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July 21 to September 20, 1919.

At Liverpool Monday afternoon and found that British

Monday, July 21:

ersury had sent instructions to facilitate my landing, but delays on the

dock held the steamer train for some hours, so that we only reached Euston
Station after 11 o'clock at night.

Mr. Montagu Norman, Deputy Governor of

the Bank of England, was at the station to meet me and I went straight to

his house at Campden Hill.

We sat up until nearly 2 o'clock tall-ing and

consequently reached the Bank quite late Tuesday morning.

Tuesday, July 22:

Governor Cokayne and Sir Gordon Nairn gave me a very

warm welcome and were good enough to place the library at my disposal to
use as an office, giving Mr. Vaughan a separate room.

They have even been

good enough to put a telephone at the desk and a card with my name on the
door, something which I have no doubt is without precedent in the history
of the Bank.

I lunched with the directors of the Bunk on Tuesday and

enjoyed a most interesting general discussion of what was taking place


There is undoubtedly a very blue feeling here in regard to the
It seems based in part upon the huge governmental expenditures,

which still continue largely in excess of revenues; the early maturities
of short government obligations, wich aggregate between nine and ten billion dollars within eighteen months; the existence of the huge foreign debt,
principally to the United States, which they would be glad and relieved to
see reduced to more definite terms; the government policy of continuing unemployment wages; and,more particularly and fundamentally than anything else,
the general unrest and dissatisfaction of labor throughout the country, just
now evidenced by very serious coal strikes in York, where deep mines are being allowed to become flooded because even the protective officers decline to
operate the pumps.

Sir Eric Geddes has been given complete authority to deal


with the whole situation and is taking engineers from the fleet to work the
we and protect the property.

Spent a pleasant afternoon and evening with Norman.

Wednesday, July 23:

Mr. Kent joined me at the Bank and we arranged for

some meetings to discuss the Indian exchange situation and other Indian matters which are now being considered by a special parliamentary committee, which
is now engaged in taking statements from various people as to how the Indian
rupee should be dealt with.

The Indian government is facing the menace of

inconvertibility,and of course the reduction of our imports from India will
result in reducing India's imports of gold or silver from us, cutting off
the principal means heretofore availed of for replenishing the stock of
silver rupees for redemption of their paper currency.

Thursday, July 24:

By appointment drove to the Embassy to call on Am-

bassador Davis and arranged passports to go to France on Sunday.


Davis was very glad to see me and expressed a desire to do everything possible
to facilitate our trip, etc., etc.

He is also anxious to talk matters over

on my return from the Continent to get a little line on what is going on there.
Had luncheon at the Savoy, where Mr. Kent and I were joined by Sir
S. Hardman-Lever, who brought up Sir John Bradbury,with whom a luncheon engagement is to be arranged in the near future.

Governor Ookayne tells me

that the Chancellor wants to have a meeting with me on Thursday, for what
purpose I have no knowledge.

I was also informed very confidentially of the

sudden death of Sir Edward Holden under somewhat distressing circumstances
which have not yet been made public.

Wednesday evening Mr. Norman invited Mr. A. M. Kiddy, whose name is
mentioned in Mr. Vanderlip's book, to join with us at his house.

Mr. Kiddy


is the financial man of the Morning Post and correspondent of the Evening
st of New York.

Both Governor Cokayne and Norman stated that he is a

thoroughly responsible, reliable, high class man, who enjoys the confidence
and respect of everybody in the City and is one of the best informed men in
the City on that account.

I had previously met him at a dinner given by

Sir Edward Holden when I was in London in 1916.

Mr. Kiddy was very frank in his criticisms of the present government in
England, particularly their policy in the matter of paying unemployment
wages, this criticism seeming to be general among bankers and business men
who are well informed.

He took a rather pessimistic view of the future of

British finance and trade and expressed the view that I hear from a number
of people, that much depends upon our attitude in America in helping along

The only particularly important statement that he made was

in regard to Great Britain's debt to America.

In his opinion, the greatest

cause of uneasiness in financial circles in London at the present time is the
uncertainty as to what would be done by the United States in regard to requiring payment of this debt and the interest upon it.

Thoughtful and

reasonable men do not believe that the United States will exercise the power
which this demand obligation gives our government, but it is nevertheless regarded as a sword of Damocles hanging over the nation and a menace to its financial security.

Aside from credits maturing in Argentina next year, it is

the only external debt of any moment that Great Britain owes.

The feeling

of anxiety is greatly accentuated by the fear that interest payments which
have heretofore been made out of the credits extended by our government actually cannot be made this fall, at any rate, at reasonable exchange rates, and
that the whole sterling market will be thrown into further disorder with ser-

sous consequences if something is not done.

With dollars practically unobtainable except at severe penalties, the

possibility that the British government would be required to pay $100,000,000
or more of interest this fall is really a source of great anxiety.


confirmed this view without reservation and stated that it was the one black
cloud now hanging over London outside of the strike situation, which has been
more or less chronic for quite a period.
There was some discussion of forgiveness of the debt, which does not
appeal to either Norman or Kiddy as a reasonable or feasible thing.
While it is latent and must be inferred by implication from statements

made, there is no doubt in my mind that many Englishmen still feel that our
sacrifices in the war have been slight, our profits imlaense, and that the

balance, if all things were taken into consideration, would represent a heavy
debt by America to the Allies.

Friday, July 25:

After further talk with Norman and Governor Cokayne, I

decided to send a cable through the Embassy in the Embassy code to Leffingwell, giving the substance of what I gather to be the sentiment about this
intergovernmental debt, having however made no intimation whatever of what
would be the attitude of our government nor disclosing that I was sending
such a cable.

Took luncheon with Mr. Hartley Withers, who said he was delighted I
had come over to look about cnd have a visit with some of his blue countrymen who were just now suffering from a great state of nerves and were allowing their fears to make them very unhappy.

We had a considerable dis-

cussion of the strike situation at York, the gist of which is as follows:
The old labor leaders are in general taking u reasonable attitude toward

the Government and are willing to treat with the government officials con-

11Lrning all grievances, in a fairly reasonable way.

The younger elements

in the unions, however, are disposed to break away from their leaders, and
Promise has been made by the government

particularly so in the coal strike.

that working hours will be shortened, which has the effect of automatically
increasing pay to those working for fixed wages and necessitating an adjustment of the rate of pay on piece work.
in a demand for a large increase.

Investigations by the men resulted

They were offered ten per cent.

was finally compromised at 14.3 per cent.


The government refused to agree

to the compromise and offered 12-1/2 per cent., which was not wholly satisfactory to the workmen.

The difficulty was accentuated by an order in-

creasing the retail prict, of coal, which had no effect really upon the profits

of the collieries, although it was made the excuse for the demand for a generous readjustment of the piece work scale.

Unfortunately the men succeeded

in inducing the protective workers such as those who operate mine pumps, etc.,
to quit.

As the mines in that district are all deep they are in danger of

being flooded; some of them have actually been flooded, others being protected by the loyalty of men who were willing to disregard the strike order,
others by having mine officials operate the pumps, and in the last few days
further protection has been afforded by sending Sir Eric Geddes to take
charge and he is manning the pumps with men from the fleet.

This has rather

accentuated the grievance than otherwise.

It is generally felt that the time has arrived to have a test with the
workmen and this is particularly due to the fact that the labor unions are
now proposing to use the strike power for political ends, their demands including the abandonment of conscription and the withdrawal of troops from


It is undoubtedly a difficult, and possibly a dangerous, situation, but

having heard these stories for some years past I rather feel that they will
work out of it without a complete breakdown all over the country.


is moat critical of the government's policy of finance, particularly of the
extravagance of the present goverament,and most complimentary in what he says
about the courage displayed in the States in levying taxes for war purdoses.
After luncheon I stopped' in for a few minutes at the Law Courts, where

Lord Reading was presiding with two Justices at a trial, and I was unable to
see him.

At 4 o'clock went to the Houses of Parliament with Norman to keep

the appointment with the Chancellor.

He gave me a very warm welcome and ex-

pressed his satisfaction that he had time for a discussion of matters of
mutual interest.

His first inquiry was as to conditions at home.

I ex-

plained in a general way how our financial program had worked out and the
outlook as to borrowings, etc,, in substance the statement which Secretary
Glass addressed to Senator Penrose at the end of the fiscal year.

The Chan-

cellor said that he regarded our scheme of finance and the policy of avoiding
too heavy a burden of short maturities as a great achievement, in which we
could take great satisfaction.

He spoke of the coal strike and said that

the time had come for a test of strength and he thought that thisstrike would
have to be fought out, although he did not fear the very serious consequences
that some people do.

He impressed me as being more hopeful in that than

others with whom I had talked.

We had some discussion of the possibilities of ratification of the
Treaty by our Senate, in which he displayed the keenest interest.

I told

him that I thought it would be ratified and that the question would narrow
down on a pretty close vote to ratification with some reservations or to a

complete ratification with a resolution of disapproval as to some provisions
of the Treaty, but that no one could now say which course would prevail;
that in general, however, the people of the country, without even having read
the Treaty, favored ratification and favored the League and that the President's influence with the country had to be reckoned with by the opposition.

We had a very frank talk about the future and I expressed some fear lest
a failure on the part of our government and his to make suitable upointments
of men of great ability and statesmanship to the important positions arising
out of peace would result in difficulties, delays and bad feeling; that the
most important appointments were the British Ambassador to the United States
and our representative and theirs on the Reparations Commission.

He ex-

pressed a very full appreciation of the importance of these appointments and
said that the position on the Reparations Commission had been offered to a
man who possessed excellent qualifications for the work, who had had both
government and business experience, had a judicial temperament, a good knowledge of banking and economics and a pleasing personality,

in fact he felt

sure that if he would accept the appointment it would be received with sat1110

isfaction by us.

He said such a man as Earl Reading was the type they had

in mind, but that he wished to continue as Lord Chief Justice.
I asked him specifically if there were existing causes of dissatisfaction between the finance department of his government and ours at the
present time, and he said that everything had been cleared up in very good
shape so far as he was aware.

One cause of difficulty in the past had been

our tendency to send men abroad to represent the Treasury without authority

to do things, then sending others to succeed them, and so on, without really
getting anywhere.

I explained that this was natural and unavoidable; that

Great Britain had been operating ships, conducting banks and trade and administering colonies and dominions at long range for generations and had
learned how to do it; we h,d never had such responsibilities and consequently
had never learned how to operate at long range from home or to train men to
go abroad to represent us; besides that, our system of statutory limitation
made it difficult to get the necessary powers, all of which difficulties he
said he appreciated.

He spoke particularly of an instance where the Brit-

ish government was called upon to pay interest on borrowings from us from the
date when the debt was created, whereas army indebtedness created in England
waich had been running for some months h. d to be adjusted without interest

because no provision had been made in the appropriations bills to pay interest and there was no fund for the purpose.

All of this was said in the most

friendly spirit, but I could see that it was difficult for an Englishman to

understand such a situation, and I imagine that such matters have occasioned

quite a lithe annoyance.
I was rather expecting him to refer to the debt, but,as he volunteered,
I was glad to learn that there were no open questions with the possible exception of the debt and its definition.

He said of course that was true

and it would be a great relief to have the terms settled, but in that matter he felt that the creditor should make the first move, and it would be
rather unbecoming of the debtor to make any suggestion.

We had a consid-

erable discussion of what could be done to straighten out the exchange
situation and to arrange to draw on American credits for the work of

I pointed out the difficulty, with our Government no longer


extending credit, and when first-class obligations like the secured
United Kingdom notes and the Anglo-French bonds were selling on a seven or

eight per cent. basis, and when American investors were so un_ccustomed

to making investments in foreign countries and when investments at home
now paid such very large returns.


This he seemed to h,ve already under-

stood pretty thoroughly, but took the view that the difficulties must be
met in some way, as the dependence of Europe on America was now almost complete.

I told him that not being an officer of the Government and having

no authority whatever, I could simply express my personal views and gave
him a general outline of the thought which I had expressed to Leffingwell
in regard to political considerations involved in the treatment of the
new countries lying between Germany and Russia.

I think that he seemed

to agree very largely, but pointed out the difficulty under which the
three principal Allies, and particularly Italy and France, would labor in
affording any assistance whatever.

He seemed to want more specific sug-

gestion as to what should be done, and I asked him if it were not a fact
that during the period of the Peace Conference the center of gravity financially had been transferred to Paris, and now that the treaty with Germany had been prepared might it not be wise for the principal Allied governments to send competent, responsib:.e representatives to Washington to


take up these matters on the ground.

He said that of course it was true

that the borrower should approach the lender and much progress might


be made that way.

Speaking of the British government's financial position, he expressed

great regret that they had such a large floating and short-maturing debt



and particularly that their expenditures did not seen to decrease as

they should; that he had the greatest difficulty itymaking any estimate
for the budget which would balance; that he had hoped, out of the
proceeds of the Victory Loan, to reduce the floating debt, but had

not been successful to any great extent, and that borrowing must

After spending about an hour and a quarter with me he ex-

pressed a very keen desire that I should call on him again on returning from the Continent.

My general impression from the interview is that the British
government now wants two things:

first, that America should assume

a considerable share of the financial burden of rebuilding Europe
and starting industry going again; that the Government would like
to have their debt to us dealt with proMptly and generously with some
possible treatment of the inter-Allied debt generally so that the
bulk of it would in some way be reduced all the way around; that he
feared the necessity for some sort of a capital tax; that some arrangement should be made if possible to put the exchanges in more
stable condition, but, more than anything else, and in this he frankly stated that such views were strongly expressed at cabinet meetings, that Great Britain and the United States should have a friendly
partnership together in working out these matters.
Sir Robert Kindersley dined with us in the evening and we had a
most interesting and frank discussion of some of these matters.



man explained that Kindersley is a bit of an idealist and/most generous and warmhearted fellow of the highest integrity, whom it is sometimes dangerous to follow but interesting to talk with.
dear friend of Norman's and a director of the Bank.

He is a



swayed by his heart, that he had ideals that were impracticable, but
was one of those chaps that everybody loved but could not follow.

Spent the morning at the Bunk and had a short

Friday, July 25:

visit with Grenfell, and at 1:30 had luncheon with the directors
of the Bank, who had invited me to meet Sir John Bradbury, Secretary
of the Treasury.

During luncheon when the directors were all present

the conversation was general and nothing very interesting developed except an amusing incident bearing on Mr. Vanderlip's New York address
before the Economic Club.


at next to Mr. Cole, who was Governor of

the Bank prior to Lord Cunliffe.

Mr. Cole was discussing the serious-

ness of the coal strike in York and in typical British fashion said, "You
know Englandmay have a

her hands any day".

It was almost

exactly in the words used by Mr. Vanderlip, and, as he lunched atthe
Bank when he was in London, I cannot help but feel that he may have taken
this typical British statement literally.

After the other directors

had left Cokayne, Norman, Sir John Bradbury and I spent the afternoon

until about 4 o'clock discussing the Treasury's policy, particularly
about the Indian exchange.
 to get the

They are very much disturbed at the inabil-

situation under control without apparently a very large


of time to test the effect.

They undoubtedly all fear that the paper ru-

pee may become inconvertible, the political effects of which would be
serious as

the natives would lose confidence in the government general-



Sir John Bradbury impressed me, however, as one of the most intelligent men I have ever met.

He has been 37 years in the service of

the Government and seems to know every wrinkle.
Federal Reserve Bank of St. Louisfrom

I heard no suggestion

him that America should forgive the debt, and he seemed


lit London City and Midland Bank, a Scotchman, who I believe had been in
business in Yorkshire for many years.

Mrs. Grenfell was with us at

dinner, but after dinner we settled down to a. general business die-


cussion which was rather profitless because Mr. Darling advanced the novel
idea that if the British Empire, including the Dominions and Colonies,
could be covered by a glorified Bunk of Englund with one bank reserve,
the British nation as a whole would be able to eliminate the premium on
exchange within the Dominions and probably with the rest of the world.
None of this appealed to Sir Charles Addis nor to Grenfell, but the discussion occupied much of the evening.

I was interested, however, to

learn that Mr. Darling held strongly to the view, as did Addis, that
Great Britain should discontinue foreign borrowing entirely, and, as Mr.
Darling suggested, should work, economize and pay their debts.


Charles said it would be a magnificent thing if the American debt could
be in some way eliminated, but one of those things not possible in the
world as now constituted.

He thought a definition of the terms of the

debt at an early date would be most helpful, also that some adjustment of
the debt between the various parties should be effectea so as to reduce
the gross amount.

I am inclined to think that Kindereley expressed a


purely sentimental view of the situation, which does not reflect the
general opinion of Englishmen of importance.

Saturday, July 26:

I joined Sir Brien Cokayne rat the Bank at 12

o'clock and drove with him to his house at Roehampton where we had family luncheon.

After short visit with the family, Lady Cokayne went wit

us to the Bunk of England Sports Club grounds, where a field day was


given for all the employees of the Bank.

It seems the Bank recently

purchased 15 or 2n acres on which they built a large records building
for obsolete

papers, etc., and a small clubhouse for the Sports Club.


of the situation.

Crossed on the bout with these gentlemen and Mr.


Harris, who represents the Canadian industrial interests in the Canadian
Mission at London, and Mr. Dudley, who is the Relief Administrator for
England.of practically the whole German-Austrian, Czecho-Slovak, Jugo-
Slav, St. Louis
Federal Reserve Bank ofArmenian

and Southeastern Europe territory.

We reached Paris



desire rather than of minimum requirements.

The Italian program calls

for $660,000,000 of American supplies, principally food; the French
for from $750,^00,000 to $1,00C,000,C00.

He thinks generally, as a re-

sult of talks with the British, that $250,000,000 are required for the

new countries and Central Europe, but after long discussion he said
generally that if we could see $500,000,000 available at once to start

matters going, he had an instinctive feeling that the situation would
ease up.

Stettinius feels very strongly that the European situation

is not understood at all at home and sees little hope of arranging a
program of general assistance unless the American government not only
gets behind it with its influence and support, but in some form, directly or indirectly, lends its credit, and I am personally rather inclining
to that, view at the moment.

Stettinius says that Hoover has done a

magnificent piece of work over here and that his influence is immense.
He believes the whole reparations protsion of the Treaty must be rewritten and that, in an economic sense, the fate of Europe depends very

much upon the character of the men who undertake that work, and particularly those representing America and Britain.

He thinks that in general

all efforts undertaken to restore stable political and economic conditions
must be undertaken jointly by the British and Americans, that the Italians
must by all means be excluded and that it would probably be better to exclude the French.

One thing is obvious in talking with him and with the

British, and it does no good,- that is the way reports are flying about
on the one hand that the Americans are sending trade expeditions to the
various parts of Europe to capture British trade, and that the British,
while calling for American aid for Europe, are at the same time develop-



ing plans to use us to pull their chestnuts out of the fire and get the
I am convinced that 99 per cent, of all of this is

trade themselves.

baseless and that a few isolated instances of transactions such as the
sale of cotton to Poland caused all this talk.

Stettinius tells me that the French have closed contracts with

English machinery manufacturers for machinery to equip plants in northern

France destroyed by the war, to an aggregate amount of $2(X,000,00, the
terms of payment being spread over a period of from six months to two
years or even more.

At the conclusion of our discussion I asked Stet-

tinius if he did not believe that the best way to make progress would be
to pick out the comparatively few fundamentally essential articles now
required in Europe and make special plans to finance their Immediate
movement, leaving the future sum to develop automatically.

He agreed

that this was the fact ana tnat wheat, packinghouse products, copper,
cotton and sugar were tile prime essentiais, if we excluded coal, which

could hardly be moved from America on account of inadequate shipping and
loading facilities.

We are to meet 1-ter at dinner and continue our dis-


Stopped at the Mission to meet IcCoy and went with him to Gen. Per
shingls residence

in Ogden mills' Paris house, loaned to Gen. Pershing


were there.

In the evening Harrison, Sterling and Logan joined me at the Cafe

de Paris.

Logan explained in considerable detail the conspiracy which

had been started over here to get everyone to join in a recommendation
to the President to ask me to serve as the American member of the Repara-

tions Commission, and I rather gathered that they thought the matter had
been pretty well arranged, but without the slightest knowledge on the
part of anybody as to whether I would accept.

