Full text of Papers of Benjamin Strong, Jr. : Correspondence with Great Britain : Montagu Norman, Governor, Bank of England, Pt. 2, 1923-1924

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STRONG PAPERS, Norman to Strong, 1923 - 1924 (List redone 5/2004, to include all materials)
1923

February 3 (w/ Prospectus of the Austrian Gov't Guaranteed Sterling Treasury Bills, February 24, 1923)
[March 6] - (may have been on earlier list by mistake; Feb. 3rd letter is stamped "Acknowledged March 6")
March 27
April 9
April 28 C
May 2 (to Case)
October 8
November 13
December 3

1924

January 7, w/ memorandum re: establishing a discount & issue "Gold. Bank" in Germany
January 30
(February 4)
May 16C
(May 17)
May 27 C
June 16
June 19
[August 25 (from Lubbock), with resolution of London Conference, and Manchester Guarding section, August 19,
1924]

(September 17)
(September 17)
September 20, with letter to Woodward (dated September 17)
October 16
November 15
November 30

Strong Papers Key:
06/01/04
[ ] = At earlier
date, item was listed as present but no original or copy is now in Papers
was copied if no copy existed

STRONG PAPERS, Norman to Strong, 1923 - 1924
(list redone 5/2004, to include all materials)
1923

February 3 (w/ Prospectus of the Austrian Gov't Guaranteed Sterling Treasury Bills)
March 27
April 9
May 2
October 8
November 13
December 3

1924

January 7 (w/ memorandum re: establishing a discount & issue "Gold Bank" in Germany)
January 30
February 4
April 28 C
May 16
May 17
May 27 C
June 16
June 19
September 17
September 17
September 20
September 17 (to Mr. Woodward)
October 16
November 15
November 30

STRONG PAPERS

Norman to Strong, 1923 - 1924

ipar1923

Feb.23,with prospectus of Austrian bills, Feb.24,1923
Mar.6
Mar.27
Apr.9
Apr. 28 C
May 2(to Case)
Oct. 23
Nov. 13
Dec.3

1924
Jan.7, with memo on Gold Discount Bank
Jan.30
May 16 C
May 27 C
June 16
June 19
Aug. 25 (from Lubbock), with resolution of London Conference, and Manchester
Guarding section, Aug. 19, 1924
Sept. 20, with letter to Woodward
Oct. 16
Nov. 15
Nov.30

-0-13attit

of (en.tilanb
3.7onbott,E.

VIM

23rd Fe

TY,

i9 2 3

Vs1
P0-4

My dear Strong,

(40

I am forwarding to you two copies

of the Prospectus of the Austrian Government
Guaranteed Sterling Treasury Bills as evidence of
the practical co-operation among Central Banks.
Yo

sincerely,

LseA4A/LAN1,

Benjamin Strong, Esq.

Austrian Government Guaranteed Sterling Treasury Bills.
Issue of

1,800.000 at 12 months' date.

THE GOVERNOR AND COMPANY OF THE BANK OF ENGLAND
are authorised by the Austrian Government to receive applications for the above-mentioned

Bills, which will be issued at the fixed price of 193 per cent.
Arrangements have been or are being made for similar issues of Bills and/or
Bonds, ranking pari passu with this issue, to take place in Belgium, France, Holland,
Sweden and Switzerland, in the respective currencies of these Countries, the issues to
be for such amounts as will in conjunction with this issue be sufficient to raise sums
approximately equivalent in the aggregate to £3,500,000. The Austrian Government
may not dispose of any funds derived from these issues except by authorisation of the

