View PDF

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

STRONG PAPERS, Norman to Strong, 1921
Jan. 5
and another on central banks,Feb.16
17, with paper handed to M.Krassin
-1

Alt.

22

Mar. 1
Mar. 14
Mar. 14
Apr. 2
Apr. 27
May 3
May 14
May 20
May 23
May 25
June 9
June 22
June 22
June 27
about Austria with M.Avenol,July
July 13, with note on conversation
July 23
Sept. 10 C
Sept. 15
Sept. 24 C
Sept. 28 C
Vissering, Oct. 12
Oct. 13, with copy of letter to
Oct. 21
Payments, Oct. 27
Oct. 28, with memorandum, Reparations
letter, Nov. 2 and Norman's reply, Nov.5
Nov. 7, with copy of Vissering's
Nov. 11
Nov. 11
by Havenstein
Nov. ll,with copy of secret memorandum
Nov. 14
and Kauffman, Nov. 5
Nov. 16, with copy of letter fromHavenstein
Swddish Minister
Nov. 24, with copy of memo from
Nov. 30
Dec. 1
Dec.3
Dec. 2
letter Nov. 10 and Norman's reply
National Bank of
Dec. 3, with copy of Havenstein's
Dec. 5 and to Governor,
Dec. 5, with letter to Havenstein,
Roumania, Dec. 5, 1921
Dec. 7
Dec. 9
Dec. 17
Dec. 18
financial and domestic situation
Dec. 19, with memo on Austrian
22 and annex
Dec. 23, with aide memoir, Dec.
Dec. 19, and reply Dec.20
of letter from Guaranty Trust Co.
Dec. 23, with copy
Dec. 29
in Europe
Dec. 29
re-establishing better economic conditions
Dec. 30, with proposals for

 cable
C

COPY
Hermitage Hotel

-

Nice - France
5. Jan. 1921

MAIIIIV strong
This is the day you sail + I am writing to wish you godspeed just as if
I were seeing you off. When you have a moment to spare in N.Y. I want you to
write me two lines + no more to say what report your Doctor gives when he sees
you for the first time after 12 months. Dont forget; a postal will do.
I have been wondering whether your visit to London did you any good +
on the whole I like to think that it was a wise stepping-stone between the
heat of India + the cold of America. But I have no doubt that it did us in
London a great deal of good - + if ever you should feel downhearted just you
remember that, ecconomically speaking, there id only hope through a community
of interest + cooperation between all the Central Banks - + you have gone a
long way to start it up, on the right lines by your visits to London.
The percentage decline in the Times indes number for December is less
than I was told to expect + leaves us just above the Armistice level. Therefore
we are lagging behind N.Y. both as to degree + pace of deflation - so much so
that pleadings for the pace to be slowed (by a reduction in rates) have less
support + deserve less consideration than I supposed - when we were lately
discussing the subject, with one another + certain Bankers. On the other
hand your Mr. Jay just hit the nail on the head in his message.

This is a perfect place - bright sunshine clear air - where only
man (+ woman) is vile:
I am trying to stop the "machine" whic
a week to do + meanwhile runs it such a pace - [especially when the rest of
me would like to sleep -] as to heat all the bearings..:' + keep me wide awake::
Goodbye my dear fellow + remember me surely to Mr. Jay + Mr. Case +
dont think of writing to me before say the 27th + when I plan to start homewards.




Yrs gratefully
[signed] M Norman

tak

ft

ovitzvita.- 54,

7442.44.4..C. ,

C.

NAA .1(411
ftrz.,41.

co

c




10:41-6

JAN 2 7
1921

c4N-Ltu5

Nfrp.

t&4

cL.4.1,_--11e4A

tiLa

49-09--itzo
tOeti244

.5(%.3tAiL,

(Led

5 a...Cs
a-41.4

y.
tilt 0?..,

tockAAA7

6-o

zetc.4.4,-Cu.

0I

4a..oe,

s
./194A.

hX't

ttit45KAA/0

()C4

6.

eGL-C.

aret.e.tto-r.

"t_ kt

CAAAA-C,_

c.s-"

412-ca,

Ae-u 44.
e-jec

0

4)(fi.C4-

o.

'1/41a4k-t

4.<4,-

cuct, 56effs

/\CCLit Sq (AO C :1/4) OCIZL

,CLAN.-

c4- (-4`

/4E4

teetat Tei(Pyt

?If4rS,Ck

tLtit,k,
1PLLI

Lo

v

tu-s-vs.A$Lip-tu.5

S'CALSI-1A OtZi

3$ilt

ce-cf.c,

N9

4:t.4e a kt4. 0 tiA.c,tA.A.

i41/44

Nip

r yaaut 4,;v

C-&-C,t3

st AZ4
"it cvift.4%

C4/4

4/1/

ttl: 1

-41.

z,
T11-11173r$41-)471

C."r"j5

:)/vni?...Y".4

tlys,

/Iv
5,1r7.,1

t-24rtA/Y

.11/409

:111

r

-2yy

-D70

V 1.:(4:1471104-N% -Yv

Enrr

',2/2V1 4'67

10,A.

"117P-r) felf

linTrir(
*1)Irl

4°1

Trrn1

"2-411

W-6')

V11:1

"\6

-ry)7

1/V4717),f'/)

444144-vrp

frired-441n

cr" "W7711

? pr

4(1:1

C

/leo)

Pr7) t4-07441-friy;-rn-e)
111111

)&1rN

'-v19

78)1:

-N1-79 15N;)

rz51) e-

°L51

NnoYiny

0411,---$17-vpi

'V41)

frrtry
7-1r"/

tylp,8

C1'-°/ '-°

r?Yyv) VV.

""17,1

1.41-0-07

----3V)5'734-N, racw

ep,i,id Air 09

1:17.V

re"

..;y-zrzniv3 1V4Y7:7"nrc)

7)07

'1427-".,

'vr31-0-4/?-7 e7fri

'14:g911244c9r

';11/14"777,0q) 711/70119

3,101WN

'4e

14";2""V

tx"-ry

/-1/1 --moo

"

c-.orcrv)/ )01

/e'lrNIP /'31115;r1)/ 111/ 34°

nyt-rvtt

(ha

47,irtnii/A),

4,4.11 'N149k

rliV7V

)

71v

J-71-01\,

r"
Irvvy

-

.:)/72;//

--n-r-251

3

-

Iften).-m

Ti

rlevYV 19

ttp
."?4)

ro

-

17\2 re))

114

int

©9

crw.r.A.0/

Wr2AI

p9

03

3,44-vv

7

,r17"Jv

-Ypixtv -151713-111-1'

py.

zru)-ept

rifTr17)

.b.vp

/

.)--ArynrinVAA

4"4:71:

A-N:7;

-

A

9

47/77

14-NevI %Yr17-71 61

iQf

vvs--0

1-1-v-r-o-nit43- "vr-5,10

;

:"1"1?I)/

.,:vr

-70

417-mm Gy cry

pl.m%

7,9

'AN-vow

1"r-0

7

443

,y1447 /%1,),y

Lz

-wl"Liv

1,12-4W-rni-0

14,1'
IL

r\ WYY44..),e

COITIPENTIAL.

MAR 2 1 1921
Vita of 6140anb
3:010011, E. C . 2

17th February, 1921
My dear Strong,

It was a week ago that I received your

letter of the 27th January, and as I was both busy and lazy
and as it required no particular answer I have not written
to you sooner.

But I am still waiting to hear of the more

particular report which according to your first paragraph
was deferred.

Yesterday I received your letter of the
3rd February, most welcome you nay-be sure.

To begin at

the end, our confidential cable of the 4th told you briefly
just what our position was and what(on re-reading it) our

position appears to be to-day. There has been and is a real
drive at us the whole time, but my own feeling is that the
danger of having our hands forced is less to-day than a wee
ago.

I think our opponents have overdone their case - they

have Protested too much.

After a tine reiteration and even

ridicule lose their effect, and though one cannot see far
ahead I can say nothing more on that score;

but -1,canwhile

owing to the collection of taxes money is dear and likely to
remain

remain so for another six weeks. The rate for all Bills
Up to 60 days is up to 7% and day by day we are mak.ing

course nukes it natural for Mr.Kiddy and

of thinking to look upon money rates as i

rather than insular, and we cannot theref
enclose
con
Bank may properly, or Iperhaps Ia shouldof ray first attempt a
undertake?
say may not
your rate and our rate shall be altogethe
epitome on this subject and your counents both for
neoplcs calculations; but riy answer to t
raised the question - I don't rameriber if

of them - was simply that if I were the F

Board I should seek to get ray loans repai

my rates down:

The expectation of your h

and certain apparent reasons for them was

not, a good deal ventilated by Ben Guinne
here a month or six weeks ago.

To return to a nersonal :

here.
411,

lb

With the exception of the turpentine narket I do

not think there are any weak spots.

The nitrate position

which looked very aainous has been tied up and can be held
together.

As regards dealings with Soviet Russia

and hence with their gold, I can add nothing to what our
cables have already told you, but I anclose(very confi-

dentiallya copy of the paper on this subject which was
officially handed to M. Krassin before he went away.

The list of borrowers who are awaiting

the first opportunity to make a public issue of their
Securities is continually 7roving.

In addition to the

continual output of Municipal Securities to carry out the
Govemaent's Housing Schemes, we irnow of pending industrial
issues by Lever Bros., the Dunlop Connany and Brunner Mond,
while among foreigners I nay mention San Paulo, Norway,
Denmark, France and Belgium, to say nothing of the
Australian and otl

r Colonies and of India.
The meat Lon of India reminds me that the

Imperial Bank of India is getting under way.

We had some

talk about it whern you were here and to my disgust I find

that they are bent on starting a Branch in London.

I

wonder if you can enumerate the operations which a Central
Bank

0

Benjamin Strong, Esq.

COW,.

CONFIDENTIAL,.

It will be understood that though there is a prohibition
on the export of gold Vlore is no prohibition on its import,

and that the arrangaqants which can be made for dealing with
Russian gold must depend upon the establishment of title in this
Country, and the recognition of title elsewhere.

Until this is

done the gold must he subject to such orders as the Courts of the
United Kingdom may pronounce in accordance with the usual
judicial procedure.

So far as this Country is concerned, the

first step to securing this and is obviously to bring a snail
parcel of gold to this Country as a basis for a test action.
Enquiry has been made as to what the British Government would be
prepared to do in the event of this course being talraft, and (a)

of the title to the gold being dofinIttel7 established in this

Country and accepted elsewhere, or (b) in the event of a decision

being given by a Court of First Instance only, in the United
Kingdom, that the title of the Russian Soviet Government to the
gold cannot be car/potently disputed.

To these question a

s-ecific reply can at once be given.
(a)

In the event of such a final decision being given,

and followed elsewhere, so as to allow of Russia obtaining a sale
for her gold in the world racket, the British

Govern-tent upuld

have no objection to the grant of re-export licences, without

(2)

,4

of such cons ignnent s prior to shipnent.
Such porcels shall be held for safe cu.stody by the Bank of
Etigh,nd who, without assurLin.7 Eurty res-oonsftbility, and

subject to pay-tent of all outof-pocket expenses, are to
export each "Parcel to such destination as the consimee
or a person designated by such e ensign ee os,y direct.
Failing such exnbrt within s:tx months from the date of

the arrival of the gold at the Bank, the gcn. is either
to be sold to the Bank at a price to be mutually agreed,
or to be sold in the -tarket by the Bank fo-2 exnort for
account of the consignee or his nominee. Should export
be suspended for arty neriod cnir'tn2* to attacholent by the

Court any such period shall not be counted in the aforesaid six nnnths.
(3) The Bank of }Ingland will. have a .standi_ng 1::oence for the
re-export of gold imported under these arr:ztgenents and
rena:tning in their custody, ..rd
'aloe no charge for
their services beyond the Est of f reig,ht , insurance,
carriage, and other expenses incurred by thel including
charges on the usual basis for 'lelting and assaying, if
this is desired by the consignee or his nominee.
(4) Gold imported under these arrange-tents is not at any time

'00

4

(5)

In the event of the British Gemernrient desiring to
modify its general Gold Policy in such a may as to
rake the abolre arrangements irrpract:_ca7-)le, the Th.assian

Soviet Govern lent nay claim six months' notice before
such modification takes effect. It is understood

that in the event of such notice being given the

edate
Russian Govern: lent Trill be at liberty to give
notice to ter-tinate the Trade Agreement, notvrithstanding
the fact that the twelve months period s'oec:Ified in
Article XIII of that Agreement riay not have expired,
It is of course understood that the object of the

I

Present arrangements being to facilitate and extend trade between
the United XinTiom and Russia in accordance with the Trade Agreement, all gold imported under these arrangements is to be used to
pay or to secure the payment for goods purchased in the United
Kingdom and in particular for goods the product or manufacture of

the British

I

CFNTRAT, BANKS

A Central Bank should not compete Tith other Banks for
general business.

A Central Bank should not take monies at interest on its
own account nor accept Bills of Exchange.

A Central Bank should hav2 no Branch outside its own
country.

A Central Bank should not engage in a general Exchange
business on its own account with any other country.
A Central Bank should be independent but should do all its
own Government's hi.sinoss - directly or Indirectly -

A Central Bank may have an Agency in anotivr country.
That Agency (if not itself a Central Bank) should do v,11
its banking and all kindred bus-In-Rs with the Central

Bank of the other country.
/0

And should co-operate in practice and rrinoiple with the
Central Bank of the other country.

And should receive the rost favoured treatment and information from the Central Bank of the other country.

y,

And should do the Banking and kindred business of its
Principals Govermlent in the other country.
4111===.=,,......,

0104,1

itg ank

LIttr.011, E.0 . 2

22nd February, 1921.
My dear Strong,

I write to acknowledge with many thanks

*- /"'-

your letters of the 4th and 8th instant, which curiously
enough reached me in the reverse order.

At the mane time

let me confirm the letter written to you on the 17th
instant.

That letter was hardly posted when I had
the pleasure of a visit from Ben Junior, who seems in the

best of health, full of interests and longing to get back
to your side.

10

He had a talk with Schroder4 and as he was

much pressed with engagements to visit Oxford and Cambridge
and to meet some of his friends, I was only able to
persuade him to come to luncheon here yesterday before
which I took him for a walk round the Bank.
you may be

At luncheon

sure he was welcomed by quite a large party as

a true chip of the old block.

I shall make a point of

sending to you through his kindness the little parcel which
you (wisely as I think) left behind, but which you say it
will help one of your hobbies to possess.

Thank

Thank you for the 0.00 Federal Reserve Bank

IP

explanation you give of the letters and numbers upon i
4. Note which is interesting, especially in view of the

16

belief is that you don't keep a Register of your Notes

that you re-issue than Sc long as they are in a fit co

dition and thereafter destroy them, merely keeping a l

account of the total amount outstanding from time to t

and relying upon examination before destruction for th
avoidance of forgeries.

This question of a Register i

as you know, before us at the present time, and arrang
are being considered under which the Government issue
Currency Notes is to be dealt Ihith and destroyed.