Logan says that the

American member must run the show ..nd dominate the conflicting interests

or we will be all at sea, and that there will be no difficulty in doing
it if we start right.

He is very much afraid that a bad appointment

will be made, both by the British and by the Americans.

After dinner I

went out to Logan's apartment with Logan and Sterling, and we sat there
until nearly 1 o'clock, during which time Logan recounted their exper-

iences in dealing with this whole situation, which is surely a romance,
and one cannot help but feel admiration for the courage and energy with
which these fellows have taken a tremendous responsibility and gone


ahead to do the job without regard to questions of authority, etc., etc.
Logan was very insistent about the arrangement as to the Reparations Commission.

Tuesday, July 29:

Capt. Robert Masson called in the morning.

seemed very glad to see me and we arranged luncheon together.



called on Monsieur Pallain to pay my respects and ex:,lained that I would

be back later on my return from the north to have a real visit with him.
He looked to me exceedingly seedy and seemed to have lost a good deal of



Monday evening Logan, Sterling and Harrison dined with me at the
ikCafe de Paris, the evening being entirely social.

From there I went to

Logan's apartment with the morning, I listening for most I eat up until tales of th
o'clock in Logan and Sterling and Logan and of the time to
experiences he and others had had in the Relief organization.
is a romance of the first order.
the following:

It truly

One hears from these men such tales aS

Learning of the need of supplies along the Black Sea

coact, Hoover sent a ship down loaded with miscellaneous goods, principally obtained from the Army,-agricultural and household implements and
utensils, cloth, clothing, meat, etc., etc., for which he paid $500,000.
His people went back into the country and bartered this stuff with the

natives for a cargo of wheat worth $3,000,000, which he brought back and
sold in parts of Europe where needed.

In another instance he heard of

a large over supply of eggs in northern Europe, where thero was no transportation, and he arranged to swap two old locomotives which could just
limp along, which I believe he got from Armenia, for 2,000,00'1' eggs.

Then again the Serbians wanted a steel bridge very badly, which he got in

German Austria in exchange for 50,C00 tons of wheat, of which he had a


surplus, and 18,000,000 kroner of Austrian paper money (printed for the

purpose, which he pointed out to the Serbs they could stami, for circulati

in their own country, and which they gladly accepted).

No comment on th

financial morals of this transaction is needed, but, as he said, it reli
the fact of the
He said that/the bplehevist countries, that is
the situation both ways.
Hungary with Bela Kim in control, and Russia, bordering on almost all

these new countries, has resulted in constant warfare, little ware now be
ing active in twenty or mnre different piaces.


Col. Logan painted a very gloomy picture, indeed, and said that he,
1114 did his chief, saw no possible outcome except by United States govern-

mental relief.

He gave me some photographs showing some of the Russian

bolshevist horrors and said that some of our own men had a mamas film
which they top',: in northern Russia shoring the whole operation by the

bolsheviks of executing eighteen people who were summarily shot after
having their shoes removed, without pretense of trial.

Logan finally

said that while conditions were undoubtedly desperate he thought they would
be immensely relieved if the United States government would step in affirmatively with immediate help, and that political conditions would then
quiet down.

He is just about to start on a trip to Warsaw with Mr.

Hoover and wanted me to accompany him, which I felt unable to do.


flesh and to be much older than when I saw him three years ago.


ward lunched with Masson at the Club at 80 Avenue des Champs-Elyses,
established by the French government for the use of the Peace Mission, a
most magnificent affair, where most of the formal dinners have been given.

Masson was most frank for a Frenchman, in stating his feelings about the
situation in France, and particularly as to the situation betWeen France
and America.

He says that it is not to be expected that America will

make a great gift to France by forgiving the debt.
thing to do, but impracticable.

It would be a fine

That is now needed is to effect an ar-

rangement by which some part of the debt can-be reduced by America accepting from France as payment the debt which, say, Belgium, Serbia,

Rumania and Italy owe to France and then arranging to defer payment=
of interest for three years.

He practically admitted that France could

not now pay interest without tremendous sacrifices, which would be disorganizing.

France needed to build up her foreign trade.

To do so

would require raw materials from America, which should be furnished on
long credit.

He said that in his opinion the terms of reparation with

Germany were not practical.

Germany could not pay the amount involved

and it would be hazardous to attemptto restore German industry to such an
extent as would enable her to pay, as it would involve a serious impairment of the French foreign trade as well as the other Allies.


thought Germany's best means of payment was her coal production and the
products of her forests and, to some extent, steel and iron, which she
could ship to the East; that steps should also be taken to mobilize German credits abroad, etc


etc., for the purpose of reparation payments.

He saw grave danger in building up Germany, which had a splendid capacil;


for organization, as the great industrial and commercial rival of the
rest of the world.

He feared political appointments on the Reparations


Masson's general theory of the position of France is simple enough,
but he offered no solution.

France had suffered an immense destruction

of property in the way of plants, houses, etc., etc.

The reparation

would be represented by instalment payments to be made by Germany over a
long period of years, which would not be sufficient for immediate use in
reconstruction, therefore the German reparation credit should be made the

basis of immediate credits in America and the neutral countries which could
afford to extend credit, and the proceeds used for the absolutely essential things.

He agreed with Stettinius as to what those essentials

In general, I should gather that he believed it would be most

difficult to arrange credit to the extent required in the United Statee
unless our government was willing to assist in some form.

He thought

the War Finance Corporation and the Grain Corporation might be made the
instruments for doing so.
future of France.

Masson, however, watsnot in despair as to the

He believed

the shock of war was over.

her people would get back to work when

I um reminded at this point of a statement

made to me in London and afterwards stated again by Mr. Dudley Ward, that
investigations conducted by the English in Germany disclosed indications
that the German people had been underfed for the past two or three years
to such an extent that their physical ability to work had in fact been
greatly impaired.

Many people were suffering from boils and carbuncles

and from the general lassitude induced by malnutrition, a very inferior
quality of food and an inadequate)supply of fats.

There has been a tre-


Appmendous reduction in the birthrate in Germany and the children born during

the latter years of the war are generally afflicted with rickets, many of
them permanently impaired, the insufficiency of fate resulting in poor
bone structure

which it is expected will produce a large number of de-

fectivee when these children reach maturity.

Physiologists from

England who have studied the matter state that it will take at least two
years to overcome the physical deficiencies of the average German of
moderate or small means, brought about by war conditions.
Masson told another story indicating one of the details of the diffi-

culty which was encountered between the Americans and the French and
which had proved most embarrassing.

General Pershing issued an order

when the forces arrived that the men were not to be allowed to visit
houses of ill fame, in fact military police were assigned to the work of
Freventing it.

The French protested against this, claiming that

health protection of the men could be better amfaxsail effected by freedom than by this restriction.

General Pershing, however, was obdurate,

and Masson said that this had resulted in turning our men aloose on the

female civilian population of France to some extent, a good many of whom
were young girls.

In general, the peasants, shopkeepers' daughters and

even the servants in hotels had succumbed to the lavish use of American

money, and, furthermore, under these conditions control of disease was
more difficult.

He cited an instance in one town where this trouble had

developed, where the daughter of one of the leading citizens had presented a thousand-franc banknote to be changed, and, ae tLese notes are rare
birds in the country, suspicion was aroused and questioning disclosed
how she got it.

The offender, a young American officer, was questioned


d his general attitude was that he had the money and she was quite
willing to accept it.

I gather from Masson's attitude in recounting

this tale that the French felt that we completely misunderstood their
system of views in these matters and failing to accommodate ourselves had
caused a good deal of unhappiness.

I talked over these matters at great length with Masson and he
finally admitted that the general behaviour of the American soldiers
in France was more than admirable.

The complaints about overcharging,

etc., were true enough and he regarded such a development as inevitable
when these boys were furnished so generously with money.

McCoy maintains

that our boys were the best behaved of all troops from abroad and that
in general they made friends with the French and that the wholesome way
in which the average American soldier treated French women and children
established a bond of friendship which the English were incapable of

McCoy says that the feelings which became strained at one

stage of the Peace Conference are now much improved.

He also stated

that of all the troops which took part in the review of the 14th of July
the Americans made the best showing.

They were a handpicked lot from

the whole of the Third Army and no finer body of men had ever been assem-


bled for parade purposes.

Just before lunch I called for a few minutes

on Baron de Neuflize, had a little chat with him about his son's work in
America upon which I complimented him, and agreed to dine with him on returning from Belgium.

He said that Monsieur Pallain was not at all well,

carried his responsibilities with him too much, and, in consequence, had
broken down his health.

From lunch called on Ambassador Wailace, who

was very glad indeed to see me and explained at some length his difficul-


ties in getting along in a country where he did not speak the language.

He said that he had finally adopted the policy of requiring everybody to
speak English.



i2. .b.e




He, as are all other Americans with whom I talked, is most interested as to the chances that the Peacd Treaty would have in the Senate.
He surprised me very much by stating that before the President left for
home it had been pretty well understood that he would ask me to take
the job on the Reparations Commission, but the unwillingness of the Foreign Relations Committee of the Senate to authorize an appointment
would delay matters, and in the meantime he had heard something of the
discussion about Mr. Baruch's appointment.

I told him that it would

not interest me at all, except that some emergency developed that made
it seem a duty, and even then I doubted very much if I could bring myself to take a job that would expatriate me for some years anyway.


promised to spend some time with him on my return from Belgium and he

was most cordial inaskin_ that I call upon the Embassy for anything that
would facilitate my trip.

From there called on Logan, Taft and McKnight

at the Relief organization headquarters.

Arranged with Logan to get a

car to make the trip along the front and to Brussels and Amsterdam, with
a French officer to go along.

Mr. Taft is most anxious that the settle-

ment for the gold should be effected as promptly as possible.

He said

that they had five more in an American cruiser in the Mediterranean which
had been received four months ago from the Bulgarians, which they were
proposing, if possible, to ship direct to New York, which I told him we
would be glad to attend to on arrival.

Frank McKnight, who acts as Comptroller of the Relief organization,
explained the many difficulties of the work of the organization in getting


together competent personnel, etc.

He was most enthusiastic about Mr.

Hoover's work; says that his heart is very much in the situation, and
that Mr. Hoover fears that unless America does something affirmatively
and generously at once we will go down in history as a selfish,self-


centered people with all Europe against us.

He feels that during the

latter days of the Conference the old influences around the President,
such as Col. House, Hoover, etc., had lost their infiuence with him to
some extent and that he became subject to the influence of a lot of
college professors and theorists and
practical ideas.

idealists who were lacking in

Hoover and McKnight are now working on a plan to sulbmit

for the creation of a large corporation with a federal charter, with
31,000,000,000 of capital, one-half preferred stock to be taken by the
public and one-half common stock to be taken by the Government or the War
Finance Corporation or the Grain Corporation, this/corporation to issue
debentures for additional funds and then to operate somewhat along the
lines proposed by Davison.

He is anxious for me to have a chat with Mr.

Hoover about it, which I agreed to to today, but unfortunately Mr. Hoover
is leaving on Thursday and I was unable to arrangeto dine with him Thursday night on that account.

After talking with McKnight and learning, rather to my consternation,
that the Relief organization is pulling out all over Europe and winding up
its affairs, I had a little talk with Col. Logan about our automobile

trip, which he undertook to arrange for me, giving me his car and a good
driver and a French officer who knew the country.

Mr. Hoover came in

while I was talking with Col. Logan and I had about half an hour's chat
with him.

ge twOr. ft very gloomy view of the C.lhation in Europe.


said that the five essentials needed, aside from coal which we could not


supply on account of inadequate tonnage and port facilities, were fate,


grains, cotton, copper and sugar, and he roughly figured the total of these
five articles alone at $3,350,000,000.

He said that the situation in

the new Eastern countries was really disturbing on et

ant of debased

currency, no banking facilities, no credits, no exports, little transportation, no credit abroad, very little effective governmental machinery,
and, outside of Finland, hardly anything in the way of a tax system.
They were all more or less at war with each other, on very bad terms,
fighting still going on in many areas, and they needed both social and
political tranquility, raw materials and more stable government.


Hoover was very critical of not only various individuals but of the attitude of foreign governments and somewhat of our own.

He said the only

solution that he saw was direct government aid to Europe; that he was
most strongly impressed by the need of building up Europe's productive
capacity at once and had prepared a memorandum on that subject which had

attracted the attention of the officers of all the foreign governments,
and of which he handed me a copy.

In his opinion Germany would recover

among the first because of better organization, greater desire to work
and closer application to the job; that she would gradually extend her activities in trade and otherwise with the new countries on her eastern border and help stabilize conditions there.

He thought the Treaty, and par-

ticularly the re7aratione slaneee, quite unwoOkable but possibly quite as
good as could be expected, but now tint- feat jolh was to have the I.(


of Nations stabilize political conditions and the Reparations Commission
wisely administer that part of the Treaty entrusted to it.

heard something of

He had

Mr. Baruch's possible appointment, and, while he did



tiarhe had cabled the President strongly urging that the foreign finance min-

ster° should be invited to Washington for a conference, not, if you
please, to develop plans or strike bargains, but to create an impression
which would awaken America to the peril in which Europe stood.


All that

he said was most interesting, particularly when he explained that he had
taken very long chances indeed in some of the things that he had done.



one instance he said that the hazard of the failure of the Germans to sign
the Treaty would have imperiled $100,000,000 of supplies which he had
scattered all over Europe and over which he probably would have lost control resulting in losses of possibly $25,000,000.

marked up his prices all around and realized a profit by way of interest
which had now become real, as he had pretty well liquidated his supplies.
Through his efforts and various trades he had made, etc., the work of the

Army and the C. R. B., he estimated that $850,000,C00 worth of food and
supplies had been poured into Europe.

He agreed that to use credit in

America would aggravate the present tendency to slackness in effort, but
nevertheless immediate relief in food das essential.

He said the

English investigation of the physical condition of the German people was
conducted by a crank whose report should be disregarded, but his own re-

port made by Dr. Taylor convinced him that the Germane on the average had
lost 20 pounds in weight and that the lack of fats had developed lassitude

and high nervous irritability, but he was convinced that three months good
supply of fate would restore them to normal.

They were even nod consuming

only about one-third, at the increased ration, of what we consumed at

It is impossible to recount the many interesting and tragic stories
which he told me, but my impression from this conversation was very die-


tinct that Mr. Hoover was a good deal of a plunger and took kigk long
chances; that he had immersed himself in a great maze of statistical
figures, calculations, formulae and estimates which had really somewhat

beclouded his judgment.

On the other hand, his own story and the stor-

ies I hear from others, both in his organization and outside, convince me
that he has done a magnificent piece of work which could only be conducted
successfully by a bold and adventurous spirit with limitless courage and,
in some instances, little regard for either methods or consequences.


should say that Europe probably owes more to him than to any other man,
for jumping into the breach with food and supplies, with sympathetic relief, all properly administered with the firm hand of a dictator.


Hoover has had an organization, he tells me, of about 900 men scattered
all over Europe, largely drawn from the Army, some of them philanthropists of various sorts, and I gather some of them very efficient while
others are quite inefficient.

He has assumed all sorts of powers accord-

ing to his own story in advising and directing and regulating matters in
these new countries, and has probably done it with a great deal of skill,
but I left him with some feeling of anxiety lest he mislead himself and
possibly other people by his own tendency to paint the picture in lurid

He is one of the most interesting men I ever met, with a con-


siderably developed ego, but his accomplishment overshadows everything
that may be said in qualification.

On returning to the Hotel de Crillon from Mr. Hoover's office I found

Gen. McCoy trying to find me to go to a reception at General Pershing's

General Pershing is occupying Mr. Ogden Mills' house, one of the

most beautiful in Paris, with an unusually fine garden in the rear.


reception was held outdoors and was an altogether gorgeous affair.

I met


General Pershing, General Bliss, General Harbord, Marshal Foch and
quite a number of other distinguished people whose names I do not recall,
and there werealso a number of Americans there that I knew, including
Mr. and Mrs. Harjes, Mr. and Mrs. Stettinius, Mrs. Borden Harriman, Col.
Quekemyer, who is one of General Pershing's aides, etc.

It was largely

made up of officers in uniform and their wives, Ambassador Wallace and his
wife, and a considerable smattering of the American colony.
Wallace was receiving with General Pershing.


I returned to town with

General McCoy and from there went to the Hotel Majestic to dine with
Sir William Goode and a party of Englishmen partly made up of Treasury

Mr. Dudley Ward was there, Mr. Butler, who has charge of the

Southeastern relief work with station at Vienna-


a Mr. Water-

low, whose name I recall after inquiry as being the same man who has occasioned a good deal of trouble to Warren Greene, and quite a number of
others attached to the British Peace Mission, mostly the younger men.
They were a very attractive crowd, but most of my talk was with Sir William Goode and Mr. Butler, who sat on my right.

In passing I may say

that I inquired of Mr. Hoover about Butler and learned from him that he

was regarded

by the Americans as the joke of the Continent,apending most


so that one could hardly conduct financial transactions with any sense
of security.

He spoke as though his people in Vienna were having a

good deal of difficulty in getting food at times and mentioned particularly the political unrest as being a barrier in the way of economic recovery.

Three trains a week are running through from Paris to Vienna,

but they are slow and liable to considerable delays.

After a while I

was asked to give a description of our new banking system, which I did,
and it led to some discussion as to the part the United States would play
in reconstruction work, most of them taking the position that while Great
Britain would get along without heavy borrowing, they were not in position
themselves to make loans to assist the Continent.

I could see an under-

lying feeling, although with one exception they were most polite, that
America had immensely profited by the war and should now step to the front
in assuming the burden of reconstruction and political responsibility.

Waterlow was inclined to be a little offensive in his manner, rather than
in what he said, and I was a good deal impressed with the way the others
at the table either ignored him or sat on him or changed the conversation.
They seemed determined that nothing unfriendly or in the slightest way of
fensive should

be said by anyone.

I got out of the meeting a very strong




ion of the disputed coal fields, where they still are.

Mr. Balfour was

much interested in discussing ahat position the United States would probably take in regard to the new countries along Germany's frontier, but
spent most of his time discussing it with Mr. Polk.
We broke up at 5
plclock and I left him/impressed than ever with Mr. Balfour's charm and
the particularly careful, accurate w

in whic

he conducted even the


most trivial conversation.

Drove in with Frank Polk,

feeling far from well and was very much worried in regard to the disputes

in the East.

He insisted that/we should accept the mandate of Turkish

Armenia and Trans-Caucasia it would lead to an impasse, as he could not
He was also a good deal
feel that our folks at home would stand for it.
concerned about the dispute between Poland and a016-46faif& which was causing ructions with the Mission.

He said he had got a bad cold, was not

feeling well, was tremendously overworked already and needed help.


spoke of my meeting with Hoover and told him he would probably hear some
urgent appeals from that source, and warned him to check up on Hoover's
That night I drove out
figures, which struck me as a bit imaginative.
Mr. McKnight, Mr. Taft and
to Hoover's house for dinner/with Mr. Kent.
two or three others were there, as well as Mr. Hoover.

Federal Reserve Bank of St. Louis

During the dinner

indulged in a good deal of reminiscence concerhing the work

sending men inland he succeeded in getting rid of the goods in exchange

for a cargo of grain worth 0,000,0°0 Mich he brought west and sold.
In another instance he heard where there was an oversupply_of eggs, but
no locomotives, and he got a couple of out-of-repair locomotives which could

still run, and sent them up there in exchange for 2,000,000 eggs.


another story he described how he made a trade of 50,000 tons of grain,
of which the Serbs had a surplus, in exchange for a steel bridge that he
got in German Austria and swapped, together with 80,000,000 kroner of paper
money, for the grain.

The paper money was printed for the purpose of the

transaction and was shipped to Serbia where it was stamped and put in

After dinner Mr. Hoover and I sat down in'a corner and

for over two hours I questioned him about European conditions, particularly
in the East.

(Here take in part of letter to Mr. Leffingwell Which covers
this conversation)





A rerk by Mr. Balfour

to omit.

Wal I

called at

the B

a picture of London that is too good
k of England and they told me that
building and had assigned the li-

they wanted meto occupy a
brary to me, I was


of course, gratified, because no



such intrusion by a stranger
the Bank.

ever before occurre


They even had my name printed on a card and affixed to the dot

and at once said that they would arrange to have a telephone put on my
desk, although it might take a little time, as the Telephone Control made
it necessary to get a special permit.
put in while I was at lunch.

