your letter of
November 20 with its enclosures:
Be assured, ho7ever, that the article in the
"Harvard Business Review" had come to my notice before I received
I congratulate you on handling so
the special copy from you.
clearly a subject which is very difficult to tteat in such an interesting manner.
I should like to have my name added to the mailing list for such statements and data as your department prepares.
I have always been a devotee of the Federal Reserve System and
shortly after the Aldrich bill was proposed, I made a digest for
two different large city banks, one of which sent a copy to every
bank in the United States.
It was very delightful to meet you and listen to
As soon as I can
your remarks at the Harvard Economic Conference.
I want to come in and have a chat with you, as I am up to my ears
The
new undertaking which I wish to confer with you about.
in a
Harvard people are doing a fine work which, however, in my judgment
could be vastly improved if they made an effort to lighten the load
of statistics and hard business facts by making the matter more
genuinely interesting for the average laymAn on whom they depend for
Roger Babson, with all his faults, does get
financial support.
nearer the interest of the average business man merely because he
and his associates try to speak to the residents of Main Street in
However this may be the Harthe language that they can understand.
vard service of course is the soundest of all.
I have heard of you frequently and very pleasantly
I am enclosing one or two
for I think we have many mutual friends.
copies of my bank letters which may interest you.



1

The National Park Bank of New York

New York, October 23, 1924
quick success of the German Govern-

THE loan flotation at New York and in
ment
London has clarified the atmosphere and
made it possible for the leading nations to
take up the actual work of putting through
the notable reforms guaranteed by the adoption of the Dawes Commission report. The
fact that the $110,000,000 American portion
of this loan was about six times subscribed

and that the bonds instantly commanded a
premium on the stock exchange emphasizes

the strong investment appeal of the issue
which is in many respects "a good faith
loan", the proceeds of which will be used to
underwrite the solution of the most difficult
economic problem that grew out of the world
war adjustment. The whole world in a sense
has been cheered by the outstanding success
of this great loan which was by far the most
interesting foreign government peace loan
ever offered in the United States. With the
broadest market ever enjoyed by a loan of
this character, it is probable that a large portion of the American allotment will be held

indefinitely by American investors for in-

come producing purposes. This would be
natural in view of the very generous income
return and the sponsorship of the loan itself.
MORE FOREIGN LOANS

With the

German Government loan
splendidly marketed, there is likely to be several other foreign government loan flotations
in this market within a few months. The

authorities of France, Belgium, and various
other foreign governments are said to have
made overtures to American bankers touch-




ing the sale in this market of large and small
loans in the near future. These foreign applications are much more comprehensive than

formerly and aside from government outlays relate to a variety of industrial, institutional, banking, commercial and other requirements in the countries affected. In this
way it is literally true that the United States

in a certain sense is "financing the world"
and that our advances for such purposes have
never been as large, varied, nor important as
they are likely to be from now on. There is

abundant reason for this in our huge gold
reserve which in the natural order of things
must be to some extent depleted by these very
interesting and urgent demands from abroad.
This will be putting the gold to very good use

and because of the great strength of our

banking position there need be little fear that
the expected out-flow will cause money

market disturbance here. In a situation
where total subscriptions of $600,000,000
for the recently offered German Government
loan brought no greater response than a 2 or
3 per cent call money rate, it is clear that the
outstanding strength of our Federal Reserve
System provides exceptional safeguards
against unfavorable money market response.
STRONG UNDERTONE

There exists a good undertone to business
and people generally are evincing a quiet confidence about the future. This has been an
important influence in the election discussions
for it is admitted on all sides that the highly
favorable change in the position of farming
communities, as compared with a year ago,

has been a large factor in the Presidential
campaign. The sharp rise in the price of
grain and farm products has added enormously to the purchasing power of whole
communities which a year ago were hard
pressed and without the means of providing
the comforts of every day living. That these
conditions have changed radically is shown
by the September returns of the great mailorder houses which showed increased sales

of 31 per cent for the month and 20% per

cent for the year. Chain stores also showed
a gain in September business of 3g per cent
for the month and nearly 12% per cent for
the year. Both systems-mail-order houses
and chain stores-in the first nine months of
1924 reported a 10 per cent gain in sales over

the same months last year.

