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STRONG PAPERS, Norman to Strong, 1916 - 1920
1916
Jan. 6
Mar. 14
June 21
July 24
Sept. 22
Dec. 29 C
1917
Feb.
Mar.
Apr.
June
-.

23
5
26
12
(")

191b
Oct. 22
Dec. 11
Dec. 31
1919
Jan.
June
June
June
Aug.

Aug.
Aug.
Oct.
Nov.

4 with clipping
3 C
5
24 C
22
28
29
21
6

1920
Jan. 5
Jan. 15
Jan.16
Jan. 26
Mar: 15
May 26
Dec. 3
Dec. 22 C
Dec. 23 C
Dec. 29 C
_

C- cable

6th january, 1916.

vIlLORANLIMI

(re 1:r. Ctrong's letter of December 10th, 1915j-

Probably no one Person could adequately supply Yr. Strong's
requirements in writing, but since answers to his questions will
doubtless be received from several sources, I am glad to make
a contribution which, when read in conjunction with others , may
prove helpful.

Before proceeding towards this specific object, I must make
certain general explanations, viz.

The Discount Market, as hr. Strong well knows, is the neck
of the bottle through, which the great majority of the Bills under

consideration have had to rase.

The Bills are received through

Foreign and Colonial Banks, Merchant Houses anu other channels,
whose main object is tc dispose of as wide a class of Bill as
possible, and who at certain times may sell direct to the Bank of
England, Banks or other buyers.

Th

either sold by the Discount Larket to the Clearing, Foreign or
other Bill-buying Banks, Houses and others, whose main object is
to buy the best class of Bill for their money; or are used as
collateral for short loans etc.

,

where the lender similarly

expects the best class of Bill.

For my present purpose, I allude to
a)

Clean Bills, i.e. they were either drawn as such or their

relative documents were detached on acceptance.
b)

Bills drawn in sterling - at not exceeding 6, or usually

- 2

-

3 months - upon acceptors domiciled in this country, and by them
made payable in London.
c)

In speaking of the Bank of England, Bills bearing two

first-class English names, one of which must be the acceptor the other of which is often the actual seller.

I may now proceed to a consideration of the occasional rressure which has been felt by the Discount Market , owing to its being

'the neck of the bottle' , with a view of showing later how this

pressure operates against Finance Bills because they are less
cesirable than Commercial Bills.

The Clearing and other Bill-buying Banks etc. (mentioned
above) only buy Bills when the rates, the state of their balances,
commitments etc. make such operation convenient, and at times they
may confine their purchases from the Discount rarket to Bills
having either a long or alternatively a short period to run to
maturity, or may then stop purchases altogether.
From this it follows that the Discount Market cannot
uninterruptedly thus sell Bills (or borrow against Bills) to cover
its continuing requirements, but cn the contrary expects at Certain
or uncertain intervals to find the demand for Bills curtailed or
withdrawn, perhaps with little or no warning.

Hence the main cause which brings Bills to the Bank of England
and the importance of the position occupied by the Bank of England
towards the Discount Market.

This is emphasized by the fact that

(at least in London) the Bank of England does not in normal times

make any attempt to buy Bine, but awaiting the moment when Bills

-

-

are thus offered (because there is then no other outlet) receives
them whether by way of collateral or sale, only upon terms and
conditions which are sometimes considered rigid.

Furthermore, it has for this reason been rightly recognised
as prudent, if not necessary, for the Discount Market to hold such
an amount of its Total Bills in the form of Bills certain to be
approved at all times and without discrimination by the Bank of
England, as will enable this outlet to be used (say in a panic)
up to whatever extent may be necessary for the convenience or
security of the Discount LJarket.

The remainder of its Bills are

of course subject to the discretion and inclination of the holder.
Having thus cleared the ground, I come to Mr. Strong's

questions, which for the sake of clearness I have ventured to
rearrange, while practically retaining

orm words, and I

couple them in each case with a bald answer.
QUESTION:

Do the Discount Market and the Bank of England

distinguish between "Bills drawn for financing" and "Bills drawn
for commercial purposes" according to a fixed rule or according
to a general understanding (as to what Bills are in the last
resort always available for discount at the Bank of England)?
ANS4ER:

According to a general understanding (subject, of

ccurse, to a, b and c above).
QUESTION:

Do the Discount Market and the Bank of England

discriminate against Bills which are in the form of Finance Bills,
or owing to general knowledge of the improper purpose (speculative
ventures or financing corporations) for which such Bills are drawn?

- 4 -

ANSTR:

Not usually, but occasionally against Finance Bills

as such.

But I consider that at all times preference has been given
in the Discount Market to a Commercial Bill as against a Finance
Bill - while I believe that certain regular Bill-buyers have
always declined to take obvious Finance Bills.
In regard to these answers I do not attempt to differentiate
between the practice of the Discount larket and the requirements
of the Bank of England because (for the reasons stated above) it
has been the general custom_ of the former to keep a large

proportion of its total holdings in Bills which meet these
requirements, and it is only with these Bills that we are concerned
Nor need. I attempt to define a Finance Bill , which is outside

the object of this memorandum.

But, even if too strict for

practical purposes, I should personally consider the following
might serve inversely as a. rough guide:

that a Commercial Bill

is such as in the ordinary course of business is intended to be
duly repaid from the bonafide proceeds of whatever shipment or
transaction (usually in Commodities) it was drawn to initiate.
The leniency or severity with which Bills are scrutinised must
depend on the individual desire to reject or to include those
which may in any case be classed on the border line.
I may, however, remark that by long custom the Bank of
England at times of pressure may purchase for make loans against)
Bills from general customers, i.e. certain Banks,

erchant Houses

and others upon easier terms and conditions than from the Discount
Larket

,

and without discrimination provided a, b and 0 are observed.

-411,1111:

14th Ma eh, 1916.

Dear Mr.Strong,

I returned to London last evening to find your
note auaiting ire and art sorry I did not chance to find

you at your hotel this morning.

You do not mention your plans and I fear to
wait long without seeing you lest you should slip away:
so may I take the bull by the horns and suggest you
should share a small and solitary dinner at my house
either Wednesday, Thursday or Saturday this week at
8 of clock?

If none of these suit please tell me your
plans for the next week or so, and I will make another
suggestion.

BELIJA:.7.11,7 STRONG J77, R. ESQ. ,

RITZ HOTEL,
W.

COPY

10th June, 1916.

Private and Confidential
My Dear Mr.Strong,

The Bank about which you enquire came from a
bad stock and in the public estimation has always suffered
accordingly.

Add to this that it has seemed almost too

progressive or extended, even if not speculative, and you
have the worse side of my answer.

On the other hand the Bank has made a deal of
money and has a good business.
taken along with others.

Its Bills would be readily

If sold alone a higher rate would

be asked and the amount thus restricted.

On the market its name ranks behind those of our
other three South American Banks, but, (apart from the War)
I should certainly consider the name intrinsically safe.
The Governor is away on a short vacation, where he is
no doubt digesting your recent letter to him.

The

Deputy Governor sends you his greetings and so do I - and I
look forward to our meeting again before long.
I am, Yours very truly,
(Sigd) M.C.Norman
Benjamin Strong, Esq.,
_,Federal Reserve Bank of
New York,
New York.

Anglo-South American Bank

YORK.
,

YO:71: 17E77

RES711:77.: PEDITAT.,

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7-7,2,;71c:

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STBO1G, !IIT 777.7./V.

tru3,y, vory Yours am, I

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43aith of 6141anb

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21st June, 1916.

dear Strong,

I received - and we have read - with much
pleasure your let er of June 1st.