They insisted they would have it

When Mr. Kent and I were lunching at the

Savoy Hotel, Sir Hardman-Lever joined us and almost the first thing he
said was to jokingly remark that he understood I was to have a private tek
phone on my desk at the Bank, having apparently learned of it at the Treasury where the permit was required.

A day or two later when I was lunching

at the Bank with the directors and Sir John Bradbury, he asked if the arrangements for my private telephone hid been completed all right,- also
with a laugh.

It occurred to me that this private telephone was causing

some commotion, but later when I called on Mr. Austin Chamberlain, he also
inquired whether the arrangements for my telephone had been satisfactor-


ily completed.

To cap the climax, when I was lunching with Mr. Bafour

in Paris, he stated to me that he heard that arrangements had been made in
the Bank to instal a private telephone for me.
this sequence means.
tary of
Federal Reserve Bank of St. Louis

One must consider what

Word first reached the Parliamentary Under Secre-

the Treasury, then the Secretary of the Treasury, then the Chan-


Thursdays July 31:

This morning I went to Morgan, Harjes & Company

and spent an hour with Stettinius going over his cables and getting a
line on his plans and explaining and discussing Kent's memorandum.


this time I had been gradually developing a feeling that Stettinius himself had become infected with the general atmosphere of depression, particularly about Italy.

He seems to have made up his mind that nothing

but government aid will meet the immediate needs, and I gather that he
thinks a start should be made with a credit of about 3500,000,000, principally for Italy and France, but that ultimately from two to three
billion dollars will be required.

He insists, however, that all of the

officials with whom he is talking prepared estimates that are quite unreliable; that they are somewhat inspired by the fear, each that the other
will get more than he does, and he thinks theyare packing their estimates
with no expectation of getting credits for what they submit.

In the case

of France they have $40,000,000 for railroad equipment, and he says that
plenty of cars and locomotives are in FrJr.?.c if they will only go to work
preparing them.

Kent and I debated his plan at great length, and from

there we all went to Voisin's for luncheon, where we met Col. Logan.

told us more stories of conditions in the East and gave me a set of postcard pictures of atrocities in northern bolshevik Russia.

It seems that

the American Expeditionary Forces up there got a moving picture film of
the execution of eighteen Russians by the bolsheviks, which have been suppressed but which they say is the most gruesome thing he'ever saw.


returned to Morgan, Harjes and had a further talk with Stettinius, and
that night Kent and I dined at the Ritz.


Friday, August 1:

This morning dictated and packed and at noon Kent

and I went to lunch with Harjes, Stettinius, Cellier, who is an Under
Secretary of the Treasury, and an interpreter, as Celier spekks no



This was one of the most interesting meetings we had.

impressed me most favorably.


He is a comparatively young man, and Stet-

tinius says belongs to the young group of Frenchmen who -re gradually

getting a strong and constructive influence in the government and seem to
be making some progress.

It was awkward carrying on the discussion entirely through an

Almost right away Celier asked whether the American govern-

ment was going to extend credit in some form to France or the French people.

I explained to him who I was; that I was not an officer of the

government, simply had relations with the Treasury in connection with its
business matters and was over here quite unofficially, but was anxious to

know about conditions, and that I would prefer to ask him a few questions
before answering his.

We then discussed at great length the criticisms

in regard to the policy of taxation and keeping so many people in the
army and out of employment; of the political difficulties in the East,in
which France was interested; of the disappointment France would experience
in the matter of reparation, and, finally, that France could not buy goods
abroad unless the people would get to work and produce goods for export,
and that it was very easy to undermine the morale of a nation by making
credit too easy, just as it was to undermine the credit of an individual
by paying chomage, which promoted idleness.


seemed to be quite in

accord with the views expressed by Stettinius, Kent and myself on these

matters; admitted that the food situation was not so bad in France, but





of them recovered from Germany and from Alsace-Lorraine, and doubtless
sale of it French equipment which the Germans had captured and which has
since been restored.

I promised to see Celier again on returning from

Belgium, as well as to meet Klotz.

I returned to Morgan, Harjes and had

another little chat with Stettinius, and that night dined with Ambassador
and Mrs. Wallace.

They had a large formal dinner party.

Among the

guests were Messiers Pichon, Minister of Foreign Affairs, Leygues, Minister of the Marine, Marechal Foch, General Bliss and General Harbord,
Mr. and Mrs. Polk, Mr. Venizelos, of Greece, and Mrs. Francis Lawrence,
of Boston, whom I took in to dinner, Mr. and Mrs. Stettinius, and Miss
Marbury, who sat on my left.

There were a good many other people there

whom I did not know,- probably thirty at the table.
tuous meal, eves for France.
six kinds of wine.

It was a most sump-

There were six or eight courses and five


Mies Marbury, who is over here giving recitation40

the soldiers, impressed me as a rather disagreeable woman, most aggressive;
she talked incessantly, principally about herself, and wound up with some
very biting criticisms of the French, who she said were squealers, thor unreliable,
Federal Reserve Bank of St. Louis

had lots of money themselves and were simply begging

the American Senate would ratify the Peace Treaty.

He said that

neither the treaty with France nor the covenant of the League of Nations

me his opinion violated our constitution and he would class them with the
executory treaties in each instance where a war situation arose, recognizing that Congress had to be put in motion to give an affirmative approval to any act which was equivalent to a declaration of war.


gether he impressed me as one of the most interesting seriousminded men
that I have ever met, as a man of very strong opinions and a very wide
range of knowledge.

His familiarity with American affairs was particu-

larly impressive.

Saturday, August 2:

We left Paris at 8:30 this morning.

Col. Lo-

gan had given us his army car, a firstrate Cadillac limousine, and, besides Mr. Kent, Mr. Vaughan and myself, Mr. Bancharel, a French officer,
and a driver accompanied us.

Bancharel says he is 42 years old, was 52

months in the army, part of the time in the infantry and later as liaison
officer with the American Field Service.

He knew all about Ben's organi-

zation and their work, of which he spoke very highly.

The driver has

been attached to the A. R. A. driving for them and Mr. Hoover's people in
different parts of Europe.

We left by Rue Lakayette, passed through

Lagny, Meaux and La Ferte, at which place we made a detour to Jouarre
to visit the Chateau de Perreuse where young Wold is buried.

The country

through which we passed seemed to be well cultivated, and, outside of
Paris, the roads were pretty well crowded for a distance with carte
bringing in vegetables, straw, provisions, etc.

At Meaux I noticed a

great many idle freight cars, some of them German.
no evidence of lack of cultivation in that district.

At C:.ateau Pereuse

we found the caretaker's daughter, who showed us the graveyard on the


grounds where 72 French and 18 or 19 American soldiers are buried, and
off in the corner two Germans.

The place was beautifully kept; crosses

46_ at all the graves with the names and a little tricolor, and all of them

planted with flowers with little box borders,which showed evidence of
the most perfect care.

I gave the caretaker, who had joined us, some

money and left impressed wit

the fact, which our courier exjained, that

in France the graves of the soldiers are regarded as sacred.

We then

followed the Marne toward Chateau Thierry, and when we got within a short
distance of it, at Chezy-sur-Marne, the countryside begun to show the
effect of shell fire, many trees along the road having been cut off by

Our approach to Chateau Thierry was over a road where Ben had


On the right bank of the river the destruction

artillery fire was plainly evident.

occasioned by

The town was pretty well shot up by

the Americans before they got possession, but the bridge had been restored
and people were already there doing business and starting to rebuild their

The destruction is nothing like as severe as places we saw later.

The five of us lunched at the Hotel de Jean de la Fontaine, a rather poor
little place, but had a fair lunch which cost 30 francs.

The lunch con-

sisted of soup, dark bread, no butter, some sort of a pickled fish and
some meat (the meat was not very good, but edible), and a bottle of rather
sour wine.

There were a number of young American officers in the place,

as well as some English.

After lunch we followed the road to Fere-en-

Tardenois, every part of the way having been fought over, the village of
Fere-en-Tardenois being almost completely shot to pieces.

The next town,

Fismes, was almost completely destroyed, and there you could pick up any
quantity of trash, rifle and machine gun cartridges, and even helmets in


the rubbish heaps, and I noticed in a good many places you could hear the
rattle of fragments of shell under foot, which had become discolored and
taken the shade of the dust.

Just before reaching Fismes we made a de-

tour to the Bois du Chatelet and saw t-e foundations of the gun which
was used to shell Paris.

It was approached by a siding from the railroad

track, and the gun was run into the foundation, jacked up and fired, and
then run out again some distance away, presumably to protect it from being

The foundation was a huge affair of steel and concrete, I

should say about 30 feet across, the platform operating on huge ball bearings which must have been eight or ten inches in diameter and which, I was
told, weighed 66 pounds apiece, the whole being operated by a big crank
which enabled the gun to be pointed in any direction.

The jacks for lift-

ing the gun off the railroad carriage were there, but the platform had bean
destroyed by the Germans with bombs.

I noticed that the railroad track

approach was also torn up, either by French shellfire or by bombs, it was
impossible to say.

From names we followed the Vesle river*xxkigkxxmit

to Rheims, through a country that was all fought over.

There is evidence

on every hand of artillery destruction; hardly a building untouched, many
of them completely destroyed; ammunition dumps with shells piled up, and
here and there in the woods alongside the road crosses where soldiers
had been buried.

Notwithstanding this, however, the peasants had gotten

the farms pretty well in cultivation.

Aside from a few army cure we saw

no automobiles and very few vehicles of any kind, but there were some cattle in the fields here and there and the people were returning to their

Rheims itself is a terrible spectacle of destruction, the cathe-

dral standing out above everything, although damaged beyond hope of repair.


The front is now boarded up and sightseers are not allowed inside,- probably very wisely, as stones in the tower are hanging by the reenforced
lle and in places looked as though they might tumble at any time.


drove out of the city to the German and French lines where the fighting
had been the worst.

The Germans had approached within three or four miles

of the city and there the countryside was entirely torn up by shell fire,
filled with shell craters, unexploded shells and the litter of fighting
still being there.

There were three huge German tanks pretty well rusted

up which had either been struck by shells,

or in one case mired in a trench.

We passed Fort La Pompelle, which was practically destroyed and annihilated.
All of the ground hereabouts was covered with lines of trenches and shellproof dugouts, some of them very deep.

In the distance we could see Mont

Blanc, Mont Sans Nom and Mont Cornillet, just beyond which the Germans had
long been stationed with their artillery.

The French had literally shot

the tops off these mountains, one of them showing nothing but the white

Much of this ground had been used for vineyards, but not a ves-

tige of agriculture or viticulture remained.

We were told that there were

about six or eijrt thousand people again in the city of Rheims, but the
task of restoring the town would appear to be the work of years.


principal streets have been cleaned up so that one could get up to the
cathedral without trouble, and they were removing the rubbish from other
streets, but undoubtedly many of the walls were unsafe, as we were obliged
to make a detour where one street had been shut off.

From Rheims we fol-

lowed the Vesle river through Livray, gradually running out of the area of
the worst fighting, past Revigny, and on into Bar-le-Due.

On the way we

passed the canal which the French used for a species of small gunboat which


they would run up to a given position during the night, bombard the German
lines and then run off again before they could be located.

All through

Alpis country there was a good deal of camouflage still hanging alongside
the road, and although we were close to the point where fighting had been
active, there were graves alongside the road, most of them French as we
were on the French side of the lines.

Just back of the canal there had

been a large number of French guns, which were placed under very substantial dugouts and the approaching road was apparently screened with camouflage.

In thio region there were a good many trees cut up by shell fire.

We reached Bar-le-Duc rather late and spent the night at the Grand Hotelde
Commerce, having driven 189 miles.

It was a poor little hotel and the

town was filled with French soldiers, as was the case in almost every one
of these villages and cities.

Bar-le-Duc seemed to be pretty active and

thriving, and our courier said that the people of the town had made a good
deal of money on account of the trade with both French and American soldiers who came there at every opportunity to blow in their money.
town was intact.


The railroad station had been largely destroyed by

aeroplane bombing and in many other places in that region the scars of
aero bombing still showed.

Bar -le -Duc was one of the places which the

Germans attacked by that method throughout much of the war.

Mr. Kent

and I shared a wretched room together, the beds having on them the conventional down mattress.

Sunday, August 3:

We left Bar-le-Duc at about 9, taking the road

through Vavincourt, being part of the chemin sacre, to St. Mihiel.
we saw the effect of the American attack.
oughly shot to pieces.
but restored.


The town had been pretty thor-

The bridge across the river had been destroyed

In all this region the roads were not very good and showed


the effect of heavy usage and shelling.

The main masonry bridge over

the river had not yet been restored, the greater part of it having been
lipwn up by the Germane and a large span is completely gone.

From St.

Mihiel we followed the right bank of the Meuse through a country which
had been altogether devastated to Verdun.

The trees along the road had

been largely destroyed,- some of them very large trees,- shot off with the
ends simply splintered and standing up a few feet above the ground.


along this road following the river were endless dugouts, and in some
places along the canal an almost continuous line of sunken canal boats.
The countryside was pretty well littered with war material; here and there
broken caissons, the remains of trucks, etc.

Scattered in the woods and

along the roadside were crosses where soldiers had apparently been buried
as they fell.

We entered Verdun, one of the really fine old picturesque

cities of France, by the Porte de la Chaussee and a beautiful old bridge.

The town of Verdun shows the effect of more or lees

constant shelling, pretty much all the walls being scarred by shell fire,
but the buildings seem to be quite intact.

Here and there a building
would be completely destroyed, but the town did/look nearly as badly as
the others we had seen on the way in.

We went right through the city,

which is completely surrounded by a big moat, with forts, etc., constructed
by Vauban, and out to Fort Douaumont.

The road to this fort was protected

by camouflage pretty much all of the three or four miles and had a narrow
gauge railroad alongside.

This entire area, as far as one could see, has

been literally shot to pieces, the trees pretty much all killed and destroyed.

I understood from our courier that it had been pretty much coy-

red with forests before the war.

The big fight having taken place three

years ago, the ground was covered with grass, weeds and scrub, but it is

no exaggeration to say that every foot of the ground from outside of
ilpydun to the Fort and from the Fort three or four miles beyond to the Ger
man lines, consists of shell craters, many of them filled with water.


Every shelter where dugouts could be built for protection from German fire
had been utilized, and over all of this country there was a litter of
shell fragments, grenades, unexploded shells, leather harness, etc., etc.
The growth of weeds and grass has completely covered this and one would
think at first glance that the place had been cleaned up, but a more careful examination, particularly in the shell craters, shows no end of
arms and war material.

In one shell crater I noticed some bones sticking

out and all over the countryside are crosses where men have been buried.
Many of them, however, have doubtless been torn up again by shells.


Douaumont, once a hue solid concrete and stone structure dug right out
of the living rock, has been so shot up that its outline is hardly discernible from the outside.

Inside it is all underground tunnels apparent,
had been
ly running to a great depth and/lighted by electricity, where the men slept

and lived.

From these underground caves openings were made to the top,

where they had steel or concrete lookouts, machine gun emplacements, etc.,
etc., which seemed to have weathered the shell fire pretty well.


was also one gun turret made of heavy steel, flush with the concrete on
top, except that the turret could be raised when the gun was to be fired.
This was scarred pretty much all over by shells and immediately on top
could be seen the marks of where shells had made direct hits but failed to
crack the steel.

There were signs warning visitors not to pick up things

nor to leave the beaten paths, a warning doubtless needed as there were no
end of unexploded shells lying about, and in one place we saw a


filled with hand grenades, mostly covered with water.

Standing on top of

Fort Douaumont one could look for miles in every direction and see nothing
the waste of war.

In one place some miles away the top of a hill

had been completely shot off and, as at Ptieims, showed only the white
chalky soil and stone.
saw in France.

It was the worst picture of destruction that we

We left Verdun by the road to Clermontl and 3t. Menehould.

This road, for much of its length, has graveyards where the French killed
at Verdun were buried, and there is one very large Red Cross hospital plant
on the road a few miles back of Verdun.

The banks alongside the road are

also perforated with dugouts for much of the way.
St. Menehould.

We stopped for lunch at

The city is very little injured and is supposed to have

been protected by reason-of the fact that it was the headquarters of an
elaborate German spy system.

They claim to have got a good many of them

and shot them, one or two quite recently.

Our courier explained that the

headquarters of a French army was located in a certain building there; whin
the Germans commenced to shell it they moved to another place whereupon tie
enemy artillery directed its. fire there, and again a third tine, all of

which theyatributed to signaling by these spies.

But the city is almost

We lunched at a little restaurant run by Marie Pignon, 58 Rue


Chanzy, who was already known to both our chauffeur and courier.


seems the place had been run by some Americans, who turned it over to her
when they left.

She was very friendly and a very attractive little girl

and gave us a fine luncheon, consisting of soup, pats,

tongue with spin-

ach, good bread, a good bottle of wine, and some pastry and hot coffee,
altogether the beat meal we had since leaving Paris.

From there we drove

through Varennea, starting to make the trip through the Argonne.



The whole approach to the woods where our men did their fighting was one
continuous string of dugouts in the banks alongside the road and in the

'ods, and through the woods were no end of crosses over graves.
was literally a city of cliff dwellers.


On both sides one could see the

dugouts which the French had occupied for nearly four years and until our
men took over this sector..

At this point the lines had been undisturbed

since the Battle of the Marne.

Here again we saw a good deal of litter

of war, cartridges and shell fragments along the roadside, even helmets
here and there, and in the woods a good many graveyards and isolated

As we worked up the valley toward Dun -sur -Meuse we could see on

our right where the forest had been literally destroyed by shelling and
nothing left but stumps and bare ground.

Our men had worked their way

through these woods for a good many miles, driving the Germans before them
over a long wide front, and, while the undergrowth had grown up and covered a good deal of the effects, yet trees were shattered and toppled over
all through the woods alongside the road.

The road here was very bad,

having been only recently patched up, and one could see that the shelling
had followed the road right along.

We passed through what once had been

a little village, Four de Paris, where a little glass industry had been in
operation for some centuries, but there was not a vestige of the place left.
One could not even see the foundations of buildings, so concentrated had
the shelling been there.

Varennes was completely destroyed.

We got a

good picture of a fine old church, part of the walls of which were still

Between Varennes and Dun-sur-Meuse we made a detour to

Armagny, where the American cemetery is located.

Our courier told us

that there were 29,000 graves, in which only one soldier is buried who


has not been f_dentified.

It was apparently in charge of some French

soldiers who received us with a great deal of friendship, but there were

some American troops there.

At Dun-sur-Meuse there was a fine old

church on top of a hill which had been pretty well shot to pieces.


Dun-sur-Meuse, after driving possibly fifteen or eighteen miles through
the woods and out into the open country over which our men had driven the
Germans, we passed through Stenay and Mouzon on to :',edan, where we had
hoped to spend the night.

There was some little cultivation along this

road after we left theArgonne forest.

All the way the trees along the

roadside had been cut down by the Germans, say one in every 4, 5 or 6,
to impede the American advance, but in general this section did not seem
to have recovered very fully from the fighting until we approached Sedan.
The German retreat was so rapid that the country showed nothing like the
damage which appeared in the region of Varennes in which the Argonne attack started.

Sedan was jammed with people and no end of French soldiers

as in all the other cities we passed through, but did not appear to be much

From there we passed on to Mezieres, which was also crowded, and

across the river to Charleville, where we spent the night at the Hotel du

At Mezieres I noticed a huge collection of freight cars on the

tracks, many of them from Germany and from Alsace-Lorraine, and many of
them French.

None of them were loaded and they appeared to be on a

It was at Charleville that the Kaiser had his headquarters so

He occupied a chateau immediately in the rear of the hotel and

used the latter for his cooking, etc., and it was largely occupied by his

The woman who ran the place said that they behaved well enough

until the Crown Prince came, but that he did not behave well at all.



hotel was connected with the Kaiser's headquarters by a passageway and
it was here that they had a meeting of the various princes of the German

44Wtmpire at a big dinner on the Kaiser's birthday.