Ou

general view is that, in accordance with your experien
is not worth while to keep a regular Register;

but ev

some system of sorting, examination and re-examination

necessary, especially in view of the attempts at forge

which we know to have been lately in progress, as to w

you have I think been kept informed by Sir Ernest Harv

Your explanation that the amount of Gover

borrowings will depend on legislation for the reimburse

of the railroads by the Governrr,,nt is interesting, the

result being (as I understand it) to force the railroads

carry with their Banks the debts due to them by your
Government.

41

I was glad to have your cable as to the

40

increase in the rate for your loans on Certificates of

Indebtedness, even if only as an indication that your
general policy was not downwards.

Like yourself, I was rather sorry at the
Chancellor's statement as to a suggestion to your Government
of debt cancellation.

I don't think his statement helped

matters here and I can understand that it did so still less
on your side;

but it is just one of those little items

Which pops out in the middle of a political speech when as
you know party tactics and coming elections and all the rest
are uppermost in the speaker's mind rather than the financial
relations between Nations.

I have had several talks with

Lord Chalmers, whose date of sailing has been postponed to

41

allow of your new Administration being in the saddle before
his arrival.

I hope that the manner in which he will

negotiate will give satisfaction, and I feel certain that
the matter so far as his intentions go will leave little to
be desired.

Generally, conditions have not moved one
way or the other since I last wrote or since we cabled to
you, but the announcement yesterday of a fall of 14 points
in the cost of living is an indication that what we require
s

11

in progress, namely, that retail prices should without

4111.1s

much delay drop to a degree corresponding with wholesale
411

prices.

This is particularly important at the present time

as it is only by these means that a general reconsideration
of wages in a downward direction can be brought about.

At

present the total amount of wages being paid week by week is
considerably reduced by the amount of unemployment, but the
rate of those -wages which are still being paid has so far

shown little sign of yielding;

and thereon of course hangs

the difficulty of the present high cost of production.
Nothing has been done as yet in regard to
the Ter Meulen Scheme or Export Credits in general.

Our

Government seems to be waiting to find out what line the
any guarantee or support; and without a guarantee of exchan
Supreme Council is going to take before corrating itself to
or of political stability in the European countries I do no
think our Banks or Institutions will be willing to assume
the risk.

A somewhat unfortunate criticism of the Bankers

attitude in this respect was made by the Prime Minister las

week in the House of Commons when, having that little

knowledge which is so often a dangerous thing, he did nothi

to help towards a solution of the difficulty he had in mind
With kindest regards,
Yours rnop
sincerely.
Benjamin Strong, Esq.

AlftetitusA.

A

Nkta

Al1144

Pt

(4;
(49V
lttt

1C010011,E.C. 2

1st March, 1921.

My dear Strong,

I write this in confirmation of my confidential cable of the 25th ultimo, to which your answer has
been received to-day and Is duly appreciated.
About ten days or a fortnight ago the Prime
Minister started making a speech in the House of Commons
and for no apparent reason so far as an outsider is aware
he came to the question of Export Credits for the purpose
of helping our manufactures on the one hand and the
distressed countries of Europe on the other.

In developing

this subject he blamed the Banks in very generous terms for
their unwillingnes

countries of Easte

taken up the line
the exporter here

period, they could

political uncertai

B

and one or two of

meeting among them

upon which it is written.

0
'`

110

With kindest regards,

defence is offence, they not Yours formally denied the
only most sincerely,
allegations In the Prime Minister's speech but they nude a

(1)-n/Lam.

deliberate assault on the dear money position by means of

ealIIMIIIMODINON010.NIP

Benjamin Strong, Esq.

CONFIIONTIAL.

of 641110

auh of thvittnibr

&A.

E.C.

MAR 28 1921

14th 1,:arch, 1921\

My dear Strong,
I will begin

by

acknowledging your

letter of the 21st February, along with Mr.aryder's

memorandum which gives an interesting resume and forecast
of your position.

I will only allude to two points:-

In the second paragraph of your letter you say

1.

that it would be dangerous to make a further advance in
the preferential rate (naw 6%) for loans secured
Bonds.

I do not see why.

advance is not necessary as

by

War

I can quite see that a further
oclieve your loans on this

security are negligible, but I do not quite grasp how a

withdrawal of such preferential rate as now exists could

be

dangerous.
2.

The last paragraph of the mennrandum states that

another great rise in prices Is almost inevitable and iiiak
whatever is the general level in the United States will

mean the general level for most other countries.

this mean

Does

that the commodity deflation which you have

effected and Which we are trying to effect mainly through
the

AO

the instrumentality of the rate is no more than a

te

by

10

th

le

mo

sh

ar

ef

fo

in

se

th

fi

as

po

in

th

Fe

th

00

#

But my private belief is that although
Rothsehilds are anxious to oblige they do not want to lose
the exchange business arising out of the gold, and I
add to therm.

suspect that this exchange business gives them good. marks
with K. L. & Co. Therefore I believe that if you are in
hands they will somehow wangle the price against
you: therefore again I believe you had better eriplozi- for
the purpose of purchasing the gold and so of deciding the
price} some such independent cone ern as the City Bank.
As to Soviet Russia, the Trade Agreement
having gone through, I expect we shall be having a trial
shipment of gold before long which will form the basis of
1

a

.4111 a test action.

In this connection I sent you an epitome

of the arrangements between M. Krassin and our Board of

IP ip
Trade in my letter of the 17th February.
Central Banks.

I think your additions

to the Memorandum are good, although they do not affect us
in this small country.

I have passed them on privately,

but with a note of their origin, to India and South Africa.
Page 5.

I, too, am not very hopeful

about the Ter Meulen Scheme, but if the principles on which
it rests are pushed in the various distressed countries, I

believe the credit of those countries maybe improved and
trade with those countries thus facilitated, even if such
trade is not directly through the Ter Meulen Scheme.

Now

Scheme for has been appointed organiser of lines
that Drummond Fraserthe tame being I hope the general the
opened up.

It has proved extremely difficult for th

Committee to find an organiser and I think they have
the best man available:

but I fear his sight is rat

limited to nanchester, where he has passed his life.

I guess he ought to begin at the other end, viz., in
distressed countries.
Page 6.

The date of Lord Chalmers

mission is quite indefinite.

41 fte

course this is more or less experimental and you will

realise that the object primarily is to remove from the
Treasury the need of fixing money rates.
Subsequently, a long Loan for the conversion

National War Bonds maturing within, say, five years,
which there are about Z700,000,000 outstanding.

if

could get these out of the way the future of our dom
finance would begin to look very different.

I do not think the reduction in Treasury Bill

has done any harm but the result cannot be seen for
months.

I fear the tendency of any reduction in m

rates is to stiffen the price of wholesale commoditi

(The relatively high price of t
the cost of living.
facing the coal miners, and perhaps it is a
of living is, I believe, one of the main difficultie
reason for their strike attitude. The prop

in their wages is in many cases out of all
the reduction which has so far taken place
living.)

But whether the Treasury was rig

reduc \ing their rate last month, it is ess

Bank and the Treasury should work together.

one do what is absolutely right and the othe

perhaps wrong, we had both better stand tog

together do what is perhaps wrong.

On this reasoning I

should not be averse to putting down our rate by one-half
per cent. towards the and of the month;

but I admit that

financially such a change can hardly be justified.
ln May or June I anticipate a large French Sterling
Conversion Loan offering generous terms of conversion to
/le At

those who took their Franc Loans/during the War, e.g.,

A

holders of the Franc Loans will perhaps be allowed to count

the sterling they paid for their old Bonds as a subscription to the new, provided one-half of such sum is put up
in fresh cash (this means two-thirds old Bonds at issue
price and one-third cash).
With kindest regards,

Yours nn

sincerely,

ijanit
MAY 9

thvianb
7 1 0 10 9 1 1, E C . 2
,

1221

27th April, 1921.

My dear Strang,

Many thanks for your letter of the 28th
March which I regret I have not answered earlier.

The fact

is I have been very much pressed for time and have kept
you advised by cable rather than by letter, which on the

whole is a more satisfactory method in these quickly
changing times.

The strike position looks bad and is of
course worsening the industrial position in most respects so much so that we are nearer large failures than we care
to be.

Believing that games as well as work
',are as necessary to Central Bank men as to any others, I

send for your entertainment some photographs taken at
Easter when two of our Football Teams went offer to Paris

to play against the Bank of France.
With kindest regards,
Yours most sincerely,

111K.A4.1
Benjamin Strong, Esq.

CONFIDENTIAL.

Of &One

4/42

1A0ITIVI, LC. 2

10
.

3rd May, 1921.

Llydear Strong,

I forgot when last writing to acknowledge your confidential letter of the 5th April, though it
was already lying in my drawer.

It concerns mainly the

so-called South African gold, and as that question seems
to be at an end I need not refer to it again.

The question

of rates is dealt with in your confidential letter of the
10th April, which it is now my Purpose to acknowledge with
many thanks.

The rosition taken by your Administration towards Soviet Russia is just about right so far as I
can judge as is also your opinion.

The Trade Agreement

with this country is the outcome of long negotiations and
a great deal

of

political pressure from many sides.

The

trade that will spring up as a direct consequence of it is
likely to be

but I think it may have considerable

indirect results in helping to open up private trade and
somewhat to restore private rroperty or ownership in
Russia;

and after all.

by

such slow steps fram within
seems

your letter was written, I have had your confidentia
cable No.19 and an therefore uncertain at the momen

ire

40'

how you stand.

seems to be the only way inOur -position iscallcourse differe
which what we of Russia can

find its yours, not only because we are owed very little mone
elf again.

the public but also because the Treasury Bill Rate h
really dominated the short money market., and ever s
late Chancellor nut his rate dovrn early in ',larch the
eventual necessity of our conforming thereto has bee
staring me in the face. It seemed better for the Tr
and the Bank to work together, even if in so doing th
may be sacrificed to the good, rather than that one
adhere to what seems intrinsically the soundest poli

so Part company from the other. Of course this question of
Bank Rate and Treasury Bill Rate has lately been somewhat
putauzy
modified by the introduction of theAtender system, but only
time will show how that is going to work and whether it can

be maintained indefinitely as I hope it may. It is liable
of course to be too much affected by the sudden abundance
or shortage of money due to special and temporary causes,
but on the whole I hope it will go some way towards making
the Bank Rate as effective as it used to be in the old days.
I should think your rim of anticipating
the maturity of the Victory Notes falling due in May 1923
was good, although I an not clear whether you have the
right to renay them before that date or whether you mean to
offer to convert then. As regards conversion, our -position
is entirely different from yours. To begin with, we have
this huge mass ofy\floating debt - Z1,200A1,300,000,000 which is just as much as we can handle or ought to allow,
and under present conditions it is unfundable. Secondly,
in the next four years we have 0300A900,000,000 maturing,
each maturity of which becomes to all intents and purposes
Part of the real floating debt within twelve or eighteen
months of its maturity. In order to effect any conversion,
you must therefore deal with the maturities well in advance
of

t

of their due date.

I do not think it would be wise for

the Treasury, considering the very uncertain future ahead

'MAX

41
401

of us, to allow- the 0.44,ot.0,11; floating debt to increase

from its present figure to any material extent, whether by
the falling in of future maturities or by the need of
financing unforeseen exrenditure (e.g. coal strike);

more-

over I believe the whole financial outlook from the
Treasury standroint would be different once they had no

maturities ahead of them until, say, 1027, and only a
floating debt of its present magnitude to think of.

If

you agree with this view, it was vise to offer the present

conversion terms (which are no more than current market
Ygt4onal Tar Bond
rates) in order to get rid of the 1922-1025 /maturities.

especially by has been violently attacked
Of course this policy the Bankers, but that only rl:oves tha

short maturities continually coming nearer to the f
debt stage were exactly what the Bankers wanted to
The German trouble and the coal

together have come so unfortunately at the same mom

this Conversion that I fear it cannot be the succes
right have been hoped.

A nominal amount of conver

would do us little good especially over 1922 and 10

it is only natural that when conditions are much di

' the existing snort investments may be preferred.
So far as I can remernber I was

40

re-elected for a year on the 5th Arril, and Mr.Peacock,

about Wham I wrote to you, was elected on the following
day.

Finally, I do not defend the prorosed
schedule of Gernan reparation payments and I am happy to

think I have not got to do so.

This question of

reparations is not as it should be, and as Mr.7eynes
assumes it to be. a purely economic question.

It is alnost

entirely a political question over which the French

Goveniment is forced to tug in one direction and the
German Government in another.

I

I doubt if the German

Gavermnent could stand if they were to agree to any of
the amounts which have been suggested, even if they could
pay tham;

and I &ft afraid that if M. Briand were not to

stand out for more he would quickly be succeeded by a
fire-eater, probably }L. Poincare, whose main object would

be to reach Berlin:

and I believe our Prime Minister is

having a moderating influance on both sides and going
perhaps as fax as rossible without breaking up the Ehtente

With kindest regards,
Yours
Benjamin Strong, Esq.

st sincerely,

644taeit

ti

CONFIDENTIAL.

4

0,diAlt.

.3\.1

192

thvianb
B.C. 2

14th May, 1921.
Lly dear Strong,

I write first of all to acknowledge

your letter of the 26th of April, and I take the last line
in it to contain the kernel of our respective difficulties.
So long as a Government has directly or indirectly a large
floating debt I wonder if any system can leave the Central
Bank of tYe

country really free to manage affairs from a

purely financial standpoint.

Indeed it was the desire to

make some step towards this freedom that made me glad that
our Government should have made an attempt by means of the

Convers

increas
this I

critici

action i

time wi

been foo

and tha

suspect too that it is much more closely connected with
Soviet activities than most of us have any idea of.

Had

we 'mown how prolonged the strike would be I doubt if a
month or so ago we should have attempted to carry out our
plans as we have done. But that is merelynJobbing backwards".

Now I want to say a word in your private
ear about Austria.

You know the position of Austria is

desperate and in my opinion nothing could be done to
improve it until the Allies should have come to terms with
Germany. But some weeks ago the Austrian Prime Minister
and Finance Minister came to London and various meetings
were held with the alliedrrpreStYrtatives.:12 result of these

was that the plight and the needs of Austria were some-

how turned over to .a

Committee of the League of Nations

Issue for a term of years.
Subsequently it is thoug
Control of Austrian Finance, Taxation, Customs and Note
the indiscriminate issue of Notes will be stopped;

internal loan will be issued to absorb some of the r

currency and that the Government importation of food

&c. will be ended, thus leaving the feeding of Austr
private enterprise.

In order that this shall have any ch

success some improvement and stability of the Austri
Exchange is necessary.

For that purpose

seems to me to be also necessary.

be offered should be

an externa

The Security that

charge on all exports and imp

(to be levied in gold?),ILa first charge on all Aust
autzett:ouo eG of

assets ranking even

food, already gra
Itfd oft he credits&c., by the

levied and collect

Control above-ment

a Dane or a Swiss

would be Represent

No

could the Governme

Could they for ins
in Paris, perhaps

COTTFIDETTIPL.

Vank
e.,s_ A

*oL
JUN 3 -19 21

thvianb
111701091t, E C . 2

20th May, 1921.

My dear Strong,
The following is for yourself only.

