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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., i., 7-7,2,;71c: . 1,7171 STBO1G, !IIT 777.7./V. tru3,y, vory Yours am, I long. - r Tho 1', n.. r ; ; 4A 4 "I' L2,ji a 1- 0 31' 4Y 021 r# j,r 0)1. V tirf: rvrr.oz.l .1c0 417.i rtf - it71 :ar) r 0' 2: 1 :11 tii0Sn 1)riiill-r,a 7f; rr /Mite 4.t thi ya *. eit), ; - 7 0,2 arr. bfl) I. - .t.. 0). T 1: /.. 1%,11c ri t.14 1 3 1. :11.41') :1 f; froil . + - - Cri1.".0 ert1:1; r7,- .;, Irc-11; Or '91.:,.-.tr.;11: -4 v0;:;:1 'JO :rou .7._ r r . c797-117.1.?'..12-4,4,1 7 7 43aith of 6141anb p 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, -,...22.214.171.12411111111111111111111161111Or'le'l Benjamin Strong, Esq.