All the way to Sedan

practically every bridge that we crossed had been destroyed and repaired,
but only in a few places did we see much in the way of wire or trenches,
the retreat beyond Dun-sur-Meuse and Sedan apparently being too raildd.

Allalong the road, however, were the marks of shell fire and in the fields
where doubtless the American artillery was trying to reach the retreating

Here and there rolls of barbed wire lay alongside the road or

in the fields, but in no such quantity as in the trench warfare areas
where the mass's of barbed wire in places were tremendous.

The entire

length of the main road to Sedan and beyond had been obstructed by the
Germans by chopping down every fifth or sixth tree on both aides of the

The trees have now been r&aoved and are lying a.,ongside the road.

Mr. Kent and I shared the same room at the Hotel du Nord at Charleville, there being no bathroom, and in general the accommodations were
rather primitive.

The meals were ordinary, but good and wholesome,

with apparently everything one could want.


The hotel seemed to be

fairly well ballot filled and again there were many soldiers in the city and
a few
here, as in other towns, we noticed/American troops as well as some British.

We had covered about 160 miles in our trip from Bar-le-Duc to


Monday, August 4:

Leaving Charlesville at 9 o'clock for the Belgian

frontier we again followed a road over which the Germans had entered Frans*
and later retreated, and hereabouts the Germans still had troops when the
Armistice was signed.

My general impression in passing through France to


this point was that the many German prisoners we saw at work in the fields
d on the roads were a pretty lazy lot, doing mighty little work but
looking very well fed and contented.

They seemed to be given a great

deal of freedom, their camps always having detachments of French soldiers
there, but the German prisoners, nevertheless, working alone on the roads
and in the fields without guards.

They all wear a distinctive uniform

which doubtless was relied upon to prevent their escaiie.

I also gather-

ed the impression that there were altogether too many French soldiers loafing about France.

Of course many of them are working at various tasks,

restoration, motor transport, garrison duty, guarding prisoners, and so or
but the impression was strong, nevertheless, that these ablebodied men
should be at work on the farms and in the industries and not loafing about
in uniform.

The first important town after leaving Charleville was Rocrai,

a very old French town, which fortunately was not greatly injured by the
war and is a most picturesque little place.

The roads were in much the

same condition as those we had previously gone over, the approaches having
been destroyed and restored and trees felled along the road.
At Fumay we reached the great forest of the Ardennes.



several places there were German helmets alongside the road and occasionally material which had been left by the retreating Germans, but aside
from that little evidence on the road of a passing army.

The trees had

still been feded about every fifth or sixth tree, on both sides of the

There was, moreover, evidence of wanton destruction by the Germans,

as the larger, more important private dwellings and business establishments seemed to have been deliberately bombed inside and badly damaged or
completely destroyed.

There were occasionallyplaces where the poorer

Entering Givet there were

ouses did not appear to have been touched.

,any more trees chopped down, the bridge over the river had been destroyed and replaced with a temporary steel structure.

Vie crossed the

frontier into Belgium at Givet, where we were asked to show our passports
but were given no trouble whatever.

In general, the cultivation in France

appeared to be very complete and the crops excellent right up to the immediate area of active fighting,except, of course, where the land is timbered.

Where there had been protracted fighting, however, the recovery

of agriculture seemed to be slower, a good many fields not being cultivated.

There are some cattle in the pastures, but nothing like what I

have formerly seen in France.

In general the crops looked in excellent

condition, the wheat being ripe and partly cut and in shocks; oats not yet
ripe; potatoes, beets and garden vegetables all green and fine.

It was

very noticeable, however, that there were practically no pleasure automobiles whatever on the roads, and the only trucks were army vehicles.
There were also very few horsedrawn vehicles, those we saw being practically all for transport for business purposes.

Approaching the Belgian

frontier and over the frontier was a magnificent exhibition of crop conditions.

On the road to Dinant the crops looked perfect; the roads were

perfect; houses which had been injured in the German advance in 1914 had
very largely been repaired alongthis road.

We took the highroad on the

right bank of the Meuse, which was one of the most beautiful drives I
have ever made, the prettiest view being at Freyn overlooking the chateau
of that name.

At Lesse the bridge had been destroyed and replaced with

a steel structure and here many buildings were patched and yet a good lnany
entirely unrestored, as the Germans seen to have done a good deal of damage here in 1914.

We crossed the river at Leese into Dinant, where a


stone bridge had been destroyed and restored with steel.

Further along

river a narrow footbridge, but quite long, had been destroyed and
not yet replaced.

In general Belgium throughout this part looked
At Annevoie the bridge had also been de-

businesslike and prosperous.

All through this part of

stroyed, this being a roadway bridge only.

Belgium we had met no pleasure vehicles to speak of, just as in France,
but on approaching Namur, where another bridge had been destroyed, we discovered some cars.

The city showed little efrect of war damage, the

forts which were destroyed by the Germans being on top of the plains back
of the town and the river.

As the day was a national holiday, many of

the stores were closed, but practically all the houses that had been injured in Namur seemed to have been completely repaired and the bridge restored.

We had lunch at the Hotel d'Harscamp, and at no place, New Yoric

London or Paris, have I ever had a better luncheon.

Everything was beau-

tifullyprepared and served and there was not the slightest evidence of war
grub such as one has in France.

The bread was white and served with


We had had but litt,.e breakfast at Charleville and were all


Luncheon consisted of oxtail soup, sole saute meuniere, sirloin

steak, mayonnaise sauce, potato chips, white bread and butter, crepes and
The lunch, however, was expensive by Continental reckoning,


costing 163 francs.

But it was one of the best meals I ever had.

shop windows were well stocked.
candy, chocolate, pastry, etc.
the car.


We saw a number of windows with sugar,
We also got 100 liters of gasoline for

Leaving Namur, the trees had still been felled about every ICO

yards or so on the road toward Brussels.

There was much more traffic,

more motor cars, more cattle in the fields and the crops everywhere
looking to be perfect.

I sever saw better.

We passed through Gambloux

The road all the way from the Belgian frontier was perfect

to Wavre.

and as smooth as a table.

Shortly before we reached Wavre we caught

up with a car which had just escaped a serious accident.

The steering

rod was broken and the car had just grazed a tree when the wheel collapsed.

We carried one of the party into Wavre to get help.

way to that city the trees had been felled.

All the

Passing through Overyssche

I noticed a good many very excellent draft horsesand here we encountered
more Flemish names on the stores.

All the greenhouses in this section,

where they grow a good many grapes for the table, seemed to be intact and

Brussels was very quiet, as it was a holiday, celebrating

their independence.

It is a curious holiday because it is the day on

which the Germans invaded Belgium, and, as I understand it, is celebrated
because by that act the old regime of German neutrality with the overlordship of the treaty of guaranty ended.

The city shows no sign what-

ever of the war, although a good many bronze and brass sign plates have
been removed by the Germans.

Many of them seemed to have been replaced

with signs of a different character.

I learned on inquiry, and found out

myself, that many of the metal fixtures such as door knobs, plates, etc.,
even hinges and toilet fixtures, when made of bronze or nickel, had been
removed and other fixtures substituted.

One Belgian naively stated that

as the Germans were paying fine prices for some of these things they were
rather generally sold and those which the Belgians were unwilling to sell

they quietly concealed, selling whatever material of that sort they could

We stopped at the Hotel Astoria, on the Rue Royale, which I

would class as something of a morgue.

As we arrived around 4 G'clock, *At

after a bath Mr. Kent and I took a lithe walk through the city and found
There seemed to be no lack of
the streets crowded and the cafes filled.
food of any kind in Brussels at the moment.

Tuesday, August 5:


I called at the Legation and found my friend

Armour in charge in the absence of Mr. Whitlock.

He was most

cordial in wishing to facilitate our trip, took our passports to be visaed for the trip to Holland and secured for us a special automobile

From there we went to the National Bunk of Belgium and called

on the Governor, Mr. Van der Rest, who received us most cordially and
arranged that we should return after lunch to meet Director Janssen and
Vice Governor Lepreux, the latter in charge of foreign exchange and the
gold matter.

We spent considerable time in discussing credits in

America and two points came out very clearly:

one was that credits for

anything less than three years minimum would be of no service in Belgium.
The $50,000,000 bankers credit now in operation has only been used to the
extent of $3,000,000 and the restrictions as to the employment of the
credit in America will probably render it practically useless and very
expensive to the Belgians, as they are paying commissions and interest
equaling 7-1/2 per cent. or thereabouts and -_,:etti:v but 3-1/2 per cent.

on their balances.

The other point was that they found our markets al-

together too high in price to buy most of the things they need, and I
gathered clearly from my talk with them that they expect theirbeet buying
market will noon

in nermarv.

This of course is nortiv dile to the

condition of the exchanges, but I believe they are confident that Germany
will recover industrialigx production promptly and bo
of conceggio,)@ to supply the demands here.

to wake mli

These ;;entlemen also

stated what I have understood elsewhere, that the Belgians' cereal crop
and food production generally, even in normal times, only takes care of
their requirements for about one-third of a year, and they must buy ,;rains


and meat in other markets for an eight-months

That wild be the

itadition this year and they will need large credits to take care of
their requirements.


Everyone agreed that what Belgium needed now was

foodstuffs, raw material and means to restore industries destroyed or injured by the Germans, and an enlarged production of goods for export.
They tell me that while some months ago they had between S00,,7,0.7, and

1,2,00,0+X, men receiving. chomage from the government this had now been

greatly reduced and one gentleman said that there were now only about
400,00Z on the idle payroll.

There is undoubtedly here, as in France and

elsewhere, an undercurrent of feeling that America has made great wealth
out of the war and should come to the assistance of Europe and little
Belgium with large amounts of credits.

They have great confidence in

their recovery and various conversations I have had, confirmed likewise
by Mr. Kent, would indicate that conditions are better here by far than
anywhere else in Europe.

The people are getting back to work more prompt-

ly and they are only handicapped by the lack of machinery and plant facilities which the Germans injured.

This destruction seems to have been

systematically directed against industries which competed with the Germa.i.

industries, particularly iron and steel.

The coal mines are all intact

and producing large amounts of coal, but I heard one gentleman say that
the Belgian reserves were not large enough to justify their exporting any thing like what Europe would absorb, asthey would impair their future economic independence.

It seems that industry at Ghent is rapidly being re-

Antwerp,which suffered little destruction, has been put back in

rather flourishing condition, but in the sections where they had foundries

and steel plants they still have a large population receiving chomage and


ware unable to get their people to work, having no employment for them.

Mr. Armour illustrated the haphazard way in which some of this work was

being directed by calling attention to te fact that the bridle path
which extends all around the city of Brussels Ras all being picked up by
hand and broken and screened and replaced so as to make

a soft footing,

in which about 600 men are now occupied, a rather useless waste of labor
if other employment could be found.

We had dined Monday night at the As-

toria where the table d'hote was so poor and badly served that we tried
Mr. Kent and I h. d an excellent dinner

the Cafe Savoie Tuesday night.

there, everything one could desire, with sugar, etc., and a bottle of
claret, the whole costing 80 francs including the tip,- at the present
rate of exchange about $4 apiece.

The five of us lunched at a little

cafe of a more ordinary type, where we had a simple lunch of soup, omelet, potatoes, fruit and wine, which coat about ;2 apiece.

We worked

until after midnight on mail, cables, etc.

Wednesday, August 6:

Kept an a_pointment at the Bank with Vice Gov-

ernor Lepreux, at 9 o'clock.

I had been a little bit discouraged the day

before in regard to making arrangements for moving the gold to London.
It appeared to me, and was confirmed by Mr. Vaughan's understanding of a
conversation in French, that they were quite anxious indeed to avoid any
responsibility for the shipment.

Director Janssen had taken us all

through the Bank Tuesday afternoon and I was very much impressed with its
size and organization and with the huge vaults.

These contained what ap-

peared to be a vast quantity of foreign securities held on deposit for
customers,with a large staff of clerks handling them and the Belgian government bonds.

Our gold was stored in the safe under what appeared to


!Poe ample security and aafeguard, and I left with a feeling of assurance
as to its condition.

It is stored in steel vaults, nothing like as se-

cure as ours, and operated with keys on which there are a number of different controls as carefully explained to me by the custodian.


going all through the Bank we were asked to prepare u memorandum of just
what we would like to have done about the gold, which is what kept us up
so late Tuesday night.

At the meeting with Vice Governor Lepreux on

Wednesday he indicated at once a strong desire to discuss the exchanges.
I described to him in some detail the difficulty of placing loans in the

United States, the unwisdom of drawing credits with the banks which could
not run for a long enough time, which inflated our position where the
bills were not eligible for discount at the Reserve Banks and where the
hazard of failure to find exchange to meet them at maturity was too great;
that it was desirable to avoid inflation as it simply advanced our price
level and made America a bad buying market; that what Belgium required
was to strictly limit her imports from America to absolute necessities
such as food, raw materials and the machinery needed for injured industries; that they should get their people promptly back to work, increase
their production as rapidly as possible and build up their exports.

illustrated the point by referring to the case of a merchant who sold
indefinitely on credit, which might result in the insolvency of both himself and his customers.

I thought Mr. Lepreux grasped and agreed with

the general proposition,but nevertheless he and Mr. Janssen, who had
joined us, both insisted that Belgium would need credits, and after some
discussion together they seemed to agree upon $200,000,000 as the figure.
Mr. Kent discussed with them the sale of army materials of an essential



up to $50,000,000 value, on three years time, which Mr. Lepreux

said would interest him very much and that he would like to have details.
This part of the discussion ended by my statement that America desired to help in any way in its power, but that it was impossible for our

government to continue indefinitely these advances to all the nations of
Europe; it was unwholesome and did not promote good business or good relations, and that the business should be directed through Wiliness channels

on an investment business.

I then submitted u letter stating that we should first endeavor to

have the Bank of England take entire charge of shipping the gold on storage here just ks they had done with the British government gold.

much to my


surprise, on Tuesday, Mr. Janssen had handed me their com-

plete dossier covering both the British and the American gold matter, containing original documents and orders, which he permitted me to take to
the hotel overnight to read.

This has been most useful 48 it contained

the British memorandum of their method, and, based upon that, with modifications, I have drawn up a tentative program for handling the matter in
case the Bank of England is xmatig/to do so.
In the course of our discussion they sent for the man who had charge of the matter, who spoke

English, and I gathered that he seemed to find no objection or obstacle
in the way of their handling the matter except they were unable here to
prepare the right kind of boxes.

This man, after asking of Vice Governor

Lepreux permission to do so, stated to me with some pride that upon the
conclusion of their handling the British gold they had received most
complimentary commendation from the British on the way they had done it,
and rather intimated that he would like to handle the job for us.


Thinking the time was opportune to do so I stated to these two gentle-

men that of course we had a surplus of gold at home and were not anxious
that this gold should be added to our stock; that we had to send it to
England in order to have it treated to ascertain the fine value and to
settle the accounts with Mr. Hoover and the Germans, otherwise
have been glad to make some other disposition of it.

we would

At once an active

discussion took place in French between Janssen and Lepreux, which result-

ed in their stating that in the course of time when exchanges improved
they would need to buy about 100,000,000 francs gold for their reserve
and they would consider it quite an accommodation if we would be willing
to leave that amount on deposit for safekeeping, suitably earmarked, with
the National Bank of Belgium, shipping the rest to London.

I said that

personally I would be very glad to do so and would cable my Bunk submitting
the suggestion.

Things brightened up from that time considerably and I

finally stated that as we had contemplated and hoped to establish relations
with the National Bank of Belgium, it might be quite proper that we leave
part of the gold in their custody, and suggested that we might leave

90,000,000 marks, a little more than they had suggested, taking the other
22,000,000 marks to London.

Whether it was the reference to leaving the

gold or our general discussion, both Mr. Kent and I noticed a very marked
change in their cordiality thereafter.

We h_d accepted an invitation for

lunch at 12:30 to meet the directors of the Bank and the Prime Minister,
who is,also, I believe, the Minister of Finance.

We then went to the

Legation where I arranged with Mr. Armour to send'a cable through Ambassador Davis to the Governor of the Bank of England and another, No. 9,
to the Bank in New York, as well as letters to both in the Legation pouch.

ey called him up from the Bank while I was there, inviti

him to luncheon.

This luncheon turned out to be quite a state affair, the party consisting of the officers and directors of the Bank, there being five of
the latter, together with the officer of the government who represents
the government in the management of the Bank, Monsieur Edgard Rambouts,
Administrator-Director General de la Tresorerie et dela Dette Publique.
It was a most interesting luncheon and the party was a typical assembly

of the heads of the old guild system of Flanders and Belgium.


Kent, Mr. Armour and I all received the same impression, that it was undoubtedly a most substantial company.

For a land which had suffered the ravages of war, the luncheon was a

The lunch consisted of soup, filet de sole meuniere, filet of

beef served with stuffed tomatoes and peas, chicken, lettuce salad,
pastry, candy, three kinds of wine, coffee and cigars.
The aid Governor,
who seemed to be a most kindly/gentleman, when the champagne was served,

made a few remarks about my visit, which the gentleman on my right said
would require the briefest possible reply, which I stumbled out as the possibility of a talk had never entered my head.
the meeting room off the Governor's office.


Luncheon was served in
I eat next to Mr. Ed. Bunge,

who spoke English perfectly and said that he was an Antwerp merchant, who
did a large business with South America and some with North America and
many years ago had lived in New York for a couple of years.

It seems

that he entertained both Vanderlip on his last trip and Hemphill in 1915
when they were here.

He let it out that he thought that Vanderlip had

made quite a break in his pessimistic talk when he got home, the impression here being that it had cost him his position with the City Bank.
also stated that Mr. Vanderlip advanced some of the most extraordinary



He found him a most interest-

and novel ideas when visitng his house.

ing and entertaining gentleman, but thought his ideas too far advanced,
one plan that he advocated being the confiscation by the State of all

estates in excess of a small amount, say $50,000, to be allotted to each

He had in his own mind put Vanderlip down as a socialist.

Mr. Bunge took a fairly optimistic view of the future of Belgium and said
that a year or two would see them pretty well restored in industry and
commerce, but that in the meantime they would need considerable credit in
America, and he likewise said that this credit should be made available
for purchases in other countries than America.
statement about Antwerp and Ghent and spoke at ?ome length of the conditions in the iron district and the coal areas.

He wanted to know

something about the American banking system, concerning which he was quite


He impressed me as being a most intelligent man and fairHe referred to a transaction which the Belgian government under-

took, which has impressed me us being the height of folly.

The his-

tory of the currency issues under the German regime constitutes one of
the Germans' worst financial crimes.

They demanded issues by the Nat-


ional Bank which the Bank refused to make.


Then finally the right of

issue was revoked by the Germans and an arrangement made for note issues
to be made by the Societe Generale.

A large amount of paper was issued

and a good many German marks were put in circulation.

When the Armistice

was signed the Belgian government let it be known that they proposed to take
up this currency at the fixed rate of one franc 25 centimes per mark.
The National Bank issued its own notes in exchange to the extent of nearly 7,000,000,000 marks, the Belgian government indemnifying the Bank, and



liten an effort was made to effect an adjustment of this debt at the Peace

As the German mark is worth about 50 centimes in Belgium

the transaction, reduced to its bones, looks to me in this way:


with the German army took vast quantities of goods from Belgium for which
they paid in depreciated issues of paper money.

The Belgian government,

through the National Bank, then took up this money and issued its own at
the rate of 1.25, being in effect a loan to Germany,without interest, of
7,000,000,000 marks, the proceeds of which had been used by the Germans to
buy goods in Belgium, to be sure at immensely inflated prices.


ately notice was given of the intention to effect the redemption and the
frontiers were not closed during the period so that there is a strong suspicion, doubtless well grounded, that a flood of German

currency came in

from Holland and over the German border which never should have been redeemed in Belgium.

At any rate, we saw vaults filled with this currency

in the National Bank building and stacks and bags of the German zinc coins
which were put in circulation and many of which are still circulating.
The period of redemption has expired and now the National Bank must sit
on this mass of currency until something is done to effect a settlement
with Germany.
One might
Federal Reserve Bank of St. Louis

indulge in some reflections here as to what currency



After luncheon the Prime Minister, who speaks but little English,

urged that I notify him immediately upon my return from Amsterdam so that
we might have a conference, which I promised to do.

