View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

04,teln,

(copy)
FEDERAL RESERVE BANK

n4

OF NEW YORK

PERSONAL

November 23, 1922.

Dear Professor Bullock:

Thank you very much for your note of the twenty-second.

There are real and practical difficulties about Ty making
the address. I am quite unwilling to address such a body of men
without being frank and straightforward and explicit, and it may be
that such a talk as that would confirm in the minds of many the
mistaken notion held in some parts of the west that the Reserve System is run from Wall Street and that I am the chief devil in the
conspiracy.
So far as stabilization at the 1913 level is concerned, I
never entertained such a notion.
I doubt very much if we could
carry out such a program even if we did entertain it, and, assuming
that we did and were able to carry it out, I think it would be little
short of murder or suicide, or both.
This notion, I believe has
taken root in some parts of the country because of the belief, hard
indeed to escape, that our efforts in 1919 to resist inflation became
converted in 1920 into a definite policy of deflation.
The chances are that I shall decide not to make the address,
but Sydney Anderson is dining with us tonight and I want to get his
views before finally deciding.
I am looking forward to seeing Professor Young.
With kindest regards, believe me,
Very truly yours,
(Signed)

Professor Charles J. Bullock,
Chairman, Committee on Economic Research,
Harvard University,
Cambridge, Mass.
BS.MSB




Benj. Strong.

`Cecember

3,

922

My dear Professor Bullock:

On returning to the office this morning, I find your notes of
December 14 and 16

The work of art you enclosed is returned herewith.

It fits the case pretty well; at least that is the way it appeared to ve
when I reached Chicago, but when I left I must Pay they all seemed to be

in a very different frame of mind.

I made a rotten talk - as I always do -

particularly because I had been laid up, but more especially because the
room was frightfully overheated, ha,i eeen used continuously for meetings

for nearly a week, and had no ventilation.
with

I never bad such a struggle

feelings of discomfort as I did then.,

The fact is, however, that before I left Chicage - I was there
three days - they really took ILO into camp.

I got well acquainted with

many of the officers and delegates, and feel that they all left convinced
that I was a friend and not an enemy; which after all is better than a
speech.

I told them right at the outset at their Banquet, after Governor

Lowden spoke (he having referred to abuse of the farmers) that I did not
propose to take second place to any American farmer as recipient of abuse,

which seemed to tickle their fancy a good deal.

The next time I am uo your way, I will tell you all about it; but
.o stop in here when you are next in New York.
Yours sincerely,

Pro fessor Charles J. Bullock,
c/o Harvard University,
Cambridge, Mass.

as.n.


En c.


January 3, 1923.

Jiy dear Professor 3ullock:
I am sorry that I

Friday, December 2, owing
happen to

be in

the

missed your
to

absence in

Sincerely,

Prof. Charles J. 8
Cambridge,

GB/




Yass.

4ashington.

Should you

vicinity again, please drop in to see me.

hith kindest regards and best

Harvarattrity,,

bank on

call at the

wishes

for

the

i'Jew Year,

tift-0.40t Ots.

.

JAN -44 1.91.J

MAW atswit
January 19, 1923.

My dear Professor Bullock:
Most of my farming is done at 470 Park Avenue.

at 15 Nassau Street is simply the grain elevator.

The office

Why not join me at

my apartment whenever you get through at the Harvard Club, stop with

me for dinner, and have a look at the crop right where it grows?
that will not suit your plans, then make it Thursday morning at 15
Nassau Street, and count on having lunch with me.

to see you.

mightglad

Yours sincerely,

irc.)fesbor Charles 0., 3ullock,
c/o Harvard University,

Cambri cie,Le .
BS.LiM




shari be

If

Benj. Strong

Charge to the account of

UNION

OF SERVICE DESIRE

CL.

Form 1228A

15 Nassau Street

Telegram

Day Letter

Receiver's No.

WESTERN UNION

TEL

Night M essag

Night Letter

runs should mark an X opposite the class of service desired;
OTHERWISE THE MESSAGE
WILL BE TRANSMITTED AS A
FULL-RATE TELEGRAM

NEWCOMB CARLTON,r4

Check

AM

DES

Send the following message, subject to the term
on back hereof, which are hereby aged to

DIRGE W. E. ATKINS, FIRST VICE-PRESIDENT

123.

14U4ni

Ili

Time Filed

telt

BArar

January 23, 191:3.

Charles J. Bullock,
Harvard University,

Cambridge, Mass.

tuV,
Governor Strong

leaving Thursday

A

for short vacation in South.

inability to keep appointment.




George Beyer

Regrets

ALL. MESSAGES TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWING TERMS:
To guard against mistakes or delays, the sender of a message should order it repeated, that is, telegraphed back to the originating office for comparison. For this,
on
one-half the unrepeated message rate is charged in addition.
Unless otherwise indicated on its face, this is an unrepeated message and paid for as such, in consid
whereof it is agreed between the sender of the message and this company as follows:
The company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any message received for transmission atth,. unrepeated-message rate beyond the sum 01 five hundred dollars; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any message received for
transmission at the repeated-message rate beyond the sum of five thousand dollars, unless specially valued; nor in any case for delays arising from unavoidable interruption in the working of its lines; nor for errors in ember or obscure messages.
' In any event the company shall not be liable for damages for mistakes or delays in the transmission or delivery, or for the non-delivery, of any message, whether
caused by the negligence of its servants or otherwise, beyond the sum of five thousand dollars, at which amount eacn message is deemed to be valued, unless a greater value
is stated in writing by the sender thereof at the time the message is tendered for transmission, and 'unless the repeated-message rate is paid or agreed to be paid, and an
additional charge equal to one-tenth of one per cent of the amount by which such valuation shall exceed five thousand dollars.
The company is hereby made the agent of the sender, without liability, to forward this message over the lines of any other company when necessary to reac
destination.
Messages will be delivered free within one-half mile of the company's office in towns of 5,000 population or less, and within one mile of such office in other cities
or towns. Beyond these limits the company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at his expense, endeavor to contract for him for such delivery at a reasonable price.
5, No responsibility attaches to this company concerning messages until the same are accepted at one of its transmitting offices; and if a message is sent to such
office by one of the company's messengers, he acts for that purpose as the agent of the sender.
The company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the message is
filed with the company for transmission.
Special terms governing the transmission of messages under the classes of messages enumerated below shall apply to messages in each of such respective classes
In addition to all the foregoing terms.
No employee of the company is authorized to vary the foregoing.
THE WESTERN UNION TELEGRAPH COMPANY
INCORPORATED
'
NEWCOMB CARLTON, PRESIDENT

CLASSES OF SERVICE
TELEGRAMS
A full-rate expedited service.

NIGHT MESSAGES
Accepted up to 2:00 A.M. at reduced rates to be sent during the
night and delivered not earlier than the morning of the ensuing busi-

ness day.
Night Messages may at the option of the Telegraph Company be

mailed at destination to the addressees, and the Company shall be
deemed' to have discharged its obligation in such cases with respect
to delivery by mailing such .Night Messages at destination, postage
prepaid.

DAY LETTERS
A deferred day service at rates lower than the standard telegram
rates as follows: One and one-half times the standard Night Letter

rate for the transmission of 50 words or less and one-fifth of the initial
rates for each additional 10 words or less.
SPECIAL TERMS APPLYING TO DAY LETTERS:

In further consideration of the reduced rate for this special Day
Letter service, the following special terms in addition to those enumerated above are hereby agreed to:
Day Letters may be forwarded by, the Telegraph Company as
a deferred service and the transmission and delivery of such Day
Letters is, in all respects, subordinate to the priority of transmission
and delivery of regular telegrams. .
Day Letters shall be written in plain English Code language
is not permissible
c. This Day Letter is received subject to the express understand-




ing and agreement that the Company does not undertake that a
Day Letter shall be delivered on the day of its date absolutely, and
at all events; but that the Company's obligation in this respect is
subject to the condition that there shall remain sufficient time for
the transmission and delivery of such Day Letter on the day of its
date during regular office hours, subject to the priority of the transmission of regular' telegram S under the conditions named above.
No employee of the Company is authorized to vary the foregoing.

NIGHT LETTERS
Accepted up to 2:00 A.M. for delivery on the morning of the ensuing business day, at rates still lower than standard night message
The standard telegram rate for 10 words shall be
rates, as
charged follows:*transmission of 50 words or less, and one-fifth of
for the
such standard telegram rate for 10 words shall be charged for each
additional 10 words or less.
SPECIAL TERMS APPLYING TO NIGHT LETTERS:

In further consideration of the reduced rates for this special Night
Letter service, the following special terms in addition to those enumerated above are ,hereby agreed to:
Night Letters may at the option of the Telegraph Company
be mailed at destination to the addressees, and the Company shall
be deemed to have discharged its obligation in such cases with respect to delivery by mailing such Night Letters at destination, post-,
age prepaid.
Night Letters shall be written in plain English. Code language
is not permissible.
No employee of the Company is authorized to vary the foregoing.

January 24, 1925.
Dear Mr. Bullock;

Governor Strong has handed me your letter to him and

asked me to say to you with greet regret that he cannot have the
pleasure of having you st dinner on Thursday as he is leaving
to-morrow for a. couple of weeks in the South.

/ -am very sorry to say that / am tiec up for dinner
to-morrow night myself, but should like very much to have the
pleasure of showing you sround through the bank either to-morrow

or Friday, and of having you take lulch with Fome of our officers

also. If you can make it for lunch to-morrow you will find Mr.
Walter

Stewart of the Federal Reserve Board here as well.
Wohlt you be good enough to 0511 me in the morning and

let me know

your plans are so that ,e may mako arrangements

accordingly?

I enjoyed greatly my visit to you yeeterdsy, and only

regretted that the time had to be so short.
Sincerely yours,

Charles J. Bullock,, Esq.,

Care Prince George ROtel,
14 East 28 Street, New York City.




Ji.ou.ry 24, 192S.

Dear Professor Bullock:

I have your note this morning and only regret that
I now find it imr;ossible to Se6 you on Illuredly.

UnfortunItely

I have not been very well recently and must run off for a couple

of weeks' rest.
It is a disappointment, as I had my secretary wire
you yesterday, not to be able to see you tomorrow, but I hope
that upon my return our arrangements 041 meet with better
SUCC88111.

Sincerely yours,

Professor Charles J. Bullock,
Harvard University,
Cambridge, Mass.

MSS




(copy)
Colo. Sorings
June 28, 1923.

Dear Professor Bullock:

"And the moral of that is - The more there is of mine, the less there
is of yours."

Some day I shall write a book on prices - and try to point out

that there are always two of us - Mr. Producer and Mr. Consumer - in everlasting
strife, and when I only get a dollar a bushel for my wheat, I may be paying like
thunder for my sugar:

But it is the change that hurts.

put can be endured save a pain in a tooth.

Anything that stays

But some of you men who think much

upon prices, (and get paid much too little for doing so) are going to wake Up
two things.

One is that a change has taken place in the control of credit - which
makes prognostication of the future of prices when based upon the gyrations of
past curves - extremely dangerous.

I wish I had a voice and a secretary to

enable me to elaborate upon this.

The other point is more impressive to me.

A combination of experiences

has led to an outcry for stabilizing prices!
Fisher, Ford, Edison, et al.

Some want a new kind of

Others want the existing volume held constant.

But all are hell bent to have prices controlled and many feel that the Federal
Reserve System can and should do it.
they will be our undoing.

Undoubtedly if those folks have their way

No one, or two or eight men are possessed of all the

wisdom and courage to do that job, and escape sudden death.
little understood by people generally.

Prices are too

We see our government, and th

departments of the government, engaged, at identically the same moment, in
developing elaborate machinery to aid the farmer to get more for his wheat and
to prevent the farmer from getting so much for his sugar!
will never be understood by all at the same time.

The general price level

To fix responsibility for

prices upon the Federal Reserve System would in time destroy us.

Let's do the

best we can with credit, which is the chief influence upon prices, admit that




2

there are other things that do influence prices, and keep away from all the
This question will be much less

dangers of a campaign for price regulation.

important when gold begins to work normally again and I'd rather help an early
return to gold payment by about seven European nations (plus Japan) as the
first real step toward steadying prices.

If I were czar of the Federal Reserve System I'd see that the total

of our earning assets did not go much above or below, their past year's averag4
after deducting an amount equalling from time to time our total new gold imports.

This is the song I've been singing in Washington since April 1922 with but
moderate success.

Most .of them don't see the point about gold:

This doesn't seem much of a reply to your nice letter.

I've not even

mentioned receiving it, but I have, and enjoyed it, but especially the good will
which prompted you to write me.

Do it again.
11

Persons, and the others of

Won't you remember me to Sprague,
your good associates;




my best to you all.
Sincerely
(Signed)

Benj. Strong

MM, 3

.22

FEDERAL RESERVE BANK

OF NEW YORK

OF, ICE CORRESPONDENCE
Bullock

To

DATE_

_sept._140,1923

192_

Nt
SUBJECT

P

ri oes, eta.

a. 8.

FROM

*Wider seal of the r.rofession - *
Here

re

. few

reflections from an econwAst (sic. save the stark) who learned a little

from reading, more from what pole told him ,:ihich was sound, still rore by what he
observed of human nature - (wetly unsound):

let. Many folks (suantity theory extremists) say 4e should regulate ':,rices.
end.

They think we can do it by control of the :uantity of credit.

Srd.

ft

few like you (and you may or may not think we should) know the

difference between *prices!, and w:pltneral price level."

4th. Almost 1.00% of bankers and 1214 of the public think of -,:rices only

as affecting their pockets (or stomachs) - that is the things they buy an,t cell.
5th. If we assume to reAt .te prices, they 'di.' each wish us to fix their
nrioos1

6th. We will be in a jam between pTOdO4er an.! his 1igh. ;rice -.1emends and
consumer and his Low price demands.

7th. As every one is both proucer nd c/msumer - Every one !till went us to

uf) the pri.ce of hie roduct and ..-ut down the --rice of what he consumes.
eth. Within the 7e.st six obnths or so we would first have gone to jail for
high sugar rices, and as soon as out on bail, been rearrested for low sheet prices

(not to mention vsoline, building costs, ws.ges, freight rates, --refot,sors' salaries
and such like.)

Now I have the temerity to -jrofess (or confess) tbst I believe;

let. That price I:ovements arise from various causes, credit being the
most in'-ortunt moot of the time.




..1 ,M-,

Sept. 12, 123

Prices, etc.

Prof. Bullock
2-

B. S.
2nd.

That price movements are a composition of individual price changes

arising from supply vs. demand, etc., plus lots of other things, including (mark this)
the sentiment of people generally - the mood tc buy or to 5i - to push or hold back,

etc. (This latter is too little ap reoiated end is uneervalued as a cause,)
3rd.

That our responsibility is first as to the :_7uantity of credit, and

second, in soee small measure, as to this"mood". Our method or control of quantity,

likewise affects the 1:ublic 'mood', - which reacts on prices.
4th. That 'all those present. views are "high lights" of feeling due.to gold

not functioning, and thet :resent policies are temporary to it conditions which we
hope may not last!

Now you say "what the devil are you doing about your elere of this -rice
job"

(I can see your fece express the words.)

It11 tell you how to find outs
'hese, the Federal Recerve System statement for say :8 months or two years

nd analyze it with regard to the following obvious f!-.4cts:

1st. Principal changes in euantity of credit in U. S. now arise from
Gold im-eorts an

exports.

Increases and decreases in our earning assets.
2nd.

The same amount of infilation of credit will result from
Importing $1,000,000 gold, or

Increasing our earning assets $1,000,000.

--11 ifEREFO
3rd.

---

If you find that net gold imports, plus domestic eroduction, less

arts consumetion is no greater in a given eeriod thee the redueLion of our earning




Sept. 12, 1925

e'r

?rice, etc.

Prof. Bullock
B. S.

-3-

assets, it is fair to eesume that we have controlled volume of credit, rola have diecharged our duty as to 'rices unless you believe that we ebou'd interrere With the

general price level by means other than and in addition to, credit control!
4th.

Uet me?

(end nearly lastly) Such interference could only be by monkeying with

"eood" - which means argument, exeostule-lon, scolding and general bedevilment; beceuee

5th.

Aside from euantity of credit

eaatity

f qcods is the only other

-thing to regulate, and ee could on'o reach the ercoseses of eroduction and conewthen
(beyond what credit does) by trying to olter the public "mood".
Tbie may not be very clear!

I don't want you to thiak we do nothing. For

18 months I have been chairmen of e oomeittee ef the Governcre weie has hec much to

do eitb endeavoring to control tte "cuantity" ef credit by control of the total of
Look over the figuree eugedet and see how they n ear.
"earning assets".
Finally.

If eerning assets are "discounts", beaks must ' ay us lsrge sums

of interest (or discount), they don't

to do so and so try to collect loans and

If when that
y what they oee. (That ens some preesure toward lieuidation)
cievelope e stee in and buy under section .14, the eurplus funds are at once used to

pay off "discount" and ereesure to liquidate Is removed. Then agein if We sell our
invef,tments, ban' e must 'oerro feree us to ay for thee and presours to liquidate is
reneeed.

Now look et the relation between discounts and investments -

art of 1922 (when holdover

1.-eesure, ort

ES My early

frozen loans was considered too heavy)

in-

vestments went up arAti discounts went down - good bond market, business revival, prices

advancing, speculation, etc.

Also late 1922 and especially early and reidore 1925,

when erice advence looked dangerous, inveetecnts went down and discounts eent up. (Always

allow for net rceluction of sum of both offsetting gold imports.)

These reflections are simply to call your attention to a coincidence, or a elan,



Se t. 12, 1.923

7Prof.

?rices, etc.

Bullock

B. S.

-4-

or a bit of forward looking - and to invite your thcu,ght thereon, and gt your leisure,
some comments.

But this is very secret, for no one should be able to control rices!!!
How are you?




I r:TI better and will be hone by November 1st:

B. S.

September 12, 1923.

To Prof. Bullock
From B. S.

"Under seal of the profession."

Here are a few reflections from an economist (Sic. save the mark)

who learned a little from reading, more from what people told him which was
sound, still more by what he observed of human nature. - (mostly unsound)
1st.

Many folks (quantity theory extremists) say we should regu-

late prices.
and.

They think we can do it by control of the quantity of credit.

3rd.

A few like you (and you may or may not think we should)

know the difference between "prices" and "general price level."
4th.

Almost 100 per cent of bankers and 125 per cent of the public

think of prices only as affecting their pockets (or stomachs), that is, the
things they buy and sell.
5th.

If we assume to regulate prices, they will each wish us to

fix their prices!
6th.

We will be in a jam between producer and his high price demands

and consumer and his low price demands.
7th.

As every one is both producer and consumer, every one will want

us to put up the price of his product and put down the price of what he consumes.
8th.

Within the past six months or so we would first have gone to

jail for high sugar prices, and as soon as out on bail, been rearrested for low
wheat prices (not to mention gasoline, building costs, wages, freight rates,
professors' salaries, and such like.)




- 2 -

September 12, 1923

Now I have the temerity to profess (or confess) that I believe
1st.

That price movements arise from various causes, credit being

the most important most of the time.
2nd.

That price movements are a composition of individual price

changes arising from supply v.s. demand,etc.plus lots of other things, includ-

ing (mark this) the sentiment of people generally - the mood to buy or to sell to push or hold back, etc.

(This latter is too little appreciated and is under-

valued as a cause )
3rd.

That our responsibility is first as to the quantity of credit,

and second, in some small measure, as to this "mood."

Our method of control of

quantity, likewise affects the public "mood." which reacts on prices.
4th.

That all these present views are "high lights" of feeling due

to gold not functioning, and that present policies are temporary to fit conditions which we hope may not last:

Now you say "what the devil are you doing about your share of this
price job?

(I can see your face express the words.)

tell you how to find out
Take the F. R. System statement for,

say

18 months or 2 years and

analyze it with regard to the following obvious facts.
1st.

Principal changes in quantity of credit in United States

now arise from




Gold imports and exports,

Increases and decreases in our earning assets,
2nd.

The same amount of inflation of credit will result from
Importing $1,000,000 gold or
Increasing our earning assets $1,000,000

THEREFORE:
3rd.

If you find that net gold imports, plus domestic production,

- 3less arts consumption is no greater in a given period than the reduction of

()

our earning assets, it is fair to assume that we have controlled volume of
credit, and have discharged our duty as to prices - unless you believe that we
should interfere with the general price level by means other than and in addition to, credit controls

Get me?

4th. (and nearly lastly)

Such interference could only be by monkey-

ing with "mood" which means argument, expostulation, scolding, and general
bedevilment, because
5th.

Aside from quantity of credit - quantity of goods is the only

other thing to regulate; and we could only reach the processes of production
and consumption (beyond what credit does) by trying to alter the public"mood."
This may not be very clears

I don't want you to th

For 18 months I have been chairman of a committee of the governors which has had
much to do with endeavoring to control the "quantitr of credit by control of the
total of "earning assets."

Look over the figures I suggest and see how they

appear.

Finally. If earning assets are "discounts" banks must pay us large
sums of interest (or discount)
loans and pay what they owe.

They don't like to do po/so try to collect
(That means some pressure toward liquidation.)

If when that develops we step in and buy under Section 14 the surplus funds
are at once used to pay off "discounts," and pressure to liquidate is removed.
Then again if we sell our investments banks must borrow from us to pay for them
and pressure to liquidate is renewed.

Now look at the relation between dis-

counts and investments - say early part 1922 (when hold over pressure on frozen
loans was considered too heavy) investments went up and discounts went down.
Good bond market, business revival, prices advancing, speculation, etc.

Also

late 1922 and especially early and middle 1923, when price advance looked
dangerous, investments went down and discounts went up.



(Always allow for net

4 --

reduction of sum of both offsetting gold imports.)
These reflections are simply to call your attention to a coincidence,
or a plan, or a bit of forward looking
anql, at your leisure, some comments.

and to invite your thought thereon,

But this is very secret, for no one should

be able to control prices!;!




How are you?

I'm better and will be home by November 1st:
(Signed)

B. S.

(

copy

)

Broadmoor, Sept. 26, 1923.

Dear Prof. Bullock:

We farmers aren't so gol darned secretive as all that:
maudlin ruminations to Young, Persons, Sprague, et al.
acid, microtome and calipers on it.

Show my

Put the microscope,

Try it on the dog, and let me know

in all candor, it's not a better or sounder record of sticking to the faith
than any one of you suspected.

This is all my damned ego, for I'm chairman

of the committee and had a fist in it.
How are you, anyway?

I'm doing nicely, be hcme next month, am

rather fat - much too sassy - and due for a fall of some description, and
suspect that you are preparing to "take it out of me" on my rejection of the
'price chart, in favor of a modified Keynes "managed currency."
The question always is, who'll do the managing?
pax vobiscum.
(Signed)

B.S.

P. S.

Is it undignified in one of your age, and mine, to retain a sense
of humor in this age of insanity?

P. P. S.

I'm now moved to the shadow of Cheyenne Mountain - my address is care
of Mrs. Henry P. Davison, Broadmoor, Colo Springs, Col.

P. S.

Read the first verse of the 121st Psalm and the 5th Act of Macbeth
and you'll know the best cure for T. B.



Broadmoor, Colo.
Oct. 5th, 1923.