Commissioner-General nominated by the Council of the League of Nations. The issues
will be free from all Taxes, Dues or Charges, present or future, levied by the Austrian
State.
These issues, together with other existing short-term liabilities of the Austrian
State amounting to about £3,500,000, are in anticipation of, and will be repaid out of
the proceeds of, a Guaranteed long-term Loan sufficient to produce a sum not exceeding
650,000,000 gold crowns (approximately £27,000,000), the issue of which is contemplated

under the Protocols approved by the Council of the League of Nations on the
4th October, 1922.
To

secure

the due payment of these

issues, as well

of the existing

short-term liabilities referred to and of the service of the contemplated long-term Loan,
the gross receipts of the Customs Duties and 'robacco Monopoly of the Austrian State
are

being and will be paid into a special account under the sole control of the

Commissioner-General, who in his discretion will duly make provision therefrom for such

payment as well as for current needs of the Austrian State.
Due payment of the Bills will be guaranteed by the undermentioned States, to
the extent in each case of the proportion stated below, by the deposit, with the
National Bank of Switzerland, of their own Treasury Bills of like maturity :Great Britain to the extent of 244 per cent.
France

Italy
Czechoslovakia
Belgium

244
244
244

TOTAL

ff
ff
ff

100 per cent.

Holders of Bills of this issue will be offered an option to convert their holdings
into the proposed Guaranteed long-term Loan on terms to be arranged when the issue
of such Loan takes place.
The Austrian Government reserve to themselves the right, subject to 30 days'
previous notice by advertisement in the London " Times," to repay this issue at any
time under discount at the rate of 4 per cent. per annum in respect of the unexpired
In the event of such notice being given,
term of the currency of the Bills.
discount at the said rate as from the expiration of the notice will be deducted from
the face value of all Bills whenever presented. Holders of Bills may register at the
Bank of England an address to which a copy of any such notice will be forwar,led
by registered post.
The Bills of this issue will be in amounts of £500, £1,000, and £5,000, and will
be payable at the Bank of England; they will be dated the 1st March, 1923, and, if
not previously repaid under the provisions of the preceding paragraph, will be
payable 12 months after date, without days of grace, viz., on the 1st March, 1924.
Applications, which must be made on the printed forms obtainable at the Bank
of England and at the Bank's Branches, must in every case be accompanied by payment
in full of the amount due (viz., £93 per cent.) in respect of the Bills applied for, and
must be lodged at the Chief Cashier's Office, Bank of England, not later than 3 p.m.

on Wednesday, the 28th instant.
In case of partial allotment the sum overpaid will be refunded by cheque.
This issue is made at the request of the League of Nations and of His Majesty's
Government.
BANK OF ENGLAND,

24th February, 1923.

CODV of handwritten letter

Hermitage Hotel, Nice, France, March 27, 1923
Dear Old Men.
Of course your .;.otter wa,

1:),-d reading: it isnt what I wanted to hear either for

MY sake or for pour own. I want aelp on your -Ice & one of taps- days may went
can give it but Lou: it -ill be year: before anyone
it b:dly & suddenly: None_
con & harl yerr too. Then it_ miserable Lr you to have to go west: the need
to vn rttner than t,lc joint:: but I understand tint nohow else can you get reel
Rest 0- reel Cuiet.
Of cour,..,- You we:- too lighthearted about yo,A,-.7 soua, oown iL IT;tnington bsIt
old tag now & I will not rake it uo. I did not ;peak to Ben bout
thEtl,

you till he stoke to me: tern I wrote him - lEttPr, c.cvi int him to stcy on in
ant but I think intends to go home errly this.
London. He i; doing o fcr to
Lumen I dont know why & I dont know what you wish, Personally I dont think he
h.s Eb_orbed enough of London to ensure his permanent rood. You know he has hEd
the grippe -slightly & is (to my delight) coming here,
(into the next room) in
3 drys for a couple of weeks: that will put him right for sure. I saw twaddy"
in Paris last week; debt- collecting a: usual but without much success. I got
along well with Pobineau - but politics make his position uncommon difficult & until
his Govts position is balanced, he can get no real independence. Goodness only knows
how & when this Pihr muddle i- to end: I am not at all happy :bout it- There
remain a number of details to be settled between our Treasuries before the debt iE
really put away (on paper!) . I will write = gain in a dry or two. God bless you
MN

ck.

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Copy of handwritten letter
Hermitage: Nice, 9, 'pril 1923
ittr dear Len.