Mr.Janssen also spoke rather enthusiastically of our willingness to
leave some goldwith them and went on to say that he had been thinking a
good deal about the possible relations between the Federal Reserve Bank
and the National Bank of Belgium and had made up his mind that the beat
thing they could do just now was to make a close arrangement with us.


wanted to come to America this fall and wanted to know if I would help
him to get an understanding of conditions and was particularly anxious thiL
I should send him two complete sets of literature about American banking
and the Reserve system, one for the library at Louvain with which he is
connected and which they are working to restore, and one for his own use
preparatory to his visit to America, which I promised to do.
I had a little chat with Mr. Armour after leaving the Bank and he exWhat
plained some of the difficulties of our situation. / he told meTuesday and

Wednesday together impressed me a good deal as to the incapacity with
which our government's t:oreign affairs are handled.

He says they are

tremendously overcrowded with work at the Legation, the American Minister


has returned home, the First Secretary of the Legation does not exist, and
he, the Second Secretary, is in charge during one of the most important
periods of the history of the Legation; the President had promised to raise
the post to an Embassy on his visit to Belgium and this halipeen ratified

by the Senate, but still we have no Ambassador here.

No one knows who

is to be here, the general impression being that Mr. Whitlock will go to
Rome. Ileanwhile the French have established a huge force, they and the

English making their reiresentatives ambassadors, and the French having,


Illw in addition to an ambassador, a minister counselor, at least three secre-

taries und , large staff, all of whom are active in promoting French

He said that Americans were conscious of the fact that the Belgians
went to the Peace Conference determined to talk poor and ask for help,
and they undoubtedly did need help, but in his opinion they were improving
in Belgium faster than elsewhere in Europe.

Belgians generally had felt

that the Americans had worked against them at the Peace Conference and Mr.

Davis had given considerable offense by his blunt statement that America
would not accept German reparation bonds in settlement of American loans
made since the Armistice, and they could take those terms or we would not
send them an ounce of food.

I must say that this kind of an attitude

toward these people strikes me as grossly unfair and little calculated to
produce the results we want.

The same objects can be z'erved by more di-

plomatic methods such as these people are accustomed to and they really
misjudge our intentions when our methods are rough and brutal, as they
sometimes undoubtedly are.

The picture I now have of conditions in Belgium is about us follows4
First, they

will need, say beginning in January, to make large purchases



tion with their wool industry; fourth, they should be relieved of im-

mediate payment of interest on the American debt; fifth, although it
was not mentioned, I believe they will likely need some phosphates from

America and probably nitrates from South America; sixth, in making loans
to Belgium in the .:rifted States, we should not stipulate that the entire

proceeds must be spent there, as our exchanges will never get back to

normal if that is to be our unfailing policy; seventh, we need a closer
personal contact with these people, and I believe we will find them
practical, intelligent and reliable if we deal with them by right methods,
but I believe they feel they have been rather hardly treated and that
they are a bit suspicious of us and think us selfish.
As to their domestic situation, unemployment is being rapidly reduced, but they should be persuaded to fix a date beyond which chomage
will not be allowed.

One of the worst features in their domestic situa-

tion is the currency inflation.

They have probably added a billion and

a half dollars, or thereabouts, to their circulation since the war started
and they should take steps to reduce it.

I have been rather reluctant to

discuss this matter with them, asthey are sensitive and still feel the
sting of direction by the Germane in all these matters.
They should be induced to send more of their people to America, particularly those who speak English.
to the National Bank of Belgium.

The government should reduce its debt
I also have the general impression

that their discount rates are too low.

While in Brussels Mr. Kent and I had a number of talks with Mr.
Jacobs, of the Credit Anversois, who seemed to take a far less pessimistic view of conditions in Belgium than some of the men in the National Bank.


Mr. Kent gathered from him that the Belgians had not suffered so seriously
by the introduction of the German paper money as some people thought.
This had been used by the Germans to buy supplies and other things at
tremendous prices and the loss was not ,oing to be so great after all.
My personal view is that no profit on the sale of commodities could compensate for the inflation of the currency of such a small country by no
less than a billion and a half dollars.

Thursday, August 7:

first through Malines.

We left Brussels at 9:1C in the morning, passing
I noticed throughout Brussels a great many build-

ings where door knobs, door bells and brass signs had been removed,
which I understand was general throughout Belgium, although the brass,
copper and bronze taken was confined to articles of sufficient weight to
justify the expense.

I was told that where such things were taken from

the poorer people the Germans had paid, but where taken from banks and
rich institutions they did not take the trouble to pay.
saw some evidences of business activity.

At Malines we

There was one 5-barge tow pass-

ing through the canal, but along the road a number of big factories were
idle, although some in operation, among others a large cement plant that
I saw.

I believe most of the flour mills are in operation.

the people look busy.


The bombardment of Malines,I believe,destroyed

the fort and did some damage to the town which was observable as we passed
through, but the buildings had all been restored.

We passed close to the

fort that the Germans bombarded and in that immediate neighborhood the
scars on the buildings are considerable.

We passed through Contisch,

where no damage was in evidence, and all along this road the farms, principally truck gardens, looked in splendid condition.

The forts approach-


ing Antwerp appeared to be undamaged.

They were covered with grass.and

although as I recall Antwerp offered some resistance it wasmostly outside
the city and the Germans entered without doing very great damage and
without setting the city on fire as in some places.
no sign of great damage,

though, again, door knobs and laa,J-

e ludldings on the outskirts which had been injured

n repaired.

In passing through Antwerp we en-

in the nature of a funeral procession to commemo-

been lost in the war.

ying wreaths of flowers.

It was principally comThe city in general

d by Mr. Bunge, a director of the National Bank,

at luncheon, that the business of Antwerp had


When the Germans left the American fleet

re and insisted on having the docks cleared up

tisfied with conditions in the city.


All along the waterfront there were marks of

e was directed to the railroad tracks.


fauns all the way to the Dutch frontier, largely

sels we were told by bankers that tke Belgium had

men on the idle payroll until the last month or

on was that the number had been reduced to

e frontier at Esschen, where there was some little

he Dutch officials at first being inc_ined to

er, who simply had a letter from Mr. Hoover.

tly overcome and we went on through Rosendul

st, but finally made our way to Willemstad, just

Certainly there is


missing the 12:30 ferry.
well kept.

Holland looks as always, prosperous, clean and

Wemade arrangements to have theboat make a special trip for

us for 17-1/2 guilders, meantime h-ving lunch at the Hotel Bellevue near
the ferry.

Lunch for five cost 8-3/4 guilders.

All the boys in Hol-

land seem to want to ride on an automobile, and, if they cannot ride on 4,
to shout at the occupants and make some gesture, and we had quite a crowd
around the car as we left the hotel.

The boat arrived at 2 o'clock

and our driver gave an exhibition of skill in putting his car on the boat,
which was just about the width of the car, at the rate of about 40 miles
an hour, and stopping in the space of about an inch or two, a bit spectacular and dangerous.

Here we crossed the Meuse river to Numansdorp.

Beyond this place it was really Dutch, the children largely wearing wooden shoes and the older women the conventional white flowing cap with gold
curls in front of the ears.

We next crossed a little river on a rope

ferry, being a scow operated by two men who pulled us across with a wire
The trip through Rotterdam, Delft, The Hogue to Amsterdam was
through a typically Dutch farming country, along canals, but nothing of
special interest.

The country certainly looks fine and prosperous, the

crops good and lots of cattle.
up at the Brack's Doelen Hotel.

We reached Amsterdam at about 7, putting
That night we ran into Mr. Van den Berg,

of the Javische Bank, who was stopping at the hotel and said he was expecting us, having heard of our coming from Dr. Vissering, and he arranged for
luncheon at the Club Friday noon.

Friday, August 8Yr. Kant and I called on Dr. Vissering Friday morning

at 11 and he displayed the utmost delight at seeing us; said he had freed
himself of all business obligations for the length of our stay and was


looking forward to a fine visit with him.
sociates, Mr.

Two of his directors and asand Mr.

joined us and we s;fent the morning discussing matters with these gentlemen.

At 1 o'clock we lunched with Mr. Van den Bergh at the Business Merle

Club, right opposite the Queen's palace, and from there I returned to the
Bank with Dr. Vissering and we spent

the rest of the afternoon until half

past five talking business, Mr. Kent having an engagement to see Mr. ter
Meulen, head of the Netherlands Overseas Trust, about foreign exchanges
and other matters in which they were interested.
From my talks with Dr. Vissering I gather about the following:
have a very great mistrust of conditions in France.


They seem to think

that France is without leader hip of any kind, that the affairs of the
nation are in the hands of a lot of professional politicians who are incapable of making plans and are playing their hands for politics rather
than for the nation.

They say the French peasant and workman has been

spoiled by too high wages and by life in the army.
that they felt that the enormous inflation of the French currency and the
large amount of government borrowings, particularly in short obligations,

would make it

necessary for France to effect a readjustment of her domestic



11 necessary food, machinery and raw materials to enable them to start up
business again.

It was a rather gloomy picture.

Throughout the con-

versation Mr. Kent and I both detected at times a rather German leaning,

not so much sympathy as possibly greater confidence in German ability and
capacity to make plans and adopt a consistent national policy.


Viasering, I would gather, holds this opinion a little more than some of
his associates who were with us.

In regard to Belgium, I was interested to find as I had imagined
that the Dutch hold the Belgians in considerable contempt, that they do rut
think they are honest, do not trust them, _Jad it was difficult to get much
out of them about the Belgians.

T. think, however, they hold the view

that Belgium is going to come out of the war on the whole pretty well.
They spoke of theredemption of theGerman currency as though it had been
foolishly handled, and referred to the fact that the Belgians would do

anything for money, one of them saying that they were always ready to tun
a dishonest penny.

We tried to get something out of them about conditions in Germany,
They did say that there was a
but it was not a particularly easy task.
tremendous amount of idleness in Germany/ that their coal production had
been falling off at a tremendous rate because the German people would not

After considerable discussion of this point, I think they agreed

that this might be due to physical debility caused by lack of food, partic-

ularly fats, and to the nervous shock of reaction from the outcome of the

They told us that the Belgians were buying paper marks in very large

quantities as a speculation, one of them saying that every servant and
carpenter in Belgium owned some marks, the poorer people carrying the

actual Reichsbarik notes, and those of larger means having balances in
German banks.

The same thing has taken place in Scandinavia, and, more

striking still, they said that Americans were buying hundreds of millions
of marks, they thought for speculation.

They did not think that it was

an effort on the part of Germany to get foreign credits at present rates
of exchange by this thoroughly unsound method.

Since we left Paris there

has been a sharp reversal of the exchange position.

Apparently coinci-

dentally with these transactions in marks Dutch exchange has fallen from
the rate of 42 cents per guilder to 36 or 37 cents per guilder, quoting
dollars here at a premium of about ten per cent.

Dr. Vissering said that

he would like to let some gold go to America, only he feared that it would
be purchased by the Germans for the sake of the premium and then resold in
America to realize a higher premium elsewhere.

I do not think his theory

is sound, but he asked us to think it over and see what could be done about

This speculation by Americans in paper marks might explain it were

it done at the instigation of the Germans.

It occurred to me that Ger-

many might be selling paper marks in all the neutral countries as well as
in America, and, with the proceeds of the sales in neutral countries, be
buying dollar credits in New York for the purpose of fitting raw materials.
It would be
Federal Reserve Bank of St. Louis

a very expensive operation and one which I find difficulty in

of his and where they put an embargo on the importation of gold.


all agreed that if the United States and neutral countries attempted

force contraction under present conditions it might lead to disaster
world over.

They did agree, however, that further expansion should
I suggested that this might be done by agreement between

principal central banks in some way, and Dr. Vissering took to the i

was greatly interested in discussing the subject of inflation and of the
This led to a discussion of whether closer understandings an
It appears that his experience and
responsibility of the central banks.
policies could not be worked out between, say, the Bank of England,
ours have been identical.
He has been attacked by government officials,
Bank of France, the Banque Nationale de Belgique, the Nederlandsche

and particularly by college professors, for being responsible for the
the Federal Reserve Banks and, possibly, ultimately, the Reichebank,

in this Dr. Vissering seemed greatly interested.

We had some talk

arrangements for checking unnecessary shipments of gold after the wa

situation had quieted down, and that also Dr. Vissering wished to con

and we are to have a further talk about it Monday.

About the German gold, I found myse_f greatly embarrassed as a

of our having imposed a charge for handling the gold which we have f

ness hours.

He said he would regret to see the gold melted, and I gather

that he rather expects us to leave it with them.

I explained the diffi-

culties about our reserve position and finally it was understood that on
Monday morning we would talk the whole subject over.

I have rarely spent

a more interesting time than with Dr. Vissering, whose mind is keen and
alert and who has a most thorough knowledge of what he is talkingabout.

We met Mr. ter Meulen at dinner at the hotel and he joined us in our
sitting room after dinner.

Mr. ter Meulen was exceedingly pessimistic ado

about conditions in Europe in general, and in France and Italy in particu-



He.says that the outlook for coal is really appalling and he fears

will cause considerable trouble next winter.

We asked him, as well as

the gentlemen at the Bank, about the condition of the Dutch herds tatit
droves of
of cattle andelogs/and were sur,Jised to learn, quite contrary to what Mr.

Hoover had told us, that the herds which had been allowed to increase when
the war started were now about buck to normal in the case of cattle, and
as to hogs they had largely disappeared, Holland never having r-ised
large numbers except for war purposes.

In other words, there will be no

large amounts.

His description of what took place at

nomic Council meetings in Paris was most amusing,


English and Americans did not understand French having
understandings and bad feeling.

There seemed to be n

Mr. Davis, who was presiding, did the best

great tact and patience, but ull had their own axes to
such surplus in Holland as Mr. Hoover was figuring upon, and, furthermore,
Both Mr. ter Meulen and the B
agreed upon anything.
I do not know how the Germans could ever pay for purchases here without
that some sort of action and nationwide plan for deali
heavy penalties on account of the exchange.
situation to facilitate the resumption of trade is abs
We asked Mr. ter Meulen about the German borrowings in neutral


I suggested that if the principal belligerents would
He did not say how much was in Holland, but he thought the

program, the lesser countries and the neutrals would h
as their exchanges would fall in due course and right
all agreed that that was so.

In general the views o

pretty pessimistic about the future.
until about 10:30.

Mr. ter Meule


Mr. ter Meulen stayed with us until about 10:30.


August 9th:

Spent the morning writing mail,and,after



of a good many bolshevist agents and the point for dissemination of their
propaganda and that they were quite active among the Dutch laboring

There was a good deal of uneasiness in Holland, and, as a re-

sult, they erected some barbed wire barriers around the exposed approaches
to the Bank court and adjoining buildings.

They had a special guard of

130 picked solders for the protection of the Bank, wireless apparatus
erected on the roof to communicate with the government, and a plan by
which all bridges approaching the block (which is surrounded by canals)
could be immediately raised.

He says that most of the Bank's employees

are ex-soldiers and reservists and that they have throughout the Bank
standards of arms for their use in case of need.

He said the government

was very energetic in hunting out these agitators and getting rid of them,
and that/all question any danger of disturbance by bolshevists had passed.

We discussed the question of terms for the custody of some gold to be
left in Amsterdam, Which Dr. Vissering was very anxious to have us arrange, believing it to be uneconomical to melt up the coin and hoping it
would result in closer relations betweei the two institutions.

I told him

that for the present, pending a determination of the payments to be made
and the amount of gold to be returned to Germany, we would ship the

240,000,00C marks that was to be roughly verified and for the present
leave the 200,000,000 marks with them pending advices from the office.

The embarrassing thing in discussing terms was due to our having charged
the Nederlandsche Bank for holding gold earmarked for their account.


agreed that what we had charged them should be returned or they should make
a corresponding charge in one sum to us and thereafter the custody
be free of charge, which was certainly reasonable.


Dr. Vissering took us


It certainly was being carefully done.

He gave me every assurance that


we need have no uneasiness about the reports.


He and the others ex-

pressed complete showed us that the coin was being represented and
all through the vaults and confidence where the gold was all as examined.

that so much of it had now been examined that we would be perfectly safe
in accepting the result of the weighing of the small bags contained in
the larger sacks, which he was sure would be accurate enough


after esti

mating the weight of the box and seals, to be conclusive within one-half
of one per cent, and this we agreed to do.

The Bank is working on the

erection of a large modern vault in the court of the building, for the

storage of gold for customers, and Dr. Vissering said he would be glad to

take charge of the custody of gold for us and we could feel every assuran
that it would be safe.

After lunch with Mr. Kent we were joined at 2:50

by one of the directors of the Bunk, whose name I do not recall.
us for an automobile trip through the Haarlemmer Meer.

He too

At Nieuwkerk we

were joined by the burgomaster of that district and with him we visited
three most interesting farms.

They all looked exceeding prosperous, wit

fine herds of cattle, good crops and thoroughly neat and orderly.


farm was operated by one of five brothers, whose father and mother are
still living, old people nearly 90 yeareold, and he had 15 children, the
entire family now living consisting of 140 people.

The cattle on these

farms are largely purchased in Friesland and brought down to the farms t

be fattened, and are later sold either for dairy purposes or for slaughte

They also breed very fine horses, the stallions being furnished in ma
cases by the government.

A general discussion with these people dis-

closed the fact that Holland would need, more than else, good


Z -4

sup2liee of fodder, principally oil cake, largely from the United

Mr. Hoover had told me that the Dutch herds had been very much

increased and that there were considerable su,Jplies of hogs in Holland.

I learned on this trip that the hogs had all been slaughtered because the
fodder supply was inadequate, and that the herds, which earlier in the
war had been largely increased, also had to be reduced for lack of fodder.
There was a time when the herds were so thin and poorly nourished that
they were giving but 2, per cent. of the normal supply of milk, many of
them being so weak that they could hardly stand.

One cannot but gain the

impression that in a country like Holland, made up largely of small farms
owned by the farmers, a stolid, unemotional class devoted in tieir attachment to the soil, there is little likelihood of serious bolehevist trouble.

While Holland still has about 400,000 men on the army payroll to some extent unemployed, the number is being rapidly reduced and these gentlemen
with whom I talked, feel every assurance that there is no serious unemployment problem ahead in Holland.

We visited one of the oldest regu-

lating pumps in Holland, the engine having been built in England sixty or
seventy years ago.

It is still operated occasionally to pump out the ea-

It was a picturesque scene and one not likely to last as there


are only three of these pumps left in Holland and they will probably be
dismantled or put out of commission within a few years.

From there we

went to Bloemendaal, which is Dr. Vissering's summer home, where he has a
beautiful place on high ground, and where we had tea with his wife and two

From there we drove to Noordwijk, where we were joined at a

little country club on the shore by two of the directors of the Bank, by

Mr. ter Meulen, of Hope & Company, by one of the managers of the Amster-


dumsche Bank, and by one or two other bankers and the chief of the govern-

ment board directing economic affairs, all of them very interesting and
apparently able, well informed men.

It was an exceedingly interesting

evening, the discussion being about general economic matters with a good
deal of reminiscence about the difficulties of conducting business in
Holland during the war.

They confirmed the general impression which I

have gathered, that all of Europe is looking to the United States to
shoulder the heaviest part of the burden in restoring Europe.

They all

speak rather hopefully of the German recovery barring difficulties with
labor and bolshevism, and seem to think that they must do their share in
assisting in the recovery particularly of Germany, because that country
already owes them large sums and they are interested in collecting
their debts.

We did not leave the club until half past eleven and reacted

the hotel at Amsterdam at 1 o'clock in the morning.

Taesday, August 12:

Left the hotel at 8:30, retracing our former

road through Haarlem to The Hague, Delft, Rotterdam, and crossed the same
rope ferry and the same steam ferry at Numansdorp, lunching at the same
hotel, principally on eggs, very good bread, coffee, jam and cheese.


then followed the same road via Rosendaal across thefrontier into Belgium
at Esechen, again without any very serious difficulty with the guards.
The Dutchman in charge did, however, complain of the unreasonableness
that passports into Holland should all be visaed in every language but
Dutch and that they were required to be able to decipher them and were
punished if they-ma&e a mistake.
----g Impressed with the peacefulnes of


One could not leave Holland without betry and its fr;dam from war

I noticed in passing through Malines, after leaving the frontier at
Esechen, that the town was a good deal more shot up than appeared on our

trip in. This was particularly the case in the neighborhood of the old
cathedral, which we were unable to pass before as the road was blocked.