My dear Professor Bullock.-

Of course what I sent you was confidential, all
right, - but it was sent deliberately to be informing, to "drale you on one
point which I refer to hereafter, - but not for quotation or use publicly
as coming from the "inside".
The reason for such caution, - which under
other circumstances would be silly - is because I cannot speak for the system,
on system policies - I am chairman of the Committee which handles all open
market operations for the whole system, - was responsible for the policy referred to, - but am servant and under orders and sometimes others do not
agree with my views. (Nor I with theirs'!)
But shay all th
to Sprague, Young and Persons, if they are interested, and explain my
"reserve" thereupon.
The "point" upon which I wanted to draw comment
from you, without disclosing it bluntly in my memo, - was the one weak spot
which you nailed on the nose a la Dempsey.
Mat can we do when all of our
Section 14 investments are gone - in case gold continues to come in?!
I'll
refer to your specific comments after referring to this generally.
It's a
hard nut to crack.
Now taking the Sep. 26th statement, which is before
you I hope, you will notice that we hold (the system)
Bills bought in open market

-:112 millions

U. S. bonds, notes & Ctfts.

92 millions
$264

All of these are voluntary purchases under Sec. 14, and can be liquidated
(the method is unimportant - take my word for it) with little difficulty
or delay - except that portion of these accounts representing purchases
The total of these items is rarely
from dealers under resale contracts.
over $25 MM to $40 MM and I presume (without figures for any but N. Y.)
that they were about $28 or $30 millions on Sep. 25 as our W. Y. total
of "resale" items was $25 millions, and the other banks rarely have over
Now 18 months ago when I first proposed this general
$2 to $5 millions.
policy, I frankly admitted the weak spot you mentioned, but had reason to
I now think we can "last"
think that we could "last" about two years.
one year, and possibly 18 months longer (3 years in all) for these reasons.
(This again is most confidential, and I'm opening my heart, because I want
you Harvard folks to have confidence in our purposes, though you may not
always agree with our methods, or even theories.)
They want to lift
and the Bank of Japan give me their entire confidence.
the gold embargo and barring the Earthquake, might soon have done so.
But even if they did, it would mean no addition to our gold from them as
their gold reserves (held abroad) are bank balances, mainly in New York,
So eliminate Japan.
much of it with us, and they would simply check on it.




The Jap

2

Russia is sucked dry of gold.
I have many good evi
Germany cannot part with much if any more, save as an act of Hari
Karl! - nor can France take it from her!
I figure that we may expect to divide the South African production roughly 50-50 with
India and the East - which means roughly - about $100,000,000.
France will not give up gold except she signs on the dotted line
(debt funding) like the British, - and that you may dismiss as a
The British debt payment this
possibility even, for some time.
next twelve months may require anywhere from 50 to 100 millions
over and above the South African production coming to us, - provided the British pay and do not exercise any options to defer.
Even then we are in position to ask them, if things get difficult, Our domestic production over manunot to pay us. (Dont smile.)
facture and art consumption, is but a few millions, - as I recall
There are no other sources of supply of
from 10 to 20 a year.
gold, and even the British cannot spare over 100 to 150 millions,
at they have already sent, without pinching.
beyond

So in a ward, against some $235 millions
of investments which could be liquidated, I can see but $150 to
$200 millions of gold still to come in within a Lwelve month.
This is not a policy of insurance against accident, - however; such
as a resersal of Indian exchange, - and transmutation, and a new
Rand, etc., etc.
It's just carrying forward the rough calculations
I made in Washington at our meeting in April 1922, when this whole
difficulty bid fair to become acute.
I'm shocked to admit that
while the policy resolution I proposed, contemplated keeping the
total of discounts and investments as constant as possible - less
from time to time the amount of net gold imports, which were to be
offset by sales of investments, I was actually voted down on the
gold part of it, and my proposal was characterized by one or two
(That was at the fall 1922 meeting and
present as d
silly!
But N. Y. had most of the liquid stuff, so we
not the April one).
sold ours just the same and the result was as I described in my
first memo.
So my friend I maintain that we did have
a policy during the past 18 months,-that it has been fairly successful, and there is prospect that it can be eqTgTly so for a year to
come or longer --- if my pals play ball - as I know they mill.
After
that, the deluge (of gold) if there is any left, - and of course
then or earlier, higher rates of discount.
But the tide may turn
before then - lots may happen.
All of this is preamble to repeating - what I once wrote you, that those who prophesy rising prices,
based upon (a) gold imports- or (b) inflation of F. R. System origin, must needs be careful lest the spigot is found to be closed and
locked and guarded against burglars or marauders, political or otherwise.
(Gosh - that reads like a Ph. D. thesis, - and at that addressed to one at whose feet I humbly squat.)




o

3

Now as to certain points in your letter, much
of 'which is answered by the above.

Our Gov't security purchases were not to "support" the bond
To get a
Our aun reasons in N. Y. were principally 3.
"position" in the money market which we were losing in 1921, because of
To relieve the pressure by frightened bankers
the general liquidation.
on "frozen" debtors, - To "tone up" business, ease the money market,
We knew then as now that
put heart into the weary and downhearted, etc.
it meant no inflation, to amount to anything, - but simply that as we
increased our "investments",11iscounts" would go down, banks would go out
of debt, and pressure an borrowers would end.
market.

I do not entirely agree mith Snyder on prices, nor upon our
function as to prices, nor his scheme for price index control of rates
etc.
His remarks anent the investment account etc. are based upon what
we did and our discussions thereupon.
You do. not say whether you agree with me as to the F. R. System
admitting a "price" function or responsibility, beyond what I described.

The figures you quote are dealt with above, in substance.
Please consider what will happen when the export movement
does take place.
It will be an easy matter to handle.
The procedure
wiff be about as follows. The 1st Nat. Bank will ship say $5,000,000
of gold, which they must get from us.
There is no other source of
Their reserve becomes impaired and they borrow the 5 millions.
supply.
If they call in loans or sell securities, other banks will borrow.
The process continuing, in a large movement, will be financed by discounting with us.
Depending of course upon the rate we charge, there
will be greater or less pressure for liquidation according to whether
our rate is high or law.
If the pressure is too great, we can relieve
it by entering the market and buying bills and Governments.
There need
be no fear of inflation then, as the credit we release will all be applied to repaying discounts.
The banks and public will not be in a
mood to employ the credit for speculation.
Our discount rate must be
high enough to discourage it, but not so high as to cause alarm.
The
two fundamental, absolutely vital matters to have in mind in considering the next gold export movement are




1st. It must not occur when our position is extended and
reserves law, - or better stated, we must be always ready for
it by not tatting extended and so having the gold to spare.
2nd. We must understand the "mood" of the public, so as
to avoid alarm and panic which we could easily cause by unnecessary advance in discount rates, and likewise prevent a
speculation which would absorb the credit we released, rather
than permit its application to reduction of discounts.
There

4

are two views to take of what may be the surrounding conditions
One can imagine a Europe on the way to
when gold moves out.
recovery, optimism, speculation, etc., or the pessimist may say
it will be the day of restricted exports, adverse trade balance,
I'm not ready to form an opinion. That
dear money and alarm.
I do know is that if that surplus reserve is used for expansion
of our credit position, it will be over my dead and much mutilatThere is absolutely no ground for alarm about gold
ed body!
exports, now or as far ahead as one can see, and less cause for
alarm over imports, than at any past time.
The use you make of what I write must of course be discreet.
Mat is already in the statements is public property, - any one can draw
conclusions, - but my elaboration of my personal views and their relation to policies are for the moment sacred!

Now a secret also about putting told into circulation.
Please
Long ago when I was concerned with some part of the program of
bury it.
the Genoa conferenoe, I got mind of the fact that proposals, inspired by
resentment about our debt attitude, were to be privately made to flood us
with gold and let us "inflate and be damned".
It had
1914 and 1917, they knew how to do it, - ind they knew haw to convert the
U. S. into a good selling market.
Mind you, never a whisper of this has
I wrote personally to some of my ftiends abroad, who were
escaped!
"in touch", that we had many hundreds of millions of loans and investments
that we could liquidate, so as to prevent inflation, we could put gold
into circulation so as to prevent the appearance of excessive gold reserves, and politely intimated that they,could"ship and be damned".
Then to make sure 1 was not misunderstood we began to pay out gold in
amounts just equalling our imports.
I've heard no more
damned" talk.
At least the heads of the banks of issue know how N. Y.
stands on the question, and I don't think they will let their respective
finance ministers forget.
Have I covered your "doubts" (2nd page 2nd par. your letter)
as to control, for the time being, through our open market operations?
Your expression It or a few months", (referring to gold imports)
strikes me as casual.
I'd say that we are safe for from 12 to 18 as
stated.

It's very doubtful whether we'd need to empty our portfolios but I'd do it and more if necessary.
A little calculation will show what a huge export of gold we
could stand, provided my two assumptions are sound and are regarded no expansion - and the avoidance of alarm or speculation.
I can make no prognosis which will aid in guessing about
future rates of discount - things are too uncertain, - but of course
it must be used as a restraint, 1,71-len conditions demand - anTI hope as

a supplement to such control as we can employ through our investment
account as described.
Do not draw from my letters that I am minimizing
the importance of the discount rate, especially when the happy day of
resumption of gold shipments among the nations arrives again.



5

The figures of Aug. 22 - Sep. 19 have no significance.
We
cannot figure as closely as that.
When the trees'-, for example, has
heavy payments to make and large tax receipts coming in, or a large
security issue - we must always tide them over with temporary loans,
lasting from a few days to a few weeks.
They run from small amounts to
as ligh as $200 millions.
The daily turnover of our members, seasonal
movements and movements between F. R. districts always cause fluctuations
in our discounts of many millions, - we bridge the gap of distance and
time.

It plan is not a cureall or permanent policy.
During these
times when gold fails as ballast and price movements are erratic and we
are on the pinnacle of gold payment as was Simon on his Column, alone
and lousy with gold, we must adapt policies suitable to the conditions,
for the moment, and always subject to change or Modification.
This
seems our best just now.
I have written dogmatically, pedantically, and personally; but
please know that the above is the fruit of much thought and discussion in
New York and Washington.
Miller of the Board has been staunch supporter
and backer, - and a most understanding one. Jay's contribution has been
what one always gets from him - sound and scholarly and devilish critical
of meek spots.
So does a policy develop, as a symposium, and too often
with much compromise.
This one is reasonably unanimous in its parts.
18. Were I boss of the F. R. System I'd tell the public all about
these things, but I'm not the boss, - just an item in the whole - now
and then we need help, advice, understanding, support.
We need it from
you and your associates, at Harvard and at all other American universities.
The: may to deserve and get it is to give you our confidence, and this is
mine!
So it's partly selfish - and -writing about all this often sets my
mind in order - if only as a result of letting off steam.
Finally, please
good friend overlook faults of penmanship, spelling (if there are any)
grammar, rhetoric, diction, arrangement and style.
I'm no scholar - but
I like my job and thank goodness the doctors out here say I've won my may
back to it in great shape.
So I'll hope to see you next month - I shall
be at home the last of October.
Remember me to all your associates, and
my best to you.




Sincerely
(Signed) Benj. Strong.

(

cop

)

Broadmoor, Colo.,
October 22, 1923.

Dear Professor Bullock:

An unpleasant habit of looking back over my correspondence, so as to
-lee how often I am wrong, and so keeping my ego in check, reminds me that some

day I may want a copy of my last effusion addressed to you.
secretary here my habits of correspondence are in confusion.

As I have no

Could your stenog-

rapher copy it and send me a flimsy?
You remember Abe Lincoln's remark that he was "down to the raisins?"
That's my condition at the moment as I am leaving for home day after to-morrow,
praise be

And some day hope to see you and be returned to the mental posture

of the neophyte.

I hope all goes well with you.
boom?

Are you still predicting a tertiary

be
And will it/based upon inflation and a general lack of confidence in the

Federal Reserve Board, or shall we just rock along with little ups and downs,
and all of us "capitalists" just starving to make big wages for labor?
Since I became a farmer I rather like to see the plunderband plundered.
9ut anathema to the politicos.




Yours,

(Signed) B. S.

November 1, 1923.

Dear Professor Bullock:

I shall sae you so soon that this will only acknowledge and
thank you for yours of the 28th ultimo.
a brother, with all my best fancy ideas;
fair exchange:
Sincerely,

Mr. Charles J. Bullock,
c/o Harvard University,
Cambridge, Mass.

BE.MM




But now I have written you like
so what a,ra yours?

Give us a

0 P Y

(

)

470 Park Avenue
New York
(About) November 3, 1923.

Dear Professor Bullock:

It is most kind of you to write me as you do.

Of course you under-

stand that in all of these matters I am but one of a large complicated organization, of varied minds and opinions.

What we did in New York, and such in-

fluence as we had upon others, was as I wrote you, a composition, toward which
I suppose Gilbert and I were chief contributors.

Many of the banks frankly

bought for "earnings," in fact our own officers and directors were influenced
for a time by that consideration.

There also appeared the serious complica-

tion of our own purchases and sales conflicting with the enormous transactions
we conduct for the Treasury and other departments, as fiscal agents.

But after

many meetings and much experimenting, the plan and policy were made to work
smoothly, and I see every prospect that they will continue to do so.
Also I hope you will bear in mind that neither in "pose" nor in fact
am I the boss of this system.
if I were.

Nor do I wish to be, nor would it be a good thing

In fact the guiding thought we should all have in mind is that it

is better to get a thing done than to get the credit for doing it.
views and of the frankest sort are always at your command.
the gold bag:

My personal

But we did "Scotch"

And my best judgment is that we shall continue to do so.

What I mentioned about reentering the market has been much in my mind
for about two months.

I shall not have a settled opinion till I have seen more

of conditions from the poop deck!
dential.

But this and our earlier letters are,confi-

The figures explain themselves:

7e keep as close a weekly account of

the gold and investment accounts at the bank, as you do of your expenses.

And

that is why we know where we are at - as to inflation!

When your good associates come to town, I hope they will call - and of
course we expect you to 7 always:




Sincerely
(Signed)

Benj. Strong

November 27, 1923.

CONFIDENTIAL

Dear Professor Bullock:

By this time you and your colleagues have probably recovered from the
excessive indulgence in

aquatic sports of

turn your

last week and can again

minds to economic and other like affairs.
You may have noticed that since

I

wrote you from Colorado, the usual

seasonal increase in discounts by members (together, of course, pith further
gold imports) have combined to overcome, temporarily, the offset which we had
succeeded in maintaining against gold imports down to late last summer.
some ways it is a little disappointing, and yet

not

unexpected.

The

In

difficulty

will always be to differentiate between whet is a perfectly normal seasonal
movement of our assets, and those movements which may be
artificial, and consequently to be guarded against.

the affairs

The

regarded as abnormal and
more I

of this organization, the more I marvel at the

are willing to

forecast the future - and

reflect about

courage

of those who

this is no reflection whatever upon the

last issue of your Beview.

When may I have the
-t the bank?

pleasure of seeing

your

associates

You promised us a visit, and I think you said that Professor Young

coming down,

too.

With best regards,

Sincerely,
Professor Charles J. Bullock,
c/o Harvard University,
Cambridge, Mass.

BS.MM


you or some of

Form 1228A

Charge to the account of
CLA

SERVICE DESIRED

V

Telegram

Day Letter

3n.i. Strong, 5 Lesau St.,

WESTEkASNA UNION
1,177
WESTERN UNION

TEL

Night Message

Night Letter

Patrons should mark an X opposite the class 0 service desired;

OTHERWISE THE MESSAGE
WILL BE TRANSMITTED AS A
FULL.RATE TELEGRAM

NEWCOMB CARLTON. PRESIDENT

AM

GEORGE W. E. ATKINS. FIRST VICE-PRESIDENT

Send the following message, subject to the terms
on back hereof, which are hereby agreed to

November f8, 1923.

C. J. Bullock

Harvard University

Cambridge, Vass.

Regret cannot see you Friday

to be gone all next week




Hope Te

Lecving for Washington

can arrange meeting later

Benj. Strong

Receiver'. No.

Check

Time Filed

ALL MESSAGES TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWING TERMS:
To guard against mistakes or delays, the sender of a message should order it repeated, that is, telegraphed back to the originating office for comparison. For this,
one-half the unrepeated message rate is charged in addition. Unless otherwise indicated on its face, this is an unrepeated message and paid for as such, in come' -ation
whereof it is agreed between the sender of the message and this company as follows:
The company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any message received for transmission at . unremated-message rate beyond the sum of five.hundred dollars; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any message receivedfor
transmission at the repeated-message rate beyond the sum of five thousand dollars, unless specially valued; nor in any case for delays arising from unavoidable interruption in the working of its lines; nor for errors in cipher or obscure messages.
In any event the company shall not be liable for damages for mistakes or delays in the transmission or delivery, or for the non-delivery, of any message, whether
caused by the negligence of its servants or otherwise, beyond the sum of five thousand dollars, at which amount emo message is deemed to be valued, unless a greater value
is stated in writing by the sender thereof at the time the message is tendered for transmission, and unless the repeated-message rate is paid.or agreed to be paid, a, an
additional charge equal to one-tenth of one per cent of the amount by which such valuation shall exceed five thousand dollars.
I. The company is hereby made the agent of the sender, without liability, to forward this message over the lines of any other company when. necessary to ream n its
destination.
Messages will be delivered free within one-half mile of the company's office in towns of 5,000 pbpulation or less, and within one mile of such office in other cities
or towns. Beyond these limits the company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at his expense, endeavor to contract for him for such delivery at a reasonable price.
No responsibility attaches to this company concerning messages until the same are accepted at one of its transmitting offices; and if a message is sent to such
office by one of the company's messengers, he acts for that purpose as the agent of the sender.
..-The company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the message is
sled with the company for transmission.
Special terms governing the transmission of messages under the classes of messages enumerated below shall apply to messages in each of such respective classes
in addition to all the foregoing terms.
S. No employee of the company is authorized to vary the foregoing.
THE WESTERN UNION TELEGRAPH COMPANY
.

INCORPORATED

NEWCOMB CARLTON, PRESIDENT

TELEGRAMS

CLASSES OF SERVICE -

A full-rate expedited service.

NIGHT MESSAGES
Accepted up to 2:00 A.M. at reduced rates to be sent during the
night and delivered not earlier than the morning of the ensuing business day.
Night Messages may at the option of the Telegraph Company be
mailed at destination to the addressees, and the Company shall be
deemed to have discharged its obligation in such cases with respect
to delivery by mailing such Night-Messages at destination, postage
prepaid.
DAY LETTERS
A deferred day service at rates lower than the standard telegram
rates as follows: One and one-half times the standard Night Letter
rate for the transmission of 50 Words or less and one-fifth of the initial
fates for each additional 10 words or less.
SPECIAB. TERMS APPLYING TO- DAY LETTERS:

In further consideration of the reduced rate for this special Day
Letter service, the following special terms in addition to those enumerated above are hereby agreed to:
Day Letters may be forwarded by the Telegraph Company as
a deferred service and the transmission and delivery of such Day
Letters is, in all respects, subordinate to the priority of transmission
and delivery of regular telegrams.
Day Letters shall be written in plain English. Code language
is not permissible.
Digitized forc. This Day Letter is received subject to the express understandFRASER


ing and agreement that the Company does not undertake that a
Day Letter shall be delivered on the day of its date absolutely, and
at all events; but that the Company's obligation in this respect is
subject to the condition that there shall remain sufficient time for
the transmission and delivery of such Day Letter on the day of its
date during regular office hours, subject to the priority of the transmission of regular telegrams under the conditions named above.
No employee of the Company is authorized to vary the foregoing.

NIGHT LETTERS
Accepted up to 2:00 A.M. for delivery on the morning of the ensuing business day, at rates still lower than standard night message
rates, as follows: The standard telegram rate for 10 words shall be
charged for the transmission of 50 words or less, and one-fifth of
such standard telegram rate for 10 words shall be charged for each
additional 10 words or less.
SPECIAL TERMS APPLYING TO NIGHT LETTERS:

In further consideration of the reduced rates for this special Night
Letter service, the following special terms in addition to those enumerated above are hereby agreed to:
Night Letters may at the option of the Telegraph Company
be mailed at destination to the addressees, and the Company shall
be deemed to have discharged its obligation in such cases with respect to delivery by mailing such Night Letters at destination, postage prepaid.
Night Letters shall be written in plain English. Code language
is not permissible.
No employee of the Company is authorized to vary the foregoing.

CLAP,

SERVICE, DESIRED

Day Letter

Form 1228A

Benj. _trong 15 Nassau Street

Charge to the account of

WESTE

UNION

Receiver's No.

WESTERN UNION

Night Message

TEL 11-4

,nt Letter
Patrons should mark an X opposite the class of service desired;
OTHERWISE THE MESSAGE
WILL BE TRANSMITTED AS A
FULL-RATE TELEGRAM

NEWCOMB CARLTON. PRESIDENT

JII

Check

AM

Time Filed

GEORGE W. E. ATKINS, FIRST VICE-PRESIDENT

Send the following message, subject to the terms
on back hereof, which are hereby agreed to

Decmmber 5, 1923.

Professor C. J.Bullock.

Harvard University,
Cambridge, Mass.

lire received.




Governor Strong still in Washington and not expected this week.
George Beyer

II

ALL MESSAGES TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWING TERM
To guard against mistakes or delays, the sender of a message should order it repeated, that is, telegraphed back to the originating office for comparison. For this,
one-half the unrepeated message rate is charged in additidn. Unless otherwise indicated on its face, this is an unrepealed message and paid for as such, in consideration
whereof it is agreed between the sender of the message and this company as follows:
The company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any message received for transmission
nrepeated-message rate beyond the sum of five hundred dollars; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any message
for
transmission at the repeated-message rate beyond the sum of five thousand dollars, unless specially valued; nor in any case for delays arising from unavoidable interruption in the working of its lines; nor for errors in cipher or obscure messages.
In any event the company shall not be liable for damages for mistakes or delays in the transmission or delivery, or for the non-delivery, of any message, whether
Caused by the negligence of its servants or otherwise, beyond the sum of five thousand dollars, at which amount eaca message is deemed to be valued, unless a greater value
is stated in writing by the sender thereof at the time the message is tendered for transmission, and unless the repeated-message rate is paid or agreed to be paid, n -1 an
additional charge equal to one-tenth of one per cent of the amount by which such valuation shall exceed five thousand dollars.
The company is hereby made the agent of the sender, without liability, to forward this message over the lines of any other company when necessary to re.0 its
destination.
Messages will be delivered free within one-half mile of the company's office in towns of 5,000 population or less, and within one mile of such office in other cities
or towns. Beyond these limits the company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at hisexpense, endeavor to contract for him for such delivery at a reasonable price.
No responsibility attaches to this company concerning messages until the same are accepted at one of its transmitting offices; and if a message is sent to such
office by one of the company's messengers, he acts for that purpose as the agent of the sender.
The company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the message is
filed with the company for transmission.
Special terms governing the transmission of messages under the classes of messages enumerated below shall apply to messages in each of such respective classes
in addition to all the foregoing terms.
No employee of the company is authorized to vary the foregoing.
THE WESTERN UNION TELEGRAPH COMPANY
.

INCORPORATED

NEWCOMB CARLTON, PRESIDENT

CLASSES OF SERVICE
TELEGRAMS
A full-rate expedited service.

NIGHT MESSAGES
Accepted up to 2:00 A.M. at reduced rates to be sent during the
night and delivered not earlier than the morning of the ensuing business day.
Night Messages may at the option of the Telegraph Company be

mailed at destination to the addressees, and the Company shall be
deemed to have discharged its obligation in such cases with respect
to delivery by mailing such Night Messages at destination, postage
prepaid.

DAY LETTERS
A deferred day service at rates lower than the standard telegram
rates as follows: One and one-half times the standard Night Letter

rate for the transmission of 50 words or less and one-fifth of the initial
rates for each additional 10 words or less.
SPECIAL TERMS APPLYING TO DAY LETTERS:

In further consideration, of the reduced rate for this special Day
Letter service, the following special terms in addition to those enumerated above are hereby agreed to:
Day Letters may be forwarded by the Telegraph Company as
a deferred service' and the transmission and delivery of such Day
Letters is, in all
subordinate to the priority of transmission
and delivery of regular telegrams.
respects'
Day Letters shall le written in plain English. Code language
is not permissible.
c. This Day Letter is received subject to the express understand


ing and agreement that the Company does not undertake that a

Day Letter shall be _delivered on the day of its date absolutely, and

at all events; but that the Company's obligation in this respect is
subject to the condition that there shall remain sufficient time for
the transmission and delivery of such Day Letter on the day of its
date during regular office hours, subject to the priority of the transmission of regular telegrams under the conditions named above.
No employee of the Company is authorized to vary the foregoing.

