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rv-11' BANK OF ENGLAND, LONDON; (AWFRE4140/COMMUMICATION SHFUMESM -THE CHIEF CASHIEFI-) 18th November, 019. 3 ent , eserve Bank-of_llew York, York. acknowledge the receipt the 29th ultimo and to e sum of £160:12: - was n Grenfell & Co. o/a gation Co. and was credited ount here on the 9th quest to be furnished with nt of Account shall have Dear Sir, Yours faithfully, Chief Cashier. 4)anit of thtillanb 10th May 1926. Dear Mr.Governor, The Governor has asked me to send you the enclosed copy of a letter received by him to-day from 7r.Ryti, Governor of the Bank of Finland. Mr.Ryti will be informed that he will hear from you in due course either direct or through the Bank of England as to the date when it will be convenient to you to meet him. If you wish us to convey a message perhaps you will be good enough to let me know when you have arrived at any decision. Yours sincerely, Benjamin Strong, Esq. ,ei N ttnk 19th May 1926. Dear Mr.qovernor, The Governor who now that the general strike is over finds his hands very full with French and other visitors who are beginning to arrive has asked me to reply to your note of the 15th instant regarding the offer of the President of the American Bank Uote Company. He hopes that if you should happen to meet the President again you will thank him for his offer which shall be borne in mind should the need arise to obtain expert assistance. As a matter of fact I may tell you for your own information that the Bank have already received a similar offer from the British firm of Bradbury ':/ilkinson Company who as you probably know are closely allied with the American Bank 7.7ote Company. Yours sincerely, / Benjamin Strong, Esq. zu-42.4 t Grand Hotel, Rome, May 27, 1926. My dear Harvey: Confirmation of cable from the Federal Reserve Bank, No. 6 of my series, has just been received, in Which I find paragraph four ends with the words "of repurchase agreements returning Friday". Apparently the decode which we received omitted the last five words of paragraph four. Could I trouble you to advise me qhether this omission occurred in New York? Sincerely yours, Sir 7. M. Harvey, cio Bank of nngland, Threadneedle Street, London. Vila Hotol du Cup d'Antibcs, Antibez, June 5, 1925. Sir: . Strong desires Lus to ;Lank you for your letter to him of the 31st 24y, und to cord you the copies cf the decode cf the message referred to, which you will find enclosed.. I have made a copy for our files, so they need not be returned. Respectfully yours, Secretary to Benj. Strcr.z. Sir E. 2. HurveY. c/o Bank of England, London. it3ank of 61111am) 0 27th July, 1926. Dear Mr.Governor, With reference to the Governor's letter of the 10th May last, he has asked me to let you know that he has heard from Governor Strong of the Federal Reserve Bank of New York that he has not forgotten his promise to make arrangements for a meeting with yourself. Governor Strong has not however yet been able to make definite arrangements regarding his movements during the next few weeks but as soon as possible he will communicate with you and suggest dates for the meeting in the hope that one or other of these may suit your convenience. With kindest regards, Believe me to be, Dear Mr.Governor, Yours very faithfully, (Sd. ) Monsieur Risto Ryti. E.M.HARVEY. 041-61-1- 7i/7 ANY ILLNLY TO THIS COMMUNICATION SHOULD SE ADDRESS. TO .TNECHIEFCASNIEN1 BANK OF ENGLAND, LONDON, E.C. 2 16th August , 1-9 19. a 0-) PERSONAL BANK OF ENGLAND. LONDON. E.C. 2 3rd April, /925. ACKNOWLEDGED The Governor, Federal Reserve Bank of New York, Hew York. APR it 1925 1:4 Dear Sir, With reference to your letter of the 20th March, I am directed by the Governor to enclose a copy of the Address delivered by 1r. McKenna to the Commercial Committee of the House of Commons on the subject of the restoration of the gold standard. I cannot find that 7±.1:eynes' address has been printed but I enclose a cutting from the "Times", which, I think, contains the salient features. Dr. Leaf of the Westminster Bank has not addressed the Committee. I am, Dear Sir, Yours faithfully, lArrr Chief Cashier. 