The cathedral has been somewhat chipped and injured but it struck me as
not being injured beyond restoration.

The evidence of artillery fire

here indicated that it was directed at the strategic points, the approach
to the town, the roads and the cathedral.

I also noticed in Malines

that there had been a more complete cleanup of brass signs, door fixtures,
etc., than at either Antwerp or Brussels.

Antwerp, along the docks, look-

ed busy and bore out Mr. Bunge's statement that it was recovering its port
business rapidly and satisfactorily.

We stopped at the Palace Hotel,

Brussels, instead of the Astoria, and found it crowded with a good many
soldiers passing through, but none of the regular tourist crowd such as
one has heretofore seen at Brussels.

Wednesday, August 13:

Dined with M

Called at the Legation at Brussels to arrange

about our passports, which I had been unable to do in Holland for lack of
time, so had we picked up our passports which had been lefton our way
when only seen Mr. Gunther, the charge d'affaires, at the Legation at

The Hague the day before.

Mr. Armour had our passports fixed up very

promptly and from there we went to the Bank and I had a very satisfactory
chat with Mr. Van der Rest and one of the directors who joined us and who
spoke English very well.

We explained what we needed in connection with

the gold, which seemed quite satisfactory to him.
relationship with the Federal Reserve Bank.

He seems to have close

Mr. Janssen was away on a

In the afternoon I called on Mr. Rombouts, who had arranged


meeting with the ?rime Minister and Minister of Finance, Monsieur Delacroix.

Mr. Kent and I had quite a long visit with both of them, first

in Monsieur Rombout's office, then with Monsieur Delacroix, and later
with Monsieur Rombout, who called in one of his experts to join us.
I endeavored to explain at considerable length the various difficulties of arranging loans in America.

Delacroix said that the govern-

ding $5,000,000 a month in America and would need to

hat what Belgium wanted was a loan of 41C0,000,000 for

ms of which he would furnish me in writing and which was

y Mr. Rombouts.

They insisted very urgently that the

be over firmxparxzem 5-1/2 per cent., but could be sold

d that they must have free credit to make some purchases
the United States.

They had only been able to use a

rs of the bank credit of $50,000,000, having drawn
of which is very expensive.

I think they contemplate

land and Germany, particularly the latter.
foodstuffs and machinery.

They empha-

I told him that I would ex-

on as he stated it, on my return home.

On the whole,

not particularly satisfactory except in developing that

ic proposal in mind and I gathered that they were willing
price for credit in America.


Mr. Kent and I dined at

It impressed me as being a pretty gay place and a

r a good many questionable characters.

I noticed in the

door knobs and heavy fixtures had been removed and re-

r zinc fixtures in many cases.


Thursday, August 14:

We left Brussels at 9:47, the day being fine

and clear, our route taking us through Hal, where we saw practically no

damage to the town, although I saw none of the small industrial plants in

Leaving Hal the trees had been felled along the road by the

Germans, I gather in 1914, many of the trunks still lying in the ditch.
We passed a good many small industrial plants on the road to Enghien,
one of which I noticed was undergoing re airs and one Portland cement plant
in operation.

All of them bore the marks of shells or of aeroplane bomb-

ing and unquestionable signs of damage in the interior or the removal of

In Enghien there were shell marks on the buildings, but what

serious damage had been done was practically all repaired.

The cellars,

however, still bore German marks left from the period of occupation.


proaching Atli we passed long stretches of road underoing repairs by.Ger-

man prisoners and a good many British soldiers in this section, the signs
and directions for motor lorries on the road being all in English.


Leuze we saw no damage from bombardment, 'nit the industrial plants all

seemed to be closed and probably had been damaged.

At Tournai, however,

the city showed the effects of considerable shelling, the principal damage
being in the neighborhood of the fort which we passed in entering the town.

In this region I noticed two cement plants in actire operation and two brick-

yards, apparently therequirements for cement and brickfor rebuilding having
started these up.

There were a good many piles of heavy shells in the

region, but I was impressed with the fact that the town itself had not
been seriously injured.

All the approaches had been blown up and tem-

porary steel spans replaced them.

In leaving the town the damage ap-

pe-red to be a little more extensive, isolated buildings being completely
destroye d.

At 13aisieux, about half way to Lille, we struck the fron-


tier and were passed without hluch trouble, neither the Belgians nor the

French looking at our passports but only at the travel orders.
encountered a puncture.
man signs indicating
Federal Reserve Bank of St. Louis

Here we

All alon6 the road the houses still bore the Ger

the number of men and horses to be quartered, etc.,


every fie or six, or else lying only on one aide of the road, having been
felled by the Germans.

Through this country we saw the harvesting work

being done almost entirely by women.
damage was not bad.

Carvin had been shelled, but the

The town, however, looked deserted.

of barbed wire began to show up again as we approached Lens.

Here the piles
I noticed


at one time the stacks of ten industrial plants without any smoke.


we approached Lens it gave us a picture of destruction of factories and
bridges, and the nearer we reach the city the greater seemed to be the
destruction, the number of plants in ruins, with evidences of warfare,
trenches, barbed wire, shell craters and destruction .pn every hand.


quite a number of miles of the city there were no crops to speak of, although much work of restoration appeared in evidence on the broken up
roads and in the fields, all of which had been pitted with shell holes.
Here the trees were completely blasted by shellfire, the railroad line
destroyed and only patched up.
the Somme.

This was the margin of the battlefield of

Approaching Lens we found the city a complete ruin and almost

It was in many respects the worst scene of devastation that we wit-

nessed on the entire trip, in many cases the buildings being literally ground
up and the industrial plants in and around the city masses of tangled steel
and iron and broken stone.

There was a reconstruction camp and narrow gauge

tracks laid throughout the region for the removal of rubbish, but it w_s
sad and depressing thing to see hardly a living tree, nothing but bare and
shattered trunks, the people living in improvised huts in many cases and
in partly restored houses.

Surrounding the city the shell holes are con-

tinuous and it is a picture of waste and weeds.

We passed through Gi-

venchy, still no crops and continuous shell craters, trenches and dugouts.


Here there was a large cemetery, and in this region the roads were still in
shocking condition.

On all sides, under every available shelter, were

deep dugouts where apparently all troops were obliged to take shelter.

We passed Vimy Ridge on our left,- nothing but shell holes and weeds,- and

Souchez on our right, the same.
for the Canadians.

Here there is a fine monument erected

The fields are filled with piles of ammunition along

the road, but they are literally torn u; art by shell fire and there did not
seem to be a level foot of ground.
Approaching Arras there seemed to b., some cultiv4tinn !_n

In the atty. nearly every building had suffered some damage and a great many

abdiima of them had been completely destroyed, but the destruction was not
as complete as at Lens.

Nevertheless the city was a sad ruin.

In this

region there seemed to be a vast litter of war material, a ;treat many wagons

and trucks, but in and around the city the work of restoration seemed to be
very active.

The railroad station is being rebuilt. Throughout this

section, for a distance of about 52 or 35 kilometers, all was shell

hole, 1-nrbed wire, trenches, dugouts, and not a tree with foliage, most
of them in fact being completely destroyed.

There was a big explosion

of ammunition some miles distant, throwing a column of smote some hundreds
of feet into the air.

The work throughout the suburbs of Arras and along

the road seamed to be done by Chinese, bl dks, French, Japanese, 4nglish
and Germans, all in uniform.

Damaged and rusting tanks were in the fields

and it was one long vista of shell craters, corrugated iron,, piles of

shells and barbed wire, various smashed war material, with one large and
one or two small cemeteries.

There was a great predominance of large

shells piled up alon.; the road.

Jai the left Mouchy, a few miles out of Arras, had been so completely

destroyed that not a sign of the town wag left.

Nowhere did we see

more tremendous accumulatione of smashed up war material, but it wee

being rapidly cleaned up.

Vie-en-L.rtois, oa the road, is completely

flat and nothing left of it; German prisoners were working in this region.
Here there was another big- ammunition explosion as we paesed.

I noticed


that about 1.7., or 20 miles outside of Lens the fields were in some culti-

vation, which disappeared as the citywae approached, only clearing work
being done as the land was quite beyond cultivatinn except with a great
dell of filliag in work.

The trees along the road to Gambrai had all beat

cut anU moat of the trees in the region blasted.

We saw another explosion

near at hand on our right as we 4,,proached Merquoin, but itwca,

to determine whether these explosions were n-,-idental or otherwise
but we had road in the. newspapers that four or five explosionshad taken

plate the day before in Belgium which were atributed to the intense heat.
Throughout all of this country there were immense piles of shells along
the roadside.

Marquoin did not appear to be as badly destroyed as Lens,

but appeared to be almost completely deserted.
with foliage on them.

Here there were some trees

There was another explosion on our right at some

distance and we noticed in the fields groups of women filling shell holes
in many places.

Cambrai is very badly shot up, but not completely destroyed.
deal of repair work is going on here.

but temporary spans replace them.

A great

All the bridges had been smashed,

Leaving for Per

skirts of Cambrai badly destroyed, but the crops looked much better.
It is most astonishing to see the amount of ammunition lying along the roil).

Every small village on the road from Cambrai to St. Quentin had been de stroyed.

At Masnieres, which town was absolutely flat, the roadside and


all the points of vantage were filled with dugouts, sr.)me of them quarried
out of the solid rock and apparently very deep.
explosion of ammunition ahead of us.

Again there was a large

At Te Catelet, which had been com-

pletely smashed, they were actively at work cleaning up the rubbish and
many German prisoners under English supervision were engaged in the work.
Between Le Catelet and St. Quentin the road had been mined and blown up
at many places, principally at cross roads, and, as we approached St.
Quentin, we passed miles of trenches and burped wire with absolutely no
evidence of restoration or cultivation.

The road had been oadly shelled

for miles, all tne trees had been destroyed, there was very little or no
work going on in the fields, and a great vista of war paraphernalia.
St. Quentin was a sad sight of ruin from a distance, the cathedral standing out on the hill top in ruins, with the city around it pretty much destroyed.

There was more destruction in the * neighborhood of the ca-

thedral, it appeared to me, than elsewhere, but the city was full of people,
many of them hard at work patching up -that homes.

We left St. Quentin for

Montdidier over a road which had been shelled for miles, surrounded with
huge mine craters and in some cases the mines which had destroyed the
roads being so extensive as to require detours around the temporary fills.
Heretkere was no cultivation at all and practically no trees standing.
The town of Roupy outside of St. Quentin was coppletely destroyed and deserted.

Approaching Ham the fields here and there had been newly ploughed

and again there were some living trees.

The town of Ham was pretty badly

smashed up, but there were some people and again the usual narrow gauge
road as in all of the larger towns,liid for the purpose of clearing away

Leaving Ham the amount of cultivation increased.

There were

more trees, and approaching Nesle there appeared to be pretty good crops.

Here the women and old men were working in the fields at 7 o'clock in
the evening.

This town was considerably damaged, but a large part of it

had escaped.

The church had been completely destroyed.

some people in the town and the usual narrow gauge road.

There were

Roye crops appeared to be better,and along this section we saw many German
graves in the fields.
few people there.

The town of Carrepuis is practically gone and very

In Roye for the first time I saw an old cemetery which

had been badly smashed up by artillery fire.

The church was completely

destroyed, but we saw the only bridge,- a stone arch affair, badly damaged,- which had not been destroyed completely; it was still in service.
There were very few people in Roye and the usual narrow gauge road.
Our courier, Bancharel, pointed out fields after we left Roye, where, notwithstanding that a battle had been raging a year before, there were fair
ly good crops growing, but all throu,_]h this section the trees were badly

torn by shell fire,and there was an endless accumulation of wire and many
unfilled trenches.

Montdidier was practicaily flat, the destruction al-

most complete, but the work of cleaning up seemed to be well advanced.
In passing through the city I saw but one house with a roof on it.

Here again there was a very large German prisoners camp, and the work
at Montdidier appeared to be businesslike and active.

In the distance

on the right is Cantigny where the First Division had their first big

There was very little cultivation around Montdidier; the de-

struction had been too complete.

Leaving the city to go to Beauvais, wh

we would spend the night, we passed one rather small forest which had
been absolutely shot away, not a tree having a leaf on it, but on the

other hand three miles outside of Montdidier the crops were appearing
again and evidence of a good deal of restoration and cultivation in the

The contrast between war destruction and an untouched area was

very marked.

Leaving Montdidier, for three or four miles out ur the

city everything had been pretty well smashed, all tne trees bore marks of
shellf ire, many of them had been shot down, but then gradually this disappears.

Shell craters and trenches are further apart, the accumulation

of wire and wire entanglements is less, and while the roadway' have been

shelled for five or six or seven miles outside the city, the fields and
country still looked the old France without any evidence of war.


and there reserve line trenches appear, with the wire piled up in the
fields, but as we approach Beauvais one's strongest impression was of
the active work by the peasants in the fields.

We saw peasant women hard

at work as late as 9 plclock at night, as long as light lasted.


reached Beauvais at about 9 o'clock and stoped at the Hotel Continental,
a nice, quiet little hotel run by a woman w..c knew Bancharel and who
spoke English very well.

There were very few people in the hotel, but

we had a good dinner and a comfortable night.

Beauvais seemed to have

been left practically untouched except that I understood that it had
been bombed by aeroplanes and a little damage done.

Friday, August 15:

We left this morning shortly after 9, retracing

the road as far back as St. Just, through a country

looked flour-

ishing with fine crops, the only evidences of War being piles or barbed
wire along the roadside.

St. Just was an old Army headquarters.


town seemed to be practically untouched, with the exception of some

We turned off the main road to Maignelay, here approaching the

area of active fighting, and although the town had not been bombed, the


increased amount of wire and trenches, etc., indicated the approach to the
fighting area.

We made a short detour and stopped at a little cemetery

where a friend of Bancharel'e is buried.

He was a lieutenant in command

of an American Field Service ambulance unit.
had been shelled a good deal.

Approaching Tricot the road

There was less cultivation and it was

here at Tricot that the German advance was checked in June, 1918.


is badly shot up and the roads are in bad condition, but the trenches in

the vicinity seem to have been pretty well filled and the work of restoration

There were great accumulations of barbed wire and shells lying

along the road to Le Ployron.

Here we took the road to the right through

the remains of the town which had been most completely destroyed and was

While the roads had been pretty well cleaned up there was still

a good deal of wire lying about, shells, etc., although the trenches had
been filled.

There were some crops and a good deal of ploughing for fall

planting, but neverhtless much of the country was in weeds and here and
there we flushed a number of coveys of quail.

Le Tretoy was completely

shot down although the peasants were wor'Ung in the ruins.
the country i

From here on

entirely ruined, filled with dugouts, smashed trees and

telegraph poles and wires.

A little ploughing had been done and a few

fields planted, but there was a good deal of litter lying about and as we
approached Rollot the ruin seemed to be complete.

Alongside the road

was a great crater caused by a very recent shell explosion.

Rollot was

pretty well shot apart, the walls of a few houses were still standing and
the road through had been cleared.

Nevertheless, it was a terrible ruin.

From here to Reasons there was little cultivation, although German prisoners were (.18-aged in filing the trenches.

The trees and woods had been


smashed by shellfire and on the left we passed a small forest showing the

effects of artillery fire, during which a whole French division had been
surrounded and destroyed or surrendered.

It was surprising to see the

extent to which the trees had already thrown out new foliage.
did not seem to be so severely damaged.

There were some houses standing


almost intact, but in this region not much work of repair had been done.
There were many unexploded shells noticeable and a good dead of litter.

German prisoners were engaged in clearing it up and here and there we no;
ticed freshly filled trenches.
near Reason.

There was even less damage immediately

The town had been damaged but was standing, and, while near-

ly deserted, a few people were working in their ruined houses.

This town

had been captured by the Germans although they did not get much beyond it.

From Reason to Compiegne conditions in the fields and along the road seemed
to be much better until we approached Margny immediately outside of Com-

piegne, which was badly destroyed, but neverhtlese the peasants had planted
crops this year and they look well.

I noticed in

place had not been so badly injured it seemed to have been a tremendous
ammunition base.

There were acres of ground covered with piles of large

and small shells and boxes of small arms, ammunition, with many danger signs
warning people away.

At Breuville, while the damage is not very serious, a
sugar factory had been completely blown up and the
ing on the ground.


Here and thre brick works wer

Entering Compiegne there was some

shellfire, but not serious, and much was repaired.
bore some scar.

The city as a whole seems but sli

there a building being completely destroyed by a bi


over the river had been destroyed and replaced with steel girders.


understand the big bridge was blown up by the French in 1914.
piegne is at the end of the Oise valley, and from there we turlied down

the valley of the Aisne into a beauti-ul country practically undamaged
IorMany miles by the war.

Through the forst of Compiegne railroad tracks

have been built and a great accumulation of stores left out in the woods.

Approaching Attichy the river and railroad track were on our left and here
the Germans had reached the railroad with artillery fire, all the big trees
along the road being scarred, fences badly damaged, etc.
that the Germans cut the railroad line and the main road.

It was at Atticly

The little vil-

lage of Vreuil was undamaged save for a few shell scars on the Soissons
side of the village.

We were now approaching the area of fighting around

Soissons, however, and Lamotte had been somewhat shot up, but the trees
showed serious damage from shellfire and the remains of camouflage lay
along the roadside.

The railroad had been considerably damaged.


Soissons on the right a forest had literally been shot away and the same
with u small forest a mile or two distant on the left.

We saw some trees,

probably two feet in diameter, which had been shot clean into with one

There was an enormous camp at the roadside with a vast accumulation

of war material, wire, etc., and beyond Lamotte little cultivation of the
soil had been possible.

The road had been badly injured by shells, but

it was well repaired, although the roadside was stilllined with wire,
pill boxes, piles of shells, etc.

Approaching there were acres of

war material,- old wagons, locomotives, shells of every description and
smashed war paraphernalia.

We entered Soissons over a bridge that had

been destroyed and repaired, and in the city of Soissons itself I was impressed with the spotted character of the damage,- in some places complete

destruction, elsewhere a building standing in fairly good shape.

lunched at the Hotel de la Croix d'4,


the lunch for five costing


42-1/2 francs and consisting of melon, fish, fiist, fruit, Bordeaux and
mineral water.

The hotel had been somewhat damaged.

the street the houses were completely destroyed.

Immediately across

In general, the city iia

terrible wreck, and, having had a ,-ood many large buildings in it, the

wreckage looks more appalling in some ways than in the smaller towns.
In fact, with so many walls standing but with the interior of the buildings
smashed and fallen in, it is in some respects more impressive than the
smaller towns which have been completely destroyed.

Soissons was filled

with people, many of them sightseers, and the little hotel restaurant where
we lunched was crowded.

I gather it is a central point of interest to

tourists on account of its accessibility to Paris, from which they run reglk
lar lines of buses for sightseers.

Leaving Soissons after lunch by the

road that originally led to Laon, we drove up on the top of the Chemin des
Dames as far as Fort Malmaison and a very short uistance beyond.

All the

way up to the top of the hill and all the surrounding country is completely
which makes
destroyed and one continuous mass of shell craters now covered with weeds,/
the road to Malmaison almost impossible for automobiles ani beyond that
point quite 80.

This Ls one of the most desolate of all the scenes at the

front,- buildings, trees, roads, everything had been torn to smithereens.
Wreckage lay along the roadside, quantities of shells, hand grenades, etc.,
and all points of vantage had been used for the construction of deep dugouts on the surrounding hills.

Many unexploded shells are supposed to

make the ground dangerous nere, and in walking across the broken ground it
was not difficult to step on a shell if not careful.

In fact, one was


impeded in the path to the fort.

Here again the dugouts were deep and
There was of course no culti-

.6,min many cases quarried out of the rock.


vation anywhere, but in one place a little hay had been made.
thing was weeds, wire, corrugated iron, railroad iron, etc.

In one

place where the forest had stood there were a few bare shattered trunks

Bancharel pointed out where some small villages had stood,

which we could only distinguish by some heaps of brick and stone.


little town where Ben had been stationed, Laffaux, had completely disappeared.