Your state..lent shows

your gorleral exmansion of b'Isiness to have been

henomenal:

But I understand you now to

yet it still goes on.

anticipate S0112 effect on money conditions from the r.ioving

of the Cotton and other

crops7.

I ho--)e the Deputy Governor's r,cent

letter Lay fora the basis of an ar-.2eL-ze:_ient on th=e lines
we discussed here.

TI2le alone can dcide \1h .n such a plan

become actual, 1,nd meanwhile

is satisfactory that

you are able so quietly to straighten out :our legal
The Reserve Banks seem to

quibbles and difficulties.
the darlings of Washing!-,on!!

be

Why is it?

On our side threatened taxation has made
the wa

easier for our foreign nay tints, and wen :lore, it

stimulabed the )atriotim
Securities:

al-ost

of those who hold A .erican

so :Inch so that latterl:' the stream has been

too ,-_yeat for easy handling.

one quite knows

',hat

lir.;
AL

1,

what measures 'Jay be taken to nrolong or enlarge this

stream, or how long it may coninue;

but I hone that by

the tine it - or si.-Jilar o-erations - conesto an end the
state of the War (already veering in the right d-'._rection)

be such as to -lake our foreign fin-Jncing a good deal

ea2ier than it has been.

To exoress an opinion on this point - so far as
the U.S.A. are concerned - would be to unravel the course
of your nolitics for the next six months and to foresee
Carranza's intentions.

And the latter are almost as

obscure as a re-)ofted alliance between the Republican and
German-American -)arties/.1

I an sorry not to be able to tell you of a
reduction in our unfunded debt:

for iou used to con aent

on its size even when you were here.

All I can say is

that it

:ust long since have passed any danger -ioint that

exists.

The Government is now selling Securities in one

form or another to run -c'rom three months to 5 years, for

the Immediate needs of the War, but I have no idea when it
ua.v be possible to introduce any general funding scheme.

Thus, both for domestic and foreign expenditure,

we are perhans living from hand to mouth, hoeing as it
seems that the double effects of armies and blockade may
bring
4\

ikbring us soon into a Position of clearer vision.
The Depti, Governor ;loins Ile in sending :,rou

all sorts of I:indly remanbrances.

Yours sincere17,

AA)

BENJAMIN STRONG, ESQ.,
RESERVE 3ANI: OF NEW YORK,
NTT YORK,

U.S.A.

BAIX OF ENGLAPP.

0

24th

July,

1916.

7,7 d7'ar Strong,

are much distressed to hear from your letter
of June 2Sth,that
take a long rest.

again on the sick list abd forcd to
But there is nothing for a

EOM to do tn

such a case but to obey Doctor's ord-rs ar.d I an glad
th

'e

Qie horns and going away at onc.

Strang

l:

eno-gn, it is only a week or two since Grenfell woke up with an
attach of gri71:,e, and to his dise)st is not s away for a month's

c- re: I fo-r a month won't set yo l up but hope the cure will be

as comPlete.
Here things have not changed. rich since yor visit, 17eyond

the advance in the Bank rate a couple of weeks ago.
that tine a flurry in your market, which gave
doing 'shot ;Iu.st have ben

Thore wqm at

a good :eason

for

sooner or later, and what was fax

Lett --r done too soon than too lat.

The effect has been

satisfocto: the Exchanges have been steadier and we have the
foelin

of 7-ei ng in an LIDroved
Our stream of American Sea.lrities has 7-fe.,,n

long, and has not :,-et needed to be helped out,

Ne ,rals or others;

Inde^d before the erd of the year some
fta.- It see s to me that. if

elections

z7

a; '.10711-3

01117. surely cee

on all the Stuff

are buying

1)o E-pss1111,-.7

orn.

;7.)

now to all .w us

an:'

credit

Not oven a s!,oreke7r

frwl yo7!

anywhe:2e Iroulcl insist on cash do .n fr= his best Customer, just,

because the Customer ha-opened to be J1Ixd
sea- utiat-ean

In a row with

111,-

He 1^r erg- hearted then In Ne-

Your -Ires in New York have gone to nothira again sinef the
flurry I spol:e of above - which reminds fie of a point, or two u-Don
rhich you ]ig7lat enl:',ghten us.

The Feder71 Res,,!rve rate of discou:Jt

is (I believe) 4130 for a certain class of Bill - whereas the
outside rate is 21. At the 5,1 or .th7.-abots. for Time Loans is
sae t-T.:.Le the rate Why Oo not tho t:ro

l

slnee I think the 21 is the rate for any

Comercial)

.

York for some -Veen

irto

deal of g
past. It mig

Next -

to slam? in the Kati' on.c.'l Bank

. see

returns - bu

to show a.n.e.-here, or even to have as
have suID12osed.

yeight

Does it all go to th

only to emerge on same future raf...7,r day
get, there? And does the Federal Reserve
Currency,- Bills as op-eosed to Gold .Certif

I shall bear in n12 the names of th

during your absence, 'o
one sloe and war on true other, tliow are no
But on the whole things are :lloeing our
have no dou'et, the Ger ;i n shoe is beginnin
one nay i;eess fa ae the stran7e, mixture of K
French Loan! (on the analoue of coming eve
befor
attend to our matter

The Governor sends you all -arts
glad to sae,-, wonderfully -cell. Above all
you are well again, and until t7-_en that you
Y071 s sincerer-,

/110- Oef: (ALAJWV

tt_Outz5

AuA. COArttec

0(/

4.4

Ake& ict,zxe

BF,-.T-A-IN STRONG Eae.,
FE:2RAL Te."-.7.VE BANK OF NEW YORK,

fvq.

likAtt

Pr-

ank of (fivianb'

Sert 92. 11.
?%,

It's time for an ans:er to your letters
of July 24th and August 8th!

indeed, you nay think that

it's already past the time, which I should admit but that
the former arrived just as I was going for a vacation
v.hile the latter only reached ine when I came back!

I am afraid you must be eating your heart
out, auay in Colorado and only hope that your 11-111e

office will be a solace to your spirits vitthout being a
detriment to your health.

If I could core across the

Elixir of Life you should soon have enollgh of It to set

you

u7D

for good and all!!

Of the reasons you give for the dis-

appearance or non-amearance of gold, I should think
that Nos. 3 and 7 outweighed the reuainder.
I cannot place and the 5th I don't understand.

The 4th
But the

position seeps curious to the extent tha'c, (I Inlieve)

Federal Reserve Notes do not count as Reserves for
National Banks, but do so for State Banks and other
institutions

institutions.

And I gather from page 4 that the object of

the amendments in Washington is to facilitate the issue of
Federal Reserve Notes against gold alone, with the idea of
re-Issuing them (vi en tines get difficult) against paper

and gold combined in the legal proportion (100 and 40 I
think).

I saw an article in the "Chronicle" on this

subject a few-we-2..s ago, but was not much the wiser for

reading it.

I pr :sumo that these Notes would be secured

like Gold Certificates, which (among o'. -her forms of

currency) are thus doubtl:ss to be replaced some day:
meanwhile the expense of such o-Derations would fall solely
on the Federal Reserve Banks.