2 the Board of Trade. Price level depends upon the quantity of goods available for purchase, the quantity of money, and the rate at which money is expended. Thus one of the factors affecting the price level, and the one most subject to variation, is the quantity of money. Money consists of currency and, far more important in amount, of bank deposits. Whatever increases or diminishes bank deposits increases or diminishes money or purchasing power, and therefore tends to raise or lower the price level. It is at this point in the argument that the Bank of England appears. Bank deposits rise and fall according to the action of the Bank of England in lending or calling in loans, in buying or selling securities or indeed anything. It follows therefore that the Bank of England by its control over the volume of purchasing power can influence the movement of the price level, and as the public demand for currency varies with the price level the control of credit by the Bank of England can be used to limit the quantity of currency. That is the system under which we have worked and we cannot fail to recognise that it is one which throws a very great responsibility upon the central banking institution. To be managed efficiently the volume of credit must be so regulated from day to day and from week to week as to maintain stability in the currency and supply the needs of trade. CREDIT AND TRADE EXPANSION Let us come now to what is required for the trade of the country. Our population is always increasing and our production should be continually enlarged. If the machinery of credit is to be adequate, we must have a slowly expanding total of credit and a slowly expanding amount of currency in order to carry the increasing volume of commodities. If credit is not expanded to meet the growing national requirements we cannot fail to have either an absolute drop in our price level or a fall relative to the movement of the price level in the rest of the world. It must not be overlooked that a reduction in the world's output of natural products arising from harvest failure or other causes may lead to a rise in the world price level and in that case our own price level notwithstanding some upward movement may still show a relative fall, a condition which would be indicated by a rise in the exchange value of our currency in relation to other currencies. A drop in the price level, whether absolute or relative, spells stagnant trade and unemployment, and it follows that the control of credit should be so exercised as to permit an expansion when internal conditions require it. If the volume of credit keeps pace exactly with trade requirements our trade will prosper and there will be neither relative appreciation nor depreciation of our currency, but the superhuman wisdom which so delicate a handling of the machine would need is, I am afraid, only to be found in theory. While I wish to express my sincere respect for the Bank of England and my admiration of the manner in which its authority has been exercised during perhaps the most difficult period in our financial history, I am constrained to think, looking back and with the clearer knowledge which always comes after the event, that after the deplorable inflation of the last years of e contraction f a real revival 4D n has had http://fraser.stlouisfed.org/ currency relate Federal Reserve Bank of St. Louis 4 bought by the Exchequer and not by the Bank of the resumption of gold payments. The text of the England, and would not entail therefore any expansion report has now been published and forms an exhausof credit. The Treasury note is nominally convertible tive survey of the economic conditions upon which into gold, but this provision of our law has in practice are based definite recommendations. The pretence, and the point the law although been only a Commissioners soonerout thatis brought the into monetary unitwith the Africa the better for name as conformity of South facts, bears the same our that of Great Britain, condition of a true gold safety. The indispensablethe two currencies have as a fact is that we separate for several of export, standard been quiteshould have freedomyears past, and the view is expressed made upon us to is too small so that when a demand is that South Africa pay our a country, gold we can do so without continue foreign debts ineconomically speaking, to leave or to conduct its affairs into independent monetary basis. licence. Convertibilityon an bullion for export is one thingConsequently the alternatives are to link up with ; convertibility of individual notes into minted some is quite another. but more widely used sovereignsother independent Until we can afford it currency, such as sterling, or not risk any demand better than we can now, I wouldto a universally accepted basis, such as gold. being .made for gold merely for internal currency One suggestion is rejected opinion on namely purposes. I venture to give my at the outset,this that South Africa should a up to exclusively point, but I recognise that it istiemattersterling with the reservation