NIGHT LETTERS
Accepted up to 2:00 A.M. for delivery on the morning of the ensuing business day, at rates still lower than standard night message
rates, as follows: The standard telegram rate for 10 words shall be
charged for the transmission of 50 words or less, and one-fifth of
such standard telegram rate for 10 words shall be charged for each
additional 10 words or less.
SPECIAL TERMS APPLYING TO NIGHT LETTERS:

In further consideration of the reduced rates for this special Night
Letter service, the following special terms in addition to those enumerated above are hereby agreed to:
Night Letters may at the option of the Telegraph Company
be mailed at destination to the addressees, and the Company shall
be deemed to have discharged its obligation in such cases with respect to delivery by mailing such Night Letters at destination, postage prepaid.
Night Letters shall be written in plain English Code language
is not permissible.
No employee of the Company is authorized to vary the foregoing.

December 10, 1°23.

VERY CONFIDENTIAL

Dear Professor Bullock:

In some way, probably inadvertently, the newspapers got

9

rather garbled

account of a committee meeting in Washington last week, and as the result there
appeared in the Journal of Commerce and the Times, some articles about the policy
of the Federal Reserve System, which might lead you te believe that the matters
we discussed sometime ago, very cenfidentially, had been made public.
the case.

That is not

Any stetement which is to be mode in regord of e matter of policy, such

as this, would of course be made officially by the Board and not by any individual.
I am sending you this line so as to make sure that you do not understand
that the subjects on which I asked you to give me some advice and in which you displayed so much interest, are now open for diecuseion.

I think

you will be interested to know that the Board will probably

publish something on this subject in the near future, but I do not know that it is
finally decided.

There is so much poesibility of trouble arising from incautious discussion
of these affairs, especially by those of us who are servants and not masters, that
I thought I was justified in sending you this word of caution.

It was a dis-

appointment not to be able to have a meeting with you the week before last, but
I hope an early opportunity will occur.
e trip to New York.

With warmest regards, I am,

Professor Charles J. Bullock,
Digitized forHarvard UnivereltYs
FRASER
http://fraser.stlouisfed.org/
Cambridge, lass.
Federal Reserve Bank of St. Louis

Please let me know whenever you contemplate

Sincerely yours,

CONFIDENTIAL

December 11, 1923.

Dear Professor Bullock:

I am in a great hurry* and have not even fully read your
letter of December 8, - but enough to permit me to send just a

line in reply, very confidentielly ireieed, in order teat yoe may
give the subject E30 Me thought before we next meet.

Suppose it were possible at the present time for the
deserve sns to buy g 1 00 or l'230 miliuns - or eny elven amount- of securities in the open market, Dr) d by so doing effect an eeact/y equal reductioe in the ae.ount whict our members were tx)rrowing
usl

As I have written you more than once before, under certein
conditions, when leF-,..zp into the mer'est to buy, the redit which we
releare comes immediately back to us through eembers who will eay
off papee they have discounted. If, therefore, it were noseIble to
increase the investments of the System and reduce the discounts, and
not increase the earning assets, would we not !)e in ...eeeition to secomplish the very thing which we are seeking to accomplish, and which
you suggest, eamely, to gradually liquidate investmente as gold some

in and .doffset the inflationary effect, whereas now, with our investments reduced 3,s they are, the only via, of reducing earning assets
might be by an advance of discount rates and rbrce the liquidation

of borrowings.

This is just a thought that I want to put in your mind for

consideratioe. Come down when you can and 7,,et us talk it over.
I may have to go to Washington in the near future, so you better
phone in advance.

I am sure that ;iou will ponder this in your mind as a very
confidential thought, and give me the benefit of your views when you
can.

Yours sincerely,

erofessor Charles J. Bullock,:,.
Harvard University,
Cambridge, Mass.

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

December 16, 1923.
VERY CONFIDENTIAL,

Dear Professor Bullock:

I am now able to reply to your letters of the 8th and 11th, and I hope

you do not mind my making the reply rather dogmatic.

Also my again urging upon

you the confidential character of our correspondence.
of the Governors can or should make statements in

Neither I nor any committee

regard to the policy of the Reserve

System as a whole, especially when it is developed in collaberation with the Federal
Reserve 'Board and subject to their approval and

,supervision. Now for the categorical

part of it.
kly own capacity

yours.

to express views on paper is much more limited than

On the other hand, I have a distinct advantage over you in the fact that I

am running the books and see the figures as

whereas you look

they develop;

as a. completed statement, and vest go behind the surface to
There has been no increase in
the Federal Reserve System.

get

at them

real information.

ownership of Government securities by

fluctuations which take place from

The moderate

time

to time are due to transactions for the Treasury and with dealers in Governeent
securities, which occasionally increase

what we appear to own, but which are in

reality being carried for short periods. To illustrate:
purchase temporarily some $17 millions of

a transaction for the

certificates a few days ago in connection

Alien Property Custodian's funds, which would appear to

be an investment, but which in reality is a



We were Galled upon to

temporary turnover, washing out in a

There has been

few days.

December 13, 1923.

Professor Bullock

2

our buying rate has been a shade under the

as they did earlier in the year, and

The reason for

bills owned.

an increase in

Bills

market.

that is that

have not distributed as well

the moment have piled up on us a bit.

for

We do

not like to arbitrarily decline to take eligible bills that are offered us by dealers.
On

the other hand, we

hesitate to

may be forced to do so if

better

our

accumulation

the

to have bill holdings

increase

buying rate at this time, although we

continues.

For various reasons

it is

increase than to have discounts do so.

The dispatch published by
nor an unofficial announcement.

the

Journal of Commerce was

It seems to have

been a leak.

neither an official
How

those fellows

things like that beats me, but they do and it sometimes causes embarrass-

get hold of
ment.

We fully realise

than we like and it

the danger that gold

You assume -

buy Government securities we inevitably increase

consequently contribute to

of inflation
to

But this brings me to the

may involve some danger of inflation.

question of purchasing Government securities.

that if 40

will come in for a time faster

through

and quite erroneously -

our earning assets and

further inflation in a. situation which is already

imports of gold.

That need not be

the

in course

fact, and if we do decide

make any purchases, they call, I believe, be handled so as to avoid any increase
AS I have written you before, when we make such purehases and

in earning assets.

throw our credit into the market it is immediately applied by member banks to repaying

what they owe us in

the way of discounts.

it merely means that

ments instead of

If that can be successfully accomplished,

we would convert some millions of our earning

holding

assets into invest-

This will give us something that we can

them as discounts.

later sell to offset gold imports and actually put some pressure on the market to

prevent expansion; whereas without

anything to sell, the

a situation such as you apprehend will

be to increase discount rates,

It is really a

New York but poesibly all, over the countrY.
If one understands how these operations work.

am hopeful that an


http://fraser.stlouisfed.org/
clear to the
Federal Reserve Bank of St. Louis

exposition of this will

public.

only possible treatment of
not only in

simple enough operation

Unfortunately, few people do, and I

be published

that will make the whole story

a

,,

.
v

e-,'

la,

4

P-.4

CP

(7`

6

4

Z7

is.

i?..

.-,-

e
0

il

0

(7°

5.

i-I

Co

ei

Professor Bullock

3

December 13, 1923.

'7'7

As to purchasing bills in London.

Here I think you have been misled in

ie.

3

0

some respects, and in fact I think very few people do actually understand the effect
of such an operation.

If the Federal Reserve Bank of New York should buy sterling

bills, the e ect of the transaction would be to place exactly the dollar equivalent at
the credit of New York banks on our books.
London exchange in New York.

The transaction would involve our buying

The sterling wou/d be placed to our credit on the books

of the Bank of England, and the money that we paid out for this sterling, would be paid

over to bankers who had sterling for sale.

We would then open an investment account

in London for the amount of our investment (as the Bank of England bought bills for us)
and the offset to that investment in London would be a bank credit in New York, the
effect of which woul.d be identical with gold imports.

If would not offset or prevent

inflation otherwise caused by gold imports one c.larticle.

IS would prevent ±..he actual

gold coming in possibly to that extent, but would substitute our own credit for it in
this market, just as though gold had cone in.

Another very practical onaestion is -

Who would be responsible for exchange losses if they arose?

Were the Bank of England

endeavoring to save its reserve and came to us with an offer of sterling bills in
place of gold and agreed to guarantee us against exchange loss, we might then be willing

to consider it.

Suppose we had teken the position that we would buy sterling bills

when sterling was at

4.70, - say about six months ago - and had bought /,20 millions

sterling, we would today have realized an

interest

would face ,an exchange loss of *7 millions.

earning of about i1,800,000, but

In other words, we would have lost over

05 millions on the transaction, unless we had been guaranteed by some responsible
guarantor.

Stated in a word, the purchase of sterling bills by the Federal Reserve

Bank just now i.e merely substituting one possibility of

credit

expansion for another,

and at the same time causing us the possibility of very heavy losses.

I can see

nothing to be gained by such policy.

My own appraisal of the situation for the future is somewhat different ;nem
yours.

It




may be wholly wrong, but at least it is worth considering.

There will be

'fsetting influences at work.

Deceeber 13, 1923.

Professor 3ullock

4

On the one hand, we may feel the

influence of gold

imports, with the possibility of some expansion and increase in our price level;
out at the same time may not British
exchanee

prices decrease to the equivalent of the lower

rate as further declines in sterling do occur?

the door to larger 3ritish exports

to

would moderate the trend of rising

prices.

be true of other exchanges.

this country.

This may

tneoretically

open

If the volume is sufficient it

The same in greater or less degree would

On the other hand, it is not inconceivable that the

?resent crumbling situation in Germany may not be arrested and will lead to

further

end even more distressing economic disorders inairope which will call for much more
drastic treatment and give

been witneosed.

rise to more alarming

symptoms than

any that have yet

In other words, due to a number of causes which were not as definite-.

ly in view a ,!ari months ago, there is, I feel, great uncertainty in the outlook, but
some possibility of a renewal of an advancing price

movement next year.

Now

in this

connection, I want to call your attention to enotler very important factor in the
situation which is little commented upon.

The stock market for the past six or eight

months has disappointed all of the chart makers.

It has reversed, or at

least has

not established, a course of ..rices which would ordinarily have been expected during

at least a part of this period.

The reason for that I think I have already attempted

to explain, so far as it is possible for any of us to explain it at all.

On the

other hand, with some advance in prices of commodities next year, and especially
6hould Mellon's tax reduction program find favor with Congress, and no bonus bill
be passed, I should suppose that ae would then have many of the elements which

generally contribute to a speculation.
me look with some doubt into the future.

That is one of the possibilities which makes
Now without any investments which can be

sold - except our bills, the amount of which could only be reduced by s,dvEuicing

purchase rates - don't you think it would be a good thing for the Federal Reserve
System to hold some short-time Government securities, provided they can be acquired

as I have indicated above - without effecting a net increase in earning assets?
In other words, provided their purchase will simply afford the members the means to
reduce their borrowings.




5

4,

k+

Professor Bullock

December 33, 1925

I have unburdened my mind rather frankly, and hope it may explain to you in

1.4.

l/ core measure sore things that you do not indicate are apearent in former letters.
Now as to publicity.

I have asked Miller, who runs the Federal Reeerve

Bulletin, to consider whether they should not publish in January, u frank simple

narrative regarding policy.

He seemed to think it an excellent idea.

I have never

written anything for the Bulletin myself, at: a poor hand at t,hit eort of thEig, and
of ceuree

an

not the one to prepare such a statement as this;

but I hope it will be

done, and if it is done that it will be illumineting to you and to the public
generally.

Once more let me urge that this whole matter be held in confidence.

may not have been justified in writing so frankly tr I do, but you have been

good

enough to advise from time to time in many matters, and I Feel a sense of obligation
which proeably justifies asking you to share some or our puzzles and anxieties.
Do emcee and see ea when you are next in town, ad tell All:a Young I count on seeing
him.

Sincerely yours,

Professor Charles J. Bullock,

Herrd University,
Cambridge,
BS.MM




ass.

December 22, 1923.

Dear Professor Bullock)

I have two letters from you which have not been answered on
account of my absence in Washington.
As now advised, I !In

shortly.

hoping that some statcment will appear

It may not be as comnlete 58 I would have made it or you,

but I think it will be helpful. It will not, however, relieve you and
me of the need for treating this subject with the

confidence which it

requires.

T ar tremendously busy on account of accumulated work during

my- absence, but will write te soon as possible unless 1 have the pleasure
of seeing you.

My secretary tells me that Professor Sprague ha e just

come in, so i shall close this at once,

and may have opportunity for a

chat ith him.
Pleaee accept my warmest
alone to you but

to

Christmas

greetings which I sena not

all your good associates whom I have come to regard

as my personal friends.
Yours sincerely,

Professor ChLrlea J.. Bullock,
Harvard University,

Cambridge, Mass.
BS. MM



December 24, 1923.

Dear Profeseor Bullock;

This i$ still not a reply to your recent letters, but just to clear up
somAling that you mentioned to we when I last sae you.

Lo you rec-11 stating thst our business review in the early months of this
year contained same ceutionary statements which you thought were interpreted by the

public as a warniag sjainat expansion, rising prices, etc.Ohad considerable effect
upon the situstion?
in the review.

I think I stated that I recalled no such comments appearing

During the last few weeks I have had a chance to look over them

all an rind nothing which I can interpret as in the nature of warning, or certainly alarming in character.

Would you mind having your files examined and pointing

out to me exactly what statements you had in mind?
of 70.11c1 to

I went to take advantF,g

of it.

Comment

such as you made *ft_

Tou know it is the very first

principle of the review that it snail never undErtake to prophesy.
I hope to heve a chance to it.rite you more fully later in the week in

reply to your lest two letters.
With best regards, and wishing you 11 E merry Christmas and a happy
New Year, I am,

:Ancerely yours,

Professor Charlep

1-1rvard U.1-versity,
Cambridge, Masa.

&SASE,




,vck,

December

4, 1.923.

P. S.

Dear Professor Bullock:

I was a good deal disturbed just now to learn from one of my associates
that we had a call from a Chicago banker who had a letter from you, discussing
the matters that we have recently been corresponding about very frankly, and that
this banker had called at the' Federal Reserve Bank of Chicago to get further information on the subject, and I rather get the impression that through you a good
deal more information had reached some of your friends than could be gained from
the regular published figures of the Reserve System or from the statements
have 80 far been made either officially or unofficially from Veshington.

As I have already assured you, it will be unfortunate to have your
organization in any way at cross-purposes with us as to what we are seeking to
accomplish, Fnd it is possible in my desire that you should be able to form an
intelligent opinion about these matters, I have been franker in writing you than
is justified ordinarily.
But certainly my letters have been filled with warnings
of unmistakable character, and I am writing now just to ask whether you %ill be
good enough to send me a copy of your letter or letters so that I can judge a
little better just what damage, if any, has been done.
My own personal desire to be of service to you and to your great organizeton in any proper way must not be interpreted as assuming any authority to speak
for the System or delegating' and frankly T am disturbed to learn of this correspondence.

Sincerely yours,

Professor Charles J. Bullock,
Harvard University,
Cambridge, Mass.




January 7, 19Pii
PFESOWL

My dear Professor Bullock:

Of course, you must understand how glad I

em to have your letter of

Possibly i never have explained to you the basis of some of our dis-

December 27.

I have always felt that in ouch matters es we deal

cussions and correspondence:

pith, our University friende eho specialize in economics occupy the same relation to

us that a physician does to 6 patient or a lawyer to e client.

Te need their

advice an we need the intellectual and imaginative stimulation tht comes
discussions and correeponeence.

Its value lies wholly in

its unreserved frankness

and its value is lost when enything occurs to impair that frankness.
reason why I

was concernec

by the result of y-ur

letter to

from such

That is the

Dr. Licetenetein.

As I

have previously written you, were I the boss in some of these things, I would deal
vith the public with a good

deal more freedom than the

Federal heserve Board seems

They are, on thecther hand, in better position to judge than I em as

able to do.

to the extent of freedom that is justified and safe.
growl about your letter of November 7.

I am not a bit disposed to

In fact, as would be the case -with any

egotist, I em rather more inclined t- take some credit to myself for throwing a bit

o' light on some of these matters in our correspondence.
There have been one or
heeeened;

they

two

unfortunate leaks.

I know exactly hot they

tere inadvertent, and I personally do not believe they did the

slightest damage, and of course they did afford the

opportunity

for a more detailed

discussion of policy after those leaks Led occurred than could have been poesible



Prolet5sor Bullock

2

hau the source

of your imformtion been our

can lay the matter aside as a forgotten

whenever the spirit moves
Let me

Bulletin and

January 7, 19E4.

correspondence alene.

Now I hope we

incident and continue our epistolary exchange

either of us.

have your comment:34f you have time to write me, on the January

the article touching on the subject that we have been corresponding

On the whele, I think it is an excellent presentation of the matter, but lacking

about.
only

in one important respect, and that is something to answer the euOttion which some

There is no

people may ask - Why did you do this?

diecussiot.at all a6 to-the

motive.

One other matter in your letter of

December 13 - all the other

things I

fear I must leave for discussion the next time I have the pleasure of seeing you.

There is no type of foreign bill of exchange which the Reserve Benke could
buy which would protect them against exchange losses.

cave got adequate bank guarantees.

We would only be protected in

What you say about the effect of investments

abroad being somewhat similar to the effect of investments at home is true enough,
excepting in one respect.

as you know,

Exchange operations

and find a. balance.

between the nations always wash

The surplus of sterling

exchange in

out,

the hands of

American exporters and others are gradually absorbed and do not of themselves become
the basis of any expansion of bank credit in a broad or permanent ray.
when an unwieldy
that

it can

It is only

exchange balance is converted into a loan or longer time investment

have an inflationary effect.

course, by the large loans which we made to

This was illustrated during the war, of

the Allies,

which were financed by

Treasury borrowings, which in turn were made possible by Reserve Bank loans.
we to

take

Were

out of the market a certain mount of exchange, while it would nevertheless

possibly have the

effect of reducing gold imports by a like amount, it would certainly

have some effect in stabilizing sterling.

On the other hand, we would be -converting

these credits into more or less permanent loans purchased by Reserve Bank funds, and
they would not be capable of performing the same function as a. regulator of member

bank borrowings from us in the same direct and effective way that domestic investments




V

January 7, 1924.

Profk.asor Bullock

are, because they would have to be made under some

arrangement for guaranty against

exchange loss, which would deprive us of the opportunity of immediate liquidation in
case money market conditions made their liquidation desirable.

It would be an un-

wieldy and cumbersome way of dealing with our own money market, and accompanied by a

lot of difficulties and possibilities of losses, which could not possibly arise
the purchase of short-time government obligations.

in

Of course, you and I both realize

that such a transaction opens up a wide field of discussion which can hardly be
covered in this letter;

but I am convinced that the effect which we wish to

by our open market operations could not be produced through
bills at this time.

Yours very truly,

Professor Charles J. Bullock,

c/o Harvard University,
Cambridge, MbSE.




investments

produce

in sterling

January 1

1224.

Dear $irt
1

rn vrittng you in Cccrernor Str-nets behalf to ,.dvise you

that he is leaving today for

two kecks ,beence in Florid:. and Trill

be back shortly before the first of February.

He wishes mo to say

that he received your letter of January 11, but has nottime to ans-ier

it until his return.
Yours very truly,

csoretary tc
'vrrrr(.3tr7.71g.

Professor Charles J. Bullock,
C/._ Harvard Uni-iefifit77-----"'"---Camtridge, Mass.




February 27, 1924.

Dear Professor Bullock:

Again I was sorry to miss your call.

It seems as though I

were away a great deal, but you may know whenever I am in Washington it

is on business and not pleasure bent.
Yours sincerely,

professor Cher/ea 44,BulARALI...
c/c, Harvard University,
Cambridge, Mass.

BS.ri







4/41 10, 1924.

My dear Professor Bullock:

This le to acknow/edge receipt of your letter
of March 25, eddreesed to Governor 7trong at his rastd-ince
,;.7,D Park Avenue, and which will not have his personal attention

until hie return to the city which I anticite rill be April.
29 or 60.

Yours very truly,
Secret&ry.

Professor Charles J. Bullock,

Harvard University,
Cambridge, Mass.

May 11, 192.
CAWFIDEATIAL

deer Proreseor

llocks

Your pie paraphrase which right be entitled "The Snyder aid the Fly"
gave es a eood deal of anusement ehen I found it a ong letters awaiting my return

rrom Euroe, nut I ellen not rieic its eublication.

I recall that in the early days

of the wer :eerr wrote a little limerick on the subject "Rerrow and Buy" wUch eet
eubliehed and made a few folks squire.

aut I ocemet resist in this cese letting

Snyder enjoy your eoetry.

3ow about that neeting.

It is ouriouehoe uareful one meet be not to

caese .eisunderstanding or steerehension.

The fe.ct le I ha.d not the elightest inten-

tion of raising that queation of se, Index Number or erice fixing nor at that tie we
I are of what the National :Monetary A.asociation vae cvntemeleting reposing to
.

Congress.

If you will. recall the diecuesion, it was Warburg_ who brought up the

question of:rice fixiug or an index control of our :...oliecy and naturally the discuceion
rrometly eiruee to that a.eeect of the eeneral emblem that we ell had been talking about.
Whet I oen't underetand le the willingneee of thoughtful, studioue eon who

ereeueably have been brought up in the seirit of Iteerican inatitutione and 'Should be
imbued with their priaciees, proposing a scheme to ongrees which in e?feot deleeates
Vavowedly and ceeeciously -Ole vaet power or ren,:cesibility of erice fixing to a Email

group of men who, in an scowl.° sense, eight come to be regarded es nothing. short of
AV. super-government.

It is undeeocratic, eteolutely contrary to the seirit of iteerioan

institutions, and so..itangeroes in its .-:oeeible ultimate eetelopments that I car. not

see the slightest eerit in the proposal.



2

Professor Bullock

.Vay 'It", 1924

Now possibly you and some others are entitled to know whether any of us

have any visite, as to the possible restoration of the gold standard throughout the
world, and suggestions of means to bring it about.

Offhand, I can only say that

such views as I personany hold are but partly formed but have dovelo:ed a ,goed deal

since my recent visit to Europe.

Let we state them to you euite eriefly.

First, on the negative side I consider that the proposals for !taking eccalled "gold loaner' to European nations in the expectation that we can dumr our gold

upon them and thereby they will be able to resume ?old payeent are all futile and

illusory. !lothing would wee of it except the exeenee of shiieeing the gold over and
the expense of ehieping the gold back, eo long 6.6 the exchanges and the disperity of

,ericee continue as at prevent.

7401Vesr the Tiank of England nor the Bank of France

nor any other foreign hank of issue whose currencies ere at a diecount want to eay the
enoreoue cost of stately increasing the size of the s'howlece of gold which they have

in their vaults by borrowing huge suns abroad and taking gold in return.

They nul d

be incurring a large obligation upon which they wo.iild pay interest and upon which

they would incur the possibility of a heavy lose in exchange uniees indeed the only
Furt'nermorci don't be' Jere

result, as I see, would he to ship the gold back again.

that any proposes for resumption of gold payment by European nations will prove to
be feasible or if attempted would be eermene!..kt so long as the immense weight of inter-

national debts) unadjusted as to method4 of eayment, are still hanging over the nations.

For exeeeple, if the French government should reduce the intrinsic value of the franc,
the

that is, the amount of gold in their coins, to one-third ofAer-war amount, resume
gold aptitnt, and then enter into a contract with the Aeerican Government to "pay us,

say, one billion dollars a year on their debt to us, their effort to return to the
gold etandard would break down overnight at the first attemet to make any such huge
payment.

And finally on the negative side, I don't believe that even any reamonably

sound progrta for resumption in Euroes, et any level of revaluation of currencies
atteepted at a given moment, could be expeoted to be eereanently successful until



e

e
4

3

Professor Bullock

May 16, 1,q24.

-2ft

,4drsparities in the prices of goods in different countries are greatly reduced from
those now existing.

It seer:s to me, therefore, that we can exclude credit trans-

tions as the single cure and we can exclude any other kind of transaction looking
to gold resumption in Europe until we have an adjustment of the debts and soee further

readjustment of price levels between the nations.
4

the
Now looking at the subject constructively, I am rather inclined to,view the
program which will ultimately work with a fair eeeeere of success must go through

the following secuence of developmente and unlees it does all efforts will fail:

First. There must be a definite workable elan of adjustment between Gerrany
and her creditors.