I said I would write & tell you about young Ben: he has been here for about ten
days & is so well that it would do you good to see him. if there was anything
wrong back of his nose it has entirely cleared up: he eats & sleeps like a pig &
enjoys .11 the chaff with which Mr. Stansfeld & T manage to provide for him.
S o von can make your mind easy about him. Personally I wish he were staying
longer in London for it takes time to settle down first & then more time to get
into the feel of the pi. ce & draw from it permanent impressions & experience:
But that i_ his affair: he is determined to go home next month so tats the end
of it. I shall be here another wePk, making three in Ell.

Things seem to be going s moothly in London: money is abundant: stock m.rket, strc
trade rather bad L our floating debt greatly reduced.
I am both sorry & surprise(
that the $ Exchange is weak rather than strong, especially as commodity prices
hardly rise at all. At the end of next month I hope we may be able to issue the
Long-term Loan for Austria, throughout Europe as well aa in London.
I am very
anxious that Morgans should then do the tune in Nv R. think they are willing to
help: if they wont or cant then Ppeyer & Wallga.rten will likely do so, a:: both
h. ve approached us .

If we can thus set up Austria, we must tackle Hungary nex t, so as to establish
one by one the new parts of Old Austria. & then perhaps the Balkan Countries.
Only by thus making the various parts economically sound & independent shall we
reach what I believe to be the ultimate solution for E astern Europe viz
Economic federation to include half
on or near the Danube
free of customs barriers &c. Poumenia will present difficulties, because she
deLpises all the Ex-Enemy Countries & 's too proud (or insolent) to make any
sacrifice for the general good.
Italy too because she claims a special podtion
& special priviledges (of domin_tion) in those parts. But while the active
cooperation of RoumeniE is essential, only "live & iet live" is needed from Ital
The black spot of '-'11rope & the world continues to be on the Rhine: there you
have all the conditions of war except that one side is unarmed.
Ho-,F long can
Germany continue thus? If Poincs14 is to last another year (till the next
elections in t.T.rice) where will German industry go? Her export tr,de & her
necessary imports? We may yet see Eelief Credits to prevent starvation between
Harvests!

I wish to know the future course of money & commodity prices in N.v. I guess
London has been buying - or buying back- Securities owing to the difference in
money rates & this may be affecting the exchange: but we cannot expect call
money in N.Y. to be twice the rate in London for an indefinite period? apart
from that the prospects of trade are so poor that I see no real lloca4 ne ed
for higher rates in London.
I hat to think of you, banished, alone, in Colorado. But like a wise man you
hf-ve tackled this trouble bravely & early & the sooner I look to see you back
in hErness. Vh6re,we need you or shall do: there must be many ups & downs ahee
of us & though everything at the moment "eems easy, the greater part of the
world is waiting to be set on it' feet again before the war will really be over.
-s ever Nm

THORPE WAGE,
CAMPDPN HILL. W.8.

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Translation of cablegrarr______

London, England.
April 28, 1923.

Federal Reserve Bank,
New York, N. Y.
CONFIDELT1AL FOR GOVERAOR:

No,2

First - Recent easy money and low rates are due mainly to our loan to
Reichsbank against gold deposits and these are likely to increase.

I do not

see how these loans can be repaid except by eventual sale of gold and it would
seem that Germany is thus using up her liquid assets in order to allow her
industries to continue work as long as possible in spite of restrictions from
Ruhr occupations.
Second -

Present easy conditions Ore hardly justified taking into

consideration high rate on your side as well as weak sterling exchange

that sooner or later we may have to bring our rate nearer yours.
Third -

We are hoping for issue Austrian long term loan 5 or 6 weeks

in most European capital but
adjusted.

there are many difficulties of detail to be

As regards New Cork the advice and cooperation of J. P. Morgan

& Co. has been sought and it is of vital importance that adequate issues be
made on your side.

Bank of England.

COPY

-2-

our respective rates.

We do not wish to make any change yet awhile but must not

be blind to future r&juirements.

I hole you have good and increasingly good reports of Governor Strong;

and ma; I tell you that a few days ago your son was so kind as to make himself acivainted with me.

I am planning to get in touch with him again.

With very kind regards,
Believe me,

Yours sincerely,
(Signed) M. C. Norman.