You will remember that in January last

Lord Chalrers was on the roint of starting for Washington
as the British Representative to arrange about funding

the Debt

with your Treasury.

His visit was postponed

from day to day and week to week - chiefly due I think to
your change of Adrainistration - and has never come off.

A few weeks ago he was again on the
point of sailing on the same Mission but again the plan
of sending such a Representative has been deferred for an
indefinite period, with the result (not unnaturp..1177 I think)

that Lord Chalrers bem7ed to be relieved of all connection
with the Mission whenever and if ever it night became a
reality.

He would have be

glad to go, but having lived

for three months with his trunks packed and unable to
make any plans from day to day; he wishes to be excused

from spending another three or six months in the sere
state of uncertainty.
No

r

IP

No alternative choice has been made or
thought of so far as I am aware.

4°

414k

0011FIDETTIAL.

of 60110

0

iriganit
JUN 1 3 1921

VmoolLEx.2

23rd May, 1921.

!Ay dear Strong,

Your letter of the 9th instant has
arrived this morning, and to remedy the a-lission in my
previous letter I nay say that we succeeded in uinning
the football :natches with the Bank of France, who now

wish to return to the charge in an atheletic cannetitian.
But this is a foril of snort which has never been taken un
seriously and I an afraid we cannot organise the necessary
competitors.

I a., surprised. and from your standpoint
disappointed, that your Treasury funding nrogranne has been

handicap so far such been that our situation or converting
Ais
been has as to remit of funding has never

large scale or with any real chance of success.

Your letter of the 5th reache

counle of days ago and is very interesting as s
how pressure developed as regards your rates.

As long as our coal strike si

is as far from definite settlement as it arnear

we shall not be disposed to make any further al
in the rate.

If we could get the coal strike

I should like to go down to 6 per cent. with the

expectation of having to go back to 7 in three
months.

But all of this is' purely hypothetica

have not even subject. it worth while to cable t
the thought

The coal strike sit

the leaders are discredited with their

rank and file are led. by the delegate

men and hotheads - and are being led
had expected.

The result is that th

afraid to negotiate for fear of being
delegates (as happened

a couple of w

cannot say what the outcome will be.

position is most serious; no coal is being mined: stock:
are being used up: the factories and Plants are being
closed for lack of coal and coal mines are being
flooded: so that it is not only a question of unernploytient to-day but of the disorganisation of industry for
months to come.

Meanvfnile of course, owing to the
cessation of manufacturing, some cormodities are

to rise in price as they gradually attain a scarcity
value.

The whole thing is most unfortunate and

depressing and is not looked at as seriously by the
Public as in my opinion ought to be the case.
The Reparation position of course has
been wonderfully improved and there was all along a conviction in this country that the Germans would agree to
the terms put forward. In France there was undoubtedly
disappointment that the Germans did so, and the fact
of settlement of the Reparations question has made
Briand's political position extremely difficult hence to some extent the new trouble about Silesia.
And there I believe the apparent differences between our
P-Plme Minister and the French agba3.17.-bitzele are due to the

desire of the former to help M. Briand in his own

political difficulties.
It

It Was in connection with this improved

position arising out of the Reparations Agreement that I

wrote to you about Austria on the 14th May.

Since then

I have heard that the French are very anxious to make an
advance to Austria in one way or another, and I think
communications have

been

York as regards help also

passing between Paris and New

being

(probably through J.P.M. & Co.).

forthcoming on your side

The meeting

about

Austria is to begin in a couple of days in London, and
the Iramediat e & ffieulty appears to be not only the

question of the ultimate Loans about which I wrote to
you but of advances to carry Austria along until the
arrangenents for control and for the issue of those
Loans can be completed.

But the .whole position is so

COYFIDELT\ITTATJ.
iflanh

of 60anb
ontrint, B.C. 2

JUN 8-1921

25 t h May, 1921.

My dear Strong,

I write only to acknowledge the receint
of your -Personal letter of the 13th instant and I agree
with what you say as tD the distinguishing difference
between your position and ours.
As regards the gold question, which is
a side issue to the Trade Agreement, I sent you confidentially in my letter of the 17th February a copy of
the arrangements between our Govern ment and M. Kras sin

on this point. This of course has never been published
and we alone outside the Government Departzlents nossess

the information.
I cannot, as YOU request at the bottom

of page 1, give you any further information as to the
test shipment of gold. The case is still sub judice and
1414 for trial;
I do not know when it will came on
nor have I yet received authority to send it to A..-nerica,
but I expect to receive that authority, provided the test
case goes in favour of Soviet ownership, and then to sand
the

*Who

gold coins to Morgans.

Their value probably does not

exceed $3,000 to 4,000.
So far as I am aware, no gold is now

being shipped fro" this country to New York other than
newly refined gold such as I described as "contract" gold
in my telegram of the 26th March.

We do not neIrlit any

indi_scriminate import and re-export even from the Colonies.

The coal strike situation remains
unchanged and was virtually sunned up in my cable of the
17th instant.

Circulation is decreasing famously,

Which seams to show that in many districts men are
consuming their own fat which has so far been laid by in
the shape of currency.
With kindest regards,

Yours very sincerely,

kr04/1.4gAne,

ate.

ir444-041
Benjamin Strong, Esq.

1,-61
.7Y".

7th Juno,

L

21.

doar Stron3.
Additions havo -000n iz.,...d,,.)

to the

Maim in connection with tho Eloviot Goad
r2ost Case, a cony of v:hich I oncaosod in Li;,10- letter of
I wn. here' ore sondin,:_; you with this
tho 29th .L. --11.
Statez:.,7:nt o

'
tho fro 02

1e.:!.:a as maear.3.ed.

Yours laos:., sLicexelzr,

Cacc)

Bonja:.lin Stronr,:;, Es-)

lArt,t4A,et.t.1,

CONFIDENT.,

Nita of 64314110
ks

3-1370:07t, E . C . 2

plan
rather they did not recognise that even a sound economic fo
111P
Entent

run tha

not ass
suppor
was a m

firms in

likely

remov
Austria
which
them b

are accustom

with IL, Gruok
and Mr.Ter M

respective co
Switzerland

with by
than I.had suprosed and vill probably have to be dealt
matters h

Germany

great dea

don't kno

the Allie
Prdbably

for which

League on

in advanc

"gold mar

when a co
411

Reparatio

various E

did not k
give the

me first

guarantee

neither y

upon the

they requ

41

their

yments in dollars, and this with Germans
proceeded to do the the result that h

40,000,000 or $50,000,000 the Exchange

4 to 1370!

I cannot say what t
Reparations Commission is.
capacity?

Do they ac

Are they Trustees and, if so,

they assume risks in Exchange and, if s
profit or the loss? and so on.

But in

further camplications, the Allied Trea

to arrange for a meeting next week at w

they shall take the risk of Exchange an

Reparations Cammission to retain in a E
any further sums they may receive fram

'ow if this can be done.

Like every

proposition, it is liable to be turned
French.

The only other way i

fluctuations in the Exchanges can be av

of some combination between the Central
countries concerned.

The Reichsbank h

and I have told them that we will co-op
as we would endeavour to do with you.

CONFIDMITIAL.

Vintit of 6vianb

ACKNOWLEDGEt)

71010.01t, E. C . 2

JUL 1,;- 1921

B. S.

22ad June, 1921.

My dear Strong,
This

is first of all to

acknowledge your

confidential letter of the 2nd in Which one or
need a brief answer.

two

Points

My cryptic reference to nvarioas reasons''
for doubting whether the Clearing Banks' Monthly Returns
would continue to be published regularly referred only to

their joint publication - I expect then to be published
separately by the different Banks instead of jointly by
the Banks in a combined fora. This makes no cl--rferenoe
and is due to petty quarrels between them.
The end of your third and also of your
seventh raragraph shows in an interesting fashion how
similar fn many ways are the conditions surrounding us.
I shall not attend to write about

Austria.
from which

The scheme is in the melting pot at the moment,
we must wait to see if the French will

retrieve it. But to answer your specific question, the
export or import tax would obviously have to be levied in
gold

COPY
June 22d1.1921
Bank of England

My dear Strong
Please refer
last lines of page
saddle until (say)
be even considered
custom.

to your confidential letter of June 2 d
1. I have now been placed in the
April 1st 1922 + the future will not
until Nov. 1921 - according to lor-

But I am driven to regard it as very probable tha
given health arrangements will be made next November for
to continue for another year - viz-till April 1923. I
gather this will be the general wish here from what has
been privately said to me.
Yrs ever
[signed] M

-

7in'ne
40

tilD. "17
"1"1).t1

ISA

Cw-e4S

°Y.1PRi P"1-. 174rwzr.lii'mfr

7°4trvy 014gqi

)

nervvr rely)/

Irt

rp-ryi

Ovv/s) reitip

7rrn

grit

Hitt

tt;01

141111-19

b

/

ea", A4447

sTh.

.144473,t"

4ric?

&)4

low iormi_le
/PO/194714J

elwisvir3S-rmin,y, Ir.4v

7

rip)sx

r /94 VP,
4,4776

COIN'

atit of 6144ane

ACKNOWLEDGED

tylertrIt, E. C

.2

27th June, 1921.

JUL 12.1921

Tl

My dear Strong,

Many thanks for your letter of the 9th
enclosing cony of the Business Strimary to the 6th June
with the "yellow pages" as to the duration of the
depression.

The inforration is wonderfully comrlete

and interesting, and I have to confess that we here have

no Statistical Derartment which keeps us thus Informed
week byrueek.
As a natter of detail, the confidential
discussion mentioned as being enclosed seems to have been
accidentally left out.

I have also to acknowledge your letter of

the 13th on the Mercantile Bank of the Americas, about
which we have heard so much during the last few weeks that
I an glad to have your confidential statement.
With kindest regards,
Yours most sincerely,

N

Benjamin Strong, Esq.

ANS'D

a y LETTER

CONFIRMED
RELATIVE

" 71772.1

CORRESPONDENCE

/.14,h,10 -&44.41 4012-(

OONPIDEV2IAL.
413:inh

of

(1.Entlitit

Koloo it, E. C. 2
13th July, 1921.

My dear Strong,

I am writing primarily to acknowledge
the receipt of your letters of the 20th and 21st June
and we shall ionic forward to a visit from Mr.Treman in
the near future.

Mr.Jay has already given us the pleasure
of seeing him both yesterday and the day before, and he

and I have spent a couple of hours in discussing many
questions which pertain particularly to the sphere of
Central Banking.

I need not say that it took less than

no time for him to become one of us, and this has been
brought about as much by his delightful personality as
by his position in your Bank.

Long before I knew that he was coming
here even for a few days, I felt that the difficulties
and uncertainties amid which we both seem to be struggling
made it very desirable, if not indeed necessary, that we

should meet in the near future.

The cables which have
passed

passed between us (of which confirmations are enclosed)
have now made this a settled programme.

I am, so to

speak, entitled to a vacation next month and that I

shall dedicate most gladly to renewing our conversation
of last winter on your side of the Atlantic, and for
various reasons I have asked Sir Charles Addis to come
with me.

He has a far greater knowledge than I of

economic subjects,

was a member of the Currenc:r

Committee which reported a couple of years ago, and he
and I together will be better able not only to discuss
questions with yourself but also to bring back a picture

and perhaps a programme for the consideration of our
colleat=3 oues than I could do alone.
,

Moreover, as I

remarked to Nr.Jay, Mr Wilson made a lamentable mistake
in failing to have co-operation with his colleagues,
and if I may compare small things with great this is a

mistake which I should wish to guard agairst!
But you must kindly remember that next

month is to be a vacation, and that New York,apart from
its heat at that time of year. is not a good place for a

vacation; so my idea is that after a week or so in New
York we should go to Bar Harbour where my old friend

Mrs.Markoe has a cottage and in one way or another
would

would find us accommodation and quiet.

I only throw

this out as a suggestion and shall be careful not to
commit you to any such plan without your full arproval.
I think that if we were to sail on the 5th
oL/Y1Y
or 6th August so -s to arrive/on the 14th or 15th we
should have between two and three weeks clear before it

was time for Sir Charles and myself to start again from
Montreal on the way home.

I take this opportunity of acknowledging

your letter of the 1Mda June, and on the subject of
Austria I enclose only for your personal information a
note which I made last week of a long conversation with
M. Avenol.

This really will give you a bird's -eye view

of the differences which exist between the French and
Italians on one side and say ourselves anc the Dutch on

policy of his country.
With kindest regards,

Yours most sincerely,

Benjamin Strong, Esq.

ANS.D 9`e
AN3 D CV
DATA
LLT-TIER
CONP,At'ZD
REL

/0trLekt12,

.11

E'

ESPONDENCE

iattAA 4/2041

(11211x1

LAD AND N( fl
r.

COITTI=TIAL.

a

Val Pf 610mb
Veltbrlt, E. C . 2

23rd July, 1921.
dear Strong,
Thank you for your confidential letter

of the 27th June, received some days ago, full of interesting subjects, most of which are controversial or at any
rate athit of very differing views under present
conditions. At the end you very kindly ask me to write
quite fully about all these subjects. Well, I am not
going to do so; first of all bee cruse no amount of letter
writing would be adequate, and secondly because I an
coming over to discuss all these questions and as many
more as you wish next month.

Enclosed is a list of the

sort of questions I want to discuss with you.
Finally, I may confirm that with Sir
Charles Addis I an booked to sail from Liverpool in the
"Celtic" on Saturday, the 6th August. I shall be bringing
my man Dick wham. you may remember, and if we are to stay

a night in New York I should be obliged if' you would
engage rooms .

Beyond that I shall be entirely in your
hands

POSTAL TELEGRAPH - COMMERCIAL CABLES

TELEGRAM

RECEIVED AT

2C BROAD STREET
al

4 Ory

ORK CITY

71, 1271 RECTO/

The Poi

DELIVERY P40.

:i(egraph-Cable Company(Incorporated)transmits and delivers this message subject to the terms and conditions printed on the back of this blan

laglost Dag Telegram u-nless °Menefee indicated bg signal alter the number of uvrds:--N. L." (Night Lettergram) or "Hite" (Night Telegram)li

228RAS0 50 RADIO 630FM
EMPRESS OF BRITIAN VIA QUEBEC ,SUE SEPT 10
GOVERNOR STRONG
FEDERAL RESERVE BANK NEWYORK
WE SA IL TODAY HOPING OUR

TO THE

SYSTEM AS

VISIT HAS DONE EVEN

IT HAS GIVEN

THE

AS MUCH GOOD

PLEASURE TO US PLEASE THANK

YOUR OFFICERS FOR THEIR WELCOME
CULTIVATE

HAL-

AND FRIENDLESS AND BEG THEM TC

NTERNAT I ONAL OUTLOOIct SO LONG

NORMAN ADDI S

POSTAL TELEGRAPH - COMMERCIAL CABLES
RECEIVED AT

20 BROAD STREET

VgR.PK" CITY
.2711. 127 RECTOR

TELEGRAM

DELIVERY NO.

graph-Cable Company(Incorporated)transmits and delivers this message subject to the terms and conditions printed on the hack of this bla
'AU le a feet Dag Telegram unless otherwise Indicated by signal alter the number of worths .,--974%

(ifhlga EaterttraM)ot 'Witt" (Night Tejegram)

228RAS0 50 RADIO 630PM
EMPRESS OF BRI T I AN VIA QUEBEC klUE SEPT 10

GOVERNOR STRONG
FEDERAL RESERVE BANK NEWYORK
WE SA IL TODAY HOPING OUR

TO THE

SYSTEM AS

VISIT HAS DONE EVEN

I T HAS GIVEN

AS MUCH GOOD

PLEASURE TO US PLEASE THANK

YOUR OFFICERS FOR THEIR WELCOME
CULTIVATE

HALF

AND FRIENDLESS AND BEG THEM TO

THE INTERNATIONAL OUTLOOK. SO LONG
NORMAN ADDI S

it.- -3

COPY

sqpt

15, 1921.

