View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

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

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