J. H. Case, Esq.

111111

11M1

p y of handwritten letter)

8 October 1923, Bank of Fngland
Pe rsonel
My dear B.S.

I have certainly been a wretched & ungenerous correspondent of late, for which
I can make no apology. It wa, useless to write to you about business & probably
bad. for you too: & I had no time to write & gossip with you.
no-s, from the news
So I have silently watched your progress these months cast
Peacock brought lsA week from Jay I know you will just be .turning your great
nose eastwards in t couple-of weeks time.

You may be sure you will be welcome in N.Y. & your being there will be welcome
here.
Q0 long as you are away the physical gulf becomes a. psychologic-1 gulf
between here & there.. & there is no bridge. This i, not intentional -but it just
grows: you know it as well as I do.
These months past have seen the Center of Europe worsen right along & although
the outsiCes have somewhat seemed to inc:!rease their equilibrium, Furope as a
whole has gone backward: this I think is in geaerai a true picture. Trade has
not improved becaus e it can only redly improve as a whole (& world trade is
poor just as Furopets trade is): added to which Ltionelism - sometimes called
Patriotism- has been active. Look at the spirit of Italy against Greece; at the
hatred of her neighbours toward Hungary: of France FgEin,t Germany & so on to
Bulgaria. & Turkey.
In spite of ell this, equilibrium has more or less been
reached (as I said )by the Czechs & Austrians & is nearer to the Poles &
Roumanians than it we.
Gradually I think you will see improvement in Eastern Europe but for the Center no
hope is in sight so far r: my poor eyes carry. This country is in Furope - tut is
becoming less & less of it.
I think we should have done more good had we formally
divorced ourselves a year or more ago; for nothing has been been done of late by the
allies to whili we either did not object or only unwillingly Egreed.
ruring the winter I hope some plans may be worked out for Hunlary whin will be feasible:
the plans are easy, but the Egreement of France & the Little Fntente is still remote,
' without it no money csn be raised. Austria has started on an even keel: if she
has the grit to s51-.40y there, all will be well.

'then you back into harness just you look around & see if you cant join hands with
us
Clank I mean) in some of our venture-VI/what :.bout Germany? or(-, reEce?
or Hungary? all central-bank business pure & simple which is already started: or
Albania & Pantzig which Er- to follow? I cm sure you would like to take a hand but
I fear you cant. America as a country is less & les. disposed to take a hand & so
I guess will continue till after the Presidential Election.
It is Ja ck Morgan
11
personally whom we have to thank for the fact that Austri got money in N.Y.

And besides the next election there is, I know, another reason cgains t you & we
joining hands & that is the Fatherhood of the League in all these non -rationalistic
& Elmo,t altruistic ventures.
I saw Mr. Mellon s everal times when he was over here & the only point about him that
I did not like was the way he talked about your (F.R.B.)Rate as it was hict.1

Which reminas me again that relatively our two rates are still wrong: I suppose they

Copy of handwritten letter, Norman to Strong, Oct. 8, iV2i (continued)
always will be: or rather they will be till we recover the Gold Standard.
We can have & perhaps deserve nothing but troubles until we are again
anchored to Gold. How & when ccn we do it? I wish you would write me
about this or perhap:: you will come here & spend Christmas as you did on the
way home from the East.

Tell me something about Ben & Phil & K: They cant all three have vanished &
yet I dont hear F word; which is rather suspicious because of some matrimonial
rPmours which were picked up on my wireless sets They of course would explain
everything or rather remove the need for any explanation!!
/nyhow, my dear Ben, I hope to heaven you ere well for good 3c all. I have
told you dozens ar times that we cant get along without you & you need to be
in the E ast & not in the Wes t. I want your he p, from your international
mind: its not common in the FRS in Washington o lsewhere.
This Bank will begin to disappear fnr rebuilding in 1924: Our pa,-ty
has lately s uffered one loss & that was Babington-smith who died strangely &
almost suddenly a couple of weeks ago.
Trotter has gone to Poland to help them construct a proper Bank. Lubbock
reigns with me (I hope happily) & would, if he knew, be sending you his love.
I am yr affy MN

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CONFIDENTIA

ACKNOWLEDGED

CONFIDENTIAL
12th November,

Benjamin Strong, Esq.

fiscal policy of this country.