Empress of Britain

N
rar Strong

The more I think of it the more delightful are the memories of
our visit: that I must write + tell you for in yourself those memories
began + end. There were - as I told you - three reasons which prompted
me to come: to pay our respects to the Board in Washington: to point
out the needs of the world for treatment + consideration on international lines: to support + strengthen your position by returning
your visits + by standing behind you as regards the rest. How far we
have met with success you will be able, slowly, to judge, apart from
the motives of which I know you approve.
As soon as we reach London I shall try to get hold of Jay + to
live with him for a couple of weeks, there or wherever it may seem wise
to go.

Keep me informed of what goes on in a general way - especially
about the final form of Hoover's letter + about your plans to carry
its request into effect.
Finally let me beg you to care for yourself more than you seem to
be doing.
You belong to others quite as much as to yourself + I have as one of the others + the right if indeed not the duty to beg you to
go slow. You are an international asset + almost unique in your own
country: with you we hope to gain the whole world: without you we should
not know where to turn for instructed support: do not jeopardise that
support, especially at this stage, by endangering the powers or the health
of yourself as its channel.
I think that Central Bankers are destined to play their own great part.
Give my love to Ben + forgive my preaching.

God bless you.

As ever
[signed] MN.

is. 192

Pyre-

EMPRESS OF BRITAIN.

aity Aul

-01.(5

4z,

?now,. 9 ALittik, of
7tt.IL

ag, /

"0 km c.C.,

# c44.04

o

/G
4;144

z

4644.0

10

tid

Arc,

etAcio

1,

dev(gatpt

"i4/

-4-kur

91-Aca

pay eta

co_4.4q,,u4stA49;4, etvi,

011.4

itYlo tuff

/0014/-ve 014-

4, Arm fit
'x

49f

4Le.

_ 443

/Kati&

6t7tabikata-

ai4eN4-7tal

etteaexita- itt"-

figi ?deur ALL4

p4;44

r(Prkdia44,9 ti,cyCaLia
ALA,.

.

y-c4

y6t44.

ipet

444, %A.Cectii

Ate--Zwe,

tOC,a

141

ad-sea; .801,

a. v& let

tt'`c Lit
eft ayetA:ett,

nrA,tota */;)vt.

-41cart cut cut, 'fteacet.

O-vikCi; cek
tk

/pc

eLA>, 10.*

toacii

1424i ere 4Yetticave-P

%Law% loc4.1i,
6424-10

Get C

th4)

CO

44.0ty

O.

144:

cpiktrAett maiti

Ottk 41, fvr6,ed Ffin.

ea_al ?fret,
/tact-a-Ceti

deitAPe;to

t

4)

4iti V a4o144 ya.itfc
?
1-lit ZaZeie4A/Vt

iitAa

ra,;eagg

at-.
ftfooL%:/ eetAe,

kta,

gszik

04,.

4.44-1 afi%Z) yo guy etZt;

d (41/C4

it,d4-

Otact

Yokt cote etAto

-

kaVe,
$1..V.t4

-ge5/tioct40

a.ccera
54vo.

in 04 ilakCatiXte 444 4 Pt/

duketve ahu:v.ted

ilowe sieart, cok,u.t.vy:

404 yew, 4oe, kviko-woLett, :

7,436t, ItzgAAA 6o Ge

oto q14.4

44temc

MU,

EMPRESS OF

-.A.e4z

c.049(e.

Aallote4 16ut toe, be(okta xot

tateto tit-Ctaiw_Ao

Liu

m.

a494Ykera

sit

°Do ai,t- cidvAA1.4bi,

eoaciedfi at itti4

ivt&tugatot3

Azio0c4

APL444Cel

114100i4
4( Mt rcit,&ax,
prezfu-d

evureaoe

cetag

oNi

41.1A/tfax4 otAe,

own ra24(4

/60-1 fr

ce.;?et, Gam.,, y
a4 ciA4

AZ

Att4
kfalAs.

is. .1q2j
0-)

PUS

t

-

EMPRESS OF BRITAIN.

./

egy

La, ezArz,

J

dLAA3 of it ffkel /tit ("/
IINGvi&do cw Of 0 lt./1

;I u.ne&

EMPRESS OF BRITAIN.

f,(ect.

zazifzuwe

611(y014,5

,tno,c

a le

POs
a,40(44 y,944,i (co-444- 4)

iluerttili Gk

Art, 'etecs

LEA&

n't aid

ktw

ter4, #4. ti-le

c4 44,2,
aksa,

qf

4,43

o,,ait

rex, yeitimAti aft. inovittrita Ake_
:

dottA,0

ke,

O),

Aict

LAX644,

643 /00blik oak

Afota fit
coA4--,-,G,G649;49 (1.1,

61-za.Amac,,,t

af.s. cut,

-getio,,,A,

a4

etato
ieete.

"it 1-iktctkcisit a444. Pc/

aluteve aitivevuz.,

uh,g, yew we, koits
avot,e4,

aitcAt-nct,
eiycikcK/Ktut-

Yopt,

q pt

mwvx,

vco.,(-

91-Acd *et--

pAy au,,r 2tAir_ti

igzuot Leo e,

yowt &am, cocukt-ty:
5-zte.i. i 11ia cod_0(e,

AlAcva 7'6U& kw, 2o wa azt
Aru2ALA, eewitiCck iztAkerci

XL"

fia

IdetAriLLA4 y4siiv-P

*A

et,(24t.

rilYp-dia44.-PctAy CA-Lc-cc..? y(s4,t 414
/42

ayAfa4i,

uAsaft

no

t-tg

2-a.4

_

(OA VccCezta

troic

nto4,

eat 142

114:ast.J., ckft4",{- ftocct--

/1-tvotk4

ivtUA4-V c4A3

aa

exAefi,

nr4ciaci

0,A; CcitA.,t4.

9cAr 10;049

Asx-hia

1:LactitA mitt,
euon 0_0_44

44-_--dca01 et.A. cot, rfteetcet

(1-ct& 6-14K-C; ca
tk

aki, 10.74,

tYee4,/

1X.e)tc

.Lecoit &'(4k

kcp
(011,

atitra,(,

t4i: c

et,6 0 ta,

Cb

ar etetutavet UC. /Kay

1"ecteek-

O.

rtitiN`mO
Avoy

f,r.;te Fpcnt

edleca pee

a
-

4

e4/tact_zaei

dod,tto

/69vi

Via, O-C244 yc,f4
a4

cv4

4t-

12RANSLATIOli OF CABLEGRAM

Lorrio n, r ]and,
Rec'd Sept . 28, 1921.

Federal Reserve Bank,
New York, N. Y.
No. 81 STRI':i2LY CONr'IDEN2IAL .b'OR GOVh2NOR

1st

Your 91

Understand finance minister has resimed owing to his

failure to obtain financial aid but official confirmation has not been received.

2nd

impossible now to foresee whether other resignations
will follow or ultimate effect beyond weakening of
present Government .

3rd.

Need. for investigation would seem more urgent in order

that their results may the sooner bring help to Austria.

Briti sh Li overturent and French Government are conferring: as to advances of say

L2b0.000 Sterling each
Bank o f &gland

COITFIDENTIAL.

611:

o f

(1':11111a0

11:twolt,

E.C. 2

21st October, 1921.
My dear Strong,
As you

remember, it was part of

my prograime to pay a visit as soon as I could find time
to the Governor of the National Bank of Belgium.
My visit has, however, been anticipated
by the presence in London of the Vice Governor, M. Le?rilx,

with wham I was able to arrange for a long interview the
other day.

Under pledge of strict confidence I explained

to him and have sent him a copy of the heads of the
discussions which Mr. Jay and I had with Dr.Vissering, cf

which you are already in possession.

M. Lepreux expressed

himself as fully appreciating their Importance, and indeed
accepted then on behalf of the Governor of the National
Bank of Belgium to whom he will communicate them on his
return to Brussels at an early date.

From this you will

see that the good seed has been sown in one more centre.

I am sorry I cannot stay to write more

to-day as I am much occupied with thoughts of a Committee
to be appointed to deal with the recently declared
Government

S

!

Goverment measures on the all- important question of

AN S'D BY CAUDLE. DATE

ANS'D BY LETTER
CONFIRMED

E LAT I V E CORP E:51ONDENCE

2.

yesterday, so we have had several days for talking, and
their visit has remained practically unknown.

They have

3.

rat

4.

As to the Reparations payments, I had to make
it perfectly clear to the President that the provision of
41

ftnds to make these payments (without any def'nite prospect of their repayment) was not a banking matter which
could be undertaken by either of us.

In that respect the

position of Germany (and the Exchange) has worsened of
course from what it was when temporary banking advances
were made by Foreign Bankers last summer.

The failure to

make payment of sums as and when due for Reparations in
future is a question of politics and must be decided by
Governments.

But in seeking for some suggestion which we

here may make to our own Government in
we have hit upon an idea which is enclosed in the form of

Blackett, and
intend to the it known to the Pri
a secret memorandum. It Iis known to make Chancellor and to
Minister before he goes to Washington.

What I wan

know from you is what is your opinion of the idea,

the attitude of your Administration would be and o
any better idea that may occur to you.

(The Briti

Government have as you know any nurber of French a
Italian Sterling Treasury Bills representing part
inter-allied debt).

We are going to take over most of the

Reichsba

5.

EMORANDUM

CONFVENTIAL.

41/

6,/

REPARATIONS PAYYMNTS.

In the event of Germany being definitely unable
to rrovide the monies required for these payments and therefore forced to make actual default to the reparations
Corimission at one date or another, the following rian should

be considered.
H.M.G. to hand. to the German Government an amount

of French (and/or Italian) Sterling Treasury Bills equal to
the amount of the Reparations payment upon whiCh she would
otherwise default, in exChange for a similar amount of
German Sterling Treasury Bills or other approved Securities.
Germany to hand to the Reparations Comnission in
full settlement of the amount of her Reparations payment thus
due the French (and/or Italian) Sterling Treasury Bills
(whioh would become pro rata the property of whichever of the
Allies is entitled to receive payment according to the agreed
proportions)

.

prom the point of view of U.7.4 this would
entail an exchange of French for Gorman Treasury T3iJls of
like amount.

entail the issue of Sterling Treasury Bills or other

ON7IDENTIAL.

it

illanh of

a

(!n land
Inthou, E.c.

2

7th November, 1921,
MY dear Strong,

On reading over my letter of the 29th
of last month I do not think that there is anything about
the Reichsbank and President Havenstein which I can
1:;sefully add unless you ask srecific questions and these

I should do my best to answer. But there are many other
points about which I ought to have 'Tritten to you sooner.
First as to Vissering:

as the most conven-

ient way of giving you information I send you a copy of

his letter to me of the 2nd and of my reply of the 5th
instant.

I fear that there is not much to be got out of

the Swiss Yational sank nor, from what I hear in other
quarters, of the Riksbank.

The mention of Vissering leads me to say
another word in his connection.

You will remember that

months ago I was secretly told of Vissering's willingness

to go to Vienna to administer a suitable rehabilitation
scheme for Austria.

I was much struck by the idea, not
only

2 -

only
-q)

his ability(aven if he is cranXy,)
eceusej would ensure an econo
also

W

political standpoint.

I mentioned hi

practically to nobody else, and when

last month with Jay I was particularly

received the above under the seal of s

let vissering know that I was aware of
I received,

hovever,

the idea that

been greatly disappointed at IT not ha

offer of Vissering's to go to Vienna wit

Jay and I were in Amsterdari.

My reply

I only did not do so because I did not

and not in the least because I or you

the impression that Vissering'sadminis
solution nprfinding an offer

us could conceive. I mention t

question should crop up later.

Secondly as to the

recently exchanged about our r

stood that vhen the Bankers' D

Treasury Bill Tap Rate there w

The manner in which you were a

ani the indication you previou

were extremely helpful and satisfactory.

Pray accept my

thanks.

S.

Thirdly, as to Austria.

Ilk

IP

After some lingering

the British government has now placed at the disposal of
the Austrian Government (through the Anglo-Austrian
Bank in Vienna) r_250,on0 7htch, though it does not take

the form of a relief credit, is intended solely for that
purpose.

I think the French Government is making arrange-

ments to do the sane.
The conversion of the old Ang]o-Austr4an Bank
into a British company and of the old Austrian Laenderbank
into a French Company are both nearly completed.

I think

I told you that in both cases the operation is made easier
by the funding of the very heavy debts 'which both of these

Banks owe in sterling to us, but at the same tir'e 4t ought
to be a. help towards the opening up of Austria.

The

quarrels in Austria between the protagonists of the French
on the one side and of the British on the other have been
very unfortunate and of course all spring from the
fundamentally different standpoints of the two Countrtes.
Our basis 4s economic, the French basis is political, and
nowhere

the distinction more clearly seen than in

Austria.
Fourthly,

4Fourthly, I am rather wondering what plans you

have

been able to make.

On my side it might be well for

411

me to say that I look forward to spending most of the
month of January in the South of France.
Fifthly, Mr.Prank Vanderlip(as you may have
seen) is wandering about Europe with thunderings of a new

plan to settle all European difficulties.

I hope the time

has already come when he has gone so far as to be able to
do a good deal less harm than when he was last similarly
engaged:

Sixthly, your Officers will well remember all
the trouble they had about the changeful methods of the

Reparation

Comaission in the keeping of their account,

and I told you that on my return here We would try and get
the Commission's methods improved.

Well, the result is

that our Mr.Paice (Deputy Chief Cashier) is now spending
a week or so in Paris in order to advise the financial
section of the Reparation Commission on the methods of thell
nepartnents. But what between the French and the Italians
and the English I should think he would be glad to get
home again!
Lastly, I am very sorry the Prime Minister will
not

;

4140

I

not be ablet to attend the opening of the Conference.

Obviously his appearance at a later stage will not have
!Inc.

I will

the same effect but may be bettor than nothing.

not 7.-rite more about this especially as one of the last

things I told Jay ras that 4t appeared to be definitely
settled that rr.Bonar Law was to go to Washington and not
CT the Prime Ninister.lut thereby hangs a tale!!
With kindest regards,
Yours most sincerely,

mit.ustAA

I

Benjamin Strong, Esq.

ANStD BY CA St_ E. DATE
ANS.° E3Y LETTER

CONF,7,/-7
RELA
i2.49141%

VE

'Di/RESPONDENCE

Ce.m.;a, fat/4 / "1/211124

.