Some of the

large department stores of this city have also
made an excellent showing as compared with
a year ago with good gains and increased activity in various lines. This reflects perhaps

better than anything else the strong pur-

cellaneous freight in any one week; the
largest number of cars loaded with less than
car load lot freight in any one week; and the
largest number of freight cars ever moved
in a single day. The harvesting sections
have been provided with unusual transportation facilities this year and it is clear that the

excellent service given by the railroads in
the quick dispatch of freight from city to
city has contributed in no small measure to
the hand to mouth policy of merchandise
buying. This has been a feature of the situation everywhere, the movement being
strengthened, of course, by the unsettlement

of cotton and other raw material prices and
the disinclination of most merchants to engage in future commitments on a large scale
during a heated Presidential campaign.
Many roads are likely to make a highly favor-

able showing for

1924,

although freight

traffic in general during the first eight months

of the year showed a falling off of 10 per
cent compared with the same months of 1923.

chasing power of the people and the continued

prosperity of the wage earning classes. In
certain sections of the West, there have been

good gains reported, the generally higher
prices for grains and hogs being a large factor in the improvement. In some wholesale
lines there have also been increases shown,
although the movement in that quarter has
been somewhat irregular owing to the drawbacks encountered in specific industries.
RAILROAD EFFICIENCY

A factor making for better conditions in
the steel market has been the heavy buying of
rails, cars, equipment and various supplies by
the railroads. These orders within the past
month have been quite exceptional and reflect

a growing belief on the part of railroad

managers in the continued prosperity of the
country during the next six or eight months.

When considered in connection with the
extraordinary equipment purchases of last
year, these new expenditures by the railroads

emphasize the growing demands of everyday business upon our transportation service
which is admittedly the largest and best in
the world. During one week the past month

the railroads loaded the largest number of
freight cars shown in any week this year;
the largest number of cars filled with mis-




LIVING COSTS

All nations are seeking to reduce living
costs, as it is recognized that the prevailing
price structure bears heavily upon the consuming classes throughout the world. The
Fisher index number of American commodity prices in the second week of October was
152.5 based on 100 as the average price of
1913.

This represented an advance of 2

points within a week. Crump's British index number for the same week was 162.9,
also 2.1 points up for the week. The index
number of wholesale prices computed by the
Canadian Bureau of Statistics and weighted,
covering 236 commodities fell 4% points in
September to 153.6. Some further progress
has been made in reducing manufacturing
costs here, this attitude being strengthened

by the refusal of merchants to purchase

goods at higher prices than the public is ready
and willing to pay. In various lines there is
evidence of growing stability and despite the

fears expressed in some quarters lest our

huge gold stock should lead to further inflation in this country, there are as yet no signs
of a dangerous movement in that direction.
Even on the stock exchange, where average
prices are considerably above the low level
of the year, there has been no spirited public




last year. The sharp advance in grain prices
and in the quotations of farm products gen-

in the first week of October reaching 71,134
grain cars, a total never before disclosed in
any weekly period. In the same week last
year only 50,032 grain cars were moved. All

this means a notable increase in genuine
wealth for the nation as it is estimated that
those engaged in agriculture and related pursuits contribute 33 per cent of the country's
buying power. These increases explain also
the ability of the farmers to heavily reduce

the indebtedness which oppressed them so
seriously last year and which forced them to
curtail usual outlays for the necessaries of
life. With the improvement shown in the
agricultural states, numerous interior banks
which at this time last year were either closed,
or on the verge of suspension, have reopened

and are functioning again to the benefit of
an immense constituency. There is apparent
evidence also that interior trade is improving
and that people in many sections are display-

ing a confident optimism about the future.
This has not shown itself in sensational
gains in trade, nor an outburst of extravagant expenditure of any kind. It means to
use a homely expression that the American
people to a large extent are "saying nothing
but sawing wood" and when they do this

on a large scale they are pretty sure to

achieve sustained progress in no uncertain
way.
PRESIDENTIAL CAMPAIGN

Not for a quarter century or more have
the American people witnessed a more extraordinary Presidential campaign than that
just drawing to a close. It has been for the
most part quiet, orderly and conducted in a
good-natured sort of way without many clear-

cut issues to excite spirited discussion. Had
it not been for the third party agitation the