The so-called Dawes plan is ingenious and resents

tunity for success than anything yet eroeosed.

better ce orIf it is ado.2ted in the right irit
ft

of good will and with a real effort to eise it a suoueese I think we eight consider

that that aspect of the debt situation has been dealt with. The next thine is the
adjustment of the indebtednese of the other nations between themselves - not upon a

punitive or selfish or exacting basis, but upon the same erinciples which characteriee

the Dawes plan, i.e., that the amount to be raid by one nation to another shall

be

strictly limited to its capacity and upon even a more generous estimate of capacity
than applied

to Germany, and that the limitation upon oaeacity shall be not only the

budget capacity but the limit of capacity to make foreign payments.

Wathin those

limits, naturally, a return to the gold standard might be considered as reasonably
because of

assured against disturbance A exacting debt ayeent requirements.

Then I believe the third step must be a certain 000peration between the
of issue and their respective governments which would enable or facilitate a gradual

price readjustment (using Great 3ritain and ourselves as an illustration) so that
case of sterling by some small advance in our prices and spme moderate reduction in
theirs, or even no advance corresponding to our advance taking place in theirs, we
would gradually Bee the purchasing power parity of the currencies.eetablished more
nearly at the gold parity than at present.




This we all realise Is a. very difficult

the

,,
o

)--,.
co-

e.
ta

4

Ale'

-.ging

s
Profesor Bullk
oc

May le, ,o24.

to experiment with, and in fact the approach to the ideal parity of the ourren-

oies might prove to be almost an accidental or fortuitous thing rather than one of
ce,sign.

Once, however, sterling got back to a moderate discount, say, such as ex-

Jested about a year ago, then eoesibly the British Government and the 3aril. of &Wand

eight have the courage, fortified indeed by very large credits in thie country, to do
just what Sherman did in lan when he announced that.the way to resume is to resume,q
and imTediately begin gold payments without any restriction whatever.

Of course, you will understand that any Bah ;..rogram as this at present

&Elev.; to bristle eith difficulties.

A few of them %hidi only need to be ,eentioned to

indicate the difficulties involved are
(1) The impossibility of protecting the London market and the value of the

pound against the effect of huge arbitrage operations in London in the event that the
ound is pegged at an artificial value which is any appreciable ernount above true
°.,urchasing power -erity.

(2) Another lies in the feet that one can not have a free gold market
without having a free lending market, and it would not be safe for London to attempt

resurvtion of gold ;,ayeent unless they had a considerably higher interest level than
we had and there are times when it becomes exceedingly difficult for the bank of Issue
to maintain

its control of the market as we ell knoir very well.

There is the difficulty of the currency note issue.

I personally can

not ass 'N)w gold _:.ayment can be resumed in England without closing the currency note

Issue entirely, which presumably eeaes having the Bank of England take it over.
(4)

country.

.,!o

attempt at resumption is feasible without large credits in this

These will be easy enough to negotiete, but I believe gve are likely to find

the British Governrnent rather reluctant to increase foreign borrowings, certainly the
bankers alone could not undertake it upon the scale required to make the c .ers.tion

absolutely assured against failure, and of course some one has got to stand the risk
of exchange lass which doubtless the bankers would be unwilling to do without 3overneent



ee

le
L

e
e

ae

e

Professor Bullock

5

e

tection.

0

Parliament.
i

May 18, 1924-

This means that resumption in England would reouire legislation by
The act of reeumption is one which deeends as much, if

not nore, upon

3 state of mind of the people than it does upon acts of Parliameet, and the very

fact that measures for resumption would need to be debated in Parliament mieht maee

successful resumetion more difficult.
(5) None or us knows what the effect of resunoetion of specie eayrents would

have upon the large mass of capital which has sought refuse in foreign countries, partly

for the sake of security egainst depreciation, partly to esnape taxation, and or
various other reasons.

Then again there would be difficulties encountered in this

country with which you are just es familiar as I am.

In a word however, I ihink

the problem boils down to the simple soeuence of (1) the German settlenent, (2) the

debt settlement, (3) some price readjustment, and (4) a large credit in this

country.

T have no eisoivings as to the adoption of polieles by our System whieh would

facilitate success once the attempt was made.

For exarple, I recall your expressing

much doubt about what I had in mind in the event of a gold export movement which might

very possibly succeed resumption of specie eayments provided there was a large return
of caeltal to Europe from America.

You thought that gold exports would necessitate

inereksing our dieoeunt rates, and I found some of my frienls abroad rather taking this
view which might be regarded as the old orthodox view of eolioy.

attitude, it seems to me, lies in this simple fact.

The error in that

Prior to the war when heavy

exports of gold occurred, bank reserves became impaired and the attitude of the central

bank was invariably to advanee niscount rates and sell securities in the okrket. It
was done to protect reserves which

lite the reverse.

were

becoming deficient.

Our eituation would be

Ne want this gold to leave us and instead of advancing our discount

rate and selling securities, it likely might he neceesary to maintain e fairly low
discount rate and even buy securities.

On the whole, therefore, I rather incline to the view which you see,, to hold
that once resumption is effected, say, in England,

there is euite likely to he a gold

export eoveeent and that our gold problem would eretty soon solve itself. Furthermore,



Profesaor Bullock

In.

May 18, 1924.

r very fact ef our having a large export moveeent of gold would at once put the
Poserve Bank in absolute oozeand of the eoney eerket because of the Increased borrow-

' Ts by Teener banks or increases in our investment account, and the danger of e rut-

way -rice level 'meld be et once eliminated because of our owe: ability to ehea
seeculation by the advance of our discount rate at any time.

I see nothing in your

letter, however, nor have l herd you express the view at tny time that ae adjustment

of international price levels is an eeseetial preliminary to successful resumption of
gold payment in Kurope.

I think we can all retsonably ex?ect that if sterling got

the usual
back to per and were oontrolled by A gold eovement that the minor nations like Sweden,

Rolland and 5witzerand, and poasibly a number of others, would be able to swing into
line very nromAlyso that if the DaWS6 plan were successful and the debter were funded

we might expect to sea a re- sonably stable currency in Germany, sterling at par, the

currencies of a number of the aeeller nations at par, with the French franc and the

Italian lire then to be dealt with by sore capital operation such as reducing the
gold value as eroposed by the devaluationiste.

The Latin recee will be very slow,

a

however, to adopt suchAnlan and I have no doubt that tbe franc and lira for anee years

will be afloat without a hitching post.
This letter is very hastily dictated and is no more than thinkiag aloud,
is quite t confidential expression of opinions which are in my mind *hien I really
have not formulated very carefully.

pith nest regards,

I hoe to zee you before long.

leve
Yours sincerely,

Professor Charles J. Bullock,
Harvard University,
Cambridge, itare.
BSAM







June 9, 1924

Dear Piofeesor Bullock:

I expect to be in New York all this week.
fhy don't you telephone the bank on arrival. Friday morning
so that ice can make an appointmsnt.

Yours sincerely,

Professor Charles J. Bullock,
Harvard University,
Cambridge, Mass.
. NM

June 26, 19?4.

der Profe. ;or Bullock:
think if we /r.d hvd stenogr-phie record of the etctemeat
I in...de at the dinner t my ..portment, you would find on referring to it

that I took the ; o tion th:t t the rte tt which I h
tod zcold
would likely come to u-, it ould be poesible for the Federtd
.,,yo-,tem, with the metns then

t ita comm.,nd,

5nd

o 1r

ith) could

3ec - to check the inflt.tionP.ry tendency of further import.; of gold
for yeor or two.
...

The onlj poseible modificoAion which I would now m9ke in
view of developmenti.4; since the. dinner would be th,t my eotim..te of the
omounte of gold which were likely to t,e received
to.re to b.ove been
bit too low, due p:=,...rtly to some gold reeouroec ro:4 of which I
then hA no knowledge, i,>nd 2ortly to the mther unexpected onlbrgement
of production, prinoioolly from ;.iouth Afric. lhere 11,8 Ll so been
3ome cli4..nge in our tiomE,etic i,itua.tion in the vo,y of n. let up of bu.,;1ne, which mAe5. the k.roblem little more difficult tkvon it woe.

thot, on the wholoe, I think N. correit eio..taneot of my polition
would be thA gold infltion, o celled, le not r..n imenediote mentoe,
but if gold continue
COMO it it 011 UitiNtAbly be menoce, nnd
juat hoT. for in inflroLion'Iry period could be ..itE.ved off depend6

ulon the t.mper of the public

portly upon our policy Aid p. rtly

upon the f.iuentity of gold which .4e receive from now on.

Im

.poor proji1itt4mi do not like to pin my :elf down to
,re, t.nd, ujy, thi i *1u:A n expreesion of a:471ton.
And my opinion, I 911:.poeie, i. no better than your, or '.4ny other
o.;.tion. If you N 1 1 rec,..}.3.1, the di cuion t my op,rtment
entirely prediooted upon the likely gold movement, - concerning A'hich
there
con.eidAreble difference of opinion. The fct re ttuA
It hoe been f.i.r in excese of whA buybody ct the dinner eatimr,ted
month-- or yv.

wof:1

,-143

po

i ty.

'Ancerely yours,
Froieozor t;u:,..1.1ea a. ou.tiock,
Chodrmtd, Committee on economic 118496mM:4i,

liarvrd Univer3ity,
Cmbridge,
BO. Mil




August 13, 1924.

Dear Profeesor Bullock:

Your letterer August 11 ie just received. At the moment there

is nothing in the bank which right be of interest to Mr. Angell, although
as you know, our work fluctuates a good deal and we now and then have

specini matters to deal %ith where outside help can be used to advantage.

But in any event I wilt be delighted to see Mr. Angell, and if' the course

a his studies brings him at All in contact with the aarfaira of this
bank, I hope he will not hesitate to call upon us for help.
Possibly you will be good eaoash to give him a c'Ird to me and
hen ha coues to New York I will have a chat with him.
Yours sincerely,

Professor Charles J. Bullock,
Harvard Uaiversity,
Cambridge, Naas.

88. '1




P`

Form 1228A

11111C11,!.rge to the account ot




13,,An

St. rnn6.,

1R 111R.RBRI1

St.

CLASS uF SERVICE DESIRED

NO.

CASH OR CHG

TELEGRAM

DAY ' -ITER
CHECK

NIGHT MESSAGE
NIGHT LETTER

Patrons should mark an X opposite the class of service desired;
OTHERWISE

THE

TIME FILED

MESSAGE

WILL BE TRANSMITTED AS A
FULL-RATE TELEGRAM

NEWCOMB CARLTON. PRESIDENT

GEORGE W. E. ATKINS. FIRST VICE-PRESIDENT

Send the following message, subject to the terms on back hereof, which are hereby agreed to

August 27, 1924

---

Professor Charles J. bullook
Harvard University
Cambridge, Mass.

Can you give me Persons address

Please reply collect
Strong

1,74..

ALL IV
To guard against mistakes or delays, the sender of a message should order it repeated. that is., telegraphed back to the -originating office for coniparison. 7,- this,
ation
one-half the unrepeated message rate is charged in addition. Unless otherwise indicated on its face, this is an unrepeated message and paid for as sue% in c.
whereof it is agreed between the sender of the message and this company as follows:
The company shall not be liable for mistakes or delays in the transmission or delivery; or for non-delivery, of any message received for.till*Mission at the unrepeated-message rate beyond the sum of live hundred dollars; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of -anPmessage received for
transmission at the repeated-message rate beyond the sum of five thousand dollars, unless specially valued; nor in any case for delays arisiag from unavoidable interruption
in the working of its lines; nor for errors in cipher or obscure Messages.
In any event the company shall not be liable for damages for mistakes or delays in the transmission or delivery, or for the non-deliviery, of any message. 'ther
caused by the negligence of its servants or otherwise, beyond the sum of five thousand dollars, at which amount each message is deemed to be valued,unleks a grea value
is stated in writing by the sender thereof at the time the message is tendered for transmission, and unless the repeated-messaie rate is paid or agreed to be paid, and an
additional charge equal to one-tenth of one per cent of the amount by which such valuation shall exceed five thousand.dollars.
The company is hereby made the agent of the sender, without liability, to forward this message over t.4,wies of any other company when necessary to reach its
destination.
Messages will be delivered free within one-half mile of the company's office in towns of 5,000 populatioktor less, and within one mile of such office in other cities
or towns. Beyond these limits the company does not undertake to make delivery, but will, without liability, at the Ander's request, as his agent and at hisexpense, endeavor to contract for him for such delivery at a reasonable price.
No responsibility attaches to this company concerning messages_until the same are accepted at one of its transmitting offices; and if a message is sent to such
office by one of the company's messengers, he acts for that purpose as the agent of the sender.
The company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the message is
filed with the company for transmission.
It is agreed that in any action by the company to recover the tolls for any message or messages the prompt and correct transmission and delivery thereof
shall be presumed, subject to rebuttal by competent evidence.
Special terms governing the transmission of messages under the classes of messages enumerated below shall apply to messages in each of such respective classes
in addition to all the foregoing terms.
No employee of the company is authorized to vary the foregoing.
THE WESTERN UNION TELEGRAPH COMPANY
tNCORPORATED

NEWCOMB CARLTON, PRESIDENT

CLASSES OF SERVICE
TELEGRAMS
A full-rate expeditedservice.

NIGHT MESSAGES
Accepted up to 2:00 A.M. at reduced rates to be sent during the
night and delivered not earlier than the morning of the ensuing business day.
Night Messages may at the option of the Telegraph Company be
mailed at destination to the addressees, and the Company shall be
deemed to have discharged its obligation in such cases with respect
to delivery by mailing such Night Messages at destination, postage
prepaid.

DAY LETTERS
A deferred day service at rates lower than the standard telegram
rates as follows: One and one-half times the standard Night Letter

'ate for the transmission of 50 words or less and one-fifth of the initial
rates for each additional 10 words or less.
SPECIAL TERMS AUPLYING TO DAY LETTERS:

In further consideration of the reduced rate for this special Day
Letter service, the following special terms in addition to those enumerated above are hereby agreed to:
Day Letters may be forivarded by the Telegraph Company as
deferred service and the transmission and delivery of such Day
Letters is, in all respects, subordinale to the priority of transmission
and delivery of regular telegrams.
Day Letters shall be written in plain English Code language
is not permissible.
c. This Day Letter is received subject to the express understand-




ing and agreement that the Company does not undertake that a

Day Letter shall be delivered on the day of its date absolutely, and
at all events; but that the Company's obligation in this respect is
subject to the condition that there shall remain sufficient time for
the transmission and delivery of suOh Day Letter on the day of its
date during regular office hours, subject to the priority of the transmission of regular telegrams under the conditions named above.
No employee of the Company is authorized to vary the foregoing.

NIGHT LETTERS
Accepted up to 2:00 A.M. for delivery on the morning of the ensuing business day, at rates still lower than standard night message
rates, as follows: The standard telegram rate for 10 words shall be
charged for the transmission of 50 words or less, and one-fifth of
such standard telegram rate for 10 words shall be charged for each
additional 10 words or less.

SPECIAL TERMS APPLYING TO NIGHT LETTERS:

In further consideration of the reduced rates for this special Night
Letter service, the following special terms in addition to those enumerated above are hereby agreed to:
Night Letters may at the option of the Telegraph Company
be mailed at destination to the addressees, and the Company shall
be deemed to have discharged its obligation in such cases with respect to delivery by mailing such Night Letters at destination, postage prepaid.
Night Letters shall be written in plain English. Code language
is not permissible.
No employee of the Company is authorized to vary the foregoing.




November le,

Wy dear Prolennor .3ullock:

or the 18th
irave bean much interested in your
Unfortunately, a very busy period followinstant just received.
e week before, prevents
ine fliy absence in ,i,:ainbt.on last 'iTeei. gme
my reply in $..; in detail , wbich I shall hope to do When I see you in
irew 'fork ats4L month.

organisation

fihd that some of my 4,6 coeis.tee. share :Its viei, that
c!ublicetions over which you preei(1e

can be of CtiMe ,reater vaiuo iiopiiehing their purpose if it
your ,,esociatee to :y,,ke
some
were possible for yet; or i

more frequent visits to Neu lork to discuss the point of view Ivhich
you develop more often in reading iltenature than by personal con-

t4ct.

hav a high regard
Illsh ao s: cri ti oi beyslause we
for the k,rest work of your Gommitteis and the Influences -.Alen it
su.,,;6eatis:inie izply 3,11 ivi.inc.e of our appre.
ci

ThLak you v sry twuch tor wri Lint .

Tonne, sincerely,

ChArleo J. Bullock, Esq.,
C!-cdr.riari, Coc,iLtc.c

liarvard Univ ersity,
Galabriut,,e,
B8.143

u

ciüc

earch,




December 1, i24.

My dear Professor Bullock:
At the moment kr. Strong,' calendar le not filled
for the time you plan to be in New York, except on Thureday
th5.t yo. name
afte;noon ri Friday morning. So h
the time which will be most convenient to you and he will

hold it open.

But, if it i 9 'Ix/pc:4,61U t, for you to tell yet what
your New York appointments will be, will you not telephone on
-rival, 4en , meeLing convenient Lo bot,h you nd Mr. Strong
can be arranged.

In any event, Mr. Surong is hopeful that you will
be at Mr. Young's .diraler, ,then he may pou,sibly see you, although

the indications are that the ts_loorf is to be well filled on
that nighr.,.

Very truly yours,

Seer :-tary to

Mr.tienj. Strong
Professor Cht,rles J. Bullock,
Harvard University,
Cambridge, Mass.




February 27, 1925.

Dear Professor Bullock:

That work of art of the early Renaleeance nae just reached
Of course, I accept your etatemeat as to its genuineness and as
me.
to t'r,e period, although had it reached me eithoet that unqueatiohed
certificate of character, 1 might have had doubts as to whether it was,
in fact, a product of an artist of the early Renaissance.

As I recall, the period was characterized by a certain lack
of imegination and of perapeceive, but had highest qualities of technique
In color and drawing. This masterpiece does, in fact, exhibit a degree
of imagination and perepective quite beyond what one would expect from

the artiste of that period, and it is a matter of deep regret to me,
as it doubtiese is to you, that the producer failed to affix his signa-

ture to it. But whoever may have been the artist, I am grateful to you

for keeping me reminded of the fact which we so often overlook, - that
some of the greatest productions in 'this world, even in modern times,
are the work of those who prefer not to be known, and who get more enjoyment from what is accomplished than from the credit of doing it.

it.

I hope to see you next week, and am writin you separately about

4th beat regards,
Sincerely yours,

Profeesor Charles J. Bullock,
Harvard University,
Cambridge, Ma88.
BS.LS

(64,4164

)1.4
MISC. 34.1

40 M 8-24

FEC::RAL RESERVE BANK
'F NEW YORK

ika

?'Vt.

.c?

BY

111r/SENT

4 Ai,

SEND TO FILES

/0

""7

COPY OF TELEGFkbi
0/-

f'
1IJI4.v

Chtrletl J. Bullock




LT.rv.1rri

ivtu.sity

Csmbristge, Mass.

Your vire

V ry &orry but leslr P'ridty for two months absencs
BENJ. :;TRONG

At-8

>IMAE1 SVFLB:a3F1

a-32'R




AI OA

NROY W31.1

s

.Da_122T

O Y., 03

1 At

JAR3G-TR

October 19, 1927.

Dear Profeesor Bullock:

Both of your letters have come, and while I now expect to be at
the bank both Thursday, October 27 and Friday, October 28, there IP a possibility that I may be in Weshington in advance of the November conference
of the Governors of the Federal Reeerve Benke.

Thursdu is a very busy day for me on account of our directors,
meetine, and even on Friday I coula hardly give an hour's time to discussion,

but I vrill do what I can in the time at my' disposal, and possibly Dr. Burgees
can eel ement for me.

I am not much of a prophet, and you will find me rather unwilling

to attempt anything of that sort as to so remote a period as two years hence;
even tomorrow is hard enoeght

Perhaps in the circumstances I had better not make a specific
e.ppoiritment until I em sure of being here.

Tentatively, however, Friday

morning will be more convenient for me.

'fours very truly,
Professor Charles J. Bullock,
Harvard Univereity,
Cambridge, Mass.




IFIVAIUD UNIII711.1taBlIaTY
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK




W. M. PERSONS

CAMBRIDGE, MASSACHUSETTS, U. S. A.

CHAIRMAN

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

EDITOR

^

A. E. MONROE
ASST. EDITOR

INt-JW LGOTht,..--1Er Y. PRESLEY
--"F.
BUSINESS MGR.

OCT I 0 1921

1.

1921

October 8, 1921.

'Mr. Benjamin Strong,

Governor of the Federal Reserve Bank,
New York, N. Y.
Dear Sir:

As you are a member of the National Unemployment Conference we are enclosing a copy of
a Special Letter dealing with Industrial Unemployment, prepared by the Committee on Economic Research
of Harvard University.
Yours very truly,

HARVARD UNIVERSITY COMMITTEE ON ECONOMIC RESEARCH

1 Enclosure

IETAiLVA1171117) 151NrILVIElEt il=
COMMITTEE ON ECONOMIC RESEARCH
CHARLES .1. BULLOCK
CHAIRMAN

W. M. PERSONS

CAMBRIDGE, MASSACHUSETTS, U.S.A.

EDITOR REVIEW OF ECONOMIC STATISTICS

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER




J. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

December 14, 1922.

Governor Benjamin Strong,
Federal Reserve Bank of New York,
15 Nassau Street,
New York City.
My dear Covernor Strong:

I was very glad to have your letter of
the 11th, and. to know that you were going to Chicago to beard

the lions in their den, which I suppose is located on some vacant caw-pasture in Chicago.

As I thought of you I was reminded of
a cartoon which I cut out of the Paris Herald last February
c

when I was in France, and have managed to find
gallery this morning.

in my art

It relates to the fate of the Ceddes

report on economy and public expenditures.

If I were a car-

toonist, or if we had one in this organization, I would like

to dray, or have drawn, a new picture of the lion in the Daniel's den.

I shall be interested some time in
hearing what really happens at this party.
Yours sincerely,

P. S. Please return this work of art;

CJB/AMB

I need it for my gallery.

IELAit,vAllaiD ITINilvm,ilall'iry
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
CHAIRMAN

W. M. PERSONS

CAMBRIDGE, MASSACHUSETTS, U. S. A.

EDITOR REVIEW OF ECONOMIC STATISTICS

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER




J. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

December 14, 1922.

Governor Benjamin Strong,
Federal Reserve Bank of New York,
15 Nassau Street,
New York City.
My dear Covernor Strong:

I was very glad to have your letter of
the 11th, and to know that you were going to Chicago to beard

the lions in their den, which I suppose is located on some vacant caw-pasture in Chicago.

As I thought of you I was reminded of

a cartoon which I cut out of the Paris Herald last February
when I was in France, and have managed to find
gallery this morning.

in my art

It relates to the fate of the Ceddes

report on economy and public expenditures.

If I were a car-

toonist, or if we had one in this organization, I would like

to draw, or have drawn, a new picture of the lion in the Daniel's den.

I shall be interested some time in
hearing what really happens at this party.
Yours sincerely,

1.
P. S. Please return this work of art;

CJB/AMB

I need it for my gallery.

iEtVAlla T.)
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
CHAIRMAN

W. M. PERSONS

CAMBRIDGE, MASSACHUSETTS, U. S. A.

EDITOR REVIEW OF ECONOMIC STATISTICS

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER




J. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

December 14, 1922.

Governor Benjamin Strong,
Federal Reserve Bank of New York,
15 Nassau Street,
New York City.
My dear Governor Strong:
-I was very glad to have your letter of

the 11th, and' to know that you were going to Chicago to beard

the lions in their den, which I suppose is located on some vacant caw-pasture in Chicago.

As I thought of you I was reminded of

a cartoon which I cut out of the Paris Herald last February
when -I was in France, and have managed to find

gallery this morning.

in my art

It relates to the fate of the Geddes

report on economy and public expenditures.

If I were a car-

toonist, or if we had one in this organization, I would like

to draw, or have drawn, a new picture of the lion in the Daniel's den.