COPY.

Amsterdam, November 2nd, 1921.

CONFIDENTIAL

Referred UP lit letter
h0.7-7.

7/4/

M.C.Norman, Esq.,

Governor of the Bank of England.

Dear Mr.Norrnan,

Thank you for your letter of October
12th.

It did not reach me until after my return from

Switzerland and Berlin.

I was in Zurich during some days, and
had ample discussions with Mr.Burckhardt.

I told him about

our confidential discussions and asked him for information as
regards the present position of the Swiss National Bank, and
whether he would be prepared to further our endeavours towards
an understanding among Central Banks, on the lines pointed out
by you.

Mr.BuTckhardt was kind enough to
explain to me, clearly and in detail, the government of the
Swiss National Bank.

It appears from what he told me, that

he is not so free in his actions a
Central Banks.

the Governors of most of the

He is under the immediate supervision of a

Board of the Bank, consisting of 40 members.

Two thirds of

these are appointed by the Swiss Parliament.

President of the

Board is Mr.Hirter, a member of Parliament.
It is obvious that this situation is
not without danger.

Parliament might easily get too much
influence

influence on the government of the Bank.

Mr.Burckhardt told

me he has to be continually on his guard in this respect.
Mr.Burckhardt is not allowed to go abroad
without permission of the Federal Government.

In asking that

permission he has to state the reasons for his journey.

Also th,

Board has to be informed of his absence.
I am afraid, therefore, that personally Mr.

Btrckhardt will not be able to do very much.

Hm declared,

however, that he would be pleased to co- operate, as far as in

his power, in the direction you pointed out.
In connection with the last fall in the exchange

rat, I returned from Switzerland via Berlin.

The consequences

of that fall are so important, also for Holland, that I would
not miss the opportunity of seeing the Governor that question.
and some other Berlin bankers about of the "Reichsbanl

I want to emphasize that I made this vi

for my own information as President of the Nederlands Ba
When it appeared, during my discussion

Havenstein, that you had already entered into relation w

I have expressly stated that I did not wish to discuss t

matters you intended to talk about, as I wanted to absta
every respect from coming into your domain.

I asked my Colleagues in Amsterdam to l

know about my visit to Berlin, as I wished to prevent yo

hearing about it first from another side, and possibly w
wrong statement as to the purpose of my visit.

In a letter, I hope to write you one of these days,
I intend to tell you something more about this visit.

Thank you for your letter of October 26th and for
your telegram of the same date.

Messrs.Havenstein and

Kaufmann were here last Friday and I had an ample discussion
with them.

As to your letter of October 12th, I entirely agree
with you about the result of our confidential discussions,
viz. that we agreed generally to further:
(1) An understanding as to the general financial
policy of Central Banks;
(2) Co-operatf_on on international and economic

lines among Central Banks;

and

(3) An eventual consortium of Central Banks(under
the lead of the Federal Reserve Bank) for
the rehabilitation of Austria and Eastern
Europe on purely economic lines.

Perhaps I shall not be wrong in thinking that, in
these circumstances, further steps will be taken either by
the Federal Reserve Bank or by you, and that I may expect
your further communications in due time.
Believe me, dear Mr.Norman,
Yours most respectfully and sincerely,
(Sd.)

G.VISSERING.

C077IDMITIAL.
1110

the Reiohsbank.

While you were in Berlin you will have learned

0

that 'r.Tiavensteints deoision to core to London wfAs

sudden but, I can assure you, very welcome.

We had

long and full disoussions with him and I was particular17
glad that on his way home he should have had the advan!--

tare of again seeing you, and I told him that so far
as I was concerned he could not be too free in his
conversations with yourself.

As regards the final page of your letter, there
is, I think, nothing more to be done at the moment, but
I hope to have further oommunication with /'r. Strong
(Who will be much interested to hear about ?..Tr,Burokhazdt)

as well as with yourself.

With regard to Austria you may be aware that

that no raterial prorress has been rye in Washington
with the legislation necessary to permit the removal or
postponerlent or the American Liens.

I trust that the

tame will yet come When we ray be able to onnsult your

wishes as to arrangements for the Austrian rehabilitation
Thu will halm noticed that following on the
policy which 7'r.JNy nna I discussed with you.

the

New York Disoount Pate was re-1i 100 to 419. last Weinesday

and our Pate to 5,f on the following day.

I should be

still bettor pleased to see the rew York Rate 17' below
ours but this is a step for viliCh we ray have to -,z it a

eonelerable tine.
Believe me,

dlar nr.V.seertngs

Yours most faithfully,

.)

Dr.G.Vissering.

.

(Yr.
(

E.,

ronz answered this)

-vauL

KAIttlalto

IfiniNTILEX.2

11th November, 1921.

My dear Strong',

We have just unveiled in the Bank Garden
our Memorial to the members of our Staff who fell in
the Great War.

As you are interested in our domestic

affairs, I thought that you would like two
of the Memorial.

photographs

The Statue represents St.Christopher

the Garden is the old Churchyard of the Church of
that name which, as you may recollect, lies just outside the Court Room.

Yours most sincerely,

AttnrMot.t..eut4.,

Benjamin Strong, Esq.

\

Caul: of Of'n,t3lin0

FEB 7

B. S.

31:0101111,

c. 2

11th November, 1921.

My dear Strong,

I enclose an early copy of Sir Charles

Addis's address before the Institute of Bankers on
the 8th instant.

It was received with mixed feelings

but, on the whole, I think that it has done good as
an antidote to the policy of the devialuntion-nongers!
With kindest regards,

Yours m

t sincerely,

ALITOV144.4t/14

Benjamin Strong, Esq.

pRIVAT:

CONFIDENTIAL.

O04

illanl;

of (1!ntliaitb

11th November, 1J21.
My dear Strong.

Or LA' 07011
I send you a copy of a schemeA

drawn up by Mr.Have:Istein when he was her, which I
meant to have enclosed in my letter- of the 7th instant.

Pray forgive the omission and,
with kindest regards,
Believe ,ae,

Yours very sincerely,

6-vAA-"Aelte

S

Benjamin Strong, Es.

"IN 41 .i"MtiliA.
e-,1

AMA talcum? An/r-

-

44.

,41

111/7K.,

rr,34i tei 111 1 LL,

NET MENORANDIJM

-

BY PBESIDULUTENSIBIN. The lists (appendix A and B)
00

discharge of the liabilities forced upo

illustrating the unbearable pressure up

and the overburdening of the German cr

overlooked that in the details the sup
optimistic but by no means sure.

Thus in the first place both

the mere assumption that the unvariable

2,000 millions of gold narks forced up

year by year, 1,000 millions of gold m
represented by the customary rTeans of

It is true this would be at the cost o

the other side, the remedy would mean
110

in comparison with payments in cash or

exchange running in foreiRn currencies.

the fixed annuity

with

column 8a invariably with 1,000 millio

regard to the delivery of goods, while

is inserted with an amount of 5,000 mi
beginning with 1921.

This amount ans

the export value stated in 1920 owing t
of our export in the first months.

M

that we shall succeed in increasing ve

export of commodities, i.e. for the ne

following six years by 5
than 1,000 millions of gold marks annua

Thus after the elapse of
exports would reach the

marks a year (that is nea
before the war).

T:te fu

could be maintained duri
excessively high level.

the conditions of the wo

*LI

2

0a&
11.

dumping measures of the co
the lists are based upon the

shipping will have for the t
freights and from banking w
earnings from 200 millions
gradually to 1,000 millions
This stri answers nearly to t

As to the import of

economy for its own needs

it may be possible to reduce
7,500 millions of gold marks
for 1021 is probably much h
within other tw
west (Loch im. Westen) - wi
(column 5).

the Western o
the import of
higher level.

productive met

the process o

materials dest
refining proce
now-a-days an
60% of the va
estimate made

I hope that wi

3about 500 millions - will have reached their end in 1924, that
debit will be reduced to 1,000 millions of gold marks (column 7)
The rate of interests upon the annual balance resulting from the movement of Germany's foreiqn trade (column 11)
has been taxed at only 5% (column 9), but without making allowance for any sinking fund. The actually existing indebtedness

of Germany to foreign countries has been put into account for
1920 with 62/3 milliard gold. marks in accordance with the
German memorandam for the London conference and the relation
between gold mark and paper mark has been established one to

fifteen (coil= 13). All these estimates and presumptions are
very optimistic and they are not meant to say that I personally
believe they would be fulfilled in all parts. They are rather
meant to illustrate that even in the case of far-going
improvement of our economical energy and capacity our indebted-

ness to foreign countries must grow to the utmost.
If we regard the list A which is so arranged that
both the cases are represented., the payments of 50,000 millions
of gold marks to the Allies as well as the 132,000 millions of
gold marks, and if we examine especially the first case which
alone seams to be discutable, the absurdity of the demands
appears from the fact that Germany must pay the auount of
50.000 millions of gold marks in the short time of eleven years.
With this fact sentence is passed upon the improvement -bond
(3esserungsschein) proposed by the Allies, because its character
bearing the form of an export-duty makes by no means any allovrance for the German economy.
AccorctIng, to the increase of the

4a further inflation. At all events the annual liabilities
resulting from the German balance of payments would have
increased to 19,900 millions of gold marks (column 10) in 1931

and the indebtedness to foreign countries to 60,800 millions of
gold marks (column 12). We are not able to state the corresponding sum in paper marks the relation of 1 : 15 between gold and paper mark being raraoired and the base of the calculation
being shaken. Only the fifteenfold of the sum in gold marks
represents a sum of 912,200 millions of raper marks. The
annuities having ceased in 1932, the Gem indebtedness, it is
true, would rapidly decrease and up to 1941 it would have
diminished by more than a third to 37,700 millions of gold_
But mention must be made of the ramarks uttered. The
result bases on the presumption that the German export can be

marks.

-5.

the Allies. The chief reason is that Germany will never be
able to get international credits in such an extent as it is
shown by the figures in column 12. That is also true without
any restriction with regard to the development represented by
table A made up under the supposition that our obligation has
been fixed once for all at 50,000 millions of gold marks. The
experiences made just now, when we had to raise the money for
the payment, of the first 1,000 millions of gold marks, have

exhibited the German credit in the foreign countries at a very
low level. Even the credit of only 200 millions of gold marks,
the first one taken in connection with the war indermity
payments, could on.ly be realised under extraordinary difficulties and it could not be got, before the Reichsbank herself
entered as debtor.
The combination of column 12 (indebtedness to foreign

countries) with column 2 (export) furnishes perfect evidence

of the total impossibility for Germany to fulfil the diands of
the Ultimatum; neither the increasing of the export nor the
supply of the waited foreign credits will practically be possib1E
and the accomplishment of the Ultimatum must, according. to the
experiences made with the pa7,/ment of the first instalment bring
about a progressive collapse of Germany's finances and currency.

The liability to pay 132,000 millions of gold marks
(lists with appendices) would cause a steady increase of
Gennany's foreign debt ad infinitum, even if the optimistic
premises of list A should not prove to be exaggerated ones. It
seems not to be very useful to enter more in the details of the

CONFID

Vault of 01"n9ial0
NJ'

Koloo

E. C . 2

14th November, 1921.

My dear Strong,

I am much obliged to you for sending a
report of the HParing before the Joint Cannission of
Agricultural Inquiry as stated in your letter of the 24th
October.

It is a bulky volume and mostly in small print

so that I do not pretend as yet to have mastered its
contents.

But Ian in process of reading parts of it with

care, especially your evidence and that of Governor Harding
and I shall no doubt thus obtain a good deal of information

about the System which could not be gathered otherwise.

Much as you have been worried by this Agricultural

Inquiry.

I feel sure that in the long run the outcome will be to
the advantage of the System as well as to yourself.

Unfortunately the wear and tear falls upon you and not
upon the System, but that is what corgi es of beim- a pioneer.

Now comes your letter of the 1st about

Mr.F.A.Vmderlip and the call you have had from 7r.H.E.
Benedict.

I have already suegested in my letter of the

7th November that the former is inclined to rush in where
angels

2.

3.

Nations Scheme will have to be dressed up in somewhat
ftein-peettciAL444.5,0

1100

different garments to mate it palatable to Vissering, to
Ityourself and to this Country.

I take this occasion also to acknowledge
your letter of the 3rd instant, received to-day, telling

me of the visits of Mr.McKenna and Sir Dymond Fraser.
From neither quarter are we here disposed to look for any
concrete results.

Personally I think T.Tr.McKenna spoke

about the Inter-Allied Wax Debts when he had better have
kept silent.
his visit.

But two things must be remembered about
Firstly, he feels very strongly against

German reparations which may rightly be treated alongside
of the Inter-Allied War Debts, and, secondly, he is anxious

to increase the prestige and foreign business of his Bank.

2.

3.

rightly enough that having several old and satisfactory
accounts in London he could not close then forthwith but
would make then dormant without delay or continue to do
nth our definite knowle3ge and approval. That
was as far as we could ask him to go. In this connection you may be interested in the enclosed copy of a
letter from the Reichsbank dated the 5th instant setting
forth the terns upon which they wish to keep their
account here, which you will see covers the question of
exclusiveness. Please keep this to yourself.
When you cone to talk with the Bank of

4.

-`

0
of the Committee on Guaranteed Loans (for the relief of

unemployment) but mercifully at the last mnment our
statesmen de cide d that economically s eaking I was t o
orthodox to give such a Corm-lit-tee a proper savour, so I

have been rejected and Kindersley is to reign in my
II

stead.. It is lucky that these sort of things do happen
for they make you chuckle even on the darkest day!
With kindest regards,
Yours most sincerely.,

~AA
111111111.1"..

Benjamin Strong, Esq.

P. S.

We must always remember that the Bank of Japan

or the Reichsbank midht want business done Which it

would not suit you or us to do, e.g. dealing with
documents, insurance, exchange, and such like.
ANS'D DY CABLE, DATE
ANS'D 3Y LETTER
"
CONFIRMED
RELATIVE CORR E5PONDENCC

&c. will you p
TRANSLATION.

and protesting

and expenses t
REI C}

ANF -DIREKTORIUTII
,n

Of

lio.25973

us by VArel pur
letter
amounts under

wire, using th

fate of amounts

In a

have alrmdy ma

account (2), a

interest or ap

first class bills which ever is in your opinion in our best
interests.

The instructions on our accounts will be made
either by means of cheques or by letter or telegrailic
advices to pay.

Cheques and instructions by letter must be

signed by two gentlemen authorised to sign for the Reichsbaa

Direktoriun in accordance with the enclosed list of signatures
and in this form are binding.

Cheques that _ay be drawn

in every case be advised beforehand and we request you not to
honour any cheques of which advice has not ar2ived.

Telegraphic instructions are only to be acted upon if the
examination of the key number at the beginning of the
message corresponds to the code.

Our transactions will

be within the limits of our credit balance.

As arranged please send us at the end of each Laonth a

statement of our accounts for afgeement.

In

cases in which we desire to undertake
the London Market -of foreign securities we will

purchases

place our instructions in your hands in order that they mar
be carried out to our best ad- rantage eitherly yourselves

or your connections.