04258




contest might have been a dull affair with
few human interest features. The life-saver
for the conservative interests, however, has

been the restoration of prosperity in the Ai
Northwest made possible by the large aver- w
age crops marketable at relatively high prices
at home and abroad. The wonderful comeback of the Northwest and the sections generally affected has been the dominant factor

making for peace and harmony in a season
when the apostles of discontent were organized as almost never before. The sober second thought of a prosperous people, therefore, has successfully answered many of the
arguments put forth by those who sought a
change for change sake without having any
very clear idea of what the new order would
bring, or what reforms if any would be accomplished. A Presidential election, however, is always an important affair for the
American people, but nothing has happened
since the June conventions to indicate that
the contest this year has been disturbing to
business in any large sense. On the contrary there has been little in the movement

of the security or commodity markets to

remind one that a great political contest was
under way and that partisan appeals through
the radio were reaching the largest audience
ever brought within listening distance of the
voices of campaign orators. This does not
mean that the campaign has not been interesting for it has been advertised and popularized in a remarkable way through the efforts

made by leaders of all parties to get out a
large vote and to excite the sympathy of
women voters as never before. The story of
the campaign in this sense has been altogether

remarkable and suggestive of the inherent
strength of underlying conditions and the
soundness of the nation's great credit structure.







gain for the great producing area. That the
country, notwithstanding the setbacks in

Whole economic situation helped by the rise in commodity prices with many new high records for the year

This is the Boies Bank Letter. It is the most direct and effective advertising
medium that a bank can adopt. Unequalled returns for the low cost involved. For
details address
WILLIAM JUSTUS BOIES.

14 Elm Street,
BLOOMFIELD, NEW JERSEY

(The Name of Your Bank Will Appear Here)
Letter on General Business Conditions
September, 1924.

AMARVELOUS rise in the price of
train and farm products has been the
outstanding development in the current
economic situation and reflects the extraordinary change in the position of important

producing states which a few months ago
were in severe straits. With the exception

of corn, all the leading crops promise a
larger yield than last year, so that the sharp
advance in prices has not been in response
to unfavorable forecasts for the American
crops. In other wheat producing countries,
however, including Canada, there has been
serious damage reported with better returns
for the American farmers as a direct consequence of a serious shortage threatening
abroad. Increased buying power of the
farming classes which are estimated to con-

tribute from 3o per cent. to 40 per cent. of
the total, explains the larger distribution of

merchandise and the increased business
handled by the great mail-order houses.
BUSINESS SANITATION

THESE changes are quite remarkable
and have influenced a better tone to
the securities markets and with other factors,

have led to a moderate rise in commodity
prices. Public sentiment is more confident

than it was, although the uncertainties of a
Presidential year are keenly appreciated as
also the continuing depression in some of the

great basic industries.

The Presidential

campaign, up to this stage, has not disturbed




confidence as the dominant parties are not
adopting sensational methods nor appealing
to class prejudice. Trade on the whole is
better than it was a month ago, although in
some branches far below the high level of
last year. The buyer still has the say in
most markets, but this condition may not last

long if business improves on the scale ex-

pected after Europe takes up the serious
work of making effective the far-reaching
reforms described in the Dawes' Commis-

The business outlook has
brightened materially within a month or
sion report.

two and the strong points far outnumber the
weak points.
NEW START

THERE is apparently excellent basis for
the assertion by high authorities that
"business has turned for the better". Average daily production of pig iron in July was
below normal requirements, the 1,785,000
ton total being the lowest reported, except
for 1921, in sixteen years. The last cotton
year showed the smallest consumption since
pre-war days. Volume of general production in June was the smallest since December, 1921, and figures for July will, it is believed, emphasize this trend. The "shutdown period", usual in the summer months,
has been extended this year and production
is being carefully supervised. The price
trend is being watched constantly.
to-mouth buying is still the order of the

day and the American people are living
frugally, thinking carefully and for the most
part doing the things which make for business stability and economic gain. Heavy
marketing of new wheat and old corn have

helped railroad traffic and increased the
nation's buying power. Farmers are vastly

better off than last year and through advances by various relief agencies numerous

crippled banks in the Northwest have reopened and are functioning normally again.
FINANCING RECOVERY

I

MMENSE investments of American

capital are being made abroad, owing to
the prospective recovery of industry in

countries whose business will be greatly
helped by the carrying out of the reforms
guaranteed under the Dawes' Commission
report. Lower interest rates here and continued influx of European gold have made
more attractive opportunities for profitable
dollar investments in Great Britain, France,
Germany and various other countries. The