I shall be interested some time in
hearing what really happens at this party.
Yours sincerely,

61-f-x-45,4
P. S. Please return this work of art;

CJB/AMB

I need it for my gallery.

t,



-151N/IV
5?

COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK

W, M. PERSONS

CAMBRIDGE, MASSACHUSETTS. U.S.A.

CHAIRMAN

EDITOR REVIEW CF ECONOMIC STATISTICS

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER




J. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

December 16, 1922.

Governor Benjamin Strong,
Federal Reserve Bank of New York,
15 Nassau Street,
New York City.
ky dear Governor Strong:

I didn't think that the "embattled
farmers" would pull up the paving stones for the sake of
throwing annropriate missiles at Well Street; and I was
very certain that the farmers would not only not went to
hit you, but that you would make a distinct hit with (and
I was therefore not surprised to
not at) the farmers.
receive your telegram of December 15, announcing that reports of your death by violence were greatly exaggerated.

But I will confess that I have been
very anxious that this particular Farmerfest should be a
complete success, and that I am accordingly very glad to
have the evidence your telegram supnlies that you were in
I believe you
good spirits on the evening of December 15.
will feel, after you get home, that you never did a better
job.

With best wishes, I remain
Yours sincerely,

CJB/AMB

(1'4°

°I"),

."." 4,10

.

jNt

7.1%,

ov,

9trro..1,

".
6




TIAlavAnTrD 1131NIIVIERSM
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
CHAIRMAN

W. M. PERSONS

CAMBRIDGE, MASSACHUSETTS, U. S. A.

EDITOR REVIEW OF ECONOMIC STATISTICS

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER




.3.

B. HUBBARD

EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

December 19, 1922.

Governor Benjamin Strong,
Federal Reserve Bank of New York,
15 Nassau Street,
New York City.
My dear Governor Strong:
I am greatly interested in your letter
of December 18.

I knew it would turn out that way, but am

very glad to hear the detail5.

Nothing in the world can ta

the place of a personal contact; and I expect your bank will
presently resemble an agricultural experiment station.
The next time I gO over to your village

I shall surely call upon the most successful farmer in Wall
Street.

Yours sincerely,

a4".

CJB/AMB

9

-HELAR-v.A.nlID i_TATIViERSIVITNY
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
CHAIRMAN

W. M. PERSONS

CAMBRIDGE, MASSACHUSETTS, U.S.A.

EDITOR REVIEW OF ECONOMIC STATISTICS

CHARLES F. ADAMS
NICHOLAS RIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

J. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

January 18, 1923.

Governor Benjamin Strong,
Federal Reserve Bank of New York,
15 Nassau Street,
New York City.
My dear Governor Strong:

I am going over to New York next Vednesday afternoon

to look into the condition ofwinter wheat on Manhattan Island, and naturally
want to call at the Federal Reserve Agricultural Experiment Station and talk
with the head farmer:
Wednesday night I have an engagement.

Thursday morn-

ing I could call at the Experiment Station, and Thursday night I could call at
your house; but Thursday afternoon I have a conference at the Harvard Club,
and shall be tied up.

Friday morning I am going down to Philadelnhis to see

Governor Norris and sore of the other dirt farmers, and find out how slowly
winter wheat grors down in that part of the wheat belt.
If you can see me at any tire Thursday morning or
eveninK, I should be very glad indeed to secure an appointment with you.
course I haven't any reel business, but I merely want to tell you sore of
the things that I don't know about banking.
Yours sincerely,
-

CJB/AMB




Of

TIARvykiitalp

UNwmit--a r11-11111
MAR /

COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
CHARLES F. ADAMS
NICHOLAS DIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER




IDGE, MASSACHUSETTS, U. S. A.

CAM

CHAIRMAN

EDITOR REVIEW OF ECONOMIC STATISTICS

110 Ng. iNairrEsLEy
GENERAL MANAGER

#
Otitit1/4

-"

January 22, 1923.

* Rprrit, vii Air
Vit

Governor Benjamin Strong,
Federal Reserve Bank of New York,
15 Nassau Street,
New York City.
My dear Governor Strong:

I have your very kind note of
January 19.

I would much rather see your farm than

your grain elevator, especially if I can get around
there at the time you eat your dinner on Thursday evening.

I will, therefore, go over to 470 Park Avenue

after our meeting at the Harvard

nub,

and will probably

arrive just before the time the horn blows for dinner.
Yours sincerely,

7-

CJB/AMB

7

vOl

JA.;',2 n

e?6,

VP

Ar

Nctizoi

444/z; 7 -'.100




iNG
rr_13

191'91
Gt,Sr-Mt

CHARLES J. BULLOCK

RIVAL-X/1D 'UNIINVINIIIFIL-Y
OMMITTEE ON ECONOMIC RESEARCH

FitES

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER




W. M. PERSONS

CAMBRIDGE, MASSACHUSETTS, U.S.A.

CHAIRMAN

FEB

'kb Vb
PP

..I. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

Ditt

F. Y. PRESLEY
GENERAL MANAGER

91923

p

January 23, 1923.
ni?

At

EDITOR REVIEW OF ECONOMIC STATISTICS

8.4,4

Governor Benjamin Strong,
470 Park Avenue,
New York City.
My dear Governor Strong:
I am sorry to miss seeing you
Thursday evening, and still more sorry that you find
it necessary to take a vacation in the south.

Mr. Jay has/Ust left the office after a very pleasant call w4h which he honored
us; and he told me that your trip to Chicago and other
things had taken a good dealidut of you.

/

I am writ-

ing this letter principally/for the purpose of saying
that I hope a short vaca

on will be all that you need,

and that I hope the va94(tion will prove not only efficacious but enjoyabl
Yours sincerely,

CJB/AMB

iffixia-vAa?.TD
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
CHAIRMAN

CAMBRIDGE, MASSACHUSETTS, U. S. A.

CHARLES F. ADAMS
NICHOLAS RIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER




W. M PERSONS
EDITOR REVIEW OF ECONOMIC STATISTICS
-I.

B. HUBBARD

EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

June 16, 1923.

Mr. Benjamin Strong,
Cragmor Sanitarium,
Colorado Springs, Colorado.
My dear Mr. Strong:

Last week I went over to Manhattan Farms
and called at the grain elevator down on Nassau Street, where
Since
you used to hang out, but are no longer to be found.
Mr. Jay hadn't anything better to do than talk with me for
about a couple of hours, I managed to extract from him full
information about your present condition, together with the
further information that in his (Jay's) opinion I was responsible for it, by getting you to go to Chicago last November
Jay evidently thought that I ought to have
or December.
known that if the embattled farmers once got you within their
clutches that would either plant som germs in your larynx or
perhaps apply permanent cloture to it.

Whether I am responsible or not, I am certainly very sorry that you are taking an enforced vacation.
Jay assured me, however, that you are getting the upper hand
of the laryngeal disturbers, and said that the prospects were
excellent that you would be back on the job next fall; of
Germs used to be dangerous, but they
course you will be.
haven't much chance these days against modern methods of
treatment, applied in time.
Mr. Jay looked well, and the elevator seemed
Quite a large consignment of
to be functioning as usual.
grain was being delivered out of an armored car (or else was
Probably
being taken away) when I went into the building.
J. P. Morgan, Kuhn Loeb, or Lazard Freres were the farmers in
the transaction.




B. S.

2

6/16/23.

I found the Manhattan farmers whom I
called upon considerably more cheerful than they were in
April, but not as cheerful as I found them the first week
in March.
Something is always happening to take the joy
out of life for the people of Manhattan Farms.
I am
glad that I live at this way station on the main line
from Manhattan to Labrador.
Manhattan I think I should join the farmer-labor party.
The enclosed Letter tells you how the
crop situation looks to the Harvard Farm Service.
From reading the Federal Reserve Bulletin for June, I infer that the Washington people take
a view of the situation that is very much like our awn.
It may be that when you return in the fall you will find
prices rising again and bank loans increasing; and then
again it may be you will not.
It will be either the
one thing or the other, or else things will be moving
sidewise, or something else; and nothing in the situation justifies any less definite or less confident
We certainly feel confident here
forecast than this.
that something is going to happep, or else nothing at
all will occur, between now and the time when the Manhattan grain crop is harvested.
I hope this letter will find you in
as good condition as Jay has described, and that your
health will be completely restored by fall.
Persons
joins me in sending very best regards.
I remain

Yours sincerely,

/,
CJB/AMB

If I had to live

11JAILxWAIID UNIFS7

It=

COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
CHAIRMAN

CAMBRIDGE, MASSACHUSETTS, U.S.A.

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

W. M. PERSONS
EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

July 25, 1923.

Governor Benjamin Strong,
Cragnor Sanitarium,
Colorado Springs, Colorado.
My dear Mr. Strong:

I was glad to receive your letter of June 28,
and still more pleased to observe the vigor with which you came
back at me.
I fully agree with what you say about a change
having taken place in the control of credit; but I an not so sure
whether your argument is made at our money curve or at Leonard
Ayres's deductions from post-Civil-War experience, etc.
Perhaps
you had both things in mind.
I would like to sit down with you and talk
this point over at length; and when yofi get back to New York I
shall hope to have an opportunity of doing so.
If you had our curve in mind, I may say that
we realize that ultimate control of credit in the United States
does not rest where it rested in 1913, and that we know that the
Federal Reserve System is, after all, a new machine concerning
7re figure in this
the workings of which no one can be certain.
office that we can judge pretty well what the policies of the
Boston, New York, Philadelphia, Cleveland, Chicago, Minneapolis,
and San Francisco reserve banks will be; concerning the Washington end of the System we are not so certain.
If, however, you had in mind the changes that
have taken place in the control of credit since post-Civil-War
days, I may say that we have for a long while taken these changes
into account in our forecast of the probable course of commodity
prices during the next ten years.
I should like also to talk over with you your
plan for regulating the operation of the Federal Reserve System.
I certainly sympathize with the purpose of that plan, and perhaps




B.

S.

2

7/25/23.

0
you could satisfy me as to its practical operation.
Young and Persons, who are in town this summer,
were glad to have news of your favorable condition, and want to
Just now we are thinking about
send their best regards to you.
the possibility of an increase of rediscount rates next fall, and
the probable results of such increase.
We speculated about
long talk about this yesterday afternoon.
the possibility of increasing rediscount rates to 5 per cent
without having this action taken as a signal for general liquidaIt ought not to be so regarded necessarily, but there is
tion.
The
a distinct possibility that it may be, none the less.
country has got to have more experience with the Reserve System
in normal times before one can be perfectly sure that reasonable
Precautionary measures will not be taken as serious danger signals.
In this office we are just now waiting to find
out whether we have been false prophets or true prophets during
The last ten days or a fortnight have
the last three months.
brought some evidence that the recession in business is nearing
its end and will be followed by an upturn in the fall; but no one
yet knows what is going to take place.




With very best regprds, I remain
Yours sincerely,

CJB/NVB

Fred Curtiss

iliTAIRVARID
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
CHAIRMAN

CAMBRIDGE, MASSACHUSETTS, U.S.A.

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAyER

W. M. PERSONS
EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

August 16, 1923

Governor Benjamin Strong
Cragmor Sanitarium
Colorado Springs, Colorado
My dear Mr. Strong:

Perhaps the enclosed cartoon has come to
your attention, but I don't want to take any chance of your
missing it, and therefore am sending it along.
I was very glad to note the fighting spirit in your
letter of August eighthiand if you only please come home
By the
perfectly well, we will get up a whale of a scrap.
way, J. tells me that it is possible for a fellow to go to
Colorado Springs and still get out and see a prize fight.
To be serious for a moment,- I may say that the last
three or four weeks have brought clear evidence that commodity
prices in general have stopped recedink and are beginning to
take a little turn upward.
The next three or four weeks will
probably bring quite a change in business conditions and business sentiment.

With best wishes, I remain

Sincerely yours,

CJBM




TIAXIRVAIR ID

ILTINKVIEllall'J1A7

COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
CHAI BRAN

CAMBRIDGE, MASSACHUSETTS, U. S. A.

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERiC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAyER

W. M. PERSONS
EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

September 18, 1923.

Mr. Benjamin Strong,
Cragmor Sanitarium,
Colorado Springs, Colorado.
My dear Mr. Strong:

I am greatly interested in your memorandum of September 12, and want to take a few days to digest it before replying.
I will not show it to anybody; but I want to ask whether you would
like to have me show it to Allyn Young and Persons, with a view to
getting their reactions. I don't request this, but merely suggest
it because you may decide that it is worth while to get these fellots' reactions.

I was over in New
a fortnight ago, and
called at the grain elevator; but Farmer Jay was out of tom, and
Dairyman Snyder was in Europe or some other place.
Shepherd
Case had gone down to the Battery to make sure that none of the
lambkins down there wore wandering off on the Coney Island steamer;
and therefore I didn't get much of anything except a pleasant reception from the watchman and kind smile ifrom the .messenger boy.
These, however, made me feel that conditions at the Bank were quite
normal, or otherwise, or something of that sort; which is to say
that everything was as serene as could be expected in a Federal
Reserve Bank situated so near the recoriized financial district of
the universe.
Yours sincerely,

v

CJB/AMB




.

( c-,

AitIvAnn

C:71

COMMITTEE ON ECONOMIC RESEARCH
CHARLES .1. BULLOCK
CHAIRMAN

CAMBRIDGE, MASSACHUSETTS, U. S. A.

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

W. M. PERSONS
EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

September 24, 1923.

Er. Benjamin Strong,
Cragmor Sanitarium,
Colorado Springs, Colorado.
My dear Mr. Strong:

Yesterday (Sunday) I found the first opportunity I
have had to give your letter of September 12 the careful study it required, and to look up the very interesting statistics to which you
It is needless to say that I spent a most intercall my attention.
I had known, of course, that the
esting and profitable afternoon.
Reserve Banks had done something to support the bond market when it
was very weak, and that about a year ago now the Banks began to reI had not, however, realized the
duce their security holdings.
full importance of the changes in the earning assets of the Reserve
Banks since January 1922; and I mender how many other people have
done so.
Another thing that mats borne in upon me yesterday
was that, when I gave your letter a first reading immediately upon
its arrival, I did not fully appreciate how confidential some parts
of it were.
As I wrote you last meek, I have kept the thing to myself; but if I had fully understood your letter then, I should have
hesitated to ask your permission 'co
show it to Persons and Young.
I now appreciate that you may not want me to show the letter to any
one.

I have also had to think very carefully about
Amhat use I could properly make in our publications of the conclusions
which a study of the earning assets of the Reserve Banks led me;
and have concluded that all that we can now do is merely to point out
that the increase of rediscounts by member banks has been offset by
reduction of other earning assets of the Reserve Banks, so that the
Reserve System has not expanded.
Of course we had already noted
that the note issues of the Reserve Banks had remained almost stationary, and had called attention to the fact that the gold which
has been coming into the country has been passing into circulation.
From now on, I shall note with increased interest the changes in
the security holdings in the Reserve Banks.

Ito

-t




B. S.

9/24/23.

2

The theory of Federal Reserve operations which you
present is to some extent contained in the article which Carl Snyder
On page 284 of
published in the American Economic Review last June.
that artide,Alenproposes that the Reserve Banks should increase or
decrease t ei7Foidings by an amount corresponding to net gold imports
/I do not infer from your letter that you would agree with
or exports.
some of the other things that he said in his article; for example, paragraph 4 on page 284, in which he proposes that rediscount rates be
raised or lowered according to changes in the general price level.
I agree fully with what you say about the complexity
of the forces that came price changes, though I think I might state
I admit also all that you
1 some of the points somewhat differently.
I feel very doubtfyl,
about the difficulties of price regulation.
if the Reserve Banks can effectively control the situati67'
through increases or decreases in their security holdings or in their
.J
purchase of bills in the open market.
My study of the very interesting figures to which
you call my attention yields the following results: On September 20,
1922, the Reserve Banks held 439 millions of securities; and on SepBetween the two dates,
tember 19, 1923, they hold only 93 millions.
also, their bills bought in the open market seem to have decreased
Thp decrease in these two items
from 220 millions to 171 millions.
is 395 millions; and meanwhile rediscounts appear to have risen by
some 330 millions, the net shrinkage of earning assets being some
45 millions.
If gold imports had come to an end, the policy
might be considered a success; but imports of gold are not at an
and if they continue fq.LeaSejLaentlas, more the policy will fail,
Iend,
because the security holdings and the bills bought in the open market
I suppose that the vanishwill have approached the vanishing point.
Banks
/ ,nriighi= 111,1v=dtir:Mp4
1etles1;theirc1. s
biTitlrolns Orsorp:: market
r
On SeptemI bills, or dispose of the last dollar of their securities.
ber 19 the Reserve Banks have only 264 millions of securities and
bills bought in the open market; so that if gold imports continue six
If, howmonth longer the Banks would have no cards left to play.
ever, gold imports come to an end before then, and gold exports begin,
1 all.the cards would not have been played before this phase of the game
had come to an end.
As the figures now stand, I am wondering how
longer the plan, assuming it to have been effective, will continue
Imuch to be capable of operation.
.

)k

21:s

rtilics

/

Another idea that is strongly impressed upon me

/ is that if and when the movement of gold turnsmogivard, the Resere




B. S.

3

9/24/23

of increasing bond holdings and increasing purchases of bills
in the open market would not prove disastrous.
Suppose that next
Ipolicy
January, before the portfolios of the Reserve Banks become bare, and
therefore before the plan has broken down, a gold export movement of
considerable proportions and considerable duration begins.
It seems
to me that if, with gold flawing out of the country, the Banks should
begin to increase their purchases of bills and securities, they would
either very rapidly reduce their reserve ratios to a point that would
necessitate an increase of rediscount rates or else mould begin to
increase their note issues, which mould take the place of the gold
that is leaving the country.
Such increase of note issues would
make the reduction of the reserve ratios quite gradual, and postpone
for perhaps a considerable time the inevitable increase of rediscount
rates; but in the long run rediscount rates would, even in this case,
have to be increased unless it was desired to have the outward movement of gold go on almost indefinitely.
i

el_

1

I

i

What I have said comes to this; that if imports
continue for a fevrmonths longer, the Reserve Banks will not have
any more bonds or bills to throw upon the market, and will face the
necessity of an increase of rediscount rates if they are to continue
to regulate things at all.
And, upon the other hand, if a prolonged export of gold should begin, rates mould have to be increased
sooner or later unless the Banks wantedito continue to issue reserve
notes until by so doing they brought their reserve ratio down to the
legal minimum.
Nhichever may things turn out, it seems to me the
Reserve Banks will finally be thrown back upon the other policy;
namely, increasing rediscount rates.
One other question is also suggested by study of
the figures.
I notice that, between November 22, 1922, and December 27, 1922, the security holdings of the Reserve Banks increased
from 295 to 458 millions.
There may have been some special reason
for this; but it was a violent departure from the plan of control-

ling things through decrease of earning assets.034it took place
when gold was still coming into the country.
The reversal of
policy at that time raises the question whether, in the then existing condition of security markets, the Reserve Banks were able to
adhere to the policy of reducing their security holdings and open
market operations.

4

Between August 22 and September 19 of the present
year, I notice that the security holdings of the Banks have increased
by 9 millions, while their bills bought in the open market have decreased by 6 millions, the net increase of these earning assets being
3 millions; and I am wondering whether further similar increases will




B. S.

4

9/24/23

be shown during the next few weeks.
The security market is now in a
fairly weak condition; and the private information we get from New
York and Boston is to the effect that the condition of the bond marThe expansion of these earning assets between
ket is fairly bad.
the dates I mention was, of course, so small as to be unimportant;
but I find myself wender'n,- reatly whether some further expansion
is now to take place, or he policy of reduction of those assets
will be resumed.

Altogether I feel very doubtful whether the plan
you outline will work without changes in rediscount rates.
Perhaps
you did not mean to say that it would work without such increase of
I can see that changes in your security holdings and open
rates.
market operations are a valuable adjunct to changes of rates; but I
Perhaps you did
doubt if the plan will work without rate changes.
not intend to imply that it would.

e

/

11)e

It is very unsatisfactory to try to thresh out
such matters as this by correspondence; and on this account, as well
as on others, I am very glad to learn that you expect to be home on
November 1.
Not long after that date your office door will be
darkened by the shadow of an earnest inquirer after knowledge, which
shadow hasn't grown any less since I saw you last winter.
It is
very pleasant to know that you are coming back in good shape and so
much interested in economic and banking problems.

With best wishes, I remain
Yours most sincerely,

CJB/AMB




IT

ILTAILWAntit'irar
COMMITTEE ON ECONOMIC RESEARCH

CHARLES J. BULLOCK
CHAIRMAN

CAMBRIDGE, MASSACHUSETTS, U. S. A.

CHARLES F. ADAMS
NICHOLAS RIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

W. M. PERSONS
EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

October 28, 1923.

Governor Benjamin Strong,
Federal Reserve Bank,
15 Nassau Street,
New York City.

ACKNOWLEDGED
NOV 1 - 1923

R S.

Kv dear Mr. Strong:

I was very glad to receive your letter stating that
you were on the point of leaving for home, and am very glad to bid you
-welcome back to your village.

When you take a walk out in your front garden you
find that the bloom is off the stock market; but,if you continue
an until you come to the bond market, you will find that the poor little bonds and bondlets are beginning to raise their heads,
Perhaps
this is because they know that on October 17 the New York Federal Reserve Bank only had about twelve millions of bonds and notes left to
drop upon them.
You will find business in the doldrums, but money
disgustingly cheap, so that the outlook for a business depression is
really not as good as some of the brethren mould like to have it.

will

I enclose a copy of your last long letter, which
All that I want to say in
of course I read with great interest.
this letter is, first, that I am mighty glad you are returning in
such good condition; and, second, that I expect to descend on your
Bank vi et armis some time next Thursday or Friday, when I expect
I am very anxious to have a long talk with you,
to be in New York.
and appreciate that, after such a prolonged absence, you may be very
busy at this time so that you cannot give me more than a few minutes.
If this turns out to be the case, I will make another trip over to
your village at a later date, 'when we can really get a chance to
talk things aver.
Yours sincerely,

C JB/AMB







'trest cz:.Lo5

Q1-11t-r4-3t139

Ijj uzips333d

CABLE ADDRESS -PRINCEGEO-

Prince George Hotel
Fifth Azle. 6' -213th Street New 'WA
GEO. H. NEWTON, MANAGFR

-4/1-7

X
sr- 4"--1

X ,,e

/e

-t
5




C

1

7s- -

CABLE ADDRESS "PRiNCEGEO"

Prince Georgellotel
Fifth Ave.

6'.28th Street New Ynk

GEO. H. NEWTON, MANAGER

c.,

b
C

"ot

m..Z

-,./.-

gok

Irr

9



-.4r,

ra,11

,-----

CABLE ADDRESS PRINCEGEO"

116ceGeorgeHotel
Fifth Ave. Clath Street New York
GEO. H. NEWTON. MANAGER

_r

cY-

.5"

.`j

,

d16---.Alr




4.-"- do(
40. 41011.04e .04F

ot.




CABLE ADDRESS ''PRINCEGEO"

.

rrinceGeorgeHotel
Fifth Aire. El'.28th Street
GEO. H. NEWTON,

New)Lrk

MANAGER

z.
-çtZ:.*

L.A.
.9
..4

Vt/

5

5

(Lze
Vie (

0-v

17,,g,

,e,xci,

.

LAyi)

A-q4,

o*,

14)4jrzi4jwxq
J-e1-04-A4,

/

Zei-Le

O'/Le

14411, ai3O-124',/

4

-14,7, /746e,t,
,

Aldi? CIAV.,a6A414 AAweelf

atli jaiit* CiAltil a

difq /1,4 ILIA, 64J ,i44_

h, 7z.1

/244

)

/14

Aimat

Al L, L

)

'44

-

./tV
eoleAd AeNI/e

)6,wp

6(/-71,e/fpc,1A-11 y )a4'

q4

,r(41e-aL_fexj2&7,2 ).4,74)-

9,f4Trt/

e

/144,--7/

Avipto,

J/jL4vd
le4, iMLe

It 607141
diAlk
iaht/ f/ew

(Li 6,,ekieeawoYe owyriAlvi,4
AeA40-4,
/t,
-

Ad Xeqz-

/A

4

'

644-e




41z.