1923.

Thus you get the prospect of a

General Election with its bone of contention nominally in
Protection as a cure for Unemployment.

The latter evil, to my

mind, is likely in any case to remain uncured for a long time,
if not to prove incurable.

But practically the alternative to

a Conservative Government seems to be Labour (Socialism) or the
Extreme Left - whatever it happens to be called - and with this,

as a cure for the bogey of Unemployment, you have the worse bogey
of Confiscation or Capital Levy, &c.

The mere idea of these bogeys brings about our
present sufferings: depreciation in Securities through sales,

largely by foreigners: depreciation in exchange, favouring of
course your dollar: instability of London: general unsettlement
and cold feet.

To-day I have nothing to tell you.
could come here.

Is there anything we can do?

and hold out your old hand.

I wish you

At least write

It must be about a month ago that

sent you a welcome for your home-coming from the West.
With warmest regards.
Yours

Benjamin Strong, Esq.

t sincerely,

PRIVATE

http://fraser.stlouisfed.org/
Federal Reserve
Page Bank
2 of St. Louis

Benjamin Strong, Esq.

3rd December, 1923.

III

Pace 3

Benjamin Strong, Esq.

3rd December, 1023.

IP
above and beyond all else and the Labour Party on the Left, advocating
Free Trade as an incident but socialistic schemes in the main (these
schemes being earmarked to what has come to be looked upon as the
key stone of the policy, viz., a Capital Levy).

It is, in my opinion,

the uncertainty of the results of this General Election and the
possibility of Socialistic legislation which accounts for the great
uneasiness which has prevailed here for the last two or three weeks,
the great fall in our exchange, the heavy selling, especially by
foreigners, of sterling securities and the general unwillingness to
enter into comnitments in sterling.

This is as true a picture as I

can give you in a few lines of what has happened in the last few
weeks.

There was, as you surmise, sine uncertainty as to
the position of Mr.McKenna

but he is only one among many_ and at

fkud.,

4-444/

heart I believe him to be /more orthodox than mow of the others. But
Some people cannot avoid the limelight:

yet it is difficult for them

to enjoy it unless they give their audiences and the Public a spice
of apparent heterodoxy:

I do not for a moment believe that the result of
the coming Election will be socialistic legislation.
I do not pretend to know:

What it will be

more likely narking time rather than a

definite change in the fiscal policy in one direction or the other.
The rise in the Swedish Bank Rate was simply on th
threat to their exchange position.

The rise in our rate last July

has effected nothing definite during the last few weeks, because, as

you know, our troubles have been due to politics which have

engendered

Page 4

Benjamin Strong, Esq.

3rd December, 1923.

(engendered fear and not to an intrinsically weak position or any
special demand here for cotton or other exports from your country. While

it is true that the climax in the Entente has doubtless frightened
people I think, as I have already said, that our domestic and political
position is infinitely more to blame than the European situation.

the other hand, I am convinced that the rise in our rate was justified
and necessary when it care in July for two reasons:

partly because

it steadied what might have been an acute bull position on the Stock
Exchange and partly because it steadied or even improved the Dollar
exchange and enabled us, well in advance, to 'lake provision for the

service of our indebtedness to Washington.

This answers your rambling sort of letter in a still
more rambling manner.

To-day it is not possible without the gift of

prophesy to read the future clearly.

Not only are we waiting

know what our own Election will bring forth but we are also waiting
with some anxiety to know whether the two Co7mittees which the
Reparation Com mission now propose to set up will indeed see the light
of day.

Believe me,
Your

t sincerely,

A:Artevo,LAAA,

Benjamin Strong, Esq.

CONFIDENTIAL

4641Page 2.

Benjamin Strong, Esa.

7th January, 1924.

Foreign support would be essential, and as it cannot be had from
the Publics, it must come from the Central Banks: to some extent
I think this can be arranged in Europe.