Your explanation of the various rates for Loans
and cainercial paper is clear enough and received with
thanks :except of course the strange idea of creating liquid

Bills in caapetition with certain friends abroad!!:

The Deputy Governor is digesting your letter on
the subject of our discussions here:

it is at the moment

rather a matt9r of detail, but neither of us must overlook
the ultimate possibility that after a purchase of Bills
(say in London), New York,rould have the right to lock up
the corresponding value in gold,in London,at a moment's
notice - which, in the event of war or panic, might perhaps

give us fariously to thin l:.

The idea of course is that

the Exchanges would, since the purchase of the Dills, have
so far risen as to allow the proceeds to be remitted by

mail or cable to New York, or else that the Bills would
be renewed pending such rise;

but the possibility of aar,

etc., (based on recent experience) must not be ignored and

might lead

o the sudden desire for earmarked gold aut-

w-ighing all other considerations.

Do you see my meaning?

In practice it's probably a question of amount.

There is not much news here and you know the
state of the War better than we do.

Our main concern is

with the Exchanges, and of course our difficulties may at
any time be increased by the inability or unwillingness of
your public to take paper (secured against Neutral securities or in any other form) commensurate with our purchases
from your producers and manufacturers.

Perhaps the fo

have either got co come to taking the paper, or purchases
froiu the latter Exast be curtailed, which is not good for
either side.

YoUr suspicions based on past history
about the unfunded debt are sound enough.

On the other

hand the danger from Treasury Bills is almost as great practically

practically speaking - with their total at 100 as at
1,000 millions:

4,

so the danger point is long past.

Further, a large amount of those Bills

1

j(

intended (and

must' be used) for the payment of accruing taxation; another

large amount belongs to Government Departments, or to
`IIndian and such Governnents, and yet another to Bankers or

v
T)

1

to Discount Hoses.

So that the proportion :rhich counts

effectively, and which is in the hand8 of foreigners or

c7;

it,
people here who can really use it as they please, is far
from the total.

%/--)
,

Then the difficulties of such operation

s
\'

have to be considered:

the correspondence and labour

NI
:;

-40,, 11d be enough to swaLlp a staff already overworked.

Nevertheless the amount is too large for comfort even though the money it represents must in one form or
6

ALanother go round and round in this tub - and a reduction

would be welcome; the more so as it would tend to extinguish

certain rights to convert into future Tar Loans, now held
by subscribers to 1:ast War Issues.
rn1

(kut:..,1 y.c514,,4% p-min

itikOr`Ylr-

WEST
CAB

I

WESTERN UNION

UNION
RAM

THEO. N. VAIL, PRESIDENT

Received at

19D PH -SO
LONDON 13

LC 0 BENJAMIN STFONS ,!UN
4100 MONTV I EW BOULEVARD 1 :::NVER (COLO)
ACCEFT SEASONS GREET I NOS
MONTAGU NORMAN

DEC 29 351PM

Fora

iftaoltAN

ibank of 60a0
23rd February,1017.

MAR271)1/

uy dear Strong,
L,t

acknawledce receipt of your letter

of January 19th, but before atte:Ipting to answer it lot

'e

just say that your earlier letters about the arrival of
'Sr. Johnson and lir. Brigham had such attention as,I believe,

enabled your friends to land at Liverpool with comfort and
consideration.

In fact, 7ir.Johnson, on his iray through

London, was good enough to call here and tell ne -that I have

here repeated to you.
There is no occasion to say any more about
the announcement of the Federal Reserve Board at Christmas
time.

We quite realise your position and its happening,and,

knowing that mistakes may arise even in the best regulated
families, the incident must be looked upon as closed.

Your letter,and that of the Federal Reserve
Bank of Nev York to which you allude (dated January 18th) ,hav

been rec3ived and are having - even if slauly - the careful
consideration which they and their contents merit.

But, in

view of the times and conditions in which we are living,these
subjects are especially camplex and, as it were, difficult of

adjustment to the uncertainties of future requirements and
conditions

conditions.

It is therefore all +o the good that you hone to

be here early in the sumer and we shall surely look forward to
your visit, partly for the pleasure it will give us and partly
for the opportunity of discussingland nerhaps completing,the
arrangements mentioned above.

Here everyone is hard worked - some perhaps are
overworked - and even confidence in the end does not make the
Imlediate outlook lquch clearer or easier.

I was hardly

surprised that whatever (temporary) view of the position of

belligerents might be taken by the Federal Reserve Board, the
Administration has found, in spite of great patience, that the
position of so-called 21eutrality cannot of itself be maintained

indefinitely- there comes a breaking point.

And a question

naturally arises as to the fature course of events.

This w'e

here might perhaps regard as academic, were it not for the fact
that while your complete Neutrality offered certain vagiing
opportunities of Trade and finance, once it ceases to be
complete ,the first results on your side seem to be a fixed

determination to use an umbrella at once in case the rain should
come in the futiv-e!I

Please persuade your people to go on taking risks,
to cast their bread upon the waters, even outside the jurisdiction of Washington and in spite of the clouds - which will
surely roll away.

If they don't unbutton their pockets they

can't do business, any more than they can earn freights if they
don't sail their ships!

To write thus to you is, I well know,

to preach to the converted, and this is merely letting off
Steen..

steam.

We are
all

you out
delighted that
again as
your
good as
Doctor will
send you
new, and
soon tur
here to be
still more
so that
overhauled (and
he will
even
With
worried!).

kindest
apologies for
regards, and
my long
omit, Ling
it has
silence
even
came
because you
about,
can
understand how
I am,

Yours
sincerely,

Benjamin

4100

Strong,

Esq.,

Montview
Boulevard,

Denver,
Colorado.

al* D

6vignA

5th March, 1917.

of

Confidential
!1-r Dear Strong,

In order to avoid delay at your end I enclose
for our personal information copy of a letter
add-essed to your Bank in New York, together with
copy of W.,norandun of March, 1916 as amended, for

further consideration.
There does not seem to be much at variance now

though there will no doubt still reilain points to be
cleared up.
Further and lest you should be ignorant of the
views of :rour domestic Bankers, I enclose a cutting
which gives an Extract from their Journal!
With kind regards,
Yours sincerely,

NA,

BENJAMIN

.

STRONG, ESQ.,

4100, MONTVIEr BOULEVARD.,
COLORADO.

Vanh of

(1 n wilanb

Volaort,Ex.2

MAY1 6 1917

My ,tear Strong,

Your letters of March 21na and
27th and 1,-)ril lid reached :le almost sioultaneously.

and as your cable arrived aft,r the Governor had
sailed, we left 11:12-1 to answ-,?r it in person, vhich by

now I hope he has had an opnortunity of doing.
Needless to say we welcome you as an
ally so greatly that the less I try to explain it the
better!!

Nau as to the points in your letter:

you :a.y be sure that we attached no importance to the
taste of the writer in the A.7.A.Journal in spreading
hlinBelf!!

I had my tongue in Ely cheek when I sent the

cutting to you.

I am sure that nothing but good can
result fro7. your coming here in the suiwier, so be sure

and arrange for a visit.

As to just how and when,

)erhaps you will be able to tan to the Governor, but
w-r,f.te

yprrite your dates and plan well in advance.

The more ire

can all hob-nob together the better and however much

your absence from New York nay be felt, it
distinct gain directly to

be a

here, and indirectly (I an

sure) to them.
'Regarding the revised memorandum just

received from your people in New York, and subject to
any arrange:Aent that may be made in New York with the

Governor, I have no doubt we shall agree to it formally
next week.