We will in future make our arrangements so that
the London business of the Reiehsban1 is chiefly conducted
through the Bank of England and we will

k-_,,erp

correspondents comparatively - small amounts.

with our
We ventn e

to point out, however, that the transfer must be gradual as
for obvious reasons it would be undesirable to suddenly
sever connections which have existed satisfactorily for
many years.
The question of a gold de-c)osit at the Bank of

England we will refer to again as soon as the necessary
alteration of the Banking Law has been effected.

We take this opportunity of expressing our thanks
for t he generous and conciliatory manner with which the

undersigned were received.

We express the hope that the

r-lationship may have greater and greater influence on the
economic conditions

not only

of the countries concerned but

also further afield.

Awaiting your reply we beg you to take over for
the credit of account (1) our funds amounting to £10,000.

REICHSBAX-DIREKTORIUM

(Sd.)

- HAVENSTEIN

(Sd.)

- KAUFFMANN.

:010S

"CONFIDENTIAL

0")?

Vault

rf (fIvian

3C010011, E. C . 2

24th November, 1921.

My dear Strong,

I have read the enclosed which I hasten
to pass on to you.
I received it privately froze the
Swedish Minister an I need not -ied that it is

intended for your eye only.
With kind est regards,
Yours most sincerely.

Benjamin Strong, Esq.

00FY.
:.-.:;r

Warred to

ini,ptter e
40

Scand

Copen

decla

"Sver

ing t

an en

cease

reviv

stand

is pos

choos

out t

not m

will h

stand

an in

stand

a vain

prese

of its

the p

with a

This c

States

betwee

toward
other

compar

agreement would also mean the first and indispensable condition
for success in attempting to solve the problem of exchange, even

if only a step towards the ultimate purpose, the general
economic restoration of Europe.
In any circuastaliees, so long as not even Great

Britain has fixed a new parity of exchange in regard to dollars,
none of the Scandinavian countries would be in a position to
stabilise the dollar value of its currency. The resolution
emphasises as a guiding rule, that the small countries should
abstain from all stabilising experiments till a solid basis for
such an attempt, i.e. an international standard of value, had
been arrived at. Premature action would minimize or jeopardise

the possibilities for a future stabilisation.

This, however,

should not be a reason for these states to remain inactive in
An energetic work for improving their own
economic and financial conditions is strongly recd vended. This
work has hitherto been directed towards -D rev ent in g a new upward
movement in the prices and stimulating a careful and continuous
reduction. How far this reduction ought to be brought is not
the meantime.

considered a question for the banks represented to decide.
The resolution further asserts that the bank rate
during the war and up till now more or less has lost its ore-war

effcctiveness as a regulator of the financial conditions of a
country.
Only by stabilising the currencies in a nimber of
countries, by restoring the gold standard and the international
confidence can the bank rate resume its normal functions.

fLt.A.A
CONFIDELTIAL.

c"-/(4"

)

2

a m^ratorium.

Practically all of us in London are
agreed on the views and remedy stated in my cable
No.100.

I sent a copy of it to Vissering but he is

rather casual and has not answered.

I fear his hands

are pretty full with the trouble over the Rotterdamsche
and the Nederlandsch-Indische &c.

As to the period of postponement (if

there is to be such a thing) you complain quite rightly
that m776 or 12 months is too short.
';hat we want is a long moratorium;

The fact is that

what the Reparation

Cormission maybe willing to concede is a moratorium of
more or less indefinite length subject to being broken

- 3

"
It

'

obviate this.

We here are most anxious and insistent

that the Ruhr shall not be occupied but at the same time
we want to get on to a smooth keel so as to allow international business - or at any rate European business - to
start up again.

It is for the sake of this international
business that I amp so anxious to see the Reparations

somehow tacked on to the Inter-Allied Debts and settled
as
whole.
1 II > amaking a
..a..."'
I

We are, as it were, in jeopardy to-day of
temporary European adjustment of the Reparatio

payments which adjustment may last long enough to allo
the Inter-Allied Debts to be settled next spring or

sumuer as a totally nifferent and separate question. Su

11

a possibility is too ridiculous.

Having, let us suppos

steadied the Exchanges by same Reparations adjustment,
are immediately to see them unsteadied by Inter-Allied
Debt payments.

As regards the present position, it

more or less outlined in my cable No.3, and the Governm

is now engaged in trying to square Belgium and Italy so

that their Representatives as well as Sir John Bradbur

may be prepared, if necessary, to vote for a moratorium

These having been squared, it would be a question of
some

-

Is

for his own part.

He saw the Austrian !Tinister and

fortunately was able to have a talk with Jack Morgan too;

so that my telegram No.4 of yesterday was merely to

prevent international - and still more Austrian operations being discussed in New York without your
knowledge.

You know these questions are even more
serious than they are d-ifficult.

I don't believe it

would take a great deal of financial or Dolitical
stupidity at the present moment to bring chaos into
Austria similar to what we see in Russia;

to break un

Germany; and beginning in Portugal to spread revolution

-

-FS

right through the Peninsula.

l0'

Don't forget that you are expected at
Nice early next month, and as to our great sorrow you have
been laid up it is all the more necessary for you to plan
such a trip.
With kindest regards,
Yours

_

st sine ere mittAttA
ly,

Benjamin Strong, Esq.

ANS'D DY CniSLE DATE
LETTER
/2)14/2.
CONFIRMED
ANSI:, 13Y

s.

RELATIVE CORRESPONDENCE
$41,

fir. Cair&
/417.

944x.eu,c4

g

#$

/6

- deal with her until something has been done about
Reparations. While I believe this to be true to-day
41k

di let us hope it will not continue so indefinitely.

But this is all part of a larger

question which I happen to have mentioned the other day

at the end of a cable to Strong. Both for economic and
political reasons Europe is in a very precarious state.
All the countries except Russia are jive& keeping on an

even keel, but in several, such as Austria, rioting on
large scale for economic reasons is near at hand, and i
others, such as 'Portugal, revolution is knocking at the

I think we shall come through.
The question of Reparations is being
considered promptly and effectively by our Government a
its settlement would have a steadying effect all round.
door.

But if things really go wrong in one place or the other
who is going to get the blarle?
We all. hope that it will not be long
before you cane and parr us another visit. Meanwhile w
kind regards and p: o o d wishes,

Believe me,
Your,

Pierre Jay, Esq.

ANS o Dy DA3LE.
ANS'D OY LETTER DATE
'

CORmED
rIELATiVE

sincerely,
ay14(.94Af,

"1206101

DoRRESPONDENCE

it.th,

011161

CONFIDE7TIAL.

1;3ov

E.C. 2

3rd. December, 1921.

My dear Strong,

This is merely to enclose a copy of the
letter I have received from Havenstein and of m
which is alluded to in my cables Nos.100 and 5.
I have agreed the reply, in confidence,
with the -principal people here, and I an also sending a
copy to-day to Vissering and to the Governor of the Bank
of France.
I know already from. your cable No.11

that this letter expresses your opinion as to Germany' s
inability to borrow for the purpose of making Reparation
payments.
Yours
.

t sincerely,

ANS'D DY CA 3:-E. DATE
ANS'D ;iyy L.CTT ER
1.2/ 4/A I

ReLn /1044414,

Benjamin Strong, Esq.

,ONDENCE
U.14'64, $4/00

,A4-270 e-c4-6, -Ow

xer

of her utmost willingness to pay will lead to furthe

with the COPY
Reparation Commission and the Powers of the

liter Prasident

a view of obtaining another modus for the Reparation

des
.deiekobank-Direktoriums. corresponding to her ability, Germany is resolved to

w mp

0.9.

to raise the deficit in respect of the- January and F
ments in the mixoeptional way of a credit.

Vie see

get this credit at present only through England.

Therefore, in view of the will

which you have been goad enough to hold out to me in

hearted manner when I was 3n London, I beg to addres

earnest entreaty to negotiate with the leading men o
Haute Finance in a way which you think fit, whether

general terms and in which form they would 11, prepared to Rrant
to the German ;3mpire a °roc:1ft up to ri5cA Millions of loldPmrks

equal to about MI Uilltone of Pounds Sterling,
If such n readiness exists I should be riuoh

obliged if you would kindly make ()leer the following points:
T7nuld the oreitt have to be guaranteed 1'

morcties suppltel direotly by the German Pripire9
In this oonnection T. nay say that the German

empire does not n' present possess any free curettes of her own.
If and as far, however, ftR the consent of the Reparation normisston

oould, be obtained the nerman novernment could posebly prooeed to
the mortgaging of the customs or of the foreign ourrenoy Whtoh ts
to he delivered by the German axporters out of the value of their
exports, respeottvely, to the mortgaging of a oorresTonding part
of -these two sources of Revenue.

or

Whether only a short bank credit is thought obtainable.
The latter, however, would be of value to

Germany only, when granted for a period which would permit the
gradual repayment within a reasonable time out of funds to be
rade available.

A repayment out of the securities to be

supplie directly by the German Government (part of the revenues
from customs or foreign currency resulting from exports), world
scarcely be possible within a short time and the same applifti

to a guarantee to be given by the German Industry, as the
Induatry also could redeem its obligations only gradually out of
the foreign currency reslating from Export.

The German Government

would in the latter case make efforts to cause the -eparatton

Commission to waive until the rnal repayment of the credit the
collection of the 25

or of. a corresponding part thereof of the

ale bill
Ite'r

[do

-

-

...

la T

TI T

4

n

security rlipht be provided if the form could be ap

et " 7 .

iiit latter

copy.
Ger-Ian Grmerrrient.

rear TIrosident TTavenstein,

You say, arc]. I al-, not 1>re

I have received 7.-iour letter of the 2
your view, that neither the puementee of the Rei
ultimo, subnittinq on behalf of the er-inn Chancellor a requ
&old at present hold by the Reichsbeer would be N
Which for convenience I nay surrtarlie as follows:
as security,
in order totast17, :Trou as1of the in
effect pwrent whether
rlents due to the Reparation Cor!oission in janilary and Pobrua
the Ger.ian Goverrrent being! able to obtain such a
vrishers to obtain advanoes o
next year, the (e an Govermenttake the fora of long* "Loans
Country, they would
kind or another ap,,,rerratinp net less than Tiks.55C),(rP,nr,f1 m
by the Public) or of short ored:Its (to be supplie
and believes that such advances cannot be obtained exoeot in
I have oonsulted with the
Country.
to forn an opinion and I have to say, in reply to
that under the conditions t7hich at the present t

PaYrTnts due durinp the next few ''rears by the Germ

to the Reparation Corrii.snion, sl ob. a &rano es cann

this Country,

I beg. You so to infoi your Chancellor,

I hold _yself at your disposal for any
further information or assistance you ray desire, and meanwhile,
in vievr of the Inportance of your letter, I or sending a cmrr
of it together vrith a copy of ray reply to the Chancellor of the
TlIxehecrier.

I beg to remain,
Pear President,
Yours most faithfully,
(Sd,)

President Tlavenst e 'n

71..117).7.TATT.

CONFIDENTIAL.

2

3

or
41/

meaning and extent of this developm

as to where it is going to lead.

going to affect your rate policy and
do you see for your rates aver the
Here I mr, incline
along as we are.
With kindest rega
Yours

ost s
.

07

..--

Benjanin Strong, Esq.

,22.2

FRIVATE
411601ferti

1n

in

Int e

fob

Is

5th December, 1921.

Dear M.Prosident,
Your visit to London came tc an and scree five

weeks ago and I have to thank you for ycur kindly message since
received through ':larks.

I, at least, enjoyed your vsit

metly, and I believe we shall Emma day come to raleaber it
as a sort of "turning point".

As to matters of business you

or the Reichsbank will be hearing by sel,arate letters.
On the 2nd I received from Dr.Ratho_lau your

letter of the 25th November, and being already prepared for it
I was able to post my answer the following day, when for your
convenience I sent you a telegram to say it was coming.

I

showed the answer to Dr.Rathenau and though he might have

wshed it had boon worded differently (because he

was thinking

politically rather than as a Central Banker) I do not think
he was displeased .ith it.

You may like to know that I sant

oopies to 21T.Strong in New York (in part by cable), to

Dr.Vissaring, and to the Governor of the Bank of ',ranee, all
confidentially.

I hope the answer will have satisfied you,

first, because it stated the true facts and secondly because
those facts are really a help towards the object you wish to
achieve.

I cannot write to :-ou as to how that object will be

ach: eyed for that is not a banking question;

nor do I really
know

inow enough about it.
41

But I'Lold you in London that, in my

belief, the Ruhr would not be occupied neat month and though
there are certainly difficulties with irmance and others to be

overcome, that is still my belief.

One of the r)su3ts I wish to see anerge as
an outcome of the negotiations now in progress is a strengthening

vis a vis your own Governamt.

of your (Reiehnbank's)

In my opinion a Central Bank which is so much dominElted by its

own Government as to have no independence or initiation and even
in a

no right of protest is not /fair position and therefore cannot

play its part either within its own country or, still more,
alongsi de other Cen'Tal BanLs.

That is for instance the

present position of the Bank of France, and we all lose by it.
In varying ways the position of the Netherlands Bank and of the
Bank of England and even of the i'aderal Reserve Bank is d]fferent

and more independent, and, now that we have more or less
emerged from the domination of our respective Governments

which during the Wr was unavoidable, all Europe will gain from
it.

Therefore I hope to see ycur

osition strengthened as a

result of the present negotiations, espeoially with other Central
Banks, and for that reason too I was glad you paid a visit to
Vissering (who wrote and told me what he intended to do) and I
hope you are already in touch with strong.

In all these matters I look wok on you:
visit (as I have said) as a

ttarling

point.

Many people hare
will

will attribute the present negotiations to the visit of
Stinnes.

I do

I did not see him but I heard about him.

not -know why he came:

his standpoint is not the same as

yours and I doubt if he achieved any good - financially or

Or

unles. i.);Thaps for his own businoss.

they will attribute them to Rathenau.

But that also is not

true though his views are wid 1. and not unlike yours, and he
has made a good im.Lzession and hal aft towards a European

I should like to think that he was going

understanding.
next to raris.

We hear bad accounts from Austria.
to happen there?

What is

The political diffareneas of the Entente

make any action diffir:ult. and here there is hardly free
capita] enough to Ttstablish the country firmly on an

cover all financJaa questions at which I should like to see
you

country rei.aesant:yd.

onjy a hoiD), which

13ut this

has not as yet been even mentioned in Washington.
You wi.]3 -and ysted, ZIr.7r7;sident. that I am

writing to you -,_ ,rsonally, and as ono C-tral Banker to
another.

I hope you will be aLle tc understand my meaning

alici that you too will write to me.

When you do so please

be sure add tell ia3 if, in arrj way, I can b

of h.:1p, for

you know that is what I should 7].1-e.

Believe me,

Dear Mr.rxesident,
oinceroly,

(Si6ned) M.NORMAN.

rresid ant Havanstain.

514444/

nt in my letter of October 28th, and I have wiready told

IP

*you that the proposal in the Memorandum was intentionally
outrageous.

