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ii I NATIONAL INDUSTRIAL CONFERENCE BOARD, INC. 247 PARK AVENUE,NEW YORK MilrUSWALEXANDER October 6, 1925 PRESIDENT ACKNOWLEDGED My dear Mr. Strong: nr"r g ltrm rprvived a letter from my I have juli good friend, Dr. Hjalmar Schacht, the President of the Reichsbank of Berlin, advising me of his intended trip to New York City in the immediate future. Based on my conversation with Dr. Schacht, when last I saw him,and in subsequent correspondence I wrote Dr. Schacht that I should be delighted to arrange a dinner for him at which he could intimately meet a small group of the leaders in American industry who are associated with the National Industrial Co :ference Board and whom he is anxious to meet in this manner. Gen. Guy E. Tripp, Cornelius F. Kelley, Irenee du Pont, L. F. Loree, W. H. Nichols, H. H. Westinghouse, Walter S. Gifford, Charles Cheney, etc. In his letter to me Dr. Schacht says that he arranged with you that all dinner and luncheon engagements for him would be made in consultation with you in order to I heartily approve of such an arrngement avoid any conflict. and am therefore asking you on what earliest evening you think I could plan a dinner for Dr. Schacht without interfering with any important arrangements that you have already in mind. Naturally we would be delighted to have you at the dinner which I am planning to arrange with the industrial group. Requesting the favor of an early reply, believe me, Very truly yours Mr. Benjamin Strong, Governor Federal Reserve Bank of New York 33 Liberty Street, New York I r 0 October 26, 1925. My dear Mr. Alexander: Referring to your note of October 6, Dr. Schacht has eeked me to eCvise you thrt preeure of engagements which he hre ban oblijed to bake in coni:;eetion with hie trip till occupy ao such of hie time during his short stay in Nsw York, *_bat he fines himetlf unable to accept your kind invitrtion to attend E dinner to be arranged for him by the National Induetrial Conference ?oard. ie, I believe, ttriting you himself on the eubject. I beg to remain, Very truly youre, Magnua I. Alexander, Esq., National Indnatriel Conference Board, Inc., 247 Perk Avenue, New York. N 0 October 16, 1925. My dear Yr. McDonald: Your note of October has just Lean received, taid I shell here plee sure ir_ brinciing it to Pr. Cob/ F ttcLtion rpon hie errivni next peek. 11.e. time here ie very bhort, tric he is alreecy meaty much occupied vith moment VEFiCUb engtesael,ts, 60 I Very truly yours, Jambe G. ilcDoneld, tec., Chairman, Foreign t'olicy Asaocietion, 9 Leet:41 street, Aew York 6ity. t the edrise you whet the prospects ere of hia accepting your kind invitation. PL. La air: uneb;e Executive Board G. JAMES MCDONALD FOREIGN POLICY ASSOCIATION GEORGE M. LA MONTE For a Liberal and Constructive American Foreign Policy CHRISTINA MERRIMAN Treasurer CAROLYN E. MARTIN Assistant Treasurer Chairman -N EDWARD HEAD EARLE HUGHELL FOSBROKE BRUCE a CARLTON CHARLES J. H. PA UL I) LOGG Membership Secretary NATIONAL HEADQUARTERS HAYES . HOWLAND Secretary ESTHER G. OGDEN TELEPHONE: 9 East Forty-Fifth Street, New York City VANDERBILT 5740 CABLE ADDRESS: GEORGE I . LA MONTE LOFN A, NEW YORK MRS. HENRY GODDARD LEACH MISS CIIRISTI NA MERRIMAN MISS RUTH MORGAN RALPH S. ROUNDS October 15, 1925 T. SHOTWELL MRS. V. G. SIMKHOVITCH MRS. CHARLES L. TIFFANY MISS LILLIAN D. WALD JAMES National Council THE EXECUTIVE BOARD and MISS JANE ADDAMS Illinois ARTHUR E. BESTOR New York FRANCIS B. BIDDLE Benjamin Strong, Esq., Governor Federal Reserve Bank 33 Liberty Street New York City ACKNOWLEDGED Pennsylvania RT. REV. BENJAMIN BREWSTER, D.D. OCT 161925 " 13- S. Maine JOHN GRAHAM BROOKS Massachusetts CHARLES C. BURLINGHAM New York MISS MABEL CHOATE New York JOHN DEWEY New York STEPHEN P. DUGGAN New York ROBERT ERSKINE ELY New York FELIX FRANKFURTER Massachusetts MRS. ROLAND G. IloRxitis Massachusetts FREDERIC C. HOWE District of Columbia EDWARD KREHBIEL California THOMAS W. LAMONT New York My dear Mr. Strong: We understand that Dr. Schacht of the Reichsbank will, while in this country, be making his engagements more or less through your office. Our Executive Committee is very anxious to have Dr. Schacht as their guest at a small, informal dinner. It is not our thought that this should in any sense be a public meeting, but merely that there be an opportunity for our