The only sign of a building anywhere in eight was the rusty

remains of an old mill that had been completely smaah'd to pieces.


Malmaison is about four kilometers hayamIxtkaxxammixy from the approach
to the Chemin des Dames.

I understand that for 20 kilometers beyond the

country is in the same condition and nothing left but shell craters with
subterranean caves and bombproof shelters.
river beyond.

You could see the Ailette

Fort Malmaison had been completely mashed up but the

subterranean works were still there.

Returning, along the roadside the

driver picked up some American ammunition belts with the ammunition still
in them.

Along this road we saw a few tourists and sightseers and at

the entrance to the hill there were three Y. M. C. A. trucks with sightseers.

Otherwise we saw no one; only miles of barren country.


road had been marked by a magnificent growth of trees along Loth sides
which had completely disappeared.

Returning to Soissons we crossed the

bridge alongside the park where Ben had been stationed and drove out to
the location of his camp which is now covered with a lumber yard contain
lag all sorts of material for reconstruction and barracks for workmen.

The bridge had been repaired with steel girders.

One building in the

city which seemed to have escaped serious damage was the Hotel de Ville.
IWorking in Soissons we saw many African or Indo-Chinese troops and there
was a considerable air of activity there, probably due to its nearness
to Paris.

Leaving Soissons for Paris by way of Villers-Cotteret we

rapidly ran out of the area of severe damage around Soissons and into a
country with splendid crops.

On the way we passed a large American

cemetery at Ploizy, being No. 593, which seems to be well cared for, the

graves marked with white crosses, a tall flagpole with the American flag
acid two large artificial wreaths standing at the front of the cemetery.

A large number of men of the First and Second Divisions are buried here.
Across the road were immense piles of shells.
there was some damage, but not very bad,

At Villers-Cotteret

anu a large number of soldiers,

in fact altogether too many for a country needing work done.


the whole length of the road to beyond Munteuil was paved and the run to
Paris, while through a beautiful country, was fairly uncomfortable on
account of the cobbles.

We reached Paris at about 5 o'clock, having cov-

ered in the neighborhood of 150 miles.

The period from August 15 to September 2 was spent in meetings at
different times at luncheon and dinner, with a large number of Frenchmen
and some Englishmen and Americans, including the following:


Pallain, Monnet, Vilgrain, Celier, Avenol, Sergent, Simon, the Paris representative of the Ottoman Bank (largely owned by the French) Whose name
I do not recall, most of our representatives in the Peace Mission, various

members of Mr. Hoover's organization and some of the representatives of
the British Treasury organization.

I also attended a meeting of the tem-


porary organization of the Reparations Commission, at which Monsieur
Loucheur presided.

The result of these various discussions is summar-

vowized in the following report sent to Mr. Leffingwell and the cabled paraphrase of the same:



Tuesday, September 2:

Mr. Vaughan took the morning train to Brussels


with the trunks and I left at noon with Col. Logan in his car, going by
way of St. Denis, Ecouen, Luzarches, Chantilly, Senlis, Compiegne, Noyon,

Ham, St. Quentin, Cambrai, Valenciennes, Conde, where we got off our road
and lost nearly an hour returning to the main road, to Mons, Soignies,
Hal, Brussels.

The country was much as we had seen in the earlier trips

except that we passed through one of the most important of both the French
and Belgian mining districts, in that section around Valenciennes and Mons
the coal mines seeming to be pretty heavily in operation and in general
industrial conditions considerably better than in other parts of France
which had been occupied by the Germans.

Unfortunately there were long

stretches of paved road which, while ih good enough repair for commercial

purposes, did not enable us to make good time driving and we did not reach
Brussels until about 11 o'clock at night.

Wednesday, September 3:

Mr. Vaughan arranged for our passport visas

and we then stopped at the CredTAnversois to get some money and had a talk
with Mr. Jacobs' secretary, Mr. Jacobs being out of town.

He had been

good enough to make a collection of photostatic copies of the communal
currency of Belgium and was engaged in getting specimen originals.


2 o'clock went to the Banque Nationale and spent the afternoon with Mr.
Janssen and later with Mr. Hankar.

Mr. Janssen stated that lie ma* ex-

pected a position with the Belgian party going to attend the convention
of Chambers of Commerce in the United States and was anxious to prepare

himself with information, etc., so I gave him a list of seven or eight
subjects that he would find useful to be posted on and suggested that he

go to the Bank

in New York, and that, as I would be back before he left



I would arrange for him to meet the bankers of New York, Chicago,

Boston and elsewhere, as well as the Treasury officials.

I had learned in

Paris, wnicn taese gentlemen confirmed, that the Belgians had now figured
out their food and fodder requirements for this winter to be about

$84,000,000 from America, and they are exceedingly anxious to conclude a
government loan, part of it free to be spent elsewhere than in the
United States, as promptly as possible.

I explained to them the situation

in regard to shipping gold to London and that we might have to move it all,
which they understood, and/explained that as yet the Bank of England had
not otarted shipping our gold as their men were handling sou: :: guld that

was already there for the account of the Bank of Englund, but that they
would take up ours next.

talk withl.Lr. Han;itr and Mr. Janssen fur-

ther confirmed my feeling that Belgium is likAkir.

7 Aid :Drogreas toward re-

covery and will not reed very large credits in America, but should have
them fairly promptly, that they should be reasonably long and some portion free for use in other countries.

I think they were a bit disap-

pointed that we could not arrange to leave some of our gold earmarked
with them, simply as evidence of our confidence.

Thursday, September 4:
there at a little after 3.

Took the 7:30 train for Amsterdam, arriving
The train was rather crowded and by the time

it reached Amsterdam, with additions, was prey`,,; long, but there was a

good diner attached.

We experienced little difficulty with passports and

customs, the diplomatic vise relieving us of any trouble.
baggage was opened.
at Amsterdam.
 4 o'clock.

None of our

Called up Dr. Vissering on arriving at the hotel

He was waiting to see me and I joined him at his office
From him I learned that Mr. Warburg had been here on his

way to Hamburg, and Dr. Vissering and his associates who joined us explained at some length various discussions they had with Mr. Warburg as to
plane for financing our exports to Europe.

Warburg, strange to say, was

now keen to establish either a largo investment trust or possibly a great
accepting bank on which bills would be drawn for acceptance at say six
times its paid-in capital, such bills to have various renewals and to be
eligible for discount with the central banks.

This impressed me as a

notable change of attitude on Mr. Warburg's part.

Dr. Vissering had also

prepared a plan for a great combination of the neutral nations and the

United States for the purpose of financing Europe during the period of

A reconstruction,

to a total of $5,000,000,000, of which the United States

was to furnish #4,000,000,000.

HI proposes to furnish me with a trans-

lation of this plan.

I found that two shipments of gold had already

been made to London.

Others were on the way.

The entire amount of our

gold had been weighed and reported to check very closely with the German
figures and they were satisfied that everything was in good shape.


gentlemen were all very much disturbed at the lack of progress in arranging
credits, the depreciation in all the European currencies as against dollars having apparently made a great impression on their ;Ands since I last
saw them.

personally, I am not so sure that it is not a pretty good thing,

but with guilders at from eight to ten pr cent. discount they are rather

They stated that they had just received a call from an important

German banker whose name they did not mention, who had stated that if

Germany was able to purchase abroad a sufficient amount of animal fodder
he was under the impression that they would need little if any outside
supplies of food for their population, as they had a very good crop, but


he said th,it the people in Germany were not working; there really was not

work for them until they could get raw materials.

They needed, for in-

stance, silk in order to finish up various expensive electrical machinery
and plants which could be immediately exported as soon as they had the
silk, and other things in like fashion; but there was, nevertheless, insufficient work for the people and a great disinclination to work.

The whole

nation apparently was discouraged and disheartened and looking at the future
They were trying ftaxiWto get credits in
with great apprehension.
neutral countries, and, while some snail credits were privately arranged,
nothing of great consequence.

The Dutch private l

August 15th by arrangement could not be extended and had to be paid at
The German mark

severe rates of exchange.

was now quoted at 12 cents

Dutch, the equivalent of about 5 cents in New York, but there was atill a
great speculation in German currency in Holland and probably considerable
amounts of it coming in.

They all take a very gloomy view of the situa-

tion in France, where they say politics outweighs every other consideration;
that politics is rotten and that they are without strong leadership; that tie

government debt is so hugs and the currency circulation so tremendous and
the lack of adequate taxation so dangerous that they look to the future of
the French with great alarm.

They say the Belgians are getting along first-

rate and they look to see them work out of their situation.

That night Mr.

ter Meulen joined me at dinner and we sat up until midnight, in the course
of the talk Mr. ter Meulen confiding to me that he had no use for Mr. Van -

derlip's plan or Mr. Warburg's plan or Dr. Vissering's plan; that the only
plan ahich he thought could be worked for the buropean situation was a strong

definite American leadership, with American credit, and that once America


took the lead the neutral nations could be relied upon to follow, under

American leadership and largely under American control, but he thought
the United States government would need to take a very strong position
He is rather
and possibly give some aid itself directly or indirectly.
more kapemi/than anyone with whom I had talked in regard to what is going

to happen in Europe this winter if we do not get ready,- with the possible
exception of Mr. Vanderlip and Mr. Hoover.

He says that the situation

in Austria is going to be appalling, in his opinion.

Nearly half of the

population of the country lives in Vienna, where there is little work and
less food.

When I told him that I did not take quite as gloomy a view

of the outlook as he did, he seemed to be tremendously pleased and was

most anxious to get every detail of my observations on which that view
was based.

He, as well as the gentlemen at the Nederlandsche Bank, em-

phasized very strongly the need for supplying fodder, that is, maize,
seed cake, etc., as being more important evetthan wheat and meat, as the

herds of cattle could be fattened and built up so rapidly If fully supplied
with food and it would protect the grain crop against being fed to animals,
which was the greatest source of loss of bread grains.

Friday, September_2:

Went to the Nederlandsche Bank at 11 and was

joined by Mr. ter Meulen and he, Dr. Vissering, Mr.
and I spent the entire morning continuing this discussion.

Dr. Vissering,

and I went over the river for lunch.



3 o'clock Mr. ter Meulen joined us and we continued the discussion until
going over all sorts of plans and possibilities.

I find them all

pretty discouraged, principally because of the failure of some positive
plan developing in America.

They repeatedly reiterated, and most posi-


tively, that Holland and the other neutral countries would join in almost

4any reasonable plan that the United States would propose and that, in
their opinion, the only hope for this winter, in which they saw a desper-

ate situation developing, was for the United States to really take a
very complete command and control of the economic situation.

They even

go so far as to believe we should create a special government organization
to deal wholly with economic matters in Europe, and not matters political,
which shouiu in efiect 0.0minate the Reparations Commission, which they

regard as more a political than an economic organization.

They repeatedly

urged that I should formulate some definite specific plan of procedure so
that they could get their government, their bankers and their business men
to at once take steps to join us,and it repeatedly developed in the conversation that they feared American sympathies would be so strongly directed
to the relief of France, Belgium and Italy that Germany, Austria and Eastern

Europe would be neglected and that there would be a =piste breakdown, great
disorder and bolshevism in that section.

Dr. Vissering is rather wedded

to the idea of some great government loans,or possibly investment loans if
the former is not practicable, to be secured by uniform pledge by all borrowing nations of their customs revenues.

Both ter Meulen and I felt that

impossible in France, Belgium and Italy, but might be quite feasible in
Germany and the East.

They said that their conversations with German

bankers convinced them that Germany would dive anything and everything she

had to get/credit needed in America, pledging any of the government revenues, giving any preferences, and even giving the endorsements and obligations of their banks and business concerns, mortgaging public buildings,

Dr. Vissering had telephoned and telegraphed to Hamburg in an effort

to ascertain

whether Mr. Warburg could join us and had ascertained that he



was in Baden-Baden, but would be back on Wednesday of next week and ready
I promised that if I found my boat leav-

to come to Amsterdam at once.


ing later than expected I would return to Amsterdam to meet Mr. Yarburg,
otherwise it would be impossible.

Warburg has been devoting considerable

time to studying conditions in Germany and I am anxious to hear what he
has to say and report to Mr. Polk.

Saturday, September 6:

At 9:30 Mr. ter Meulen and I joined Dr. Vis-

sering at the canal by the Central Station and from there went by motor

boat through the locks into the Zuyder Zee and north to a point near the
island of Maarken to witness the start of the regatta, which waamost
interesting, combining various classes of American-type boats which they
call "sharp boats" and the Dutch type of yacht, or round boat, which follows in general the lines of the Dutch sailing vessels of light draught
and full bows and stern.

After they got away we went on north to the is-

land of Maarken and spent half an hour looking over the settlement, which
is quaint in the extrme, composed entirely of fishing people, who fish
principally in the Zuyder Zee and in the North Sea, transferring their
catch to steam vessels which come out and buy the fish on the spot, carrying the catch to Amsterdam and other cities.
The land is so nearly at water level that at times it has been completely submerged when they have strong gales.

The inhabitants have

maintained their old customs and costumes, the men wearing loose, baggy
knickerbockers and the women full skirts and tight waists, practically
everybody wearing wooden shoes.

They did not impress me particularly well,

and I am told that inbreeding has reduced their physical quality tremendously, with much tuberculosis on the island, and they have become so


habituated to visitors that the children, and even the women, are more or
less beggars.

Certainly they did not appear to be a very affable or

particularly goodlooking lot.

From the island of Maarken we went to Volen-

dam, a similar fishing settlement although considerably larger, built on
the mainland, and here there was a striking difference in the appearance and

character of the people.
sturdy looking race.

They were a cheerful, friendly lot, and a pretty

The town is known for its good looking people and

has attracted a little settlement of artiste who are there pretty much the
year around.

They also maintain the old Dutch costume here, although the

men wear a loose baggy pantaloon that is tied
the knee.

around the ankle instead of

Much of this town is built on the dike, although a few years

ago when the dike broke just south of there the whole town was submerged
except houses standing on the dike, and they suffered pretty severe losses.

We had a very good lunch at a little hotel and returned by the same route
through the locks into the main canal late in the afternoon.

Dr. Visser-

ing and Mr. ter Meulen frequently reiterated their opinion that if the
United States took the lead Holland could be relied upon to do a consider-

able share in financing food and reconstruction requirements in Europe and
they are most anxious to join us, but they are pretty blue as to the outlook unless something is done promptly.

We took the 8 o'clock train for

the Hook of Holland and after some little delay fussing with passports,
baggage, etc., got pretty comfortable accommodations on the boat to Harwich
and had a very smooth uneventful trip, starting ,xt daybreak the next morning.

The train landed us in London the middle of the afternoon, at the Liverpool
Street Station, where there was no end of difficulty in getting a cab.

Monday, September 8:

I went first to Morgan, Grenfell's for mail and


learned from Grenfell that they were expecting me at the Bank, where I was
still regarded as a member of the family.


Mr. Morgan came in, although I

had no opportunity for a chat with him as he was just starting for ScotSpent the rest of the day at the Bank where I had lunch, the others


present, outside of the directors, being Lord Sumner, Sir John Bradbury and
Mr. Morgan, quite an unusual event to have so many outsiders.

Lord Sumner

and Sir John Bradbury were there for the purpose of discussing the program
on the Reparations Commission, on which Sir John had just been appointed to
represent Great Britain.

After lunch they got at me about ale possibil-

ity of my serving on the Commission.

Sir John Bradbury holds the view that

the American member should act as chairman and that it will vastly facilitate working things out.

On returning to the hotel that evening I ran

into Col. House, who asked me to stop in to see him the following morning.
Dined alone.

Tuesday, September 2:

After cleaning up some mail with Miss Ericson I

spent about an hour with Col. House, who at once opened up the subject of
the Allied governments'debts, which he said,to his mind,was a menace to
international goodwill and international solvency.

He said that he had

just had a long talk with the Chancelor and had suggested that some scheme
should be worked out for dealing with the debt which would insure everybody
against possible disaster and reduce the possibility of friction in the

He asked me if I had any scheme and I then suggested a plan for

canceling debt waich was duplicated and further reducing it as between the
Allied governments by substituting German reparation bonds, the theory being
that if defaults must occur they should be confined to defaults by the Central powers.

He was enthusiastic about the possibilities in some such ar-



He also stated that he had been working on a dispatch to the

President urging him to use the economic argument somehwat in his speeches
regarding the Treaty and the League of Nations.
would prepare something for him.

He wanted to know if I

Stopped at Morgan, Grenfell's to see

about steamer accommodations and spent the rest of the day at the Bank,
except for about an hour which I took to call at the Union Discount Company,

where I found that Mr. Nugent was away, but had a chat with Mr. Stephenson
and then went to the London Joint City and Midland Bank where I had a little
chat with Mr. McKenna.

Dinealone at the hotel.

Wednesday, September 10:

In the morning Mr. Raymond Fosdick called to

discuss the preparation of a cable to send to the President.
later to show me a memorandum that he had prepared and a draft of a cable
that was being typewritten.

Took a short walk with Col. House, who said

that he was returning to Paris for a few weeks, but was determined to get
back home early in October °y in if the President objected.

Lunched at the

Bank and had a long talk with the officers in regard to the policy of the
British government and of the Bank of England in regard to money rates,
also as to the melting of the gold coming in from Holland and Belgium.

Sir John Bradbury dined with me =A at the Ritz and explained at great
length his views in regard to the work of the Reparations Commission.


is very urgent that I should accept the appointment if the President offers it.

Thursday, September 11:

At 10 o'clock I joined Col. House and we spent

about an hour walking and principally discussing the plan for dealing with
the Allied debt.

He asked if I would be at the Hotel at about 5 o'clock,

when Earl Grey and Sir William Tyrrell would be there to discuss the matter.



About 11 o'clock Fosdick called with drafts of his memorandum and dispatch
and we had quite a discussion of the difficulties bound to arise if the
economic argument is emphasized at home by the President.
spent the rest of the day at the Bank.

Lunched and

At luncheon Sir Chdrles Addis

announced, much to my surprise, that there was a premium on gold in New
York, which apparently arose out of the experience of his bank in endeavoring to ship gold to China through one of the national banks in New York

and being unable to do so because the national bank preferred to make the
shipments itself and furnish the Hong Kong and Shanghai Bank with taels at

a premium, which he had interpreted as a Famium on gold.

After lunch Sir

Brien Cokayne proposed an exchange of gold on the Continent to enable the
Bank to make some payments and we discussed the feasibility of releasing

gold in London against sales of rupees in New York by the Indian government, which he said he would suggest to the Indian government.
called to go over the gold figures and estimate the outcome.

Mr. Kent
At 5:30 I

joined Col. Houso)Earl Grey and Sir William Tyrell at the Ritz and gave
Col. House a memorandum outlining the principles which might govern the
treatment of the Allied debt on the scheme which I discussed with him.

Earl Grey seemed to grasp the point at once and suggested that if I would
transfer from the Baltic to the Mauretania it would give him an oppor-

tunity to talk it over further and get a better understand'ng, which I said
I would do if the British government could arrange the transfer of accommodations.

Met Sir Robert Kindersley and Monnet in the Ritz at dinner.

Monnet advanced the rather radical theory that the only thing that will
cure Europe of its present disease is pain and suffering and that the best

way is to

have it promptly and get through with it, letting down the bars


Iliall around and forcing people to a realization that the war has entailed

losses which can only be recovered by hard work and economy.

It struck me

that his ideas were a bit fatalistic.

Friday, September 12:

Called at Morgan, Grenfell's and afterward spent


a,day at the Bank, taking lunch there.

Sir Charles Addis said that he had

started inquiries in regard to the gold premium in New York, of which he had
learned not only in his reports from New York but in some government publication.

Also, had a long discussion of the theory of absorption of the

remedy or abrasion of coin when dealt in between nations or between central

Mr. Kent came to the Bank after lunch to go over the gold figures

with the Chief Cashier, Mr. Harvey, and at 5:30 I took the train with Lord
Cunliffe to Epsom to spend Sunday with him.

Saturday, September 13:

I had a most enjoyable visit with Lord and

Lady Cunliffe, two of their little girls being there, and 'aturday afternoon
Mr. Blackett turning up.

Much of our time was spent in the orchard and

going over his grounds, park, etc.

Went to church Sunday morning and our

evenings were spent in discussing Blackett'a new work in the Treasury, Lord
Cunliffe's plan for an international exchange security and the rupee situation.