INCREASED EFFICIENCY

THIS country has gone further in the
elimination of red tape than any other
nation in the world. Business methods are
being simplified, industrial leaders
cutting out waste and the cost of doing business is being systematically reduced. Out

of the stress of the after war readjustment
and the intricacies of the European repara-

tion and debt settlements, there has developed increased cautiousness in business
affairs with the responsibility of leadership
more keenly appreciated by those having to
make important decisions. Automobile
makers are turning out new cars only as the
demand develops in the effort to avoid loading up dealers with more cars than the buy-

ing public could be expected to absorb.
Manufacturers, wholesalers and merchants
generally have fought shy of accumulating
heavy inventories of high-priced goods so as

to avoid the dangers of a possibly falling
market later on. No country has developed
a higher type of business management and

American dollar is still the most sought
after of all circulating media and because
of our fabulous gold reserves and the fact
that the United States alone, among the

those in charge of great enterprises prepared

leading nations, adhered to the gold standard throughout the war and its aftermath,
dollar remittances are popular everywhere

THE wheat belt is experiencing the best

abroad.

With the prospect of an early

straightening out of the reparations tangle
and the reorganization of foreign industry,
there has been pronounced improvement
in countries which a year or two ago suffered

from acute depression. The outlook in this

respect is better than it has been at any
time since the armistice. With the Dawes'

Commission report accepted, the world is
nearing a hard and fast peace basis again.

This will be of immense benefit to this
nation, for business everywhere has been
more or less unsettled by the confusion
abroad and the possibility of another outbreak in Europe.




long ago for such a trade recession as this
nation has recently passed through.
BETTER TIMES!

prosperity it has enjoyed in many
years. Conditions have so improved within

two or three months as to indicate that this
year's wheat yield will be at least z8,000,000
bushels larger than the crop of 1923, instead
of 93,000,000 bushels smaller, as seemed
probable when the June forecast was published. Serious impairment has been indicated in Canada where black rust is said
to have reduced the prospective wheat yield
by nearly 1 so,o0o,000 bushels. The outlook
for oats is more favorable, with an apparent
gain for the year of 139,000000 bushels and
prices ruling 14 cents or more above 1923.
These changes are well-nigh revolutionary,
all things considered, and with the better
prices for live-stock disclose a remarkable

MISC. 4. 1-200M-I-24




FEDERAL RESERVE BANK

OFFICE CORRESPONDENCE

OF NEW YORK

Governor Strong
41110.-

FROM_

SUB

Mr. Snyder

Here is a little note fro. M
of Moody'e Service, which shows that

i agine that we have many, even thoug

You will note his suzgestion.

MISC. 1. 1-20011-1-14

FEDERAL RESERVE BANK

OF NEW YORK

de

OFFICE CORRESPONDENCE
Governor Strong
FROM

DATE_NQYA_ 28_, _1924____

SUBJECT:

Measurements of Trade

Mr. Snyder

As a example of the extent to which our Index of the Volume of
Trade is being used commercially, I append this chart which was brought in
this week by a young man from the Hudson Motor Company, of Detroit; and we
have found a number of other instances.

The interesting thing about this is that they feel they can put
their finger on conditions within their own plant which produce the major
variations of their shipments, from the course of our index; so that they
are utilizing this index as a norm of what their business ought to be.

(

I

C

http://fraser.stlouisfed.org/
Federal Reserve28 1524 Louis
NOV Bank of St.

192_

FEDERAL RESERVE BANK
OF NEW YORK
DATE- Dec. 1, 1924

iOFFICE CORRESPONDENCE
0

Governor Strong

RoA40

About a Dinner

Mr. Snyder

SUBJECT,

I am wondering if, instead of the academic group, it might not
be worth while to have (juite a different group, made up more of solid
business men, a banker, and maybe one or two writers, and invite thereto
And have
the three Principal Choristers, Anderson, Willis and Seibert.
no one from the _:ank but yourself.
I was thinking of such a list as, for example:
George E. Roberts
Lamont, Leffingwell or Dwight Morrow
One Director: Owen Young, Woolley or Reyburn
W. C. Mitchell
A strong business man from outside New York, like,
for example, James Simpson
A forward-looking banker like Mr. Alexander or Mr. Warburg
A manufacturer like Guy E. Tripp, Mr. Eastman or Mr. Vauclain
An enlightened lawyer who takes an interest in such matters,
like Mr. Wickersham or even Elihu Root
A newspaper editor like Geoffrey Parsons, Editor of the
Tribune
Two or three financial writerci, like Franz Schneider,
Thomas F. Woodlock, Mr. Noyes and 4illiam Justus Boles