In other words, and to use your own words,
it, was a method ofdtemPorising with a situation which needs

radical treatment" which would put "almost irresistible
"pressure on the French for revision of the reparations
"program".

It is extremely

This is past history now.

difficult not only to keep you informed of facts when you
are 3,000 miles away, but still more to keep you in touch
with hopes and fears and sentiment!
With kindest regards,
Yours

t sincerely,

ANE'D
BY CARLE.
CATe
ANS'O B
LETTER

Benlanin Strong, Esq.

CONFIRMED
RELATIVE

Of

CoRREsOoNmeNcE
5-4

tip,_f_aa-te:c*
e

,

90,9g; avi 1 pi 6

/Z /i/2

r

°/A 5/2

ACK NK) VV

r,

jganlegf2dainA
'7-Gition, E. C
.

2

9th December, 1921.

416
C.1.01JIDaTTIAL

Valtit

VO 1(6

-

f 6141-1ane
3E)310011, E. C . 2

17th December, 1921.
!7y dear Strong,

I have no letters from you to acknowledge.

This is Saturday, and I go back for the
sake of a brief recapitulation to last Saturday, the 10th
instant.

My cable No.9 of the 9th had given you an

imaginary picture as it arpeaed in the best light when
Loucheur went back to France on that date.
r'n the Saturday I saw Rathenau for a long

time before he left, and in consequence I was persuaded
that at the present time we can achieve nothing better
than a temporary moratorium, but that the ultimate
settlementshouil depend upon a General Economic Confer-

ence to be called if possible by the united States. I did
not know whether a brief moratorium without other rearrangements was possible, and I Was uncertain about the

prospects of a General Economic Conference being called
within reasonable time by the United States.
By Monday the 12th it had therefore
seemed

'seemed worth while to try and bring together the Tinited

states, France and Great Britain, not for a General
Economic Conference but for a meeting in the persons

416

activelyiand I may say bitterlyldiscussed in the newspapers here and in France.
difficult:

The position was becoming

it was thought that the British Government

4F.

was somehow involved in this idea of a meeting, of which
as a matter of fact they knew nothing, but which had
undoubtedly and unfortunately been somehow divulged to
the Press possibly in Paris.

Be that as it may, the

question of a meeting in Washingtontabout which I was

attempting privately to find out the possibilities from
yourself had lost all chance of privacy and had become

public property which in turn was liatae to make a
difficult position for the British Government,especially
in view of Briand's prospective visit.
MY 17, sent on the evening of Thursday/the
15th, was therefore designed to ask you to hold your hand.
I had no other course.
On Friday, the 16th, which was yesterday,

I received your No.23 and sent you my No.18, the only
answer which, under the circumstances, was possible, and
there the matter stands and I will not enlarge upon it at
length.

Of course you, Strong, and we here, know
that

that we are individually and entirely agreed upon the
motet desrable policyl which is summed up in your words

"that simultaneous consideration of Reparations and
"inter-Allied debts by all parties interested would be
"the ideal arrangement".

That is the ideal at which I

was aimingleven if it were by a private meeting of three
in anticipation of a General Conference of many.
But it is evident that at the moment that
ideal of simultaneous consideration is not practical
politics, and we in Europe must therefore try to make
some arrangement among ourselves without the United
States, but I do not know how far it will be possible to
do so.

Briand is due to arrive to- morrow and

obtain the support of either or both of these Countries
411,

will n-ed considerable "payments" to one or both of them
in one form or another;

and if the moratorium is to

last no more than three or six months, the time is not
long enough to impose on Germally even the few very proper

and necessary conditions outlined in my letter to you of
the 5th instant.

I have given you in a rough and ready form
a chronological account of the past week's cablestwith
some explanation of how they came to be sent and how
they were received on this side;

and I am now in hopes

1

that you have been making personal and informal
enquiries as to how the land lies in connection with
of a General Economic Conference in Washington.
such a meeting as I have mentioned abovelor failing that
With all good wishes,
Yours

t sincerely,

4:(6ehtaft,
411111----"".

Benjamin Strong, Esq.

P.S.

I purposely leave out any mention of Austr
I have heard from you further.

ANS'D BY CABLE. DATE
ANS'D BY LETTER " 2//8/a,
CONFIRMED

.

RELATI'J- CORRE7,0NDENCZ

COPY
Sunday, Dec 18,21.
Thorpe Lodge,

lappden Hill, W.8.
1/1111.My

dearest Strong

It grieves me very much to feel you are not well + perhaps
are overworking + not taking care of yourself. As a private
individual you are within your rights: As a Central Banker you
are not. Thats the main reason for this letter
I have told you before that you are not your own property:
Many of us depend upon you: there may yet be (not a war but) a tug
of war: + you will have to pull on :tour side because there is nobody else in the whole of America. So you are an international
asset. Dont forget that. The fact that perhaps few realise it,
makes it none the less true + those of us who do realise it, love
you all the more for it.

These Reparations questions have during the last few weeks
given us a state of things half way between a circus + a panI hardly know whether I am on my head or my heels.
demonium.
Addis is in China + that really has been almost a mercy:
for he likes to argue every question down to the theoretical bonewhich is quite right but takes a long time + uses up a deal of
tissue. But he certainly takes the wide international view +
looks upon you as a Brother. So I can ask no more of him.
I am going to the South of France on the 31st as you know

I must pull out for a few weeks or I
+ Moreau, is coming too.
But I shall be back in any case before the
shall be done up.
end of January.

[Dec. 18,1921]

I an keeping in close touch with Vissering + Havenstein.
was the latters visit here which in a quiet, unseen way really
lw brought the Reparation Question to a head here + obtained for it
a more "understanding" feeling: in fact the Chancellor has become
as much anti-France as he has pro-German! He realises that the
large question is the Civilisation of Europe which includes the
industrial machine - + no mere argument of pounds or dollars.

I realise that your position - to say nothing of the position of your administration - is fearfully difficult. I am glad
we paid you that visit last summer + I am glad too that your
Congressional Enquiry is behind you
Is it not strange that in these crucial days you + I +
the likes of us in standpoint, have most to fear from the countries which in theory are most democratic - ie. France + the U.S.
- while Japan, Germany, Italy + England though nominally less
democratic are actually more international in outlook.
Now, for heavens sake, take good care of yourself, my dear
The object of this scrawl is to urge you to do so.
From
the Armistice down to Nov 1921, we have had lots of troubles but
they have been made for us. From Nov last for a while we have
troubles to get over which are the direct + inevitable outcome of
the war. And you + I have another 15 months in which to work
together
B.S.

God bless you: I lean on you every day.

Yrs affect31 [signed!

M N

Sit4414Af ca.er,

0

et
kiett:4 cotm.1_644.4 Aamre, &vg.tur..712.,

44- itAt tuctit,0
6-ektareOL et,

C-44 CAL4 OC. A- r-4--ft 42141 di-fV1;1411

tt,iiSLA6LC,C

44.4(i
0.644,0"r1A

44 A, 7at6,,ol, 61(rxt41.0

54,e4A)

it*V%

eLl hAr-fvut_tc

.

kt,14

mt &aka

C-0 Ca; (V4tAftt. had 4t12",
C41 ;

A.1

fOC

60

40(0te.

CAKPI

crvtvi4c.c9ry 01*-(04N-A0 14.

wetArat

ct La -vv.i5C&A* 44/4 6cake4 4, 414 0:v114/

Kra ste_eLZ

Wad

avvi.

4aa4202,41

Llikgis/ 4 kricte., GiZta4.nakce10.6

V ca-taS Cc-Coatia

71404A-

ttat

tiAta cite,

Ec,

ittOIC

4.41t 543-14, (
kicAtt

c(..r

r, vtliA)

Ate, 440--C.,

c31

11/14Ntiut,

44411C/ c9f 4A4W.

PraAtx4

c4944wt4..ei

fetA, to.coAka

Autta frwa c9L4AA,t,i)

CAA&

anAc Ua.cati GL,
f4/1._Z 64.

0,(

,

Larkoat

01: 64-4AAt

gkAlti

g1444141Af
AC;Vrk,VM::7,/

THORPE LODGE,
CAMPDEN HILL. W.8.

1(1 kute,4-

EB 2

s(i7-45-(43

VtA124 Ake. VCAti KkAaet

ICSLe %/et,.

0Al. WY(

* IttatAfog ttt (X)44"C07,14Ak5
trZtA9-t- Laikkis

efilraft4i.-ei.

A, IZIPVZ. 2/4Acti-e)

64-D

co LIL44: yoti,c n, VAA:0_

'2444,-Pt (7. ttiki

'/

(,-t&,tre6Af,

4a4

Acu..A,r of

71ta-ne, ANAL/ AIFE'

(K.6-+

tt

Ilv4cceA, it at /1.4,Lickfd
a;,g.,

;zt

CO-We

4244 bote
16)4k

(tk,

iv

49-f krzt-t

6.n ezwe cIA

a..44st

4...e_ahL4t,
.

_

"(494et,

00-4,4 f/1 cistk tketk.,

44fr

T-144 (

tAt-P-n.

4-c4.4%),A.

lAtett,-ex, c9(

coca, a44 aae-4-7t44144.14a,

egittc-r

f4944 AAE. frie4 yfr4LT

ixeke-)

(Ail

titeLAN

/4..LAN_Ao frnAt
(A pti,t.4-11-1(/

4C

at Ce-uktat 0a.ttil %/au cvie

;

7Itckti

Frkt.,_ 6a,

16g4-

CAA.

4,4a444 4:t

(Tao et4)
;/C"

.

Yr-afAA

THORPE LODGE,
CAMPDEN HILL. W.8.

tget.tiet4.44C4/;4

ttx a

(gtka, titP4A,

5

a444

44t-ZaAc'

141 40'4/3

Cita

(1164-4; Cif i4(-51

edartA4/ vca.k 45LA.e, ArettLei

/ke,
Eittulecit bucw Ocit(1,-GA,(4914A-

to 4,

Svttg/atE;t4

kati.,

kervjj

v.0-4-42.A
c'ke4-

f-ecetAtzz.

fo-v. a At_
kt1,4 642-0.-44w,
(7(t CIAAAke-¢,(44"

Ih`o -

fl-4'.7vtt/vv
id

kt, Clot5c,

NICAlxikes

42, CA; LC6A-6;#1,

fraud

/Kat'

CuAeett

Acte-et;t1b -

42)

cord

.C. cut&,6-

Qv n4.

tto

PZPIAAJ,-- 0"C CZNS4Lit,41.
motiz, cv.t.cerwftte.cir alf

j-zeAc440

it(cL,e

ydNtif pred-;(;vt -

/454".

ictt:

EL

aat) 441_4t we itaa
)4r,44 ced- Zoo
&AT S(44444440---/`

c(6'evaLtikAA- ot;a

Co iscud"4"15

_

40u/4 Ce-tA.c502#4:0z

f
4a,

CL/a. leash

ctfc. oco vcc- 4lle441 AAve, &As Ltur,(

arcazo

fit_

CC/74C

CALCI

Attlti

pit

cflui.a.c

FrX-1% 42,114.-rt/t;vm .

C114-(4,4,

e1/4, ilkifte4t

t)*('

fehe

6° .tfitvkt, cArot

Kra. ka_ear 0{7

q,

krati aiitu.itakce:vtetZ

go 9 CAA& 4

d-411 Cir0444ii ail

*ft OVA)

Arau,

49.y6jvikel

c51

vo2.-te1/46`

Ace, -e-c-c,

trakcat G
f.

c

c.

°L-00144

14, AAAA.e/ dal 4-44

PrAALciz,

Gtitura- rta cIL4Ak ir<1 Ck. fet.t, LA/VilAtkV
k_4.tt,

(4424Z-4

ct".40

*VtAft A

_

11146 Aflate0

tGoceEez

ceio4o4.-4.4,

eta/ A/ &eer, itiAt

C' ktraf

Cik AVALeti ka4

citAib.. n'&A- 444 64041.474

ykLilk-

kW,

61(1-

oL,

c A44A sLoN

tga ItY

0.11.441,0

54,v-e_4(4v

&

412.-0-14,

4/CiirAk &II/4

La-La
oC taw/

ettkcis-e

frt496 chl5vt(so

Ag. aka.,

Sk

At. 014

60 ce-A4`

5'0 v414 tvi, ceamANctiz;it

&col,/ 44.6 tvvcr-a- £2Mt.0
C,

4.11:4c)

WAAL c..,ixf 4 4

(A

toetcciv t.);

t,

S524-ptkaAAAi,

ultvi ettekt_ 6240
it.4.4.A41 4(s,m14. rt,ev
ktAAPie

Aire_ 4cat-

)'

al4g,

"kti-

"i4Pcoc4i C

da-A,44

tkr 040-Ctut Zitt,t,k-

frIt4itk
14catare2.4---

iect4

c-tatots4

er

/t)e)

B.S .

io tv-Ls
Sc.rattrC
itirneti44. etent,44_

64's ef

Air

7sleceLuvc

gwcoef(a,U:c.

htb-r-AAALitrAZ c,s;

ikatkAP e014/0

94,1/41.

INA-Are

etattre (10 tiVar,

U-41

&NAN

/Va..r t

c,

Ave AaAre, C`42

491 kkArc, 4e0-14, vlkaie

Ctiat f 4,

tire&asz,

etc
6o sa- elAKt ttrevica. 4.41L.

00a, krttif

N4toLA-Ce, to-at covvii,
,tittxatto JS &Lovtitte,,,

esoetat, Co

kcLAK

yetot
to-04,600

\.

N

Vita

-thvlitm)
V.0001t, E.C. 2

19th December, 1921.
14r dear Strong,

I enclose a copy of a Memorandum dealing

with the Austrian financial and domestic situation
in October last.

I had it from the League of Nations'

Office and I feel sure that you will realise that it
is intended for your eye only.

With kindest regards
Yours v

,

y sincerely,

/04101,A4/14,

Benjamin Strong,

CO7TIDENTIAL

Vinth of -61#1anb

country and the security obtained by a large uncalled
liability would to a great extent be lost owing to
difficulty of collecting in a foreign country.

There were therefore two objectio
(1) That a Discount Company was to give especial
facilities to one client,

and

(2) The probable removal to the United States of

nominees who would respond if a call were mad
the shares.

I agree that you have to read this

!lr.Paget's letter and that is Why I am writing to e
it privately to yourself.

Yours most sincerely,

Benjamin Strong, Esq.

4

©f

erred to

in letter or

COPY

Guaranty Trust Company of New York,
32, Lombard Street,
E.C. 3.

19th December 1921.

Catesby Paget, Esq.,
Principal of the Discount Office,
Bank of England,
E.C.
Dear Sir,
-re shall be obliged if you will inform us

if, in the event of our buying; shares in a Discount Company

should in any way prejudice the relations and facilities
of such Discount Company with your poodselves.
We shall be dbliped if you will kindly
address your reply for attention of the undersigned.
Yours very truly,
(Sd.)

E.G.HULIPIIREYS

Asst.Manager.

EGH/AP

a

Warred to

in latter 4)

COPY

t*

Discount Office.