''Te quite see that the main basis of our

transactionshad better be gold, altho

.;11 it 'lay be

necessary to lilt the extent of that commitment.
there any objection to the Me: 10 ranthz1 b
before the end of the War:
waiting till after peace)

::or is

3 C 0 111-16 operative

but this fact (rather than
sentimentall- an

advantage, is in nractico likely to limit the scope of
any im:lediateAo-erations thereunder, and applies as

to Paris as to London.

vegy feu bills

Rich

You see that nowadays there are

arising out of actual commercial trans-

4

-actions in existence:

owing to scarcity of shipping,and

of in-Torts, to the many restrictions to world-wide trade
and to payments by Governr.lent (the only large purchaser

and shipper left anyWhere) being :lade in cash, such

bills

3
4110

bills are now comparatively seldom drawn.

Even ignoring

the preference for American names you could hardly buy a

line (say ml000,000) of them in London at current rates
at any on

time end I am sure you could not do so in

Paris.

Therefore I ran .eat that If and -when the

memorandu.1 is put into effect its practical result for the
t-12.ine being may be small, except in so far as any sterling

balance held on your account may be dealt with on an
interest basis.

As to Paris, I expect you
sticky and pernicketty craw to deal with!!

find them a

They obviously

will not be buying many bills in New York and I have already
spoken of

our difficulty in buying bills In Paris.

The

English-French Rate has been carefully maintained between
27 and 28 francs per pound for:--an7 months past, having

lately fallen from well below the latter to just above the
former, and %th ile lerha-ns more likely to go da,rn than up,

I should doubt if it

be allowed to go below 27,unless

the French Government is so generously treated in Washington
that the effect is felt here.

The conditions thus set forth seem to
nrevent:-.7 now making any suggestions which could be of

value to you in connection with either the English
French

1

a"

7rench accounts. Meanwhile I =eh hope this will all be
discussed with the Governor in New York.
ITo7 be sure and come along this sur.,iler, so
that VT.D may welcoran you, as Tr_ ally

as 7/ell as a friend,

and with greetings from the Deputy,
I am,
Yours sincerely,
LAI

BENJAMIN STRONG, ESQ. ,
4100 Y.ONTVIEW BOTTLEITARD,
COLOPADO.

arrry-v_AXI

bank of 64140
Water1711, E. C . 2

12th June, 1917.

e-

K9

My dear Strong,
I have before me four letters
recently received from you, for which I have been and
am very grateful - though I did not attempt to write to
you as long as the Governor was on your side.

He has

now turned up looking very well, apparently much rested
in spite of some strenuous days and thoroughTy gratified

by all the kindness he received from yourself and your
countrymen.

To revert to your Individual letters!
those of the 19th April and 18th May call for no ansvrer

beyond a renewed assurance that, while the leaf you
enclosed is pleasant reading, I found amusement rather
than sting in the earlier article!

As to your letter of

the 10th May, I am only glad you have given your son a
line to bring here and shall take it hardly if, for one
reason or another, he never turns up.

In any case be

at(

assured that we shall do anything in the world 17? can

or his father's son and sake.

Last]:-

S
Lastly as to yours of the 16th May, only just
received, I know well that you have now a deal of

heavy work on hand, -hich must upset -cur plans, but

I

suggest that af- soon as you are through with it, in

part if not altogether, temporarily if not permanently,

you cannot do better for your health, and perhaps even
for your work, than cane for a visit here.
The organisation of a ForeignCenso:,.sl_ip is in

its essence a difficult job - partly because of private

interests and their differing standpoints, partly
because of the ramifications and uncertainties of all
such financial transactions, and largely because of the
difficulty in getting such (and inleed any) technical
Censorship actually handled.

Primarily, I supnose, a

Censorship in War time should be military, although no
Government Department can be expected to look after the
technicalities of any branch of trade or finance, and
the best solution is likely to be found in one Govern-

ment authority with adequate expert or technical
advice.

So far as the ranifications of transactions

with neutrals al'

concerned, our Foreign Trade

Department has, I believe, already sent out a ,aan of
M SteAkAczowv
ex-)erience/in that branch, who has probably found a

i

-perch

3.

perch in Washington.

I have had no experience in the

details of Censorship as such, though I have reason to
10

know how conveniently technical advice mar

be

given and

used.

The Deputy Governor has realised throughout that in the suggestions made to you in recent cables
we were going somewhat ahead of the agreement, as well as

perhaps outside it - apart from the probability that your
legislation ad hoc is not yet cacipleted.

But he thought

that, being a separate transactionion,,purely I) gold basis,

you night care for the idea on its gun merits, without
regard to precedent or to The terms of the Agreement.
Personally I think the financial outlook
between our two Countries see LS satisfactory, though vie
must expect n-7nor

'ps and

downs while the necessary

arrangements are being evolved.

And just as veitjlave all

along believed that the Paris-London rate must be kept
at a reasonable figure for the benefit of all concerned;
so I am persuaded that the Nevr York- London rate must be
s!miltarly cared for.

Any other course would be

sentimentalljr as well as practically a feather in the

German cap, which would surely affect the neutral as
much as it would hearten the enemy.

I

do

I do not know where this will find you, but if
10

you should be in the Eastern vortex let me beg you 7ersonally
to undertake too little rather than attempt too much work.
The end is far off and as an ally I rant to see your brains
preserved for thei long run rather than spent on the inevitable

and almost overpowering difficulties of the early rush.
With our Iqpressing salutations (as I am sure
Monsieur Pallain always writes to you),
Yours sincerely,

A-71(..ek41

.....

BENJA:TIII -IRONG,

4100 MONTVIEW BOULEVARD,
DENVER,

COLORADO.

Rink of 61440

r
NOV

4,

19W

Vault of Oinolane
---'27ra-reT6-6-dr;;Tgm

My dear Strong,
Having learned that ,Jr.H.P.M.Rae,Managing

Director of the Bombay Company, Ltd., of India, is planning a
business trip to the United States, I write to say that I have

ventured to give him a letter of introduction to yourself which
will be sent out so as to reach him before he leaves India.

Will you have the kindness to give such
help to Mr.Rae as he may have occasion to need, and let me say
that, although I an not personally acquainted with him, he is
a cicse associate of Messrs.Wallace Bros. & Co. of London,whose
Senior Partner has been a Director here for very many years.
The enternrise and position of that firm as well as of the
Bombay Company are probably as well-known to you as to me.
I can hardly suppose that at the rresent

time any general business is being conducted in your Country,
but if the course of the War continues as we all hope it may,
and as the successes of your troops seem to make certain, then
a change in your business activities may develop at any moment
and it is in view of this change in conditions that I understand
Ii!r.Pae hopes to pay you a visit before long.

I take this opportunity of acknowledging
your

your letter of the 2nd instant, and of congratulating you

-OP

on the results of the Loan, news of which has come to us
since your letter was written.

I am always afraid that

You may be doing more work than your health can stand and
so am inclined to hope that after this is disposed of you
may be able to take a vacation.

The Governor wishes, as usual, to be
most kindly remembered to you and we both regret that, as
14,4044'

you suggest, vie cannot keep up a more regular and complete
correspondence.

Yours sincerely,

4A)

Benjamin Strong, Esq.

40

BANK OF ENGLAND. LONDON, E.C.

11th December, 0.8.
Uy dcar Strong,

Your letter of the 22nd ultimo has been very
much appreciated by myself as well as by my Colleagues who have been
eager to, read it.

We are all glad to learn your present feelings,

with which we have the greatest sympathy and we are glad, too, that
you are nowHgoing off to take care of your health, only hoping that
in the strenuous months which have passed you have suffered no
overstrain.