My feeling is that, to meet with a solid congregation like this,
might perhaps suggest to the Caterwaulers a little better idea of their
importance and mission.

RECEIVED DV

BOVERNIM Ur/




FEDERAL RESERVE SANK

tax. 3. t4w44.24

OF NEW YORK

°OFFICE CORRESPONDENCE
Governor Strong

DATE

SUBJECT:

December 1,

Two Problems.

Mr. Snyder

FROM

Here

res two little studies that have puzzled me

good deal.

The first is the amount of new capital issues in the U.S. by
from 1885, plotted on a ratio scale.
You will note that, save
for the two big years of 1917-18, the chart suggests no real financial
convulsions.
I.

years

Puzzle:
If in and after the war the general level of prices
rose, and now is, about 80 per cent. of pre-war levels,
require, for the same rate of industrial growth, something like an 80 per
cent. increase, over the normal trend, in the amount of new capital issues?

As there has been in recent years no such increase, does this suggest that new plant construction and industrial expansion generally has
been actually far below the normal rate?
The average prices of industrial shares, as registered on the New
York stock market, when divided by our index of general price level, show
a very slow, even rise up to 1917, indicating apparently a steady advance
But from 1917 on,
in the relative or real value of industrial shares.
this relative or real value takes a very sharp drop and is now far below the
normal trend of the previous 20 or 30 years.
II.

Are industrial stocks now far below their reel value, and,
Puzzle:
if not, why have earnings not increased in recent years correspondingly to
Other things being equal, it
the rise in the general price level?
would seam as if a heavy rise in the price levels should mean a corresponding increase in the average earnings on plant investment.




why would

FEDERAL RESERVE BANK

MISC.4.1-24M-1-24

OF NEW YORK

OFFICE

CORRESPONDENCE

Governor Strong

DATE_

December 2,

SUBJECT: History of the Bank of England

FROM _ Mr. Snyder

About the only complete hivtery of the Bank of Engiaud is that by
Andreadee, who was a Greek who wrote in French, and this only comes down to
103.
I hove talked with Dr. Chandler about the question, becF:use he has
been especially interested, and he says there ie nothing else that is very
much worth while, except interesting bits about special periods, so I have
ordered the AndrePdee book for Governor McKinney as the best thing avnilable.

Of course, the Keynes and Withers books have a good deal of reference
to sore recent history.




4

W.S.C. 1. I -200 M -1 -24




FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE

FROM

Governor Strong would like t

of the bank of Lngland" that you think

I.

415C

I -11414-1-24

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
J011

Governor Strong

FROM

DATE

December 5,

194,

Mr. Snyder

SUBJECT:_ The btabilized Rentenmark.

To the contributory causes which you mention should be added, according
to Dr. Glasenapp, the very powerful influence of the rentenmark's convertibility
into gold, a feature that I was not myself aware of until I looked it up.
Perhaps you would like to glance at his account of it.
The figures as to Great Britain's allied and colonial debts are attached herewith.
-.;1

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EC Bank of St. Louis
Federal Reserve5

124

WX. s.

1-20111Y-1-Z4

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE

DATE

Governor Strong
FROM

4oaember

9,

192A.

Stock Market Activity.

Mr. Snyder

DEG 9 1924
It is quite noteworthy that the Times averages of 25 industrials have made no
advance in the last three weeks. This is in spite of a tremendous churning of the
market and sales that have broken all records. Such an arrest of the advance, with
enormous sales, is usually, with the market at a very high level, the indic 'ition of
a sharp reversal.
As the market is now at the highest point since 1920, and only a shade below
1919, I am wonderins,if this doesn't prelude a considerable decline; and whether
this, if it occurs,` will not put a pretty heavy damper on the much predicted and much
advertised boom.
In fact, I am wondering if, instead of this boom, we may not have a rather
sharp setback next year in business, just as we did at the beginning of this year, and
at the beginning of 1923.