The President is on his way back to Berlin to see
what can be donelhaving met Vissering yesterday in Amsterdam.

will be a good many days before anything definite can be settled.

At present, therefore, there is no scheme but merely an idea of a
scheme: this I enclose.

If some such scheme comes to be put into

effect, it would be a grand thing from every point of view if you
could co-operate.

That is why I am writing to-day.

When you

receive this we can exchange cables if you are at all attracted by
the idea of such co-operation.
For the present you must please keep this entirely
to yourself: or rather let me put it another way, there is only
one person in America to whom you can mention the subject and that
is Jack Morgan.

Benjamin Strong, Esa.

Believe me,

Yours mo t sincerely,

61 Al4X4104

3.Strarg. 7sq,

coNurErTIAL.

:1,72,1oRATTum.

It is proposed to establish a Discount and Issue "Gold Bank"

in Germany which would temporarily be separate from, but
be operated and absolutely controlled by, the Reichsbank.

The initial capital to be, say, the equivalent of r,15,000,000
(? it Gold larks)

of which P,51000,000 (? Preference Shares)

to be subscribed forthwith by the Reichsloank.

The remaining fa0,000,000 to be subscribed by German. Nationals
and others.

(It is hoped that payment for these Shares

and for the Notes to be issued by the "Gold Bank" would

be made mainly from the large amounts of foreign currency
now held abroad by Germans or hoarded in Germany.)

Existing "Gold Barks" in Gerrary to be absorbed as quickly as
possdble.

The "Gold Bank" and its Notes to he based on sterling and its

Reserves to be held outside Germany.

In the event of the "Gold Bark" being established, the Bark

of England, in conjunction vrith such other Central Banks

as may be willing to participate, propose to lend up to
£5,000,000, as and 'rher required, to the Reichsbank, for a
nerl_od

CONFIDEIITIAL.

CONFIDENTIAL.
Page 3.

Benjamin Stro

fitted at a moment when your he

when your family all wish to set

one reason, but I cannot weigh i

the present inwardness of the pee

but I see signs from one or two

over finance in the System, a fa

Harding to play with the idea of

you give way to terptation and t

or writing, then, as it looks to

Banks goes overboard for the pre

be maintained because the sole u
missine.

As to myself,

here for another fifteen months.

I should have

Committee of the Reparation Com
to be in two places at the same

devote several months to hard an

and at the same time mind his ow

if that Ccmittee will be findin
culties.

I have not seen the Co

twice in Thris within the last c

with Kindersley and others it is

different angles of vision as th

As I wrote to you on the 7th Janu

c oh-F

Ei7-2 'Am

Page 4.

Benja

CONFIDEKOIAL.
Page 5.

http://fraser.stlouisfed.org/
Reichsbank
Federal Reserve Bankthe
of St. Louis

Benjamin Strong, Esq .

30th January, 1924.

in spite of the Comittee,if we cannot obtain

CONFIDENTIAL.

TRANSLATION OF CABLEGRAM

England London
Ilay 16, 1924

Federal Reserve Bank,
New York, N. Y.

#80

Your #39// #1

3TRLCTLY CONFIDINTLIL FO! GOVERNOR:

I understand that

with the exception of approximately :;10,000,000. all sums required for

payments on June 15th have either boon invested until that date or will
not be paid to J. P. ::,organ & Company until near that date.

'..ut while

questions must eventually be decided from stand point of our Tro sury
you are at liberty to consult J. P. Morgan & Company as suggested regarding
payments due next month

Perhaps simplest ways of avoiding such disturb-

ances as you fear on June 15th and December 15th would be for your trasury
to allow liberal discounts on prepayments of interest during months
/

immediately prededing each interest dat
of your recovery

Y
//7

Greatly rejoice to learn

#4 Could you assist towards the recontruction of

Hungary or austria by suggesting names of suitable persons for vacant
position of adYiser to New Central Banks in BudIpest or Vienna

Norman

41)

17th ? ?ay,

1924.