14

A,tour
yZ/i/aut& 6/A /7Y/Le,

4,

/A44,4

efAilx

71,ati601

rur-t

61"Ck.

AIAJ-eAvik-en,

/t
.) A
2

44.

A4

6)-v-4/1:4' at,,t
ekh-e-v-e a7,71- ,

'

(6,1

44 m A-el.

g-)24,x4 rebvi,4,_
-ete

afrk

1

inimmer

CLASS OF SERVICE SYMBOL
Telegram

Day Letter

ilkiht i':-...

Biiiiit:

WEST
AM H

NL
these three symbols

Lefter

If n0Y18 of
appears after the check (number of

words) this is a telegram. Otherwise its character is indicated by the

symbol appearing after the cheek.

,

18

TE

Ewuome, CARLTON,

PR/

Form 1201

AN ANaWE

IS EXPECT
obf"h

TJNION

CLASS OF SERVICE SYMBOL
Telegram

Day Letter

I

Blue

Night Message

iNZA M

Nite

Night Letter

NL

If none of these three symbols

3ES...)kGE W. E. ATKINS. FIRST VICE-PRESIDENT

appears after the check (number of
words) this is a telegram. Otherwise its character is indicated by the
symbol appearing after the check.

RE-ilVED AT

F107 16
28

CAMBRIDGE MASS 28 1016A
GOVERNOR BENJAMIN STRONG

9xt

FEDERAL RESERVE BANK NASSAU ST NEWYORK

=LETTER RECEIVED MAY
PLEASE TELEGRAPH




I

AM 10 56

NY7

SEE YOU AT ANY TIME FRIDAY NOVEMBER 30

IMMEDIATELY,
:C J BULLOCK.




Blue

viirgSTEkilStsa UNION

Nite

WESTERN UNION

CLASS OF SERVICE SYMBOL
Telegram

Day Le.'
Ni(

'sage

NL

Night

appears after the check (number of
words) this is a telegram. Other. .
wise is coaracter is no catea Dy me.

symbol appearing after th check.

\-:1
.

EVIfftMA CARLTON, PRESIDENT

SYMBOL

GEORGE W. E. ATKINS, FIRST VICE-PRESIDENT

Day Letter

clue

Night,. ass

AM

E

If none of these three symbols

It ,43E

1.021,til.

Nits

Ni

tL

If nn,A# th
aPP

three q 'is
eck (nute f

rs after th

this islegram. Vi
icat ... ;
wiselfb Character
wo

er the,ahe ,

switolitppearin

-rc\tk
RECEIVED At

BAYIZ 21
CA CAMBRIDGE MASS 5 1 C2 OA

GOV BENJAMIN STRONG

FEDERAL ,RESERVE BANK NASSAU ST NEVJORK NY:

i

MORNING AND HOPE TO
=SHALL CALL AT BANK TOMORROW
2 Psr'''

OMETIMF THAT AFTERNOON STOP

APPOINTMENT WI

,C

TO

MOR N I NG

W71(.111:4t

--

HA

u

Ve.
çr

ink

GET

111111

J BULLOCK.

WILAILIVAIRID UNIVIEIR'SITY
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
cetAIRMAN

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

CAMBRIDGE, MASSACHUSETTS, U.S.A.

ACkNOWLEDGED
DEC 13 1923

F IERA

EDITOR REVIEW OF ECONOMIC STATISTICS

B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

December 8, 1923.
Governor Benjamin Strong,
Federal Reserve Bank,
15 Nassau Street,
New York City.
My dear Governor Strong:

Your letter of November 27 has remained unanswered
because I had hoped to see you very shortly, and so to avoid discussion at
Either I differ from other people, or else
long range by correspondence.
I have a special facility for saying things in such a manner as not to convey quite the ideas which I wish to convey.

In the first place, I may say that I had noticed
the recent increase of open market operations of the Federal Reserve Banks,
which I had supposed might indicate nothing more than a desire to keep on
earning their dividends at a season when rediscounts rere diminishing.
But I saw last Tuesday a Washington dispatch to the Journal of Commerce to
the effeot that it was expected that extensive purchases are to be made in
the market in the immediate future; and this naturally set me wondering.
Since I had to go to New York some time this, month, and should have difficulty in going later, I rent over last Wednesday night, hoping that you
would be back by Thursday or Friday.
I had a very pleasant talk with Mr.
Jay, but regret that I did not see you.
I had appointmen
that made it necessary for me to be home today; otherwise I should have
waited until Sunday night in the hope of seeing you.
Under the conditions, I can simply write what is
on my mind, and what I would have said to you if I had been able to see
you.

There is real danger of gold inflation through
continued imports of gold; and up to November you were successful, by a
bold stroke, in holding the thing off.
Unfortunately for the policy,
it now seems that unsettled conditions in Europe and discussions of a
capital levy in Greet Britain are likely to continue to produce large
gold imports for some months to come.
Meanwhile you have used up about
all of the ammunition with which you started, and have got to find something else to do.
At such a juncture it is surprising to see open market operations begin to increase.
This development has led me to think further
about the idea which has been considered by you but rejected; namely,
the purchase of acceptances in the London market as a means of preventing gold coming here and inflating us.
I understand fully the difficulties of a political nature that such a policy would encounter, but




2

B. S.

12/8/23.

Perhaps the thing might now
would like to make the following suggestion.
If gold continues
be done with benefit rather than detriment to the farmer.
to come here, it will certainly produce inflation and will increase the
Upon the other hand, if you were to
prices of the things the farmer buys.
adopt the policy of buying bills in the London market, you would be doing
something that would tend to inflate the markets where the farmer sells his
'Would it not be for the farmer's interest to have gold inflastaple crops.
tion in the United States avoided, and to have bills bought in the London
market with the possible effect of improving the prices that the farmer gets
I concede that the amount of such purchases which
for his export surplus:
you might make would be relatively small, and might make no substantial difUnder
ference over there; but the tendency would be as I have suggested.
existing conditions, therefore, is it not possible to reopen the question of
the advisability of purchasing bills in the London market?
Incidentally,
such a policy would help to solve the problem of meeting the expenses of the
Reserve Banks.
I had hoped to give you an opportunity to shoot this
full of holes without exposing my ignorance in a written communication; but
since I did not see you I have got to make this possible exposure of my ignorance.
I am taking it for granted that there is nothing in the law that
prevents you from purchasing the right sort of acceptances abroad.
If the
law prevents you from doing so, then of course my ignorance is all the greater.

I should be considerably disturbed in mind if I should
see the Federal Reserve Banks increasing greatly their purchases of government
certificates during the next thirty to sixty days, beoause it does not seem to
me that either security or commodity markets need to be stimulated at this
I may be wrong on this point; but we are inclined to think here that
time.
the first three months of next year will be a period of considerable activity
in business, and that it is even possible that by April there will be need of
some restraining influence.
To stimulate things now might make the need of
a restraining influence in April all the greater; and I should consider it
unfortunatelbf the doctor to stimulate the patient and then be obliged to administal4edatives four months later.
Doubtless the Reserve Banks could purchase -a-rfoderate amount of securities in the immediate future without stimuan appreciable degree, and if that if all that happens my
lating
fears will be unfounded; but I am disturbed at the suggestion in the 7ashington dispatch to the Journal of Commerce to the effect that a resumption of
purchases in the open market by the Reserve Banks may be intended to obviate
a necessity for a change in rediscount rates, which change, evidently, would
be in a downward direction.

t717777

So far as I can see, security and commodity markets
ought not to be stimulated by reductions of reserve rates or increased open
market purchases on a scale sufficient to make money cheaper than it would
otherwise be.
If you have different information on this point from -what I
have, you would naturally not agree with me, and I would probably not undertake to convince you that my information is better than yours; but I merely
state my views for what they are worth.




B. S.

;

3

12/8/23.

From what we can learn about the prospects of the
building industry and the plans of the automobile makers, as well as the
general trend of developments in other industries, it may well turn out
that the first three or four months of next year will be very much like
the same months of 1923, with the possibility of a situation developing
which will call for moderate corrective measures by next April or May.
There is one other thing which I should have said
to you if I had seen you namely, that it may be that the reparations
problem is now in course of solution, although most of those who are talking and writing about it think that it is farther from settlement than
ever.
The solution which may be in process of being worked out is the
It may involve the gravest danger
French solution, and not the English.
of another European conflict at some future time; but it may also produce
conditions under which economic conditions in Germany will become stabilized
and will then gradually improve.
The agreements that the French are working out with the German industrialists in the Ruhr will begin to yield some
reparation money; and they will have the further effect of weakening Germany
in the political and military sense, and thereby affording immediate security
to the French, which is probably the main thing that the French have in mind.
It is possible, indeed, that the French policy will result in political and
social disturbances in Germany this winter, which will make conditions there
worse than ever; but if they do not do so we may, by spring, find the Ruhr
industries going ahead again on a basis that will have to be accepted as the
final adjustment for the time being of the reparations problem.
This is a
very tentative opinion, which the developments of the next three months may
prove to be wrong; but I think it is worth derious consideration.

Allyn Young is, I think, planning to go over to New
York some time before Christmas; and I have suggested to him that he should
try to see you while he is there.
I doubt if I can get ov
the early part of January.
Yours sincerely,

CJWAIEB




ilitAnvART) UN-frivimn-nry
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
C.-IAIRMAN

CAMBRIDGE, MASSACHUSETTS, U.S.A.

EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

Deoember 11, 1923.

Governor Benjamin Strong,
Federal Reserve Bank,
15 Nassau Street,
New York City.
My

W. M. PERSONS
EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD

CHARLES F. ADAMS
NICHOLAS RIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

dear Governor Strong:

I have your letter of December 10, and am glad to
learn that the Board will probably publish something concerning its poliEnough has leaked from Washington, both about
cies in the near future.
the plan of oombatting inflation and the matter of handling investment accounts, so that both things have been to some extent the subject of discussion among bankers and others interested since early in November.
There has been, however, surprisingly little discussion, or for that matter
intelligent interest in them, on the part of large bankers.
I have talked
with only a few, and in no case until after there had been a leak at WashWe will, of course, be very careful what we say in our publicaington.
tions.

Even if there had not been these two leaks, it
would be very desirable for the Federal Reserve Board or the Committee
Governors to publish a statement about their policies; and I was very
glad to learn from what you said when I saw you last month that you had
been in favor of proper publicity.
The kind of publicity that these matters get at Washington has seemed to me to be pretty unfortunate.
In addition to things that members of the Board and the Board's employees say,
and in addition to the Tiashington newspaper dispatches, there is a certain
person who makes a business of sending out to subscribers to his service
reports of what he says he has learned from members of the Board about
future policies.
You doubtless know to whom I refer.
Following up the suggestion that I made in Saturday's letter about doing something to inflate the marketsin which the
farmer sells his commodities, it has occurred to me that it is perhaps
not impossible to get some representative of the farm interests to "demand" that the Federal Reserve Banks do something to prevent inflation
of the markets in which the farmer buys, and to inflate the markets in
which he sells.
When we revised the tax lams in Massachusetts some
years ago, we had two delicate matters which we managed by having a demand made upon us that these things should be done, the demand coming
from the quarters that might naturally have been expected to oppose them.
Yours sincerely,

a
CJB/AMB




,,

(-- '

.......4.

/

......,

r,, 4




nARVAA.R. 11) UNIVINAISrlint7
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J BULLOCK

CAMBRIDGE, MASSACHUSETTS, U.S.A.

CHAIRMAN

W. Si. PERSONS
EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDER/C H. CURT/SS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R THAYER

EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

December 15, 1923.

Governor Benjamin Strong,
Federal Reserve Bank,
15 Nassau Street,
New York City.
My dear Governor Strong:

I have your letter of December 11, and if it is Possible to do so will run over to New York some time before Christmas.
But
work in this Office is very exacting; I have company coming; and there are
certain family and personal matters long neglected which are demanding immediate attention; so that I am not at all confident that I can come.
On the other hand, Allyn Young is going to New York
on or about the 17th, and will write you to make an appointment with you.
If the complications I referred to can be disposed of, I can perhaps come
over to New York on December 19, and either see you that evening or see
you some time on the morning of the 20th.
I should have to return to
Cambridge on the afternoon of that day.
It is unlikely that I can do
this, however; and my ability or inability to make the trip will depend
upon whether a certain surgical operation which is in prospect turns out
to be a minor operation or one of intermediate importance.
It pretty
certainly isn't a major operation; but it
troublesome just the same.
.

is

My opinion upon the question put in your letter of
December 11 is probably not worth a great deal; but I am greatly interested in the problem that "teacher" has propounded, and will venture to make
the following statement of my ignorance:
If the Reserve Banks were to buy $100 or
A.
$200 millions of securities in the New
market, and by so doing
effect an exactly equal reduction in the amount which New
City
banks were borrowing from you, you would probably not stimulate
greatly the security market or tend to inflate business by that
operation.
But this answer is predicated on the assumption that
your purchases reduce member banks' borromings,by an amount corresponding to your purohases, below the point which they would otherwise fall to at this season of the year.
If you stay out of the
open markeyediscounts are going to decrease anyhow during the
next thirty to sixty days, and your purchases will stimulate the
market unless they make rediscounts diminish by enough more than
the seasonal amount to offset the effects of your purchases.
If
rediscounts are going to diminish seasonally $100 to '200 millions
anyway, and you do not, by releasing money through your purchases,
diminish them by an additional $100 to $200 millions, you will be
inflating things.




B. S.

2

12/13/23.

In the above answer I have said "New York City
Of course it is true that in the long run money finds its level
banks".
But the money you release
in all the different uses to which it is put.
is going to be put into the investment market in the first instance; and
unless the reduction of rediscounts goes on by banks who are in daily
touch with the investment market, and so presumably effects an amount of
liquidation in that particular use of money equivalent to your purchases
Money does not
of securities, you will be tending to inflate things.
find its way immediately to the same level in all the uses to which it is
put; the security investment part is one use, commerce is another, etc.,
A lot of money dumped into one of these pots doesn't immediately
etc.
affect a general redistribution of money through the underground conduits
that connect the different pots; and if speculative markets are inclined
to be bullish your action will stimulate speculation in securities.
As a means of combatting gold inflation, I rather
doubt if your plan is effective after you use up the original ammunition
In the spring of 1922 the Reserve Banks had some
with which you started.
$500 or :3600 millions of governments, and that stock of ammunition could be
employed effectively along the lines you propose.
When you use up that
original stock, I doubt if you are going to accomplish much in the way of
combatting inflation by buying more ammunition.
If your purchases of securities could compel the banks that are in direct touch with financial
markets to reduce their rediscounts with you, you would not inflate security markets very much; but I guess that if you buy as many as $200
millions of governments during the next sixty or ninety days you are going to stimulate security markets to a very considerable extent, and you
are not going to accomplish anything much in the may of combatting gold
inflation.

You may by this operation accumulate some securities which you can use as a means of controlling security markets, and so
controlling business expansion next spring,if there is need for exerting
such control then; but you will probably have stimulated both things somewhat by your purchases.
I think everything depends upon the amount of
your purchases.
$50 to $100 millions would not stimulate things much
anyhow; but, on the other hand, it would not go far toward combatting
gold inflation or giving you control of the situation next spring.
Whichever thing you are aiming at, you would not want to buy a popgun;
and the purchase of a really powerful weapon would seem to require purchases of government securities on a considerable scale.
$200 millions
would certainly not be a great deal of ammunition.
I have made some inquiries this week about the
price of certificates, and am told that certain issues have recently
risen in price,and that any considerable further demand for such issues
would produce further price increases.
Perhaps these are not the issues
you want to buy.
I shall not be surprised to receive a mark of zero on
this examination paper; but I hope teacher will be as kind as it's in the
nature of such animals to be
CJB/AMB


Yours sincerely,




3C,

.

Rzc.:7gurv

-

,

i.-.GlitC3
fr,4:TG,,)
.T.

t

7 "Wretts

DEC

.

'1923

r

ifitAiRVAIRID UNIVIERSIITY
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
CHAIRMAN

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

Governor Benjamin Strong,
Federal Reserve Bank,
15 Nassau Street,
New York City.

CAMBRIDGE, MASSACHUSETTS, U.S.A.

W. M. PERSONS
EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

December 1, 1923.

Dear Governor Strong:

I have your letter of December 13, and will regard it
It will be very fortunate if a simple statement
as strictly confidential.
of the policies the Reserve Banks are following can be published in some
form that will be considered authoritative.
In the first place, I note what you say about the
causes for the increase in the holdings of certificates and the increase
So far as certificates are concerned, your explanation
in bills omned.
clears the whole matter up; but what you say about bills awned leads me
to make the following comment.
An increase of your buying rate would, I suppose,
throw a greater burden upon member banks, and tend to increase the amount
By buying more bills without changing
of discounts and rediscounts.
your buying rate, and so allowing rediscounts to diminish, you ease the
money situation, and thereby give the bill market and the statements of
member banks an appearance of ease which does not reflect accurately the
This may be a wise thing to do, particularly if you
actual conditions.
believe the conditions to be temporary; but it would seem to me, none the
less, that you are expanding Reserve Bank credit, and thereby preventing
the slow distribution of bills from producing the natural effect it would
The policy may be a wise one; but it tends
have upon the bill market.
to make money conditions easier than they mould be if you advanced your
buying rate, thereby causing banks to increase their bill holdings and to
Assuming that
stop reducing their borrowings from the Reserve Banks.
the policy is a wise one under the conditions, it seems to me to make a
real difference in the bill market and in the reported condition of member
I assume you are right in saying that it is better to have bill
banks.
holdings increase than to have discounts do so; but this seems to me to
mean that the increased bill holdings are making some difference.
I did not mean to assume that by purchasing government securities you inevitably increase your earning assets above what
they were at the time that the policy of buying overnments is put into
operation, because of course rediscounts might decrease by an amount fully equivalent, or even more than equivalent, to your government purchases;
but I meant to say that, even though your total earning assets showed no
increase, you night be doing something that would prevent them from shaming
Let us assume that, during
a decrease that would otherwise take plaoe.




toeez




B. S.

2

12/20/23.

the period you are buying $100 millions of governments,your rediscounts
mould, in the natural course of events at this season, diminish $100 milI meant to say that your government purchases might tend to aflions.
fect the situation unless they had the effect of producing an additional
If the natural seasonal dedecrease of ;100 millions in rediscounts.
crease of rediscounts during the period be placed at $100 millions, and
your purchases have the effect of causing a decrease of $200 millions in
rediscounts, then you have not affected the situation; but if your buying
of governments results in an additional decrease of rediscounts of only
$50 millions, then the result will be that rediscounts will decrease by
the total amount of $150 millions, and your government holdings will increase by $100 millions, thus making your earning assets $50 millions
larger than they would have been if you had not been purchasing governments.

I intended to raise the question whether you could
be sure that purchased by the Reserve Banks of $100 millions of governments mould make the reduction of member banks' redisoounts f;100 millions
greater than it would naturally be at this season of the year.
I have
no doubt that such purchases of governments by the Reserve Banks will
make rediscounts decrease faster than they mould otherwise decrease at
this time; but you will certainly be affecting the money market if your
purchases do not cause a decrease of rediscounts $100 millions greater
than would otherwise have occurred.
In regard to buying bills in the London market, I
did not mean to suggest that the Reserve Banks should buy sterling bills
and get involved in a speculation in sterling exchange.
I assumed, as
was assumed in what discussion I had of the subject with some of the Reserve Bank people two or three years ago, that bills could be bought
abroad drawn in terms of gold currency, which would not involve a gamble
in exchange.
Perhaps it mould be hard to find such bills today in considerable quantity which would be eligible for purchase by the Reserve
Banks; and if so, there is nothing in the suggestion that I made.

If there are eligible bills dramn in terms of gold
currency which can be bought abroad, in London or anywhere else, it still
seems to me, in spite of what you say on the third page of your letter,
that, to the extent to which you could buy such bills, you would be likely to head off gold imports.
In order to secure) the credit on the books
of the Bank of England there mould have to be either a gold shipment or,
what of course is more likely, a purchase of foreign bills, which would
make the foreign countries our creditors to that extent.
By becoming
our creditors on account of this transaction, they you'd not be under
the necessity of remitting gold in case there were a foreign demand for
gold in order to purchase American securities or to buy anything else in
the United States.
So far as the effect of your purchase on the American market is concerned, it seems to me to be like any other investment
that you make, for example the purchase of government certificates that
we have been discussing above.
If you can do that without inflating,




B. S.

3

12/20/23.

you could, under similar conditions, do the other thing; and of course the
amount of the purchases of foreign bills that you could make without causing inflation here would be limited in the same way that your purchase of
certificates is limited.
The fourth page of your letter is intensely interesting, but impossible to discuss without expanding this letter into a volume.
I agree that we may next spring reach a situation in the United States that
will call for some action by the Reserve Banks to prevent inflation.
I
did not think that was the case last spring, but I can see that it may happen next spring.
If the situation arises, the best thing to do would be
to advance rediscount rates; but I know what you would say on that point if
we were talking the matter aver, either at the Links Club or down at your
In view of the conditions you would undoubtedly state if
grain elevator.
we were having such a conversation, I agree that it may be a good thing for
Reserve Banks to provide themselves now with some short-time government securities, provided they can be acquired without stimulating the market.
The last sentence on page 4 of your letter putsthe proviso quite differently,
namely, as follows: provided they can be acquired "without effecting a net
increase in earning assets".
In order to avoid stimulating the things you
may need to regulate later, you would need, it seems to me, to increase your
purchases of governments only by such amount as would make your total earning assets move precisely as they mould move if you were not making government purchases.
If, at a time when your total net assets would otherwise
decrease as the result of decreasing rediscounts, you purchase governments
and thereby keep your total earning assets at the same level, it seems to
me you would be stimulating the market.

Allyn Young went over to New York on a hurried trip
Monday, but was unfortunate enough to find you out of town.
He will be
going through your city the last part of Christmas week, and will doubtless
try to see you then.
Yours sincerely,

CJB/AMB




I*

1.71V Eli
t?

Ill
r/ '711

BOiN:'°;1'

-

rib;

-

_

-

-




-;

r

DEC

21

1923

OMS 2 SOM 8-23
FEDERAL RESERVE BANK
OF NEW YORK

!NTEROFFICE

ROUTE SLIP

OFFICE SERVICE
MESSENGER SECTION

ACKNOWLEDGED
EARCH
5.A.

JAN 7- 1q94
W. mit...FF.0n
EDITOR REVIEW oFrecoNogireksr,ns-nce
J. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

December 27, 1923.
OF OFFICE ENVELOPE WHEN POSSIBLE.
USE THIS FORM INSTEAD
SHOULD BE DISTIN
DELIVERY ALL COMMUNICATIONS
TO INSURE PROMPT AND ACCURATE

N. B.

"Y LABEI,EO

-

Dear Governor Strong:
I have your letter of December 24, and enclose
This was
herewith the only correspondence with the Chicago banker.
based upon such published data as were available concerning Federal
Reserve Bank investments and information that "leaked", probably from
I know that one "leak" was from WashingWashington, during October.
ton; the source of other "leaks" I do not know.
I think this letter is written just as it would
have been written if I had never had any letters from you and had not
At any rate, that was my intenseen you on the second of November.
Your correspondence has been regarded as confidential; but of
tion.
course I cannot profess to be ignorant of things that come from outIn this letter to Dr. Lichtenstein I tried to write as
side sources.
an outside observer, expressing merely beliefs or conclusions based
upon data available to him.
I told you, either when I saw you on November 1 or
2 or in the letter which I wrote you just before I left New York, that
there had been a "leak" on this matter, and that I had therefore felt
free to discuss things about which I couldn't very well be ignorant
after other people knew them.
I also told Mr. Jay the same thing,
and said that I had talked with two or three people in New York whose
reactions to the policy had been very favorable.
I also enclose a copy of Dr. Lichtenstein's letter to me, in order that you may understand the references in my letter to the general credit situation, about which I wrote on the last
page.
Of course I should not have written any such letter if the
thing had not already been out.
We shall always keep everything we have from confidential sources strictly confidential until the thing gets out.
4f-ter that it is impossible for us to be ignorant, although of course
we never refer to confidential sources, and do not profess to have
inside information.