The latter part of your letter tempts me to try
and write at some length on the subjects you mention,.and perhaps
we here are more fearful of their eventual outcome.

At the present

moment we need not expect social or political disorders chiefly
because we do not know what the Peace Conference and our pending
election will bring forth.

But here and throughout Europe there

is undoubtedly a great body of persons who look forward at no
distant date to such social and political changes as may very easily
entail disorders.

That. I think is a fact which we must all recognise.

Our domestic conditions give us more misgivings'

on the financial side than yours need give you, and for such ,reasons

as the following:- Our business has been mush more disorganised by
the War than yours and will therefore come round more slowly; our
floating anct

unfurithd

debt is large and may be difficult to handle;

our need of ,raw materials is great and immediate; our foreign

debtors (az:a whole) are good only in the long run, if at all; our
debts abroad are large and do not tepid to ease the exchange position.

Meanwhile the need for fresh money both at home and abroad f?r
enterprise and imparts is growing insistent and will tend tolcompete
,

with the Orrernmen-Os need, so that each is apt to force the pace
aatinst 1,0 other Ind to hamper the other's legit t-dilate requirements.
t

Over and above tnese domestic considerations,

a cloud ,of uncertain bulk is hovering in the shape of the Peace
11

I.

Conferenee

'Conference.

There I agree with your second page in fearing

Ao

some possible danger from economic strife.

Opinions and forces

-hich among the Allies were dormant or non-existent during the War
are certainly showing themselves, and people are going back to the

outlooi whiCh n normal times used to appear to them to be normal.
On all sides a r people admire your President and all that he has
I

accomplished inIthe War, but they fear that perhaps his idealism
may not square, with the facts when looked at apart from the enthusuasm

of the War;'andit seems true that the only class among the European
-Allies from whom he is certain of suppok is the socialistic class,
whence again si)rings some danger of the disorders mentioned at the

beginning.' Moreover your people (it is murmured) have not been bled
for the War to the same extent as the Allies in Europe: they have

not grown poor in order that once for all a lesson may be taught to
Central Europe:

they have made huge advances to the Allies for

carrying on the War, but (it is said) those advances were no more
Xt alt

a,

than temporary contributionsowards the democratisation of Central
Europe, by wham they should eventually be repaid or to whom they
should somehow be passed cn:and perhaps (it is said) your people
therefore do not make allowance for certain feelings of bitterness

and competition which undoubtedly exist.

I only wonder if they

can be smothered at Versailles.

If on the top of all this we try to guess

what is going to happen at Versailles we can only suspect that in
order to make peace the President is apparently bent upon at least
certain points 'which may rather contain the germs of strife.

For

instanoe:- No indemnities, though the Allies are grievously
impoverished as I have said above; Freedom of the seas

of uncertain

meaning but, on its usual interpretation anathema to several of the

Allies; a league of nations - perfect as an idealistic policy but,

as sope think, incapable of prompt adjustment to facts.
f

I

I

i

II

These points represent the views of the lan

in the streetanalif they are at all true, we must indeed agree with
0.

1,

4r1;n4

you that the international future lies very much with those who
are to meet at Verqailles.

But whatever is to be the outcome, you are

abundantly right in saying tnat the conditions which are soon to

governthp world depend very much on the conditions which exist
I

1

between our two countries.

If it is to be economic peace, we between

us can go' along way towards completing it and making it real: if, on
the otheil band, it is to approach economic strife, we, too, may per-

chance find a way to avoid it or a

least to minimise it.

In any

case and whatever happens, let us stand together and hope for the
best.

I shall show a copy of this letter to the
Governor and others of my Colleagues, but you may be sure that,

however much or little they agree with these views, all of us value
our friendship with yourself and our connection with your Bank and
are determined to cherish that friendship and that connection to
the utmost.

Wishing you health and happiness for, Christmas

and the New Year,
Yours very sincerely,

cryr/uoi,:tet

qtywno.,

1 sn.

JERSONAL
ifitnit

of C*420

31st December,1918.
My dear Strong,

11

Some days ago I received your letter
of the 9th instant, giving details of Senator Owen's visit.
Since then he has been here but, although we were able to secure

his company for a few hours, his visit to this country was so
short that it was not possible to show him such courtesy as we
had intended.

We will tr; and make up for this if he comes

back to London next month.
I can quite suppose from what Senator

Owen said while he was here that you and he are not in entire
agreement on all points, but it is evident that he takes deep
interest in banking subjects and wishes to master their details
from all sides.

I have also received your letter of the
10th instant and am glad to send six more Interim Renorts of
the Committee on Currency and Foreign Exchanges.

At the same

time, I may as well take the opportunity of sending three of
each of the following which have appeared subsequently, namely,

the Report of the Gold Production Committee and of the Committee
on Financial Facilities, in case you may find time to glance
through

through them.

411fr

Let me take this opportunity of
thanking you for the kindly greetings received from you
at .Jhristmas time, and with all good wishes for the New
Year,

Believe me

Yours sincere

bil

4T--,frcaLin

Benjamin Strong, Esq.

7741SONAL

ittit of C60a0
4th January,1919.

S
My dear Strong,

This is a perfect outrage;

I guess you

know your man and ours, but lest t' :ere should be any mistake
I have underlined their na--Les in the

enclosed cutting.

The fact which I have to confess to your
very private ear is that we can't compete.

There is a certain

type of individual who gets ahead of us every time.

Now I

really laid myself out to tickle your Senator: stool out in

the min

him while he was getting into a carriage, and

even asked him to a quiet dinner (fit for gentlemen) before
I had ever set eyes on him:

This he refused because he was

to be in France.

The next day I hear a yarn; a day later
I read it.

You must do the sane.

I do not know who paid

for the arnouncement but hope you will be able to share my
smile

Believe me
Yours sincerely,

Benjamin Strong,Eso.

Se

rman Ban
ee on
a short visit
has had a

ters with

ness circles.
largely res

eral Resery
hut. has
ng several i
fully adv
ndments,

United Sta

.

i

'4

.1

7.
A

,I

'

11,

t
I,

... r

.....1

I

,
.

.

he past week,
sing financial

war days in

who was not
ssing of the
t before the
tification of
then unsucorporated as
as well as in

he pillars of

erican financial statesmanship. On Thurs-

evening he was entertained at a dinner at
Savoy Hotel by Sir Edward Holden who

supported by some of his principal

ragues

he direction of the London Joint City and
land Bank, including Mr. McKenna and
Darling, and among the other guests were
ohn Bradbury, Sir Robert Chalmers, and

Keynes, of the Treasury, Sir George Paish,
Hartley Withers, and the principal financial

ors of the London Press. Replying to a

t in his honour, Senator Owen gave a very

uctive account' of the highly successful
in which the American Federal Reserve

king system has functioned during the war
uccess which. meets with increasing appreon now in British banking circles, as greatly
gthening the case, in view of our after-war
irements, for certain reforms in our own
ency system which have bedn prominently
ocated of late years. Senator Owen looks
lations between the
banks, but he makes
London must remain

,

:

PEDERAL RESERVE BANE
OF

Copy

Translation
No.

TELEGRAM

A54008
tit

19

Prepared by

Departments
Interested

Checked by
Code used

To

1919.

TRANSLATION OF INCOMING CABLEGRAM.

1-4113
PZ 557 T"K

.1k)

3

FE1°M-Zr°4Z

RVE BANK,

ORK.