20th December, 1921.
Dear Sir,

In reply to your letter of the 19th
instant, I cannot undertake to say that if a Discount
Company enjoying facilities at the Bank of England were
to alter its nature such facilities would necessarily be
continued without change.
I am,

Dear Sir,
Yours raithfully,
(Sd.)

C.PAGET,

Principal.

The Assistant Manager,
Guaranty Trust Company of New York,
32, Lombard Street,

E.C. 3.

v)

C 0 1TF I ra IT I AT,

46iiizt111

_40..atte

C1,_;

3.117010011, E. C

.2

23rd Pecarlber 1921.

7y dear Strong,

I have told you in my cable No.21 of

the 2Thd instant that in principle an Agreement has been
reached with France.

This Agreement will not, of

course, be of any real value until it has been passed
by the other Allies as well at the Meeting of the
Supreme Economic Council which is intended to be held
at Cannes the first week of next month.

Our people are anxious that German
Representatives should be invited to cane and discuss
the contents of the Agreement.
have it at any price.

The French will not

I suppose it will end in

Rathenau or some other well -informed German being

unexpectedly found in a hotel at Cannes at the critical
moment andkthere being an unofficial meeting with
Loucheur and some of the Britishers.

That is the

tray the French prefer to carry on their negotiations..
On the

As the basis upon which my cable of yesterday
rests is an "aide-memoiren (an extremely secret
document' of which I enclose a copy for your personal
information and upon the annex of which I will only
make one or two remarks.
A. (4)

As the month of necember is not yet

ended it is obvious that these provisions merely give
the idea of what it is very properly desired to bring
about.

B. (1) and E.
outrageous.

I think these provisions are

I have written to Havenstein to tell him

so in the hope that he will say outright that were he
as President of the Reichsbank to be superseded he
would withdraw.

I notice the technical adviser is

not described as a neutral Which was at first insisted
upon by the French.

The word neutral must have been

knocked out at the last Nament.

But Upon this

general question I have been very wishful that the
position of the Reichsbank should be considered.
At present it is as bad(or worse)as the Bank of France
so far as being dominated by politics and that view
was shared by the Reparation Commission.

fln the

other

ti
other hand the French were anxious to have a Caisse
de la nette in Germany:

an arrangement which would

fatally interfere with the sovereignty of German;. So
you see that this technical ad

in as being more effective tha

of the Reidhsbank and less obn
de la Dette.

There is no provisi

Economic Conference in the pap

the intention is that arrangem
be made during the Meeting of

Council When I have no doubt t

this country of France, Bel
be completed!!

Yours most sincere

Benjamin Strong, Esq.

64tAsz4A,

ANS'D BY CABLE. DATE

,

ANWO BY LETTER
CONFIRMED
RELATIVE CORRESPONDENCE

in
11, Ref*Tred .+,1

1

tter 0

PCS/ /

1)-e

22nd December, 1P21.
41

The British and Frolich Governments, having, tal-en into

consideration the declaration of the German Government that it
is unable to meet in full the instalments in respect of
reparation falling due on January 19th and February 15th, 1922,

and its reouest for postpanmrent. agree to rake recorendatiens
on the following lines to the Allied 'Powers for dealing with the
problems which arise: -

That the gam of 150,000,000 to 200,000,000 gold

(1)

malts which the German Goverment offers to pay in respect of
the January and February instalments, being insufficient, the
Allied Governments should insist on a payment of 500,000,000
gold marks.

That if the German Goverment cannot neet this

(2)

parment otherwise, it should apply a portion of the Reichsbank
gold reserve for the purpose.

That Payment of the sum of 500,000,000 gold. arks

(7)

should be accepted as follows:on January 15th, 1022.

125,000,000
do.

on February 15th, 1 °22.

do.

on larch 15th, 1P22.

do.

on April 15th, 1P22.

(4)

rent to neet

That in view of the inability of the German Governengagelents and as a condition of the grant of

postponerert of ce-tain payments, the German Government shall
agree to take, without delay, the measures set out in the
accompanying note.
(5)

pa71ment from

That the Allies should agree to forego any cash

Geriamr

during 1P22 in excess of the sum of

500,000,000 dboverentioned.

CO

That the Allied Governments should consort to the

operation for a period of three years of the 7iesbaden Agreement
regarding

regarding' reparation in kind. payable to Prance, Toblect to til.e
fo 1 lovring conditions (1) the aneunt of deliveries under Annexes III to VI

of Part VIII of the Treaty and the Arrreeient,
together shall not exceed 1,250,000,000 gold
marks in 1922, 1,500,000,000 in 1923, and
1,500,000,000 in 1924.

(ii) the amount standing deferred at the end of 1924
shall be linuidated by Prance in ten equal annual
instalments beginning on the 1st 'ray, 192 6 by
set off against SUM] due to Prance in each year
out of reparation receipts, and unless the
operation of the Agreerent is continued for a
longer period by agreenent anong the Allies,
Prance shall, in no year Frubs ea u ent to 1024
receive, vthether in cash or deliveries, suns
Which, when added to the said instalments, would
result in Prance receiving in that year more
than her proportionate share, as determined by
Inter-Allied agree-tents, of the total payments
by Germany in that year, including the instalment
due by Prance.

That any Allied Power entitled to reparation shall
be per-litted to enter into ar,reerents sir"ilar to the Vriesbaden
Arrree-rient for delivery in kind, sublect to the approval of the
Reparation Commission, provided that the value of deliveries in
(7)

Versailles, without undue delay to the effect to the Wiesbaden
and to
Agreariententer into agr. eenents with other Powers for
deliveries in kind of the nature of the Wiesbaden Ameelent,
(9) That during 1922 each rower shall retain for its
own use the value of any deliveries in kind (including the
proceeds of any levy under any Reparation (Recovery) Act), But
snblect to the provisions of paragraph 6 of this document and
of any Inter-Allied alreement already entered into or hereafter
to be entered into, the receipts of any Allied Power in respect
of reparation during 1922, together with interest thereon at
5 per cent, per amwn, as frori 1st January, 1923, shall be taken
into account in determining the proportions of reparation
receipts che to each Power in 1923 and subsequent years.
That as from 1st 'lay, 1922, the cost of the Aznies
(10)
of Occupation, other than that of the United r.)tates of .Pnerica,
and exclusive of the cost under Articles 8-12 of the Arrangerent
of 28th June, 1919, should be fixed at monthly amounts payable
to British, French and Belgian GovermInts in sterling, Preneh
francs and Belcrian francs respectively. These Enounts should
be determined by ts-17.-ing an annual anount of 220,000,000 gold

narks which should be divided in Proportion to the effectives
employed, a special alloy; ice of 2 gold marks per Pan per day
being ade to cover the hiFeher cost of the British Airy; the
rate of conversion being based on the mean rate of each of the
currencies in question during the month of Deorriber 1921.

the resulting expenses should be payable by Geinary, over and
above the lump suns above mentioned.

(n)

The British C'roverment will raise no further
oblection to the acce-Aance by- the Reparation Cornission in the
agreement between France and Gennan,y regulating the price of

coal delivered to 'Prance, so far as concerns deliveries up to
31st Decerter, 1921, inclusive, provided that it is a.greed that

for the future all coal deliveries to ?ranee, irrespective of
the method of delivery and of the internal price in Geiriany,
shall be credited to Gernany and debited to Prarce on the basis
of the cost at SIT.Quentin of Prench or British coal, Whichever
is the lower, less the cost of transporting the German coal to
.Quentin which :Ls borne by Frame.

e price thus to be fixed vrould include all cost o:
transnort borne by Germany.

The British Govemnent for its part, sub ,1 get to the
concurrence of the 13e1Frien Goverment, would be prepared to
accept a ratification of the Treaty of the 13th August, vrith the
following nodificationstThe rilliard already paid ay-.1 the 500,000,000 gold
(,a)
by Geriany in :Tamar!. to April, 1922, should
,narlcs to be
(12)

be treated tomther.
it of this total sun of 1,500,000,0M gold marks
(b)
there should be Applied a sum of 500,0 00,000 towards pement of
the cost of the British Armies of Occupation up to 30th April.
19P1, inclusive! and prance should similarly receive such SUN
as would rertult in Prance obtaining the sere proportionate
payment on account of the total costs of the French Arry of
nocu-c-Ation incurred up to the 30th Ariril 1921 Inclusive as will
have been received by the British pire in respect of the sane
period on occupation account, the amount due in the case of
France bein7 deterninml on the assumption that the value of the
Saar Mines is not debited to Prance on occupation account.
(e) The rmnainder of the sun of 1,500,000,000 of 7old
-rnar12..s

narks will be pa7rable to Be lrriuri in respect of BelFrian priority
sublect to the deduction therefrom of a sum of approximately
179,000,000 lire now deposited with the Bank of Italy.
(a) The value of the Saar Mines will be debited to
Prance as a reparation pa7x-ietnt in 3.922, and Prance shall
liquidate the debit in accordance with the provisions of
parafrraph 9 of this docurent .

be :United to an arount not exceeding the net
additions to the issues during the month of December
1P21.

Is

n.

The German Government uill prepare and submit to the Reparation

Cnmission within six weeks of notification a considered
prograrme for
(1) the grant of autonomy to the Reichsbank and the

nomination of a technical adviser to be agreed upon
between the Reichsbank and the Reparation °omission
charged with the duty of supervising the financial
policy of the Reiohsbank and in particular with
dis er Clt ion

discretion to refuse consent to advances direct or

le

indirect by the Reichsberk to the Gerrean Goverre Ent;

(2) the issue of internal loans - other than Treasure
sills discounted by the Reichsbartle - in amounts
se.ifficient to cover arse Pudseet deficit until such
time as the Budget eer be belanced by Revenue

receipts;
(3) neasures calculated to secure the balenclng of the
Budfeet; in particular the pradral suppression of
subsidies, and of expenditure weeether capital or
otherrise on services erlich are not of ur"ent
necessity; and the balenelLnei of the receipts and
expenditure of the railway, postal, telegraph and
telephone services, to'ethor with all necessary fiscal
measures for the assessment and collection of
taxation;
(4) measures calculated to stop abuses in the natter of

export of capital and to facilitate the return to
Germany of capital already exported;

(5) reasuros directed to prepare the way for a reform of
the monetary circulation of Germany; including the
cessation as soon as possible ef additions to the
uncovered note iseue;

(6) periodic publication of financial and calrercial
accounts and statistics in accordance with ;)re -Trar
practice,
0.

This programme as submitted shall indicate the periods necessa

for its continuous realisation in each part and shall so far
as possible be (1.3 c cop an i d by the to

of ane. laws or regula-

tions necessary to give effect to it. The Reearation
Commission, within one month of the receipt of the programme
i'ron the German Goveeraent, will pronounce upon it. It will
decide if the periods proposed by the Gereon Goverment are

such as should be accepted, and 1..f it decedes t'eat they are
not

F

*

Q:14314110

71)111001t,E.C. 2

29th December, 1923.

My dear Strong,

I refer to your letters of the 21st
and 25th November concerning your letter of introduction
to Mr.Nakane, only to say that he called here some
10 days ago in order to make an appointment to
present your letter.

Since then I have twice tried

to get in touch with him without success but shall
hope to do so early in February.

At the moment it appears that
Mr.Nakane has been forced to go into a hospital for

make himself known to me, but it is only fair to

Os

say thAt, owing to the generous fare which had -bc3en

extended to the Mission,most of my visitors were
asleep while I was trying to entertain them:
Yours mos

inc erely,

Benjamin Strong, Esq .

Anis-o DY CASLa-. DATE
ANS'D BY LETTER
47/0.41,
CONFIRM ED
RELATIVE CORRESPONDENCE

lane

I shall look
have appeared in our correspondence. forward to hearing m
AP
from you on my return from Nice between the
and 30th of next month.
Yours most sincerely,

Benjamin Strong, Esq.

er

CONFIDENTIAL.

thtBittne

Intbon, B.C. 2
30th December, 1921.
My dear Strong,

When Monsieur Loucheur and Dr.
Rathenau v.er3 here a week or ten days ago, the main

subject of discussion was, as you know, the German
Reparations, but in additirn the: etc discussions

also took place with the idea of opening up trade
in Eastern Europe and Russia.

It is difficult to

say whether these we: e based mainly upon political or

upon economic considerations.

I think that the

Primp Minister, who took part at an early stage, had
it in mind to use this method in order to bring
together France, Germany and perhaps other countries,
on an economic plan as it was impossible at the
moment to do so on political lines.

On th

other

hand some of those Bankers and business men who had
discussed similar schemes with Etinnes

a month or so

ago and who were brought into the present discussion
were undoubtedly thinking along economic lines with
the

the object of opening up trade.

At the same time

you may Lake it as cartain that some more or less
satisfactory assurances were received from the

Representatives of the Soviet Government as to their
willingness to abandon their earlier ideas of
Communism and anti-capitalistic legislation.
Within the last day or two one or two

meetings have been held for the purpose of bringing
these nebulous and quasi-political ideas on to a
more solid econo..d.c foundation.

They have been

attended by our Colleague Kindersley, by Docker who
rep:esents manufacturing in the Midlands, by Hichens
who represents iron and steel, by one Smith who
r-presents engineering and such like, and though the
idea is still hazy these gentlemen have now gone to

Paris in copany with a Cabinet Minister (WorthingtonEvans) to carry matters further in conjunction
with those who have been interested in the idea by
Loucheur.

I have not thought it worth while to

send you any cables on this subject, but I take the
opportunity of enclosing for your personal information
a memorandum marked secret which gives the outline
of

of the scheme I have mentioned above in so far as
up to the present it has been reduced to writing.
Yours mos

incerely,

Benjalain Strong, Esq.

AmsD Ov C
ANS'D GY LETTER

DATE

.

24/

9/.2.2.

CONFIRMED
RELATIVE COORE5PONDENCM

"Roferr.i.4 to in iiitter

SECRET
PROPOSALS FOR TE-ESTABLIST-IING BETTER

ECONOVIC CONDITIONS IN EUROPE
Her industries are dislocated, her

Europe is prIralyzed.

international trade is almost at a stand-still, her people suffer from
unemployment and privation.

Systems of transport have fallen into disorder with the result
that the whole current of commerce has been impeded.
Want of confidence of one nation in the other has paralyzed
the efforts of individuals, and the fluctuation in the values of the
national currencies has tended to restrict trade to primitive 1)arter,

and to destroy the opportunities of employment.
A resumption of international trade and a development of the
resources of each country will extend the volume of productive
employment and tend to relieve existing privation.
International trade will be re-established only when those
engaged in trade and industry can once more feel confident that in
Central and Eastern Europe economic principles will he observed which
are essential to the development and even the existence of private
enterprise.

The fundmental conditions upon Which alone international
trade can be actively developed with the Central and Eastern European
countries may be thus stated:The rights of private ownership in real and personal property
and private enterprise must be recognised.

This implies without

infringement of internal sovereignty the recnrTition of public debts
and of the obligation of compensating those whose property may have been
expropriated or witheld.

There must be a legal system wh4oh sanctions and enforces trade
and other contracts with impartiality.

An adequate means of exchange must be available, and,
generally, there must be a financial and currency condit'ons which
offer reasonable security for trade.

- 1-

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