!I

CMS 2 SOM 8-23

IF

FEDERAL RESFRVE BANK
oF NEW YORK

Mir

11.
'
'

'

I

..

.

-ilitAIRVA

UNIVIERSIFY

COMMITTEE ON ECONOMIC RESEARCH
CHARLES .1. BULLOCK
cdAmmAN
CHARLES F. ADAMS
NICHOLAS RIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

CAMBRIDGE, MASSACHUSETTS, U.S.A.

ACK NOWLEDOED
JAN 7 - 094
W. M41.11RSOES4
EDITOR REVIEW ogretON0aMSTATISTICS

J. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

Decembee 27, 1923.

Governor Benjamin Strong,
Federal Reserve Bank,
15 Nassau Street,
New York City.
Dear Governor Strong:

I have your letter of December 24, and enclose
This was
herewith the only correspondence with the Chicago banker.
based upon such published data as were available concerning Federal
Reserve Bank investments and information that "leaked", probably from
Washington, during October.
I know that one "leak" was from Washington; the source of other "leaks" I do not know.
I think this letter is written just as it would
have been written if I had never had any letters from you and had not
seen you on the second of November.
At any rate, that was my intention.
Your correspondence has been regarded as confidential; but of
course I cannot profess to be ignorant of things that come from outIn this letter to Dr. Lichtenstein I tried to write as
side sources.
an outside observer, expressing merely beliefs or conclusions based
upon data available to him.
I told you, either when I saw you on November 1 or
2 or in the letter which I wrote you just before I left New York, that
there had been a "leak" on this matter, and that I had therefore felt
free to discuss things about which I couldn't very well be ignorant
after other people knew them.
I also told W. Jay the same thing,
and said that I had talked with two or three people in New York whose
reactions to the policy had been very favorable.
I also enclose a copy of Dr. Lichtenstein's letter to me, in order that you may understand the references in my letter to the general credit situation, about which I *wrote on the last
page.
Of course I should not have written any such letter if the
thing had not already been out.
shall always keep everything we have from confidential sources strictly confidential until the thing gets out.
After that it is impossible for us to be ignorant, although of course
we never refer to confidential sources, and do not profess to have
inside information.




4.,

B. S.

2

12/27/23.

In our publications we have said less than we
should have been justified in saying, in view or the "leaks" which
occurred in October and in the first week of December.
I think the
only reference to anything of the sort is in the Letter of September
29, in which it is pointed out, in a survey or the general money
situation, that, while member banks have expanded during the past
year, the Federal Reserve Banks have not expanded, in spite of gold
imports.

It is our intention not to do anything but
chronicle movements of the bank statistics until there is some
authoritative statement of Federal Reserve policy.
It is my belief
that it would be a bad thing for our publications to have the idea
get abroad that we are operating on inside information.
We have, I
think, never published anything not based upon data which were common
property, or intended to be common property.
As for speaking with
any authority about the policies, of course we shall never think of
doing that, either in our publications or personally.
The fact that
Fred Curtiss is on our Committee alone would make this necessary.
Fred has always leaned over backward; and he never has told me anything
about your policies.
I hope that my letter to Dr. Lichtenstein has
caused no embarrassment in Chicago.
You will see that its effect
would be to impress upon him pretty strongly the fact that, during
the previous twelve or fourteen months, the Reserve Banks had acted
pretty effectively as an equalizing factor in preventing gold inflation.

Yours sincerely,

CJB/AMb
P, S. On looking at my letter from Chicago, I notice something conI will
fidential in it, which I had not noticed before.
therefore, instead of sending it, affix to the letter that I wrote
Dr. Lichtenstein a statement about the question that he asked me.,
It is possible that I could secure from Lichtenstein, whom I know
very well, permission to send you the whole letter; but there is
nothing in the part that I omitted which bears upon the thing you
are now interested in, namely, the information that I sent him.




6,

-

November 7, 1923.
!

Dr. -,7alter Lichtenstein, Executive Secretary,
First National Bank,
Chicago, Illinois.

and
1143

My dear Dr. Lichtenstein:

I have your letter of October 31, and
thank you for the information about business conditions in your
district.
Boston felt the easing of money rates first; New
York felt it about a fortnight ago; and you will doubtless feel
it very shortly, if, indeed, you haVe not begun to feel it by
the time this letter reaches you.
In New York last week, I
found that the rate to best customers had already fallen from
5;1-: per cent to 5 per cent.

or",

On last week's trip I visited most of
the large banks there, and found them feeling cheerful and confident about the outlook.
If a business depression is coming,
there is certainly nothing in the large rew York banks to indicate it.

pr

tlati

Pfkrtie3 tc

c

Dr. Lichtenstein asks what the experience of the
last year has shown to be the influence of open market operations
and rediscount transactions, respectively, on the credit situation,
and what is the proper function of both classes of operations in a
wise credit policy.
He goes on to say that he thinks this ouestion puts
the cart before the horse, because the general credit situation
would influence the open market operations and rediscount transactions, rather than vice versa; and asks if there is something in
this que4tion which he has not grasped.
y on
His letter to me, dated October 31, was written
,r
t
after the "leaks" which occurred in October; and I concluded that
these leaks were the occasion for the letter being written, although of course I do not know about that.



:A.,.

Poi

November 7, 1923.
Dr. .7alter Lichtenstein, Fxecutive
First National Bank,
Chicago, Illinois.

My dear Dr. Lichtenstein:
T have
bur letter of October 31, and
thank you for the information about business conditions in your
district.
Boston felt the easing of money rates first; New
York felt it about a fortnight ago; and you will doubtless feel
it very shortly, if, indeed, you haVe not begun to feel it by
the time this letter reaches you.
In New York last week, I
found that the rate to best customers had already fallen from
51 per cent to 5 per cent.

On last week's trip I visited most of
the large banks there, and found them feeling cheerful and confident about the outlook.
If a business depression is coming,
there is certainly nothing in the large ew York banks to indicate it.

In the textile and clothing trade we
are in, and aro going to continue in, a fight between producers
who find raw materials high and middlemen rho doubt their ability to pass along to their customers increased prices.
We are
bound to have complaints from all parties to the scrap, and me
shall have to agree that their situation is a difficult =pus
.At
Retail trade is holding up very well
in the Fast; and in Boston we find that the opening days of
November have been exceptionally good.
-Tarn weather checks
sales, and then a spell of cooler weather brings business back very strongly.

Your inquiry from the Federal Reserve
Bank is probably connected with the action of the Federal Daserve Banks during the last twelve or fourteen months in selling most of their government securities.
I believe that the
theory on which this was done is that something was needed in
order to counteract the effects of continued gold imports.
These imports increased member bank reserves and produced a
condition that might have led to undue expansion of credit.







L.

2

11/7/23.

The Reserve Banks have been paying out large amounts of gold certificates and reducing their outstanding note issues, and have thereby
counteracted the gold imports somewhat.
They have also sold most
of their bond holdings, 'which amounted to $603 millions on Itay 31;
1922, and had been reduced to $88 millions on October 24, 1923.
when they sold these securities the market was obliged to carry
them, and the additional load thus thrum upon the market brought
member banks in to rediscount.
The increase of rediscounts in
the last twelve to fourteen months has been substantially equal
to the amount of government securities sold by the Reserve Banks.
Thus the System has not increased its total earning assets, and
the increased deposits rhich gold imports enabled member banks
to make at the Reserve Banks have been offset by the load mhich
sales of securities by the Reserve Banks have compelled the market to carry. 'It siems to me that, during this period, the Reserve Banks have been acting pretty effectively as stabilizers
and equalizers, with the result that gold imports have not
threatened to inflate us as they might conceivably have done
otherwise.
Open market operations probably act in
the same way as sales or purchases of securities.
By buying
fewer bills, the Reserve Banks compel the member banks to carry
a bigger load, and presumably increase the amount of rediscounting; mhereas, by buying more bills, just the opposite result is
reached.
Tf it weren't for the gold imports
which created a special problem the policies of the Reserve
Banks would probably have been influenced by the general credit
situation, as you suggest; but I think that study of the composition of the different kinds of earning assets of the Reserve
Banks for the last twelve to eightcen months indicates that they
have had in mind the danger of inflation from gold imports, although doubtless they have not lost sight of the general credit
situation.

Yours sincerely,

CJB/AMB

IsTATM UNavv.lasitary
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
CHAIRMAN

W. M. PERSONS

CAMBRIDGE, MASSACHUSETTS, U.S.A.

EDITOR REVIEW OF ECONOMIC STATISTICS

B. HUBBARD

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

Governor Benjamin Strong,
Federal Reserve Bank,
15 Nassau Street,
New York City.

EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

Januat9 10, 1924.

AIWA'

Dear Governor Strong:

I am very glad indeed to have your letter of January 7,
and very glad that you are not "disposed to growl" about my letter of NovemIt is difficult sometimes to draw the line between things that have
ber 7.
become public and things that still remain confidential; but in that letter
I tried to be careful not to mention anything that had not been discussed in
Federal Reserve publications or made known through the "leaks" that occurred
If I werehlt doing this economic research thing, I wouldn't
in October.
need ever to talk about or write about any subject that we have ever discussed; but as it is I have to do a certain amount of talking and writing.
The letter I sent you is the only one that I have written to any Chicago
banker, and it therefore gives you the whole of the correspondence.
During the past fortnight most of the fellows in this
office have been away at meetings of scientific associations or have been
home for the Christmas vacation; so that I have not been able to look up
myself, or to have any one in the organizatibn look up, the passages in
Federal Reserve publications last spring which seemed to us and to others
to contain cautionary statements that were naturally interpreted by the
Persons and Hubbard have just completed a reading
public as a warning.
of these publications, and have brought me the necessary memoranda to enable me to answer your inquiry.
The general theme of most of these statements was
about as follows:
prices have had a somewhat sharp rise; credit of member banks is expanded to a point about equal to the 1920 maximum; production is approaching, or even near, a maximum; labor is fully employed,
and in some cases a shortage has developed; further increases of bank
credit would serve merely to inflate prices and not increase production,
etc.

In the Federal Reserve Bulletin for March, pages
283-4, you will find most of these points mentioned.
On page 284, in
the second paragraph of the second column, the discussion ends in the
following paragraph:
"Expansion in the volume of reserve bank credit
at a time mhen physical production is approaching maximum, particularly if the growth of business extends to all districts, will bring the




2

B. S.

1/10/24.

"reserve banks into a closer relationship through their rediscount operations to the movement of production, trade, and prices than they have
sustained for more than a year."
The first four lines, taken in connection with preceding discussion, lead to the conclusion that an increase of rediscount
The last five lines, however, "let the reader down
rates is impending.
easy" by telling him that the Reserve Banks are merely coming into closer relationship, through their rediscount operations, to the current
large movement of trade.
The first half of the paragraph seems to call
attention to conditions that require caution; but the last half says
nothing definite, and leaves the reader to guess what the whole discuscfd-gsion really means.
-t-

-6z ---

In April the Federal Reserve Bulletin comments along
somewhat similar lines upon credit expansion, but without saying anything
specific which suggests caution.
The May Bulletin points out, on page 539, that during the previous fifteen months the commercial banks had expanded nearly
to the point reached in 1920 without much resort to the Reserve System,
and that the volume of goods produced and marketed exceeds the peak
reached in 1920.
On page 543 it states that the extent to which member banks can finance further growth of business without additional accommodation from Reserve Banks depends mainly upon the size of gold imports and the possibility of shifting from investments and collateral
loans to commercial and industrial loans.
Then it goes on to say that
the import of gold is not large, and if it continues at the existing reduced rate it will not finance much further expansion.
It then adds
that the possibility of realizing on securities is limited, and states
that a continuance of the growth of commercial loans must soon result
in increased borrowings at Reserve Banks.
After this it adds, in the last paragraph on page
513, a quotation from Hoover's report as Chairman of the President's
Conference on Unemployment, to the effect that additions to credit
which do not increase production are speculative, and should be subjected to control in order to keep business in a healthy state.
It
then concludes, on page 544, with a paragraph which says that the lending capacity of the country's banking system greatly exceeds the credit
needs of the country's productive capacity, and that, as available supplies of labor and equipment become fully used, "credit policy must be
increasingly influenced by careful consideration of the continued effectiveness of further additions to the total volume of credit in contributing to increased productivity".
Articles upon the same general line appeared in.
most, if not all, of the publications of the various Reserve Banks
during the spring.
In the March 1 Monthly Review of your Bank, on




B. S.

3

1/10/24.

pages 2-3, you will find data presented along the same general lines,
concluding with a paragraph, at the bottom of page 3 and top of page
4, which states that, in the present situation, when industry and
trade are approaching maximum productivity, the effectiveness of further additions to credit will be of diminishing importance in promoting production and distribution of goods.
In the May issue of your Review, on the last page,
you will find further discussion, beginning with the extract from
Hoover's report upon the effect of the overexpansion of bank credit,
and ending with a quotation from the current issue of the Federal Reserve Bulletin about the approach of limits at which credit policy
must be increasingly influenced by careful consideration of whether
additional credit emoansion contributes to increased productivity or
merely causes inflation.
Articles of somewhat similar purport were published in the Reviews of other Reserve Banks in April and May; for
example the Reviews of the Cleveland Bank.
of the Reserve Bulletin and the various Reserve Bank publications
would seem to be justified in concluding that the Federal Reserve
or
authorities thought induatrial_expansion mns_atJ_P near,_ the limit,_
and that those responsible for Federal Reserve policies were about
to give very careful consideration to the question whether a further
increase of bank credit was desirable.

Mile these publications were appearing the New
York papers had, for two or three successive weeks, articles about
an increase of the rediscount rate at the New York Reserve Bank.
These articles were doubtless got up by newspaper men, but they inevitably created the impression that an increase of rediscount rates
was under discussion in New York; and bankers in both Boston and New
York presently learned that your Bank cam very near to increasing
the rate.
Personally, I attach very great importance to
the effect of various published articles by economic and financial
writers criticizing the Reserve Banks for not raising their rate
above the market rate for commercial loans, and saying that the Reserve Banks were not on their job.
This subject was mentioned, I
think, in our last conversation.
An editorial written by a New
York writer was published in a Boston paper, and had the effect of
sending a large and perfectly good borrower into one of the biggest
banks in Boston, with a panicky inquiry as to whether he could be
sure of having renewed a very moderate loan which was coming due
within thirty days.
There were other things, such as the steps
taken to moderate building operations and Jr. Hoover's statement




Altogether,

13.

S.

4

1/10/24.

0
which was taken
which tended to
June we were in
meant; and some
"again" just as
profit.

as a suggestion of a boycott by housewives against sugar,
the same general result.
By the end of May or first of
receipt of inquiries from subscribers as to what it all
of them asked whether business was going to be liquidated
operations were beginning once more to be carried on at a

Perhaps the effect of the developments outlined above
would have been less if the business community had not retained rather
painful memories of 1920 and 1921.
The net result may have been good; but
T felt at the time, and am still inclined to think, that the doses of
caution were somewhat overdone.
The recent article or two in the Federal Reserve Bulletin have been helpful in bringing to the forefront the matter of openmarket operations of the Federal Reserve Banks.
gest, the discussion of reasons for the open-market operations of 1922
and 1923; but they perhaps prepare the may for further and more explicit
statements about policies, and therefore I have been very glad to see
them appear.
About the matter of buying bills in Europe, I have
no argument left if there is no way of buying bills that would protect
the Reserve Banks against losses in exchatige.
Concerning the effect of
such investments, if they could be made in bills drawn in gold currency,
I will not argue further now, partly because I need further time for digesting what you say on the subject in the last paragraph of your recent
letter.

I had hoped to get over to New York this meek, but
pressure of work in the office has made it impossible to leave Cambridge.
I shall be there for a day or two week after next, and shall hope to
call upon you; but I am going over to hold a conference with subscribers,
and my time is under the control of the fellows who are arranging the
conference.
In any event, I hope to see you next month.
Believe me to be

Yours sincerely,

CJB/AMB




They av

HAIL-3_17A13.11)) ITN1117107.1143.1rifTh.'"
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
CHAIRMAN

CAMBRIDGE, MASSACHUSETTS, U.S.A.




W. M. PERSONS
EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD

CHARLES F. ADAMS
NICHOLAS DIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

February 28, 1924.

Governor Benjamin Strong,
Federal Reserve Bank,
15 Nassau Street,
New York City.
My dear Governor Strong:

I was sorry indeed to miss you last
:uesday, but still sorrier to learn that you mere in WashIf you had been in the
ington rather than down in Florida.
latter place, I should have been fully reconciled; but as it
is you might just as well have been in your office submitting
to the ordeal of an interviemrwith a Harvard economist as
down at Washington trying to find out what members of the
Federal Reserve Board, if any, have been taking dough from
Doheny, putting sin into Sinclair, or trying to find out haw
much gold the Federal Reserve Banks hold "exclusively" as a
reserve against federal reserve notes, and if so, what they
are going to do with it.
I went overito New York to attend a
dinner Monday night, and took advantage of the opportunity
to cruise around in the spring wheat belt Tuesday morning,
in order to find out how many more rural banks are going to
blow up, and if so, when.
I was going to recommend to your
careful consideration an article which Warren,of Cornell,
has published in the February number of the Quarterly
Journal of Economics.
This deals with the agricultural
depression.
Warren is a good eoonomist and a
practical farmer, and the article has impressed me very
greatly.
I told Alt. Jay that he ought to read it, and
I think that you certainly should.

I shall probably be over in New
York within a month or two, and shall try at that time
to see you.
Yours sincerely,

CJB/AMB

TIAllavAni) -43Naviumsilify ACKNOWLEDGED
LIAY 1 (6 1994

COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
CHAIRMAN

CAMBRIDGE, MASSACHUSETTS, U.S.A.

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

. PE

EDITOR

NS

REVITIF ECMIC STATISTICS
J. B. HUBBARD

EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

March 26, 1924.

Governor Benjamin Strong,
470 Park Avenue,
New York City.
My dear Governor Strong:

I have been trying for about a week to sit down
When I got my ideas
and compose my ideas and write you this letter.
working, the first thing that they did was to throw off the enclosed
I am not often
wretched verses, which may interest you or may not.
taken with such an attack; but sometimes I can't express myself in
I
This is always when I am not serious.
prose as well as in verse.
of the versos,and am sending this letter to your
have kept no copy
house; so that if the thing ever gets itself into print, or does any
other desperate thing, it will be your fault.
When you took the economists out into your
front parlor so graciously after dinner, and administered the welldeserved spanking, I was at a little loss to understand what was up;
and you will remember I asked you what the efforts were which you
thought economists were making to get laws passed requiring Federal
Reserve authorities to regulate prices, by changing discount rates,
I shouldn't
or dumping gold into the Atlantic Ocean, or otherwise.
have asked the question if I had seen the proof of an article, which
I found on my desk when I returned to Cambridge, which one of the
National Monetary Association people is going to publish in the HarThese proposals were not only new to me, but
vard Business Review.
Warren Persons knew about
I find that they were new to Allyn Young.
them, but hadn't given them much consideration, although I believe he
You may have had still other things in mind;
didn't object to them.
but if this article had reached me before I went over to New York
shouldn't have asked the question that I did.
I think that probably I am in substantial,
and perhaps complete, agreement with you with reference to the degree
of power which Federal Reserve authorities have over price movements.
Some time I would like to talk with you further upon this point, and
make absolutely sure that I understand your ideas; but I fully agree
with your contention that control of credit is only one of the factors
affecting prices, although a very important one, and I agree that it
is perfectly impossible to impose upon Federal eserve authorities the
duty of general price regulation.
In my remarks immediately after the dinner, I
fear that I left out one very important thing which I had intended to







v

!AO

B. S.

2

3/26/24.

say but was unlucky enough to forget; namely, that if confidence can be
restored in Europe, so that the gold imports now resulting from laok or
confidence by European investors (chiefly, I suppose, but not wholly, in
France) come to an end, it isn't at all clear that we shall have any
gold import problem.
Ellen John Williams made his estimate of the balance
of payments for 1922, he found it difficult to account for the whole amount
of gold imports that year except on the ground that foreign buying of American securities had been going on.
He is of the opinion that, if we leave
transactions on capital account out of consideration, there isn't much
reason to expect gold imports unless we do something that appears to be impossible; namely, make our French, Italian, and other foreign creditors
pay us interest on the money they owe us as the British are now doing.
I
had this in my mind, but I think I didn't say it; and I believe the conclusion to be drawn from my remarks was that I expected there would be a substantial, though not an excessively large, amount of gold imports even after the restoration of confidence in Europe.

Williams is of the opinion, and I think he has good
reason, that, if we go on exporting capital, we may very well have an outmovement
ward movement of gold which would bring our troubles to an end, at least
for the time being.
Persons and Young have called to my attention the
advance copy of the report of the Federal Reserve Board, and I expect tonight to read what it says about Federal Reserve policies.
Young and
Persons seem to be much interested, as well as gratified, by the discussion of the subject.
I greatly enjoyed the evening that we spent with
you, and found it very profitable as well as pleasant.
borne time,when
you have nothing better to do, I want to talk with you further about desome things you and Mr. Warburg said led me to infer that you
flation.
believed that, in Europe, when gold payments are resumed, the outstanding
volume of paper money will be greatly reduced.
flation.

With kindest regards, I remain
Yours sincerely,

CJB/A103




Or cours




"'ill you come and try my Index?" said the Snyder to the Strong,
"It will regulate the cycles, as the sweet things move along.
Whenever the curve moves upward, we will jam the prices down;
And then reverse the process, so we'll not alarm the town."
you? Won't you? Will you? Won't you?
Walk in Mr. Strong.
Will you? Won't you? Will you? Won't you?
Walk in Mr. Strong."
"The way into my Index is up a winding trend;
And many cute statistics, you'll find there at the end.
When we approach depression, we'll then turn on a boom,
And after that is started, 'we'll quickly spread some gloom."
"Will you? Won't you?
you? Won't you?
Walk in Mr. Strong.
Will you? Won't you? Will you? Won't you?
Walk in Mr. Strong.

all

"I thank you very kindly," the Governor replied.
"I like your handsome Index, but there are many things beside.
We need to match the microbes which destroy the beasts and crops,
And match the big gold imports, and see that nothing drops."
"No T thank you.
No T thank you.
No thanks, Mr. Snyder.
You have a pretty Index; but
I cannot walk inside 'er."

"And then think of the Brookharts, the Dakotas and the Sioux,
The Heflins and LaFolletes and fierce, wild Kickapoo,
Just think yhat these wild Injuns may do to our new banks.
And think of the economists, and all the other cranks."
"No I thank you.
No I thank you.
No thanks, Mr. Snyder.
You have a pretty Index; but
I cannot walk inside ler."
This was the conversation 'tmeen the Snyder and the Strong.
It vies very interesting, but it was not very long.
And now when I hear skeptics on the business cycle scoff
I think of the new Index, and can see where they get off.
"Will you? Won't you? Will you? Won't you?
Walk in Mr. Strong.
With this Index,trade depression
Never can last long."

_




laAIRvAllain
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
CHAIRMAN

CAMBRIDGE, MASSACHUSETTS, U.S.A.

W. M. PERSONS
EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

June 2, 1924.

Governor Benjamin Strong,
serve Bank,
Federal
Na4eliN:Street,
1)71V61YOrk City.

der Governor .Strong:

Your letter of May 16 was very carefulread and studied by Allyn Young and myself, and we have been
"meditating" upon it ever since.
T have started once or twice
to reply, but have never been able to complete a letter because
I really haven't known what to say.

fly




I appreciate the force of your suggestions, and think that, if I were as fully informed about facts
and conditions as you are, I should very likely be in full
agreement with you.
Yet there are a lot of Questions that
come to my mind and make it difficult to feel sure that I am
not writing nonsense.
at I need to do is to prepare a little brief on the subject, and then sit down and talk to you.
As soon as I 'get examination books read
and a few other chores attended to so that I can leave Cambridge,
I am going to run over to New York; and I shall hope to be able
to make an appointment with you to talk things over.
In such
case I believe I will try to put on paper, in the form of a little summary, my whole state of mind, so that I may be sure to
talk to the point.