1(04,/

iL4L

162-421-&-i

dien't}

MISC.

FEDERAL RESERVE BANK

OF NEW YORK

,OFFICE CORRESPONDENCE
Governor Strong
FROM

DATE
SUBJECT:

December 10,

Cul rant Batik Debits.

Mr. 'Snyder

Perhaps you taulc like to see the cir rt for the ye-r showing total bank
debits, including New York CI ty,
nd for 140 centers outside N -w *ork City.
You
will note that the main ptrt of the run-up in itovember was confined to New York
City.
Allowing for seasonal, outside debit, for hovemt)er declinEld, inste.:d of
wondering if tighter mosey now might not have a rather dampening effect.
rising;

::nd I




194

MIMAA4M4-24




FEDERAL RESERVE BANK

OFFICE CORRESPONDENCE

OF NEW YORK

Tse

Governor Strong

FROM

Mr. Snyder

S

As to business conditions:

I do not get the impression from any of
get, that there was any considerable improvemen
O
this month, over the two preceding months.
the general t
this morning's Business Summary,
usual seasonal changes, seems to have been slig
/i

d
For example, our index of out
All this gi
November by about 5 points or so.
wave of enthusiasm which swept the East after t
great churning of the stock market, has had no
If, as I think you feel, the psycho
iness.
at least for the immediate movement, would not
the great hopes established in November be liab
rather than the great boom that has been predic

You will note that our index of 20 basi
an index of business conditions as anything we
over the low point of the year, is still below
we did not consider high.

In view of the really heavy increase i
depositsi in the last six or eight months, this
But when your friend Dr. A. begins to be prophe
doubt.

Pt.
efrf;,

DEC 10 ib24

FEDERAL RESERVt BANK
OF NEW YORK

*CSC. t.1-10014-1-i4

OFFICE CORRESPONDENCE
Governor Strong
FROM

DATE

Dec. 15, 1924

SUBJECT:_

Mr. Snyder

You had to listen the other night tD a very grippy and muddled

speech--the world's worst, I felt--and I'd appreciate it ever so much if
sometime you had the patience to look through a paper which was the background of what I was trying to say.

91
It was a very exasperating thin
ideas together.


http://fraser.stlouisfed.org/
DEC 15 k 24
Federal Reserve Bank of St. Louis

"

feel able to put your

4,e7L44-0-0,4%.

M'SC

4. I-20014 1-14

FEDERAL RESERVE BANK

OF NEW YORK

all OFFICE CORRESPONDENCE
AIR

FROM

Governor Strong

DATE Dec. 18,_1924
SUBJECT:

Major Bellerby

Mr. Snyder

Major Bellerby is coming for lunch today, with Prof. Mitchell and
Prof. Chandler, and then I can gauge his depth a little better.
I don't
take it from his letter that he in any way sets himself up as an authority
or an expert, and that his book is rather an effort to draw attention to
the question of unemployment in its relation to the monetary problem.
But this seems to me far from an important study, and I have a
feeling that if the working classes generally could get the impression that
Federal bank policies are being directed towards stability of production and
employment, that would be a tower of strength when the test comes ten years
hence.




_192_

MMC.3.1.0CM-1-20

I FEDERAL RESERVE BANK
OF NEW YORK

*OFFICE CORRESPONDENCE
40\ Governor Strong
TO

FROM

DATE

SUBJECT:

Dec. 18, 1924

Use of our Index

Mr. Snyder

Here is an interesting case of the way that some large enterprises
are making use of our index of the Volume of Trade.
This is the second or
third case that I know of.
I think I reported to you the case of the Hudson Motor Company, and
also the fact that they seem able to account, from conditions in their own
plant, for the discrepancies between the run of their own business and our
index of Trade; and here is another case of the same thing.

This curious synchronism of industry is the thing that is borne in
on me more and more as our investigations progress, the way that whole rafts
of things tend to swing together, just like the stocks on the Stock Exchange.
Of course there are wide and notable exceptions, always, but the
general rule seems to be that of flocking together, up and down.
I gave public report of our index just a year ago.
If it can get
as much of a vogue as this in the first year, I am wondering what it may do
in the next five years or ten years.