My dear Strong,

I am now writing as arranged when you were
here with referenoe to your letter of the 6th March on the
subject of the balance maintained on the Federal Reserve Bank's
account here.

if the present balance of some £165,000
I would propose that £1)0, )02 should be made productive; I

suggest, as an experiment, that one-half of that sum should be
invested in Commercial Bills and the other ..E50,1)0 be employed

for short periods at interest under the Bank of 4.rigand's
guarantee.

You are,

I think, aware of our procedure in the

latter case under which the interest earned is a little below the
weekly Treasury Bill "tap" rate.

As regards the purchase of Bills

we shall operate as far as practicable in accordance with your
wishes. but of clurse Commercial Bills remain less abundant
than formerly and it may well be impracticable to obtain Bills,
e.g., with American drawers or endorsers.

Perhaps you will

let me know whether this proposal will be satisfactory.

We do not purchase bills for the Bank of
Prance and seldom, indeed, for other Banks: and I do not

PI:;RST4A1.1

Page 2.
,O11.4111P illwelmo :Me

.. ...

Benjamin Strong, Eq.
Mo.

WIMOIROOMPO.

1014,00.1.

give you advice that would be of much assistance

pproaching M.Iobineau on this point.

I think that it is quite time the Bank of

ened an account in New York and for that purpose

o transfer to our credit with you very shortly a

0,000; which we may add to later.
Believe me,

Yours most sincerely,

tStaNEW M. NORMAN.

rong Esq.

17th May,

1924.

TRANSLATION OF C.03L17, MOM:INC

London, England.

May 27, 1924.

Federal Reserve Bank,
New York, N. Y.

STRICTLY CONFIDTLITLIL FO1 GovEmoa:
No. 84

Your number 43.

Tbrsonally I should favor appointment

of an American as Reparation Agent and I think Tandersley would probably
take the same view but I am doubtful if Lo7an would find general support
either here or in America. YXER3
Bank of

Last word mutilated:

England.

CONFIDENTIAL

""".

ACkNOWLEnn
-04 3

nit of angland,

1(324

joadon,

E.C.2

16th June, 1924.

My dear Strong,

I was especially glad to receive your letter of
the 3rd instant because it gives so good a report by Dr.Miller.

about yourself and-describes the occurrences in Paris as simply

an accident.,
Letters between us are comparatively of little

value because conditions are changing so quickly and we must come
more and more to rely upon the cable.

Anything therefore which I

now write will probably be wrong by the time it reaches you.
your views on the stabilisation of German Currency.

I knot

I am not sure

that I entirely agree with them because I am not sure that, at any
rate up to the present time, the European currencies were not
better stabilised on Sterling than on Gold: a case in point has
been Austria.

But as conditions are changing, I think it is very

likely that Germany will not be a case in point.

Anyhow, the

Dawes Plan apparently stipulates for a Gold valued currency and
your view is therefore to prevail.

3.
V

of page 2.

All this is linked with your remarks at the top

What is to be the position of Sterling and what are we

proposing to do?

The reduction in your rate to 30 may, at first

sight, lead one to believe that our rate ought to remain at 4%.
I do not think so.

I want to get our rate up, but it is necessary
to

CONFIDENTIAL
16th June,

Benjamin Strong, Esq.

Page 2.

1924.

to find an excuse for raising it and at this moment no excuse
is very apparent.

I want, as I say, to get our rate up with

yours down because I want to see our exchange improve as a
definite step towards our attaining gold parity.

There is no

need for great hurry in our reaching gold parity, but there is
great need for hurry in having a policy which is clear to
everybody and which is definite and final.

In one way or

another we must somehow try and work towards that end during
the next few months.

This,

I am sure you will agree, is in

line with the discussions we had when you were in London.
4.

The remarks above on the subject of a gold

valued currency are somewhat pertinent in the case of Hungary
at the present moment.

Hungary, as you know, is undergoing

reconstruction on lines more or less similar to those of
Austria under a plan of the League of Nations.

To carry

through the plan a foreign loan is necessary of the equivalent
of £12 millions Sterling.

It was expected, until a week or

two ago, that one third of this sum would be found on the
Continent, one third in London and one third in New York.

now seems that nothing may be forthcoming from New York: a
third is therefore left in the air and rather than let the
reconstruction scheme fail we, (the Bank), may have to find this
£4,000,000.