If I should try now to give you the impressions left in my mind by your letter, I am sure that a good
deal of what I should write would serve no useful purpose.
I
need to be sure that I see the fundamental facts as you see them,
or know whether and at what points we differ about fundamental
facts, before I can write anything that is worth being read by
you, or, for that matter, anybody else.
Yours sincerely,

CJB/AMB




7

IllipxxavARID ILTNitymnsnriry
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK




W. M. PERSONS

CAMBRIDGE, MASSACHUSETTS, U. S. A.

CHAIRMAN

EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L.. MILLS
EUGENE V. R. THAYER

ACX NOW LEDOED

EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

JUN O- 1924
174

!;;;;k

June 5, 1924.

Governor Benjamin Strong,
Federal Reserve Bank,
15 Nassau Street,
New York City.

vr dear Governor Strong:
I am planning if possible

to be in New York on June 13 and the
June 14.

morning

of

Can I see you at any time between ten

o'clock on June 13 and twelve o'clock on June 14?

Yours sincerely,

CJBAMB




111-111

si

j11

1924

eA41,16-1?

IBLANavAni) UNlvAnasilry
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK

W. M. PERSONS

CAMBRIDGE, MASSACHUSETTS, U.S.A.

CHAIRMAN

EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER




EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

June 10, 1924.

Governor Benjamin Strong,
Federal Reserve Bank,
15 Nassau Street,
New York City.

My dear Governor Strong/
/ I am looking forward with much interest
and pleasure to s
to suggest tha
ing to say
Statisti
time

ing you next Friday morning, and am writing

the basis for some of the things that I am goto be found in Volume I Of our Review of Economic

, which we published in 1919.

It will save some

our discussion if you can have that volume of the Re-

vr:w on your desk Friday morning.
Yours sincerely,

-

CJB/ADE3




illiANR.VA
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
C,IAIRMAN

W. M. PERSONS

CAMBRIDGE, MASSACHUSETTS, U.S.A.

EDITOR REVIEW OF ECONOMIC STATISTICS

CHARLES F. ADAMS
NICHOLAS BIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

tau

June 20,,

Governor Benjamin Strong,
Federal heserve Sank,
15 Nassau street,
New York City.

NC"

^

12-4

"

- dear Governor Strong:

We have been so busy taking in the money
here this reek that I haven't had time to give further thought to
the very interesting discussion which we had last week Friday.
I agree that economists are a pretty bad lot, and that statistics
are an invention of the Devil, and that prophets ought always to
be without honor not only in their own country but also in all
other countries.

You were saying so many interesting
things that I forgot to question you about one statement that
It relates to the discussion at
you made which surprised me.
your dinner last winter.
A week ago today I understood you to say
that you agreed with me in the view -which I expressed at your
dinner to the effect that, unless re lost some of the gold that
had come to us, we should ultimately, somehow, some time, be inI was surprised when you said that, because I
flated by it.
thought you expressed the contrary opinion at your dinner; and
I intended to ask you whether I had understood you correctly,
but the thing got crowded out of my mind entirely.
find, on talking the thing over with
Allyn Young, that he understood you at the dinner to express
the view that the Federal Reserve authorities could prevent
the gold that has come here from inflating us even if it stays
Did I misunderstand you last week Friday morning,
with us.
or did Young and I misunderstand what you said at the dinner,
or have you modified your opinion since the dinner?
Yours sincerely,

CJB/AMB







%;1




wri
ThLR VA RID UNINVAlitHaTh
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK

CAMBRIDGE. MASSACHUSETTS. U.S.A.

CHAIRMAN

CHARLES F. ADAMS
NICHOLAS RIDDLE
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

W. M. PERSONS
EDITOR REVIEW OF ECONOMIC STATISTICS

j. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

F. Y. PRESLEY
GENERAL MANAGER

June 27, 1924.
1

Governor Benjamin Strong,
Federal Reserve Bank,
Nassau Street,
New York City.




My dear Governor Strong:

I am greatly indebted to y9 for'yeur
letter of June 26, which clears up the thing that/had puzzled
It shows haw easy it is for people who wept to underme.
stand each other to derive wrong impressions f"em an exchange
Language is, after all, a pretty/effectual device
of views.
for concealing thought, no matter how hardiffie try to make ourselves clear.

/-

oted in the press the
statement of the Federal Reserve Boars statistical department about business conditions, whit* seems to me to be a
good illustration of what you said, fortnight ago about staThat/etatement appearing at the
tistics always being late.
end of June really reflects cond#ions existing at the end of
Eby, or perhaps the first meek ifil June, which was perhaps the
law point of the recent dip. At any rate, during the last
three weeks there have been a., increasing number of indicaoreover, the
tions of a slight improvement in business.
fact that after a pretty shpirp recession which has lasted
about four months the greal slump in everything, which the
calamity prophets foretolq, has not occurred, is one of the
most significant and mosyreassuring facts at the present
moment.
This morning _

/

/
/Yours

i

/

1

I

/

1

I

CJBAMB

/

sincerely,'

c




WAIXILtVAIL.ID ITN11171EllaN7A-Sir
COMMITTEE ON ECONOMIC RESEARCH
CHARLES .1, BULLOCK
CHAIRMAN

CHARLES F. ADAMS
ROBERT AMORY
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER




CAMBRIDGE, MASSACHUSETTS, U.S.A.

W. M. PERSONS
EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

89,1enyrwi,,t0
0.3c11?)

1T2.4

HOMER B. VANDERBLUE
ECONOMIST

F. Y. PRESLEY
GENERAL MANAGER

August 11, 1924.

Governor Benjamin Strong,
Federal Reserve Bank,
15 Nassau Street,
New York City.
Dear Governor strong:

One of the best economists we have
ever turned out is leaving us this fall to accept a lecThe fellow
tureship at' Columbia University next year.
is named James W. Angell, and he is the son of President
He graduated from Harvard in
Angell of Yale University.
1917, spent the next year or two in the army, then came
back anu completed the requirements for the degree of
Ph.D., and also served as instructor and tutor.

He is a brilliant student; and Allyn
Young, under whom he wrote his doctor's thesis, said that
this thesis was about the best piece of investigation he
Angell is also a fellow
had ever seen a student do.
He was offered a
with a very attractive personality.
prize lectureship at Columbia, which was quite a flattering offer for a young fellow in his position to receive;
and he thought it might be well for him to spend a year
in New York anyhow.
I am writing to you about him because his special interest just now is with problems of
His doctor's thesis
international exchange and iinance.
was in this field, and he expects to devote some attenAngell's duties at Columbia will
tion to it next year.
be light, and he is intending to give most of his time to
investigation.
I am writing because, if you were
looking for a most promising young economist to investigate conditions in Europe at this most interesting tine,
and should write to myself or to Allyn Young asking if




8/11/24

2

we could recommend a man to you, we should both of us reply
that Jimmy Angell is the man and that he is going to be in
New York anyhow, under conaitions that weula make it possible for you to get part or his time.
am not writing because Angell needs
He hasn't expected to do anything except give
employment.
his lectures at Columbia and do some job of research in his
special fiela, which job he expected to do, as economists
usually have to do their work, strictly upon his awn account.
He isn't wealthy, but he is provided for sufficiently well
for the next year; so that, as i said, he isn't looking for
employment.
I venture to suggest that, if you rant
somebody to do special work in the economic field which
weula not require all of his time, Angell woula be a remarkably good man to employ; and also to say that, if you have
no need of such a man, you might be able to suggest to him
Some problems of international finance to which he might
well devote his attention next year, and you might find it
well worth your while to assist him in getting information.
Angell will have a good year in any
event; but I know that he is the sort of fellow you would
like to know about, even though you may have no work for
him to do for you or no suggestion of work that he might
do on his awn account.
If you would like to have him
call upon you when he goes over to your village in the
fall, I can tell him to do so.
Yours sincerely,
-

CJB/AMB

./4"'t)1,,;''.!
.,,

,

...,.

0,

......, ,

;...s.,...... :-3.:),




MLAILIVAIRID MINIMEIRICTV
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK

W. M. PERSONS

CAMBRIDGE, MASSACHUSETTS, U.S.A.

CHAIRMAN

EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD

CHARLES F. ADAMS

EDITOR HARVARD ECONOMIC SERVICE

ROBERT AMORY
FREDERIC H. CURTISS

HOMER B. VANDERBLUE

WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER




ECONOMIST

F. Y. PRESLEY
GENERAL MANAGER

August 15, 1924.

Governor Benjamin strong,
Federal Reserve Bank,
15 Nassau street,
New York City.
Dear Governor Strong:

I have your letter of August 13,
and am just now sending Jimmy Angell a card of introauction to you.

I am suggesting that, before he de-

cides definitely upon a subject for investigation
next fall, he should call upon you and talk over the
different things that he may the

have in mind.

They

will prooably relate to problems of international
credit ana exchange involved in the present 7,uropean
situation.

I know that you will find Angell
an attractive young fellow, and am glad that you are
interested in seeing him.

Yours sincerely,

CJB/ADM

v.i.;EtvEr,

7,
I (ON%

'1'

....

GUVRNOR'S SEG'Y

A

(9-.1q. 1r

if"ii

AUG 16 1:-.,'24




W.1% 11. 1 15 NI

WIRE TRANSFER
DIVISION

5-24

TELEGRAM

FEDERAL RESERVE BANK
OF ' ,W YORK

DECODED

COMMERCIAL WIRE-INCOMING

CHECKED

TRANSLATION COPY

COMPANY

ATTENTION

124W0 MQ 30 COLLECT

GOV BENJ STRONG FRB

CA CAMBRIDGE MASS

TOUCH WITH OFFICE

PERSONS ON AUTOMOBILE TRIP OUT OF
WI LL RETURN
FROM

HIM




I

321P AUG 27

TO CAMBRIDGE ABOUT SEPT 5

WI LL ASK HIM

TO WIRE YOU

CHAS J BULLOCK

5P

STOP IF

I

HEAR




MARI/TART) UNICYINIUNISM
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J, BULLOCK

W. M. PERSONS

CAMBRIDGE. MASSACHUSETTS. U.S.A.

CHAIRMAN

EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD

CHARLES F, ADAMS

EDITOR HARVARD ECONOMIC SERVICE

ROBERT AMORY
FREDERIC H. CURTISS
WALLACE B. DONHAM

HOMER B, VANDERBLUE
ECONOMIST

F. Y. PRESLEY

OGDEN L. MILLS
EUGENE V. R. THAYER

GENERAL MANAGER

(I

November

8,

Governor Benjamin Strong,
Federal Reserve Bank of New York,
33 Liberty Street,
New York City.

ICI,

924I

-106

04400:,

,e-

)1

Dear Governor Strong:

NOV 2
I have just been reading George
Roberts's November publication, and on page 176 notice
that he thinks that cheap money has found its way into
use and that one reason for t 's is that the Reserve
Banks have been putting back into circulation the gold
which member banks devoted to payihroff their indebtHe doesn't say anything
edness to the Reserve Banks.
about what business conditions would have been since
last March if the Reserve Banks hadn't been doing what
they did.

t

All this is preliminary to saying
that the last six months have greatly increased my
respect for the potency of the weapon (or, if you
please, instrument) which the Reserve Banks have in
In the fall of 1922,
their open-market operations.
when I first talked with you, I was inclined to think
(without, however, supposing that I really knew anything about the subject) that you attached too much
importance to the decrease in Federal Reserve security holdings between June and November of that year.
I could clearly see that the effect of the open-market operations at that time would be unfavorable to
security markets, but thought that the amount involved was not large enough to produce as much effect
It was not unas you seemed to think it had done.
til the spring of 1923 that I acquired great respect

A :k Ni 'VW 1 ,e oth-

Nov 18 1924




ft24




B. S.

2

11/18/24.

for the potency of the "invisible hand"; and even then I
did not have sufficient respect for it because I knew
that the campaign to "kill inflation before it gets
started" had frightened people who knew nothing whatever
about open-market operations of the Reserve Banks.
1924
ought to give everybody a wholesome respect for the
aforesaid "invisible hand".

And yet, in spite of all that has
happened this year, I do not think that the banking community as yet has any adequate idea of the importance of
the open-market operations of the Reserve Banks; and this
applies to the heads of some of the biggest banks, I
think.
I haven't been over to New York
since last June, and hope to go over next month.
I
haven't anything that justifies taking any of your time;
but I am going to call at the Bank, and hope to see you
for a few moments anyhow.
Gregory, of the London and Cambridge
Service, who has been over here for some months, seems to
me a very promising man, and I should like some time to
learn whether you have seen enough of him to form any
opinion about him.
Carl Snyder gave us an extremely
interesting and valuable talk at our conference last
Friday night, and contributed greatly to the success of
our conference.
I remain
Yours most sincerely,

CJB/AMB

113Nawanam
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK

W. M. PERSONS

CAMBRIDGE, MASSACHUSETTS, U.S.A.

CHAIRMAN

EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD

CHARLES F, ADAMS

EDITOR HARVARD ECONOMIC SERVICE

ROBERT AMORY

HOMER B. VANDERBLUE

FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

ECONOMIST

F. Y. PRESLEY
GENERAL MANAGER

V

November 25, 1924.

Governor Benjamin Strong,
Federal Reserve Bank of New York,
33 Liberty Street,
New York City.

NOV 26 b24




My dear Mr. Strong:

I have your letter of November 19,
and shall be very glad at the first opportunity to
take advantage of your suggestion that I drop in at
your office and get a spanking.
I am planning to go over to your
village some time between the first and tenth of December; and as soon as I can fix the date will write
you and try to get an appointment.
Of course we 'are somewhat out of
touch with things over here, and probably we ought to
be in New York oftener than we are; but one trouble
is that one gets so much over in your town that he
has to forget or disregard that one sometimes doubts
whether it isn't better to be off on the sidelines.

With best regards, I remain
Yours sincerely,

e
CJBAMB

ThiAIRVAIRID UNIIVINIRSIVTV
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
CHAIRMAN

CAMBRIDGE. MASSACHUSETTS. U.S.A.

CHARLES F. ADAMS
ROBERT AMORY

FREDERIC H. CURTISS
WALLACE B. DONHAM

W. M. PERSONS
EDITOR REVIEW OF ECONOMIC STATISTICS
./. B. HUBBARD
EDITOR HARVARD ECONOMIC SERVICE

HOMER B. VANDERBLUE
ECONOMIST

OGDEN L. MILLS
EUGENE V. R. THAYER

F. Y. PRESLEY
GENERAL MANAGER

ember 1, 1924.

Governor Benjamin Strong,
Federal Reserve Bank of New York,
33 Liberty Street,
New York City.
D EC

Dear Governor Strong:

2 1924

I had planned to go to New York this week;
but, in view of an invitation that I have received to the Owen

Young dinner next week, I have decided to go over to your village
at that time.

The invitation, by the way, while it came from

Mr. Bedford, has your card upon it; and I suppose this means that
it is to you that I am indebted for the opportunity to attend
this function.

I am writing particularly to ask at what

time between the evening of Wednesday, December 10, and the noon
of Sunday, December 14, it will be convenient for you to have me
call upon you.

I shall reach New York in time to be able to

call upon you Wednesday evening at, let us say, around 8:30.
can stay over until Sunday noon, so that I can call upon you
Sunday morning, December 14;

or I will come at any intermediate

hour convenient.

Yours sincerely,

CJB/AMB




" AxAtiki

JAJ_

asihrtIr
HIAILIVAnID
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK

W. M. PERSONS

CAMBRIDGE, MASSACHUSETTS, U.S.A.

CHAIRMAN

EDITOR REVIEW OF ECONOMIC STATISTICS

J. B. HUBBARD

CHARLES F. ADAMS
ROBERT AMORY
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER

EDITOR HARVARD ECONOMIC SERVICE

HOMER B. VANDERBLUE
ECONOMIST

F. Y. PRESLEY
GENERAL MANAGER

December 5, 1924,

MAK

jVI

aak
tug
454,

IA

'

governor Benjamin strong,
rfid-eral Reserve Bank of New York,
y Street,

tity.
-




My dear Governor Strong:

Your secretary writes that you will '24
be able to see me at any time during my visit next week exI am therefore
cept Thursday afternoon and Friday morning.
writing to say that, unless your secretary meanwhile informs
me to the contrary, I will call at the Palazzo Vecchio at
11 A.M. next Thursday.
If anything has come up,since your
secretary wrote ,to make this hour inconvenient, I should be
glad to have him write me, either at this office if he writes
not later than Monday, or at the Hotel Commodore, New York,
if he writes after next Monday.
I am expecting to attend the Young
dinner; but am not counting on having much opportunity to
talk with anybody in particular at such a large gathering.
Yours very truly,
/1_

cJB/A.MB

Z
I7);:"4")aire

TRAILIVARID "-HArlivm.H.snrIc
COMMITTEE ON ECONOMIC RESEARCH
CHARLES J. BULLOCK
CHAIRMAN

CAMBRIDGE, MASSACHUSETTS, U.S.A.

J. B. HUBBARD

CHARLES F. ADAMS

EDITOR HARVARD ECONOMIC SERVICE

ROBERT AMORY
FREDERIC H. CURTISS

HOMER B. VANDERBLUE
ECONOMIST

WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAYER




W. M. PERSONS
EDITOR REVIEW OF ECONOMIC STATISTICS

F. Y. PRESLEY
GENERAL MANAGER

February 24, 1925.
Jr. Benjamin Strong,
270 Park Avenue,
New York City.

Dear Governor Strong:

Ever since I visited the Palazzo Vecchio
last December I have wanted to send you some little contribution to the furnishings of your most impregnable and artistic
Bank, but:haven't been able to pick up anything that would be
quite appropriate.
Last week, however, I had to go to Washington to attend Cal Coolidge's inheritance tax conference,
and while I was wasting two days there found time to visit
some of the second-hand book shops and other places where
genuine antiques can occasionally be found.
By good luck I
managed to pick up the enclosed pen and ink sketch which our
art connoisseurs here tell me is undoubtedly by some unknown
Florentine artist.
The best opinion I can get is that the
artist intended to represent what used to happen in Florence
when Lorenzo di Abdici found it necessary to apply the brakes
in order to prevent undue credit expansion, by which credit
would increase faster than production, with the result that
prices (expressed in terms of Florentine currency of that
period) would tend to become inflated.
At any rate, if it
doesn't represent this, it represents something else; and
that's about all that you can expect to get from a pen and
ink sketch by an unknown Florentine master picked up in a
-lashington book shop.

I will add, in conclusion, that this is
the only copy of the thing that exists; so that you can feel
sure that you have a unique work of art.
If it gets into
the newspapers, it will be nobody's fault but yours.
Yours sincerely,

C J BAMB




THE HAND THAT- ROcKS THE BOTTLE Rocx5 THE WORLD

(These be
Strorki Drops

0

nARVARIT) ITINITNIFIMBILarY
HOMER B. VANDERBLUE

COMMITTEE ON ECONOMIC RESEARCH

DIRECTOR HARVARD ECONOMIC SERVICE

WARREN M. PERSONS

CAMBRIDGE. MASSACHUSETTS. U. S. A.

CHARLES .1. BULLOCK

EDITOR REVIEW OF ECONOMIC STATISTICS

CHAMMAN

JOSEPH E. HUBBARD

',ARLES F. ADAMS

EDITOR HARVARD ECONOMIC SERVICE

OBERT AMORY
FREDERIC H. CURTISS
WALLACE B. DONHAM

W. L. CRUM
DIRECTOR OF STATISTICAL LABORATORY

JOSEPH L. SNIDER

OGDEN L. MILLS
EUGENE V. R. THAYER




ECONOMIST

T. P. BLODGETT
BUSINESS MANAGER

October 15, 1927.
Governor Benjamin Strong,
Federal Reserve Bank of New York,
33 Liberty Street,
New York City.
Dear Governor Strong:

I expect to go over to New York the
latter half of next week, and am writing to ask whether
you can see me some time on Thursday, October 20, or
I can call upon you at any place
Friday, October 21.
Perhaps I should need as
or hour that is convenient.
much as one hour of your time; but I should be very glad
to see you even if you could only give me fifteen minutes.
I want to talk about the things that
I would naturally have in mind at this moment; namely,
I know
gold, international debts, and the year 1929.
that you are well "fed up" on all these subjects, and
therefore haven't bothered you for a year or two past.
The time has come, however, when I feel constrained to
trespass upon your good nature by making the above request.

Yours very truly,

63
CJB/AMB

ElAnvAR

UNitvonsitTa7
HOMER B. VANDERBLUE

COMMITTEE ON ECONOMIC RESEARCH
CAMBRIDGE, MASSACHUSETTS, U.S.A.

CHARLES J. DULLOCK
CHAIRMAN

DIRECTOR HARVARD ECONOMIC SERVICE
EDITOR REVIEW OF ECONOMIC STATISTICS

WARREN M. PERSONS

JOSEPH B. HUBBARD

-HARLES F. ADAMS
.0SCRT AMORY
FREDERIC H. CURTISS
WALLACE B. DONHAM
OGDEN L. MILLS
EUGENE V. R. THAY5Ft

EDITOR HARVARD ECONOMIC SERVICE

W. L. CRUM
DIRECTOR OF STATISTICAL LABORATORY

JOSEPH L. SNIDER
ECONOMIST

T. P. BLODGETT
BUSINESS MANAGER

October 18, 1927.

Governor Benjamin Strong,
Federal Reserve Bank of New York,
33 Liberty Street,
New York City.
Dear Governor Strong:

Conditions have suddenly arisen at
home which make it impossible for me to leave Cambridge
this week, so that I am obliged to postpone my trip to
New York until next week.
I am therefore writing to tell you
of my change of plans, and to ask for an appointment any
time at your convenience on Thursday, October 27, or Friday, October 28.
Yours sincerely,

ekmoaLli. A.,.1444

CJB/AMB

Cuelmt

it('



kat,

W. T. 11.1 50M 1-25

TELEGRAM

FEDERAL REF ERVE BANK
OF NE V
<

WIRE TRANSFER
DIVISION

DECODED

COMMERMAL WIRE-INCOMING

CHECKED

TRANSLATION COPY

COMPANY

ATTENTION

49WU C 22 CA CAMBRIDGE MASS JUN 23
1035
GOV BENJ STRONG
NY

COULD YOU SEE ME FOR

FIFTEEN MINUTES SOME TIME NEXT
FRIDAY MORNING IF_SO PLEASE
WIRE FIXING HOUR MOST

CONVENIENT TO YOU

CHAS J BULLOCK

Woricei




Ar dig-axe(

1212P
Vrtafitoti
wi,rqt- a




CJB/AMB

truly, very rs Yo

possible. as
time your of little as take to endeav6r will
Mr. see to expecting
haveheen
28. October



I

and Burgess,

I

Friday, on conveilient find you as hour such at

appointment an for ask nd

27 October of afternoon the ing

,

your UD call to plan will and 19,
dur- time some
iecretary
;

October of letter forhour you thank

I

Strong: Governor Dear

ir

City. York New
Street, Liberty 33
York, New of Bank Reserve Federal
Strong, Benjamin Governor

if
1927. 20, October
MANAGER BUSINESS

BLODGETT P. T.

THAYER R. V. EUGENE
MILLS L. OGDEN
DONHAM B. WALLACE
CURTISS H. FREDERIC
AMORY ',BERT
ADAMS F. HARLES

ECONOMIST

SNIDER L. JOSEPH
LAeORATORY STATISTICAL OF DIRECTOR

CRUM L. W.
SERVICE ECONOMIC HARVARD EDITOR

HUBBARD B. JOSEPH

CHAIRMAN

STATISTICS ECONOMIC OF REVIEW EDITOR

RESEARCH ECONOMIC ON COMMITTEE

SERVICE ECONOMIC HARVARD DIRECTOR
VANDERBLUE B. HOMER

U.S.A. MASSACHUSETTS. CAMBRIDGE,

PERSONS M. WARREN

V it TUNIIVN,RM

BULLOCK J. CHARLES

111/VUVA111111)

721AA'1/4"'"

ejl

A

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