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m19c.3.1.00141-20

FEDERAL RESERVE BANK
OF NEW YORK

iFFICE

CORRESPONDENCE

Governor Strong

TO

110
FROM

SUBJECT

Rate

Mr. Snyder

Do you know the people on the American Banker at all?
to be a journal that is a great deal read by bankers.

It seems

I think the screed is worth reading with a little care, for of all
the types of criticism that the system and policy have had so far, my feeling is that this is possibly the most insidious.

It is a kind of a catchword idea that can easily get under the skin
of the average man, and even the serious and friendly type.
You know the "father complex," the instinct to rebel against author,ity, is very deep in us all, and I can't help thinking that there were phrases
in the Board report of last January that maybe will come home to roost in a
very uncomfortable way.

"Judgment" and "discretion" are very fine phrases, but the thoughtful man is apt to ask whose judgment and whose discretion; and if it is to be
the Board's, is he not apt to remember the kind of judgment and discretion
displayed in 1919 and 1920, quite unmindful that the personnel of the Board
And I'd like to ask you to consider what
may have changed in the meanwhile?
would be your own feeling about the kind of judgment and policy that might
be in evidence with you out of it!

I never felt that all the attacks of Skelton iilliams and Hefflin
and Price and Edmonds amounted to very much, and the recent gabble of Willis
and Anderson and Seibert probably still less.
But you have yourself remarked upon the idea that the people of
the country would never entrust to any board or body of men their economic
welfare; and does it not seem to you that some phrases of that report came
dangerously near to assuming that prerogative?
I write this because of the possibility of a renewed discussion of
this problem by the Board, and in our own Annual heport.
I attach also another squib, and I believe there was still another
in the J. S. Bache market letter in something of the same tenor.




I FEDERAL RESERVE BANK
OF NEW YORK
DATE

OFFICE CORRESPONDENCE
Governor Strong

FROM

SUBJECT

Dec. 22, 1924

State of Trade

Mr. Snyder

A preliminary estimate on our Index of Trade for November shows
some falling off from October--about 100 for November against 106 for
October, 103 for September and a low point for the year of 94 last June.
In part this decline may be due to the fact that November ha: fives
Sundays, which is always difficult to allow for in the calculation for seasonal changes.
It is evidence, I think, as to how sensitive (and how "sound"--?)
this index is, that this difference of the number of Sundays in a month should
frequently make a distinct difference in the average.

On the other hand, the stock indicators lave reversed themselves
and, instead of a decline, the market last week mane a very marked advance,
carrying the average of a wide list of industrial stocks, like the Standard
Statistics average of 202 companies, up to about the peak figure of 1919 and
some eight or ten points above the high point of March, 1923.
The average of railway stocks is now at the highest point since 1916.

In other words, the general trend has oily partly followed the stook
market boom, and the indications are that November saw no such great improvement as was so widely expected from the Coolidge election.
On the other hand,
I hear that steel bookings are very heavy and that this is one of the reasons
for the continued strength in the stock market.




.4:SC

4.

I -LNIM 1-24

FEDERAL RESERVE BANK

OF NEW YORK
.

OFFICE CORRESPONDENCE
vernor Strong
FRO

A

1911

.

DAYS.

Dec. 22.

24

192

SUBJECTC

Mr. Snyder

As to current bank debits:

221924

DEC
cx-4
I attach herewith our current report of bank debits for 141 centres
and for 140 centres outside of New York.
The figures, inclusive of New
York, have been running a little high, owing orobably to the stock market
turnover.
I suspect that the figures for this last week are also swollen
by the usual tax return.
For the country taken as a whole, outside of New York, there seem
no indications of any sharp upturn of business.

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SC.

FEDERAL RESERVE BANK

4. I -ZOOM 1-24

OF NEW YORK

11P6FFICE CORRESP
To
FRO

Governor Strong

b

riATE
SUBJECT:

.

Otto- _24 , _104

Policy

_Snyder
I '"1,11111)/f

I think it would do a great deal of good if that very admirable
exposition you gave Dr. Baker yesterday could somehow get into type.
It
is just that sort of thing that is needed, I believe.
Prof. H. J. Davenport, of Cornell University, a. fine old scout and
a good friend of the system, is coming in today for lunch.
I'd like to
bring him in for a moment just to say "How do you do."




192_

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