of in House of Commons. for the judgmentthatthe the event of the latter depreciating to io with an below and will conclude with I began per centapology goldI parity the connection should be abandoned. to take too much of hope another. In my desire not The Commissioners " your and timeexpect to seeyou, I have parity manygold by July 1st or to weary sterling at made with statements next," but areform and without the qualifications of far too didactic in sufficiently impressed by the scope the fluctuations in would be necessary if I six years and explanations which sterling during the past were and book. However halting inflation once embarked writing a by the difficulty ofquestions of currency value and upon, immediatelycredit may affect trade, there the machinery of to reject any such scheme. It was therefore in operation decide whether are many other factors necessary to which may sterling or or should be their influence. Africa's counterbalancegoldaccentuate the basis of South The currency and to taxation, efficiency of business condition of Europe,reach the decision with promptitude, seeing that the gold standard would which have control, labour questions are all matters be automatically restored by the expiry of I have dealt only June a serious effect upon trade. the existing law onwith 3o, whatfailing the introduction of new legislation. Furthermay be called the monetary side of the problem, more, the Commissioners regarded whole, the but when we consider the problem as a it as imperative that influence should be informed at the earliest monetarythe publiccannot be properly described as possible date as to the course to be believe this producing more than a tendency. But I pursued, so that ample be should be given for preparation. influence totimevery important, far more important The Government should recognised, its well worth indeed than is generally then stand byanddecision, regardless of the course who are concerned about the the careful study of all which sterling might pursue, and should country. Interest in involved. It is worth trade of theitself assume any risks trade questions is while to note the pertinence of this recommendation a long and honourable tradition of the House of the and I Great Britain, where the gold imCommonscase offeel greatly honoured that so standard will section of its members should have invite portant a be automatically restored, failing further legislation, on January this subject. e to address them on 1, 1926. According to the reporting experts, South Africa * is in a favourable position for the resumption of gold payments. For some months the South African South Africa and the Gold Standard.-Monetary pound has been of peculiar interest in and early problems are always very near gold parity the case in January in a actually favourable position for of countries was speciallyat a small premium in terms of gold. Further, basis are only one-third above acquiring the necessaryprices for their currency and the level that basis be before the war, while in credit, whetherimmediatelygold or silver or exchange. the United States Africa, which per cent half the In the case of Souththey are fifty produces higher and in supply of gold, the situation Consequently world'sGreat Britain higher still. is rendered stillthere can be no by reason of close deflation being more interestingquestion of itsfurthereconomic and necessary before reaching parity with gold. A third political ties with Great Britain, which is at present element is the strong gold position in the the off the gold standard and probably not far fromcountry. The being Bank carries a pre-war monetary point of Reserverestored to the64 per cent gold reserve, the commercial banks hold heavy sterling balances, basis. Various questions, such as borrowing facilities and the Pretoria mint is of vital consequence in and exchange on London, arenow in operation. There is therefore no dependence on London for and connection with South Africa's monetary policy,the local supply of coin, and no been discussed in an these matters have recently likelihood of any serious depletion of the country's metallic reserves. expert report rendered to the Union Government. On the other hand, while sterling African It was in October last that the Southis considered likely to invited Professor E. at Kemmerer of Government reach parity with goldW. an early date, there remains the risk that another relapse might Princeton University, U.S.A. and Dr. G. Vissering, take place. Should this occur Bank, to study tied President of the Netherlands South Africa if the to sterling would be compelled to follow Great Britain monetary situation in South Africa and to report on * * 5 6 l3ank was founded and according to which, with modifications since effected, the central institution now operates. Whether this step be taken or no, however, July I will see one more country-and that the world's leading gold producer-returning to the credit and currency basis which is the goal of monetary policy in almost every country forced at some time during the past ten years to abandon the universal pre-war standard. * * * New Capital Issues in the United States.