They are a delightful family, have a beautiful place and lead a simple country

After spending twenty odd years in building up his property, culti-

vating it and planting it, he now feels that the war situation necessitates
the most rigid economy and he is leaving a good deal of it to grow up in weeds
and spending as little money in upkeep as possible, which it struck me was
about as painful self-denial as he could practise.

Monday, September 15:

Spent the day at the Bank, coming to the City


'kith BlackeW by the early morning train.

At lunch Sir Charles Addis

admitted that he had been completely deceived in regard to the gold premium at New York and was rather indignun-c, that the British government had

published an irresponsible article on the subject, consisting, as I understood it, of a quotation from some foreign financial magazine.
having returned,


I had tea in the Governor's room and we went at the sub-

ject of discount rates hammer and tongs.

The Bank of England, it seems to

me, is getting ready to put the limit of pressure upon the Treasury to get
money rates up to reduce their short borrowings and to put the Bank in position to control the market.

I pointed out to them that so long as they

maintained their rates at present levels any effort Which we undertook to

bring about liquidation of lower prices by marking our rates up would make
their situation worse and we would prefer to work out a friendly policy in

It developed that, folloWeig my earliertalk with Sir John

Bradbury on this matter at dinner, a meeting had been held at the Treasury
or at the Bank with the Chancellor, Sir John Bradbury, Sir Brien Cokayne
and Mr. Blackett, and that Sir John Bradbury had repeated to the Chancellor
something of the views I had expressed to him at dinner and apparently indicated to him that a cooperative policy between the Bank of England Lnd
the Federal Reserve Bank could not be brought about by our reducing rates,
but must result from the Bank of England increasing rates, and consequently

the goverlent submitting to increased rates.
see what results.

It will be interesting to

In the evening Kinderaley and Grenfell dined with me

at the Ritz and sat up until midnight having a most interesting discussion,
principally on the international relations between Great Britain and the
United States and the difficulties ahead of us.

I suggested the wisdom

of Governor Harding coming to London and getting a bit better acquainted


where, which they thought would be an

excellent thing, but it was quite

apparent that they wanted to look him over pretty carefully before giving
him board and house room at the Bunk.

Tuesday, September 16:

Spent the morning and lunched at the Bank,

and at 3:30 called on Ambassador Davis.

He appeared to be rather blue

about the Treaty, feeling that every day's delay and possible failure to
ratify the Treaty by the United States was gradually developing a situation
which would lead to bad blood between Great Britain and the United States.

We discussed it at some length and he seemed particularly interested in
discussing the capabilities of the various men in the British government,
Lloyd-George, the Chancellor, etc., and had apparently given considerable
thought to the possibility of /the gradual dissolution of the Coalition
idea would force Lloyd-George to align himself definitely with the Labor or
some socialist political element in the country.

Mr. Davis, like almost all Americans that one meets over here, appears
impressed with the desirability of an Anglo-Saxon understanding in economic
matters, if not political, and it is noticeable that this should be true of
those in France who have particular contact with the French people, as well
as those in England.

Sir Brien Cokayne picked me up at the hotel and I spent the night with
him at his house at Roehampton.

I discovered that business and the Bank

of England was taboo in the family.

He apparently makes it a practise

never to mention the Bank when he gets home nor his business, and Lady Cokayne, he says, is densely ignorant on that subject, and it is one thing
which gives him relief from the anxiety of his work.



Did some shopping for presents to take home,

Wednesday, September 17:

etc., went to the Bank spending the morning and lunching there.
opportunity for a very nice talk with Lord Revelstoke.

After lunch called

on Sir Vassar-Smith at Lloyds Bank and found Mr. Bell away.
has been ill for some time.

I had the

He apparently

He, like most of the other men in the City, is

tired of"letting George do it."

They have somewhat adopted our expression.

He seemed inclined to the view that some of the better element in the
Labor Party would get a strong hold on the government and possibly control

He looks forward to very troublesome times in finance in Europe.

From there I stopped to see Sir Seymour Kix,g, who was very glad indeed to
see me.

He spoke most positively of the wisdom with which the British gov-

ernment was handling the Indian financial situation and thought it would wak

Nevertheless, the natives and their hoarding proclivities were a men.

ace to the world for the present, until their trade balances could be handled otherwise than by withdrawing gold from bank reserves.

He thought the

disturbances in northern India were due to monetary rather than political
causes and was satisfied that anything in the n-ture of monkeying with the
currency would have serious social and political effects.

Called on Sir

Charles Addis at the Hong Kong and Shanghai Bank and had a very nice talk
with him, principally about India, and he asked me to read a book on money
and currency just published by a man in the Treasury which he said was
interesting as presenting a moderate view of the possibilities of getting
along without gold.

Norman dined with me at the hotel.

He had handed

me earlier in the day a very confidential report on the relation of certain matters in the Bank, which I had read with interest and returned to him.
It was most enlightening as to the views of the Court of the Bank in regard


tt the Bank's future.

I think for the first time since I have been here

Norman frankly stated his conviction as to what was ,:oing to happen in

Europe, concerning which he seemed to have no doubts whatever.

Thursday, September 18:

Stopped at Morgan, Grenfell's to say good-bye

to Grenfell who was leaving town; spent the morning at the Bank and lunched

Thursday was the semi-annual meeting day of the shareholders of

the Bank, at which they had expected some difficulty to develop as some of
the shareholders had been complaining that they were not getting the war
profits of the Bank, which had been very large.

I am not advised of the

details, but apparently some scheme has been worked out by Which the excess
profits go to the government, either as a present or tqsame way in adjustment of their accounts.

The meeting passed off without any disturbance,


The directors having understood that I was sailing on the Baltic, were
most cordial, in fact more cordial and outspoken than I have yet seen them.
In regard to my visit, they urged me to come back and really exhibited a
spirit as though I were one of the Court.

At 3:45 Hartley Withers called

and I explained to him a plan for the regular publication of the Federal Resystem
serve Barik/figures in the London papers and asked hta if he felt willing to
prepare a series of articles for the Economist in regard to the Reserve
Banks, etc.

He said he wanted to do it, but it

wasprincipally a question

of time and material, but he agreed to dine with Norman and me to talk it
over Friday night.

Had tea with Mrs. Straight at Claridge's and dined with

Sir Frederick Huth-Jackson

house, 64 Rutland Gate, only his daughter being

there beside ourselves.
He feels
Federal Reserve Bank of St. Louis

very strongly that the worst roblem ahead of us now is to


build up Germany and let Germany tackle the problem of the new countries
to the east.

He apparently did not appreciate the difficulty of arranging

any such plan in America, particularly in view of the reparation clauses of
the Treaty.

He is coming to America in October.

Friday, September 19:

When I saw the Chancellor on my first stop in

London he asked me particularly if I would call on him again before returning to the United States.

A few days ago I askedSir Brien Cokayne if he

thought it would be desirable for me to do so, and he said by all means,
that he thought the Chancellor expected me to and would be disappointed if
I failed to call.

So Mr. Norman having yesterday arranged an app:intment

at 11:30, I called at the Treasury at that hour.

The Chancellor was most particular in asking what impressions I had
gathered on the Continent and I spent possibly fifteen minutes in explaining generally the way I felt about it.

In brief, I said that the encouraging points were the resumption of
agricultural cultivation and the apparent failure of labor disorder to reach

organized violence; that the discouraging feature was disordered governmental finance generally and the tendency of the people to expect the govern-

ment to solve every difficulty resulting from the war without a necessary
interval of hard work, depreciation, poverty, etc.
statement in regard to the situation in England.

He then made a long
He said, as to labor, he

thought the London police strike, the Liverpool police strike and the experience in the York mining strike had all demonstrated that the country was
really not behind the strikers in their extreme demands and extreme measures
and that if matters reached a crisis he did not know but what the wisest
attitude would be for the government to say that they would appeal to the


liountry as to whether they wanted the lawless element to rule or an orderly
element to rule.

He was confident


the outcome of such an appeal

and thought that the extreme labor forces would not get sufficient support
for any radical program to result otherwise than in discrediting their
motives and methods.

He said, as to the Government's finances, that they really were improving.

He expected to collect 000,000,000 sterling on the Excess Profits

Tax, a large part of it at the old rate of 60 per cent. on account of the
delay in making returns of payment as of the financial year in which the
tax arose; that there would be still further large recoveries from the sale

of materials by the Army and Navy, and he hoped next year to see a budget
fairly in balance, although it would be very large, containing many extraordinary war items which could not be eliminated under another year.
so referred to the necessity for deflation.

He al-

He himself felt concerned as

to the Ways and Means advances but less concerned as to the Treasury bills,
both of wlich had been reduced.

He expected later to be able to establish

higher interest rates and possibly check further expansion, but he feared
that too great a deflation would be disastrous in that it would possibly
produce less money than the Government required and in an economic sense
the Government would have to pay a debt incurred in an inflated currency
by borrowings under deflated currency conditions, which would have the effett
of tremendously increasing the actual volume of the debt to be paid, and his
general view of the future was that deflation and debt amcrtization must be
a very gradual process.

I pointed out that historic periods of great in-

flation and expansion and elevated prices generally found their readjustment
in a smash and the problem was to avoid the smash; that it did not usually


occurso to speak, years after the maximum inflation had occurred,about world,
until some living upon the stimulation which had brought the the artificial prosperity.

He asked me what I thought were the particular points

of danger in the outlook and I said it struck me there were three:


A default and collapse of government credits in Europe.


Defaults and collapse of private credits, which would interfere

with trade throughout the world; and

Possibly, as a consequence of either 1 or 2, a period of poverty,

lack of food, unemployment and disorder in the centers of population.

He said he thought this was correct, but said he relied upon the ability of the people in most of the civilized countries of Europe to bring
about a change of government by vote rather than by violence, which had al-

ways been to my mind the great safety valve in Great Britain and possibly
in some countries on the Continent.

This led him to say that he felt that

the future as to government credit de:ended very much upon the method employed in dealing with the Interallied debt; that Great Britain was in a
position where if its debt was paid it could pay its creditors; if its
debtors did not or could not pay, then Great Britain could not.

He said

he was proposing to send a Treasury representative to Washington to discuss

this matter and would like to talk it over with me.

I referred to Col.

House having brought the subject up with Earl Grey and having mentioned to

me his conversation with the Chancellor on the subject, and asked if it would
be quite clear to him that I had absolutely no authority to discuss this; that

I was not an officer of the government and whatever I said would be ex cathedra an
ight be completely repudiated were it referred to.

This he said he thoroughly under-

stood, and I pointed to the analogy of the situation which arose when the
Anglo-French loan was negotiated.

Feeling sure that this was made perfectly



clear I assented to Mr. Blackett joining us and with them discussed the
matter for possibly three-quarters of an hour.

ally the substance
Federal Reserve Bank of St. Louis

I explained very gener-

of my talk with Col. House and Lord Grey and I stated my

Digitized receive and continue


to hold a considerable part of her share of the reparaT


write off 010,000,000,000 and the British government would write off net

four or five billion dollars, nor, further, that theoretically the
British debt of ia8,000,000 sterling to the United States was good,

whereas the greater part of the 131,600,000,000 sterling owing to the

British government might, and probably would, prove to be worthless,
particularly the b520,000,000 sterling owed by Russia.
At the conclusion of our talk he saidthat he could not avoid the conviction that the existence of this debt over an indefinite period of years,
possibly for generations, would be a constant source of international irritation.

Every nation having payments to make to Great Britain and the

United States would hold an annual budget or financial discussion in their
parliaments, keeping the subject alive and probably bringing to the surface
all other causes of irritation which might exist at the moment, and for his
p,,rt, in the interest of better international relationships, he thought that

we all would be much better off, and certainly the British government would
be, for an immediate disposition of the matter.

I pointed out to him the

possibility that the pressure felt by all of these governments to make their
payments abroad might develop a situation throughout the world where governments would use every economic weapon possible to secure advantageous
trade positions as against competitors, which had been a fruitful source cf
dispute and war in the past and would likely be in the future; that I had
heard many statements made and read papers indicating the belief that the
League of Nations, under clause 19 of the covenant, would deal with these
matters, but I did not consider that practically the document intended the
League to do so

)r that it would be advisable to do so in this world as

at present constituted; that the League organization would be preoccupied



Data to be appended to Journal relating to
Mr. Strongts trip abroad in 1919.

The economic argument in support of the League of Nations which


should appeal to the American business man seems to me to be the following:

Our modern systems of industry, transportation, communication and
credit/ have bound the nations together in an economic unity, with almost
complete interdependence one upon the other.

Natural resources and the

abilities of the people of one nation enable it to produce food, raw materials and goods which cannot so well be produced by other nations, so

that the lives and well being of congested populations the world over are
actually dependent upon the continuity of the exchange of foodstuffs,

raw and manufactured materials and credit, which, if discontinued for a
considerable itriod, would reduce parts of the world to starvation and

The immediate interest of ail nations, and of the United States more
than any other, is to see that this interchange of goods and credits is
promptly resumed so that Europe shall not become bankrupt or starve or
break dorm into political, social and financial disorder.

Should such a calamity occur, it would destroy the buying power of a
large section of the world, which has been our best m-rket for everything

which we can best produce for export, and would also reduce Europe's ability to produce those things which are likewise essential to our own wel-

fare and industrial progress, and which they must be able to ship to us
if we are to maintain our export trade.

We are now in the position of a large producer or manufacturer
whose most important customer, because of some sudden calamity such as
fire or earthquake, has lost his plant or his credit or his courage, and


who, on that account, is not only unable to resume 2roduction but cannot
pay his debts.

The wise business man, under these conditions, will fur-

nish his customers with credit for materials needed to reconstruct his
plant and help him restore his buying and producing power, otherwise not
only is a good customer lost but a debt becomes uncollectible.


Europe now needs food and raw materials and long credit, still more it
needs the steadying hand of our great nation which has emerged from the
war substantially unimpaired and still has u great surplus production of
materials now urgently needed by Europe.

To start the economic cycle, we

must not only furnish these goods and extend credit, but we must also ensure, just us in the case of an industrial reorganization, that a firm
and wise hand is Introduced into the mana ement during the mriod of recu-

peration, in order, indeed, that both the old investment and the new
capital may be wisely used and not lost.

The distinguishing difference in an economic sense between an individual and a nation is that an individual is the master of his own success,
limited only by his cad -city to plan, to work, to produce and to save.


nation is limited in this respect, because it is governed by representatives who cannot always direct the nation's energies solely with economic
objects in view.

Political considerations interfere.

Governments employ economic advantages or economic weapons of many
kinds to

ramote the development of their own economic position in the

world, sometimes ruthlessly to the disadvantage of commercial rivals, and
war has usually been the result.

The American business man who desires to preserve the foreign cam


merce of his country, to free it from the menace of disorder in Europe and
to prevent the use of economic weapons by foreign competitors who may be
driven to create unnatural advantages and discriminations in the trade between nations, must recognize at once that an international organization
in Which American representation

will have a stablizing influence must

prolktly be created through the League of Nations.

If America refuses

its au port to this necessary organized work of reconstruction, she will

be regarded us the world's most dangerous and selfish business rival, and
all the nations, as soon as the power to do so develops, will be forced
to _arm themselves with every economic weapon at hand against her.

The following program might be considered for dealing with the gov
ernnent debts between the Allied nations, for the present excluding

Russia, and subject to modification should the United States government


join the plan:

Interest upon the net resulting debt of the Allied nations to

be funded by each creditor nation for a perioa of from three to five
years and the creditor nations to agree to defer capital payments except
as provided in paragraph 5 hereinbelow, for from five to eight years.

The discharge of a part of the debt between the various gov-

ernments to be arranged by transfers of qame portion of the indebtedness
whic.L. causes duplication:- if France has made loans to Italy, Serbia;

Greece, Rumania, etc.- Great Britain to accept some portion of the indebtedness of France in the obligations of those debtor countries; all
such transfers to be effected in accordance with a formula, if possible

The British government to acce t some portion of the Reparation
expressed in percentages, insuring an equitable adjustment.

Bonds received by the other Allied governments, in settlement of a perced
Age of the remaining Allied debts.


If and as soon asthe Reparations Debt is defined at a practi-

cable amount, the sca_ing of the nominal obligations of the Central
Powers to be effected between all the Allied nations.

The definition of the terms of the various inter-Allied debts

should allow sufficient f_exibility so that payments could be required

whenever necessary to correct the foreign exchanges should they become
adverse to any creditor nation.

From the stand oint of Great Britain such a plan would have the

followinz effects:




The United States (and possibly Great Britain) to fund he Inter-

eat on the net resulting Allied debt for a period of from three to f*.ve
years, and to agree to defer capital pigments for from five to eight. years.

The discharee of u ?art of the debt between the various govern-

ments to be arranged by tr-nsfere of some part of the indebtedness which

ceases a duplication;- for instance, Great Britain to accept from France
obligations of the eovernments of Serbia, Rumania, etc., held by France;

the United States to accept fro Great Britain and France obligations of
the other debtor nations, etc., all in accordance with a formula to be
reduced to percentages representing an equitable adjustment.



The United States (and possibly Great Britain) to accept some

portion of the Reparation Bonds received from Germany, in settlement of
a percentage of the remaining Allied debt.

If and as soon as the Reparations debts of the Central Powers

are defined at a practicable amount, a scaling of the nominal reparations
obligations to be effected between all the Allied and Associated nations.

The definition of the terms of the various inter-Allied debts

should contemplate payments whenever the foreign exchangee became adverse
to any creditor nation.

From the standpoint of the United States such a plan would have

the following effects:



3rd PR )3F. 28th May 1919


To have created and handed over
to an International :rust 5

:iold Bonds

by the fallowing enemy states for the
amount specified:-










The ilonis to be identical in

their terms with the other 1:eporation
Bonds, to be Jointly tend severally

guaranteed,but to have Priority as
to principal end interest;

to be n

first charge on the revenues find cue -

toms of the enemy states and to be free
of all taxes.

£ 1,101,010,001 to be dealt vith

by the Trust forthwith as follos, the
remaining Z150,000,030 to be held in
trust for the purpose of funding interest in case of default.



The interest,namely 5,-;,

to be

paid in gold quarterly in London to
the Trust.

Lech enemy state is entitled, up
to one-fifth of its share (as above) of
the amount of the

bonds oreated, to

21-.1 Bonds to be issued by the Trust and

to be used for the purpose of the purchase of food and row materials,and the
payment of armies of occupation.

The whole or any part of its share
of thy debt may be paid off and extin-

uished by any enemy state after its
liabilities under reparation have been




An International Trust shall be
set up with a "Court" oomprised of seven
one French,

one Great Britain,
one Italy,
one Dutch,
one Jaenn,

one representing the other VOD
members of the 'frust.

The Trust shall receive and hold
the aforesaid 2115) million 570 Gold

Bonds with the interest thereon as and
when paid and anw further sums that may
from time to time fall in.

The Trust shall oreate,issue and
distribute 21:, Mold Bonds among the
allied states that have suffered raptorial

and industrial damage during the war for
the rehabilitation of their industries,
the purchase of raw materials,f)od etc. -

The Bonds will become the absolute property of such allied states an
may be sold by them outright or used as
collateral f)r loans obtained in the
money centres of the world.



The distribution shall be effected
by a Commission of the Trust and one object xt shall be the making good of any

debt balance there may be oting Jn prewar trading debts after they have been
settled as far as pos:Able by available
set offs.

Again it shall be within the

power )f the Commission to allocate sums,

not exceeding one-fifth of the amount
guaranteed by the particular enemy state,
towards the payment for the armies 3f
occupation, food supnlies, purchase of
ray, materials for the enemy states when

the liquid assets of three states are



42,500,000 per annum.













Great Britain







































-6The difference in interest bettecn

to be

and 21-,; Bonds, namely

retained and held by the Trust t
a fund arainst any default in



or interest by the enemy states and thereby'

to provide for the payment of the interest
on the 21T


The accumulated funds,

if anyi, to be invested in % 1 securiti's

by the :rust, after Providing for the
expenses of the Trust.
3oth the 5; and 2},-, Bonds to be

free of all taxes throughout the world.

All Btate Banks, Bank of England
and Federal i.eeerve Bank to accept the

,nds as collateral at their face



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