Committee to meet Dr. Schacht and talk over with him some of Germany's current economic and financial problems. SAM A. LEWISOHN New York S. GALE LOWRIE Ohio BISIMP FRANCIS J. MCCONNELL Pennsylvania JULIAN W. MACK Illinois I should appreciate very much an opportunity to drop in and see you just a moment to explain a little more fully what we have in mind. ROBERT R. MOTON Alabama MRS. BEVERLEY B. M UNFORD Very Virginia n erely yours, WILLIAM A. NEILSON Massachusetts MRS. GORDON NORRIE New York ROSCOE POUND Chairman' Massachusetts VERY REV. HOWARD C. ROBBINS New York REV. JOHN A. RYAN District of Columbia JGM:OLS HENRY R. SEAGER New York HERBERT KNOX SMITH Connecticut GRAHAM TAYLOR Illinois HENRY M. WAITE New York P. WALSH Missouri FRANK MRS. H. OTTO WITTPENN New Jersey agli°339 Endorsed by The National Information Bureau, Inc. * SOVERN:R'S OFFICE 1:.1 92 061 1`3 1925 October 22, 1925. My deer Mr. McDontad: Ay arrival in !ea York, Governor 01, ong mcnLioneci to me your kindness in inviting me to be tue your Executive Committee at a dinner, and much guest ce you to Esk him to to my r2grat, T '-al ohlit7e of my iwptility to %vzil myeeli of tnis opporLunIty uecLuse of the I.:rga number of ang6gazients vhich I have been abligad to meke and tho very short. time *Mott I have for my vieit. Please be assured thet I appreciate your kindness and this evidence of your hospitality. I tei to remain, Ancarely yours, Mr. James G. McDonald, Chairmen, Foreign Policy Assocition, 9 Eskat 45 Street, Mow York City. Ea.S.I45 0 October 22, 1925. My dear Mr. McDonald: just had opi:ortuntty to epetk to Dr. SchR,cht in reserd to your letter of October 15. He ?ludo that his erk;z,gemsnts rill occupy so much of th tip of hir. Olort viail here, thvt he r.:ela it is impossible to accept the kind invitation which you extend to him to be the guest of yoar Committee at t. dinner, anr! hue asked ale to ex.:,/-ese hie regret. I beg to remain, IL..ry truly yours, Jr_mee G. McDonald, Eaq., Chairman, Foreign Policy Assocition, York City. 9 Ea at 45 StreTt, I te.es Edwin X. Alderman Robert S. Brookings Whitefoord R. Cole Mr. Fred I. Kent page 3. contributing factor, it is not a controllin one. For examples: 1873-1879 - We had almost continuously low interest rates here and in England, but loans did not expand, nor did prices rise. Other factors wore unfavorable. In England, money loaned in '76 at a rate as low as 1/2 of 1 per cent; but few business men were willing to pay even that, because they could not see a profitable opportunity. In the United States, we find that bankers were threatening to go out of business because the business of lending money had become so unprofitable. The recovery of business in '79 is definitely assignable to other causes than cheap money. 1893-1896 - Low interest rates, with minor variations, all the time. 1,:onetary controversies and generally unsettled business conditions more than offset whatever stimulating effects cheap money might otherwise have had. 1913 - Autumn of 1915 Low interest rates, narticularly after the lowering of reserve requirements by the Federal Reserve Act which became effective in the autumn of 1914. There was no expansion of business activity; in fact, in thy; year 1914, loans, I believe, showed a slight contraction, - any way, prices fell a little. The uncertainty over the European situation more than counter-balanced any stimulating effects of cheap money. In the autumn of 1915, however, loans expanded because it was then apparent that American business men could make good nrofits in filling war orders. They went to the banks to get the money with which to expand their business activities. In brief, the trend of business is governed by a complex of factors, of which the rate of interest is only one of many. Looking ahead, I should attach much greater importance to the drift of events on the Continent of Europe during the next twelve months than to the fact that we have a large gold supply. I would also, I believe, attach more importance to the labor and transport shortage in this country and to the maladjustment that still exists between agricultural and manufacturing prices. Hoping this will be at least provocative, I am Sincerely yours Director. S December 11, 1922. My dear Mr. Moulton: Your letter of December 1 has been awaiting an opportunity for me to reply because I have been laid u:,; for a week. I sr