E NO SUMMER PLAN BUT AMERICAN VISIT MOST

YOUR FURTHER VIEW.
MONTAGU NORMAN.

1st word Yours and 16th word Your doubtful)

1

191(3

igank of 6440
.5th June, 191.
446

My dear Strong,

Your letters of the 2nd and 7th ultimo
arrived a couple of days ago, and I can only say that we are
all astounded at the organisation you can get and hold
together for your Loans - even after tho passing of the War
fever itself.

The bulletin you enclose and the posters which

'came separately are signs of forethought and work which we

can and do admire, but cannot equal.

No wonder your Loans

were such successes.

If all goes smoothly we, too, are likely
to be making such issues this simmer, mainly for the purpose
of clearing up some of the floating debt: so far the amount

of fresh money needed for the year's outgoings is comparativel
small, and may almost be ignored.

But no one can say how soon

unforeseen expenditure, and on a large scale, may not begin
to come along, either for home or foreign purposes.

We here are perhaps too near Paris to be
as immune as you seem to be from the uncertainties obtaining
there: they cause continuous action and reaction not only on
the minds of the public, but also on all who have to do with
the

the French or Italian Exchanges or the general

questionir

of exports.

You enquire as to my plans for the 0
summer and, as suggested, I have sent you a cable to say
that the idea of a visit to America has faded into the
dim future.

It remains however a plan which above all others I

wish to carry out as soon as possible: for there is no
vacation like a change of country: frequent contact is
necessary if one is not to lose touch, especially amid
these changing conditions,and I am drawn towards an old
friend (Mr.Markoe of Philadelphia) on whom perhaps the
years are telling more than I realise at a distance.
It is because of the work entailed
here by these coining Loans and by the delays in Paris, &c.,

that I can make no plans for a vacation.

The Governor was

to have been away a month ago, but (more of course than
myself) is prevented from moving - although happily he
keeps wonderfully well especially when the sun shines, as
it has done lately.

Generally speaking, we feel to be
living on a bubble which may burst sooner or later - but can't
last for ever.

We are still hemmed in by War time restric-

tions as to rates of money and Stock dealings - added to
which

molkhich, an end has been enacted to our so-called gold market.
The change from war to peace work is proving slow among the

Ilk.
41/I

industries, which are hampered by the reduced buying power of
foreigners and which are therefore the less able to reduce
the amount and cost of unemployment.

On the top of all this,

we have rumblings of discontent among many sections of workers
and an outright demand for the State to become the owner in
certain cases - all arising to a great extent from a false
idea of the prosperity resting on war credit.

Perhaps the most serious point from an
international standpoint is the position and needs of the
war-worn countries in Europe, as to which Mr.Vanderlip will
have given you, as he did us, a very gloomy picture - coupled
with a remedy so heroic as to be difficult of achievement.

We here do not think that at this stage much can be done along
these lines by private enterprise or credits: some scheme may
be concocted in Paris, which with united and political support
may well be on the heroic scale, but short of that it looks
as if the needs of these countries - including currency and

exchanges - must be treated by political rather than by
financial measures.

In other words, the states who wish to

stimulate their manufacturers' exports must lend to the states
who

who are to purchase on longer term than any exporter or
Banker can afford.

Pray keep me closely informed as to

your plans, and forgive the irregularity of my letters.
With kindest regards, ffrwmi/ Atc
eg.

wi

Believe me
Yours sincerely,
ILA1017m.4001,

Benjamin Strong, Esq.

Translation of Incoming

FEDERANI"ESERVE BANK
Or i1 -:J YORK

Date

CABLEGRAM
---------

UIVZ:Pl1/4

From

,14eacti

4111

.1 0 sk

2 7 111

av\ztxt.mszikvz
No. C

3

TRANSLATION OF INCOMING CABLEGRAM.
JUNE 24, 1919.
N 1190 Z KN(A)
LONDON

13

BENJAMIN STRONG,

FEDERAL RESERVE BANK,
NEW YORK.

DELIGHTED PRAY USE MY HOUSE AS YOUR HOME

MENEVER CONVENIENT.

MONTAGU NORMAN.

r

16 ank 01 f 60aub

22nd August, 1919.

My dear Strong,

I have received your letter dated Paris

the 16th instant, mentioning your sudden trip to
Constantinople, now postponed, and yesterday I received
your letter of the 19th instant confirming the telegrams
exchanged by us.

I telegraphed you last night as
follows "Received your letter 19th. Our representatives
"have started for Brussels and Amsterdam. We are in
"touch with Kent and await his completion of insurance
"with Chubb before definitely arranging shipment. Shall
"be happy when you so direct to transfer a portion when
"held on your account to order of Bank of Spain".

from which you will have learnt that we have got into
touch with Mr.Kent from whom we are in hourly expectation
of hearing that he has completed the insurance through
Chubb & Sons, and that our Representatives

have already

left for Brussels and Amsterdam are free to move the gold.
I hope that on our part there has been no avoidable delay
in this connection, but telegrams certainly seem to take
as long as ever between here and the Continent, and, if
the

the insurance is to be limited to comparatively small
shipments, it will take a longish time to effect the transport of upwards of 22 millions sterling, of which sum. 0

12 millions from Amsterdam is to be attended to promptly.
I note what you say about the possibility

of a shipment to the Bank of Spain and as telegraphle
yesterday the Bank of England will of course be willing
to set aside out of the first arrivals from Brussels or
Amsterdam any amount that you may direct to be forwarded
to Madrid and to make all necessary arrangements for
shipment and insurance if you so desire.

The Governor is away and, as you know,
noeds all the rest he can get.
It has been very hot indeed ever since

you left us, but Mr.Stettinius, who was here last Friday,
would have it that London was cooler than Paris.
I look forward to seeing you and hearing
your news a month hence, when you will still find your
card on the door.

With kindest regards,
Ycurs very si

erely,

X-?-7ta ft

Benjamin Strong, Esq.

Nank of &One
28th August, 1919.
My dear Strong,

Thank you for your note of the 26th
14

instant, from which I note that we may proceed with the

shipment of gold as detailed in your letter of the 23rd
August to the Governor.
It was no trouble at all to cancel the
arrangements for the retention of ,'1;t10,000,000 in Brussels

o/a Spain.

shall look forward with pleasure to
seeing you early in September.
I have seen 'fir. Kent again to-day and

have arranged with him to nroceed to ship to London
175,000,000 from Amsterdam and *35,000,000 from Brussels.
For the balance he still awaits further instructions from
New York.

With kindest regards,
Yours sincerely,

Benjamin Strong, Esq.

Fmk of

640ane

9th August, 1919.

my dear Strong,

nianks for your note of the 27th, which
is interesting.

I had hoped that you would have come

back here before this and that we should have been sitting
in the garden together.

A remark you made the other day led me
to think that you may be coming back next week and I just
want to warn you that for the first half of September Thorpe
Lodge has to be demobilised for household reasons.

I may be able to go right away for a
week or so, but, in any case, I shall not be able to be
living there until about the 15th of the month.

7/,,,, Cm,

(.1,4-,

Yours sincerely,

tlYth&vt,

Benjamin Strong, Esq.

skoia g(rark

1

Vault pf Chtt

21st October,1919.
My dear Strong,

It was kindly of you to write to me on
the 1st instant while you still had your "nose to the wheel's

in Washington, without a moment in which to turn round since
landing.

Nothing much has happened here since
you left except that, as you will have seen, we were all tied
up with a railway strike (and the people took it doggedly,
good-naturedly and grandly).