-The total of new securities issued in the United States by governments, municipalities and corporate undertakings during 1924, surpassed all previous records, reaching the huge figure, according to the New York Commercial and Financial Chronicle, of $5,57o millions, as compared with $4,304 millions in the preceding year. Converted approximately into sterling, the total is five times as large as the corresponding figure for Great Britain. It must be remembered however that although the American, like the British figures, exclude home government loans for national purposes and conversion and bonus issues, American statistics are calculated on the basis of the nominal amounts of the issues, while the British are based upon issue prices in all cases. Probably therefore, while the figures are not strictly comparable, the disparity between the American and British totals is exaggerated on this account. The following table shows the distribution of the new issues as between the various objects to which they were applied :- New Capital Issues in the United States by Groups (000 omitted) 1920 Foreign Governmt. 1921 1922 $ $ $ 191,000 329,270 416,305 671,765 1,199,396 16,277 27,145 1,070,901 1923 186,845 570,946 Municipal : Untd. Sts. U.S.Posns. Canada -. 45,780 47,023 1,043,118 1,353,677 8,186 8,830 75,982 134,834 98,985 179,106 337,473 Farm Loan -- Issues Railroads .- 121,940 322,379 352,666 344,415 523,808 464,516 726,241 887,991 1,325,601 779,617 Public Utilities... 382,339 491,935 Iron, Steel, Coal, Cop- 148,446 84,849 184,870 291,900 197,871 34,408 8,300 10,156 13,805 19,016 117,865 25,732 48,360 66,797. 29,507 694,389 281,414 456,767 per, etc.... 291,547 239,658 151,105 324,259 194,779 261,424 167,128 90,995 105,674 53,181 333,401 Equipment Mnfctrers. Motors and accessories Other Indus- trial and Alnkturng. Oil Land, Buildings,etc. Rubber _. Shipping Misc. Total ._ 161,889 250,911 86,500 19,763 1,685 2,000 2,610 20,525 3,568 34,789 321,961 144,271 249,359 202,285 13,800 192,931 3,634,834 3,576,738 4,313,363 4,304,426 5,569,689 It will be seen that there was a substantial increase last year in issues on behalf of foreign governments, as cipalities and The leading indusDigitized for ess capital FRASER http://fraser.stlouisfed.org/ en toget Federal Reserve Bank of St. Louis 26,308 Princess Hotel, Paris, August 28, 1926. Dear Mr. Osborn: The enclosed is a telegram which Governor Strong received this morning, tut which, so far is he is -able to ascertain, is not for him. A telegram with tlit or a Aptgar text WO* received by him yesterday you may have inquiry made as to whether it is not for another party mud through Morgan, Harjes t Company, Parit!Ittwas return' tx th,am. "Strong", and also possibly to insure against any confusion of rumor in the At Governor Strong's request, I :..- sending this telagram -",a you, so that future. Looking forward to the pleasure of seeing you again in Lc..' n soon, and with best wishes, believe me Yours very sincerely, Mr. J. A. C. Osborn, c/o The Bank of England, Threadneedle Street, LONDON, E.C.2. EXECUTION COPY C-IM 4-29 DERAL RESERVE BANK OF NEW YORK 11 INCOMING CABLEGRAM-SERIAL NO. RECEIVED ON Ju.1--16.-1922- London July 16, 1929 Federal Reserve Bank of New York New York No. 179/29 Your 202/29 total is 400,000,000 more than aggregate of domestic and foreign. Please confirm. J. A. C. Osborne MT c)/ TEST CORRECT "M TEST INCORRECT NO TEST . NOTE. UNDERLINED WORDS WERE RECEIVED MUTILATED. REPETITION HAS BEEN REQUESTED AND WHEN RECEIVED WILL BE PROMPTLY COMMUNICATED. TELEGRAPH AND CODES DIV. FILE COPY CDE 7-1M 4.29 FE RAL RESERVE BANK OF NEW YORK OUTGOING CABLEGRAM-SERIAL NO. SENT ON July 16, 1,J29. Bank of EnAland, London no. 207/29 ULET J.A.,;. Osborne Our i202 domestic should refd .578 million. Federal _reserve Bank of New York. WU 10 7,7 TELEGRAPH AND CODES DIVISION )1 eLriAtiattq17 BANK OF ENGLAND, LONDON, E.C 2 12th September, 4:910. Benlmiin Strong, Psq., Ritz Hotel, T'iccadilly, W. Sir, With reference to the Governor's letter of to-day I am desired to