leaving to-day to str.end the Convention at Chicago, and will hoe to meet Dr. Nourse. Also as I am ,-roposin,- to address the Convention, I shall hope to be able to dodge quickly enough in case anything is thrown at ie. You and so:re of your fellow economists are really reei,orsible for ay going, so the damage will be on your heads. I have read your letter to e:r. Kent with a great deal of interest, and the followine, com:-ents occur to me: It seems to me that the total supply of gold, as you state, is not necessarily a controlling influence ucon the trend of business or tr:on prices; rather it ie what is done with the gold. ?or instance, if it is coined into money and goes into circulation in substitution, say, for hank notes, it probably has a very slie)t effect. On the nther hand, if it goes into bank reserves and the 2olicy of the bank of issue, :\ermits of an expansion of credit based u;on an enlarged reserve, then it has a very etrour.7, effect upon the course of business and ?rites. In other words, as to the absolute amount of monetary gold, it impresses : :e as one would be impressed if' but a small corner of a cloth were lifted from the front of a large picture and then one attem'ted to form an opinion from that stall corner of the bicture as to what sort of a picture it was. Charts which should show the amount of monetary fold should also show the total amount of all kinds of currency in circulation, and the total amount of bank credit. r Mr. H. G. Moulton #2 December '1, 1922. Then beyond that, we have a factor which no one can chart, and that 0 is the state of mind of the public; to buy; whether there iE confidence and the Toed or whether there is distrust and the mood to cell. The important thing as to our own situation seems to he what you state on page two of your letter to Nt . Kent - that the Federal 7serve discount policy is the most significant factor in the situation. This I admit; and it is the most important factor for the reason that I have above stated, - that if our eolicy permits of the pyramidieg of credit upon the foundation of this enormous gold reserve, then we will affect the course of business and prices. Liut if we can hold the volume of credit reasonably constant, and yet suf!icient for the needs of legitieate business, then it seems to me we can oecape the disorders otherwise conseruent upon an enle.rged gold surely; at least so far as the influence of credit might under a eisteiken -elicy of eJeansion he allowed to produce disorder. I am inclined to lock at the reserve eercentage of the neearve Systee in this way: - The law requires us to maintain minimum reserves of 35 per cent. of our deposits and 45 cent. of our note liabilities. 4e shov-LJ now ignore the law, end assume hypothetically that this enoreoue reserve impoees upon us the responsibility of working (in our own minds) upon a different reserve -rercentage, say, 65 or 73 or 75 per cent. That can not be core exactly /fld actually, but it can be some sort of an intePectual sup ort for a policy designed to avoid the dangers which might result from our large gold holding. ielt, on the other hand, I do think that the influence of interest rates is very considerable; we are possibly too inclined to consider this from the standpoint of absolute stated levels of rates rather than from the stenopoint of the influence of chaneik; rates. I Mr. H. G. 'Moulton IS Certain bueinesees 9 are of such character that they are necessarily conducted upon a pretty narrow -argin; necessit,:tes 5,1teration in is tle very strong December 11, 1922. a change in the level of interest rates calculations of ef'fect upon the business in the face of rising profit. And beyond that, of course, mental attitude of saopl..1 who ,re doing interest rates, or, on the other hand, Nith the advantages of falling interest rates. dut I do agree with you (-,om.-letely that the trend of business is governed by a complex of factors, of which the rate of interest is only one But of many. you do; -1-ossibly I attach more significance to it than I at least from what, you said the other It was a pleasure with me and I only hope night at my apartment. to hsve you and your friends erenft such an evening that we can do it to;ain. much by it. Yours sincerely, r. H. C. loulton, Director, institute of Economical 26 Jackson Place, Washington, D. C. gather that Cert,--Anly I -rcfited very