Maney and bill rates have gone

up, as with greater advantage they might well have done long
ago.

We have some hopes of getting them yet higher before

the end of the year.

Politically the position is almost

more complicated than ever but may be somewhat cleared up
with the meeting of Parliament about to take place.

For

while the railway strike has been serious and other strikes
are continually threatened, or in being, so that production
is all the time diminished, there is a great and growing public
lemand for economy which it is obviously easier to advocate

than to carry out..But the mere fact of recognising the
financial difficulties is quite a step in the right direction
as

-"

as compared with the general apathy when you were here. flik.
Now I come to the real reason for this
letter.

See the °Economist" of October lath, page 326,

for distinct signs of growth in the Federal Reserve seed

1!

which you sowed when in this country.
With kindest regards,
Yours sincerely,

Uh12444.41
Benjamin strong, Esq.

P.S. °Lucky strikes° are still so severely rationed here that
you can't get any at the shops.

DEC -419finth

of 6100

eth November,1919.

My dear Strong,

Many thanks for your two letters of the

20th and 21st ultimo
I certainly thought that the °Morning Post"
interview was inspired by yours elf, as the general opinions

as well as the place seemed to tally with your views and movements.

I cannot trace the other article which you say has been

quoted in Paris.
I hadi some talk with Hartley Withers a few
r4, trait,

days after I had mentionedAthe reference in the "Economist" to
the Federal Reserve system, and I took the opportunity to
explain to him how you had been tied up in Washington.

I note that you are going to have a Conference
in Washington on the 12th instant, after which you expect some
rise in rates of discount.

This his, to some extent, already

been foreshadowed in the increase in the rate of your loans to

member Banks, etc., the news of Mich was cabled to us this
morning.

Since you left here our general position
has not altered to any great extent.

There was, as you will

have seen, an increase in the rates for Treasury. Bills about a
month

mon41

th ago and about the same time tne special ratebon foreign

iiney deposited here was discontinued.

Tne result has been

sufficient to absorb slowly the Ways and Means Advances, but
not enough to contract expansion.

We have long been, as you

know, anxious to move gradually towards considerably higher rates
and the step above mentioned was in the right direction.

we have been able, with a ver

To-day

good reason, to rase the Bank

Rate to V and the rate on Treasury Bills will follow at once

to 5V.

The reason for the forrrer,which with the concurrence

of the Treasury has led to the latter, was the steady increase
in the circulation of Bank Notes and Currency Notes, caused to
some extent by covering part of the Currency Note expansion by
a deposit of Bank Notes.

The result of this has been to bring

our Banking Reserve down to very little over 020,000,0GO and
it is really the decrease to that figure which has been the
ostensible reason for the rise in the Bank F.ate.

At the same time I cannot regard the certainty
of sound money as definitely settled.

On this subject the

community, in so far as definite views are taken, may be divided
into three groups:

(1) the advocates. of unadulterated sound money;

(2) the advocates of expansion and the printing press, which to a
considerable extent is the view held by many political leaders;
and

Ond (3) the advocates of confiscation euphoniously called
"Levy on Capital ".

Politically, I cannot think the situatio

has improved in spite of apparent triumphs of the Government.
For one thing and perhaps to some extent because the truth of

the financial position as disclosed by the Chacellor in
August was too strong and unpalatable,a "lump of toffee" was
administered last week in the House of Commons.

The upshot

of this is that, given a normal year and no fresh expenditure,

all will be well; but a normal year is as remote as a "blue
moon" and meanwhile, with extraordinary expenditure, both ends
cannot meet.
stottimit.

A fresh demand for an issue of Preniun

Bonds has also grown up although a couple of years ago the
question seemed to have been laid to rest by a Parliamentary
Committee appointed ad hoc.

We cannot believe that any such

issue will produce a large amount of money.

It is certainly

opposed to the spirit of saving which the War Savings Committee
have been trying to disseminate for some gears past, and I
should have thought that people in general needed a rest from
further excitement or speculation of any kind.
On similar lines the Stock Exchange, who

have already more business than they can easily deal with, are

bestirring

bestirring themselves to get rid of cash dealings (already

a rule which is observed in the letter more than in the
*spirit) and are hankering after fortnightly settlements and
From a domestic standpoint I can

freedom from restraint.

see some advantage in such a change because the position would
be steadied bypbearlaccounts whereas as things are every
operator has been a potential "bull" for the last few years
and(with the rise in values has forgotten what it is to make
a loss; but from the international position,and especially
with the uncertainty which still hangs over European markets,
I think we ought to go slow and give as little leeway as
possible to the foreign operator.

Mr.Kent wrote the other day that you
had kindly asked him to put a parcel of "Lucky Strike" cigarettes
at my aisposal.

Pray accept my thanks.

Your gift comes at a

very opportune moment as I am arranging to go to the South of
France for a rest in a fortnight's time, and while there I
shall be fortunate to be thus supplied with tobacco.

The Governor is very well and,as he will
no doubt read this letter before it goes, sendsyou his greetings
I know that many of your friends here would do the same if they
knew of the opportunity.
With very kind regards,
Yours

Benjamin strong,Esq.

icerely,

and, I believe, harmless these cigarettes are, I am only
surprised that they cannot be purchased in London.

As a

410

matter of fact it will amuse you to know that the first
intimation received about the parcel which you sent here

4"1

was a note from the Customs people to say that they had
be-n forwarded by the wrong method and were in consequence
confiscated!

I had a most delightful month in
the South of France, where - except for a couple of days the sun shone from morning till night.

'there were very

few visitors and meat and drink of all kinds were abundant quite contrary to what one reads in the newspapers.

I came

back last week, with many regrets, to dark, void and wetbianketty conditions, to which I am gradually trying to get
accustomed.

Happily I find the Governor as well as ever

to all appearances both in mind and body, which is the more
to his credit as the fall has provided more thorns than
usual to his"bed of roses".

I shall write to you again in a
few days, this being merely an attempt to get rid of some
arrears, to repeat my thanks for the "Lucky Strikes", and
to wish you over and over again a very happy and prosperous
New Year.

Yours very since

Benjamin Strong, Esq.

INAMINimossm~"wwww"*.°*1*

thvione

116

33ank of C*Itne
likrIttlatt, E. C . 2

15th January,1920.
14y dear Strong,

We have been much interested in the
papers and pictures which are mentioned in your letter of the
19th December and, while they have been treated as confidential,

several of us have been trying to get the hang of the plans and
drawings: some day we may be able to take a leaf out of your
book behind your back!

I wonder if the site, being so much

longer than it is wide, from the point of view of appearance
is not rather awkward to deal with; for if all the inside space
is to be used right up to the frontage it may be difficult to
avoid the semblance of monotony when looked at from the outside.

The second page of your letter is very
distressing.

No one but the Governor has read it but I told

Blackett that there might be an opportunity of discussions with
you here in April.

I do indeed trust that if you pull up now and

go right away there may be no further trouble; but from our
personal standpoint it is a great blow that you should be going
away from New York just at this time.

Your recent rate increases

have tended to take away some of the result which might otherwise
have

have come to us from our own, but we forgive you for the,.
sake of the enormous benefit to both sides from close and
personal co-operation.

40

I am getting one of our old pensioners

to put a lecture of his on Bank history into some sort of
pamphlet form and this I will send to you in accordance
with the hint in your letter of the 8th December.

We sent you a cable right away about
poor Cunliffels death, thinking that you would like to be
the first to know it.