inform you that after all the Bank expect another consignment of Marks 27,000,000 from Amsterdam before the close of business to-norrow. I au, Sir, Your obedient Servant, Chief Cashier. BANK OF ENGLAND. LONDON. E.C. 12th August, /0.9. Benjamin Strong, Esq., Governor, Federal Reserve Bank of Ne;T York, care of Nederlandsche Bank, Amsterdam. Deer Sir, I an desired by the Governor to acknowledge the receipt of your telegrams des - atched from Brussels and Amsterdam respectively, as follows - "On arrival Brussels I find approximately two hundred "and ninety million marks gold could be shipped at "once to London for treatment as discussed with you "but considerable difficulty will be experienced in "effecting transportation without necessary arrangements being first made in London as was done with "shipment recently made by you. Would it be possible "for Bank of 7ngland to handle this gold on behalf of "Federal Reserve Bank of New York by same method. In "this event National Bank of Belgium would be instructed "to act upon direction of Bank of England in arranging "details of transportation. Also could Bank of England "arrange for insurance cover in London preferably "through Chubb and Sons to cover all risk and payable "in dollars in New York. Federal Reserve Rank would "of course expect to pay all costs and service charges "and vould greatly appreciate couctesy. Kindly tele"graph reply both to Brussels care Banque Nationale "and Amsterdam care Nederlandsche Bank". "Many thanks for your telegram. The total amount both "Brussels and Amsterdam probably four or five million "pounds less than amount mentioned your telegram. "About one third of this is in Brussels and two third "here. Would appreciate your telegraphing me care "Nederlandsche Bank advising if arrangements for shin_ "ment can cover Amsterdam as well as Brussels". and to confirm the following telegrams which were despatched in reply - "Bank will be happy to make all arraniiements for trans"port to London of not exceeding the Thirty five "million pounds you mentioned verbally. The amount "mentioned in your telegram is mutilated. Bank will "also attend to insurance if possible in the manner "you desire". "Your telegrmm of the eighth received. 77-111 be happy to "arrange shipments from both Amsterdam and Brussels. "Have cabled New Yotk respecting insurance". I am, Dear Sir, Yours faithfully, LL<J2_, CaM7L. P.T.O. P.S. I enclose by direction a letter addressed to you which has been left at the Dank. 0A-xF PIN TO 11,4111 COMMIWOC.71014 51401,0 00 It ESSED "THE CHIEF CASHIER-) 9 BANK OF ENGLAND, LONDON. E.C. 2 14th August , 19. Benjamin Strong, Esq., Governor, Federal Reserve Bank of New York, care of Nederlandsche Bank, Amsterdam. Dear Sir, I am desired by the Governor to confirm his telegrams despatched to you as follows lath August 191c "Learn from New York insurance can be "arranged: terns unknown to Bank but "understood cabled you direct" Loth Alz_,.st 1919 °Vie are ready to send to take delivery at "both centres as soon as authorised we "await terns upon which to insure with "Chubb" The Bank now await a line from you before making arrangements for transport to London of the Gold in auestion. I NM, Dear Sir, Yours faithfully*, :/Chief Cashier. BANK OF ENGLAND. LONDON. E.C. 2 25th August, /919. Benjamin Strong,Esq., Governor, Federal Reserve Bank of New York, Hotel Ritz, Paris. Dear Sir, By direction of the Governor I telegraphed to you to-day as follows upon the receipt of your letter to him dated the 23rd instant :Your letter twenty-third August. Increase equally "convenient. Have seen 'ent to-day and still await completion of . Mr.Kent called this morning and informed us that there was nothing now to do but await the conclusion of the insurance arrangements which he is making, but we will in the http://fraser.stlouisfed.org/ meantime Federal Reserve Bank of St. Louis warn our representatives in Amsterdam of the increase flANY REPLY TO TM IS COMMUNICATION SNOULD SE ADDRESSED TO 'LTVIECF.EPCASHIER1 BANK OF ENGLAND. LONDON. E.G. 2 2nd September, Ig 19. Benjamin Strong, Esq., Hotel Ritz, Paris. Sir, The Deputy Governor has handed me your letter of the 29th ultimo of ,;;hich I note you have sant a cony to Mr.Kent. The additional shipments from Brussels and Amsterdam which the Federal Reserve Ban7 have follnd necessary will be arranged forthwith. They will not cause the Bank the least inconvenience. You may rest assured that the re_2orts which have reached Messrs.Chubb & Sons indicating partial insurance direct in London have no foundation in fact. re-insurance in our Market. They may be due to