You may not know that as from the

1st of this month he had amalgamated his firm with Fruhling
& Goschen, an arrangement which would have been very happy
for all of them.

He was at their Offices on the 2nd (Friday)

when the new concern was launched so to speak, and certainly
was not well but he was not seriousl5, ill until the Monday

and he died early on the Tuesday morning.

He is a great

loss not only to us but to the whole community and never
could a stalwart champion of sound money be so ill spared.
On the whole things look rather
brighter than they did a couple of months ago.

First: The

cost of living, which was confidently expected to rise, was
stationary during November and December: but it is thought

doubtful whether it can remain where it is owing to the
increasing

there is going to be real trouble, but it is difficult

t.

give any reason.
Fifth:

The rise in our rate whidne

took place early in November is now becoming effective.

Hitherto the Banks have been preaching cheap money as well
as practising it in their rates (mostly in order to out one
another's throats).

No doubt the demand for commercial

advances has been enormous and the result on the Banks is
that now they are loaned up to the hilt and in self-defence
almost bound to put the rates up as well as to scale down
their customers' requirements - all of which is healthy
enough.
Sixth:

The Currency Note circulation

is contracting as well as could be expected and the Bank
Note circulation inclines to do the S9.1713: but the latter

position is obscured by the gradual addition to our figures
of the Gold,hitherto held by the Banks.
The French Government's credit has

gone to pieces in London, and when they offered £8,000,000

of their Treasury Bills for sale the other day t Napplica,
tions did not reach £1,500,000.

I cannot see how they are

going to get along and there is some danger that owing to
political pressure credits may have to be opened for them
and for other of the European countries which are simply
going

lnoreasing competition of the former enemy countries
for limited supplies of food.

Second:

she American Exchange, which

might have been expected to become demoralised has fallen as it was bound to do - but has never been demoralised.
Third:

The Government indebtedness as

a whole has perhaps now reached its apex.

Next year it may

be expected that extraordinary receipts from stores, &c.,
will more than cover extraordinary expenditure and that
ordinary and increased receipts from taxation will more than
cover normal expenditure: thus one may hope for some reduction of debt.

F')r the rest of the year - I mean financial

year - heavy taxation will be coming in which is expected to

more than cover outgoings and somewhat to reduce Ways & Means
advances and Treasury Bills.

An issue of 50 Exchequer Bills

is to be made next week, but this is solely for the purpose
of extending for a few years similar Bonds falling due this
year and to avoid money for their repayment being provided
by our book credits.
Fourth:

The labour position has been

obscure and uneasy all along and although the railway men sea

at this moment to have come to terms with the Government ther
are threatenings in other quartar,3.

Sosahow I do not believe
there

411'

going to lead to further inflation with you and with us
just as conditions are beginning to show a glimmer of
improvement.

Hoping for a good and quick recovery
and with kindest regards from the Governor and
Yours vary sincerely,

Benjamin Strong, Esq.

of 60a116
irmtbett,,E.C.

2

16th January, 1920.

My dear Strong,

One point occurs to me since writing
to you yesterday.

You have doubtless read Keynes' book.

Possibly you have not seen the epigram on the book
has just appeared in Punch.

It is so candid and ,-)et SO

kindly as a summing up of many people's attitude towards
Keynes' diatribe that I send it to you to paste in the
cover of your copy.

Yours very sincerely,

afrn4.44.
Benjamin Strong, Esq.

43attk of

(1 *tutil
3TolomEx.2

26th JanuaryllWO.
My dear Strong,

In your letter of the 8th December you
asked me to send you an account of some of our traditions and
peculiarities and the moment has now come when I can do so.

Long before your letter reached me I had
often thought about a remark you made to me in the summer that
we, as a body, were woefully ignorant of the Bank's history.

Personally, I think history is a dull subject, but after what
you said I decided to try and add to our knowledge by induoing
an old gentleman Who has devoted the last 15 years to the study
of such antiquities to come and lecture to us.
This lecture has been. printed and I am
_

-TZel

enclosing a couple of copies, which I hope may serve your
purpose to some extent, and from time to time I will send you
further information which we are collecting.
With kindest regards,

Yours very sincerely,

Benjamin Strong, Esq.

bievntier.44.

auk of (fn lintJ

I

15th Mardh, 1920.
My dear Strong,

It is nearly three weeks since I received

your long letter written from Hot Springs, Arizona, and
dated the Gth of last month.

There was a great deal in your letter which

was interesting to us and a good deal to which I might reply
if you were within touch, but, as you are leaving San
Francisco for Japan on the 10th of next month, you will not
receive this letter until May.

By that tine its contents

would, in any case, be stale, and you will furthermore be
engrossed in what you see and hear in the cast.
So I am not writing to you on general

matters of business or politics, but merely to say that I
have given myself the pleasure of procuring for you such
letters of introduction as seen likely best to serve your
purpose.

These are enclosed herewith, together with a list

of their sequence.

I need only ad'

that what I have done

has been to get you official letters throughout India
through the Government of India, also to the Presidency
Banks

Banks (not yet merged as I believe), and lastly letters to a

private individual in each place who is said to be the hud of
IP

the local business community.

A-personal letter to the Viceroy from his
brother is added as an afterthought.

I have not gone further East than Java
because you will no doubt be receiving other letters from
Sir Charles Addis which will supply your needs there.

But,

as Addis is away for a month's holiday in Switzerland, I have
not been able to consult with him on this point.
I very much hope that the letters now enclosed
and those you will be receiving from other sources will be
such as will obtain for you all the information you can want;
the more so as I have taken care that in each instance the
parties addressed shall be advised of the chief objects of
your visit and your probable enquiries.

With kindest regards from the Governor and
all of us.

Believe me
Yours very sincerely,

Benjamin Strong, Esq.

Nanit Of (fIvianb

my dear Strong

I have

of the 25th March u

kind as to have sen
safely a fortnight

had time to examine

seen enough to real

addition both to ou

general banking lit
Professor Kemmerer

seems as good an in

Federal Reserve Sys

really most good of

of your absence I w

Secretary for the t

Belie

Benjamin Strong, Es

Dank

IIf

6101attb

3rd Decenber,1920.
My dear Strong,
I cabled last week to Mr. Jay to find

out what had become of you and heard from him that you
were due at Marseilles to-morrow.

o-day comes your letter

of 9th November from Delhi, for which I am grateful, as
also for a few postcards and a number of photographs which
have come along from time to time.

I shall not go into details of
conditions in New York or here, much as I look forward to
discussing them with you as soon as you come here: indeed,
I and all of us have been waiting from week to week for a
long time past for the moment to come when we can talk to
you face to face.

Meanwhile, as you may be sure, we have

been trying not to lose touch with your friends in New York.

As to my own plans, I shall be here
continuously - Sundays and holidays excepted - until the
31st of this month and on that day I hope to go to the
South of France.

The sooner you can arrive in London the

better for us, but the date you must settle after you have
had time to see whether you need to go to Brussels and
Amsterdam,

Amsterdam as you suggest.

But whenever you do come to

London let me remind you of your hotel, of which the
40

address is "Thorpe Lodge, Campden Hill, W. E.".

The

Booking Clerk tells me that an hour's notice will be
enough to get your room ready, or, if you are in a hurry,

this can be done after you have arrived.

Above all things I hope that after

your long trip you will find all your old troubles have
been banished for ever and ever.
With kindest regards,

Yours very sincerely,

-,...1.1.1.11111111111111111111111161111Or'le'l

Benjamin Strong, Esq.

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