Is it necessary under those conditions that

Hungary should start off with a Gold currency?

If so she

must transfer the proceeds of her foreign loan to New York in

order

CONFIDENTIAL

Page 4

Benjamin Strong, Esq.

16th June,

1924.

Norman Davis seemed to me the best name you mentioned, but
nobody believes that he would consider for one moment going
either to Budapest or to Vienna.

For the time being the

position is being temporarily held by an Englishman and a
Dutchman, respectively.

But permanent appointments ought to be

made as soon as possible as the Central Bank in Austria has
already suffered greatly during the last few months from having
no Adviser, and therefore no adequate and independent support
for its President against the greed of the Viennese Bankers and
the glamour of the Austrian speculators.
7.

Shepard Morgan was here for half an hour last

week but has now gone back to his secluded castle in Savoy:
Mr.Saunders called, too, in a hurry to get home for the democratic

convention, and Mr.Case, I am glad to say, is to be here during
the next few days.
Believe me,

Benjamin Strong, Esq.

of igngland,

ACKNOWLEDOED

3011d0II, EC. 2

JUL 3

192A

19th June, 1924.

R R.

My dear Strong,

I am p:rateful to you for your letter of
the 4th June on the subject of the Houblon tankard. It is very
good of you to have taken so much trouble in the ratter; but I
have rot sent you a cable (as you sugisted) because I confess
I cannot take any step which might be interpreted as an indication of willingness to ask the New York Clearing House
Association to nd over to us an oblect of great interest and
value.
We such rerrret and are preatly to blame
that when the Houblon family Darted with the tanimrd it was not
acquired by the Bank of England; but I should feel that I was
acting ungraciously if I were to suarsest in any way that we
drudged the possession of it to the Clearing House Association.
1

Believe me,
Yours

sir cerely,
1)4A(ert.tA.

Benjarrir Strong, Esq.

low

17th Sapte-bor, 1424.

dear Strong,

Por a long tire past I have been having
letters at intervals .Trom 'Tr.TTenry A.Porster and I used to
acknotyleth7e them without comment.

Lately they have been

coming more frequently, and I begin to think that Mr.Porster
rust be light in the head.
I enclose three lottors recently received
.

from him.

Perhaps you could maim some erquiries about him

and tell re hov to treat him.
With 1,:indest reards,

Yours rest sircerely,

(SIGNED) M. NORMAN..

Benjamin Strang, Esq.

41411(44.1.4444

17th Septenbor11924.

My dear Strong,

am sorry that there has been so long a

delay in acting upon your letter of the 15th July last, but as you
know I have been away from the Bank since the and of July though
owing to the London Conference my holiday did not start until same
time later.

I have, however, to-day put into effect
the arrangement which I discussed with you in the Spring..

You

will accordingly receive for our credit a sum of S250,000 while
on the other hand I am employing at interest, under the Bank's
guarantee, £50,000 from the balance on your account here and a
further sum of approximately £50,000 has been invested in prime

oormerdalaMseaso,under the guarantee of the Bank of England.
An official letter is being written to
you on the subject by the Chief Cashier and cable advice has also

been despatched to you

http://fraser.stlouisfed.org/
Benjamin
Strong,
Federal Reserve
Bank of St. Louis

Believe me,
Yours sincerely,

(EIGNED) M. NORMAN.;
Esq.

aCkNOW!,,EFKIEID

(P,atilt

OCT 2 8 1924

of (6upland,
34111dME.C.2

cia

20th September, 1924.

My dear Ben,

I came back here two or three days ago after
having spent a month more or less in Savoy and a month more
or less at the Conference.

It is indeed my intention, as

it has been for a long time, to write to you about a good
many things which are in my mind; but the trouble is how to
find the time.
Itt

Meanwhile I have written YOU one letter about

car..

your account in London and now I write again because I have
just opened your letter of the 11th to Lubbock (Lubbock I
must tell you has just gone away for some weeks and it is
not worth while for your letter to be forwarded to him).

an not really familiar with the intrigue he has been having

with you about the Houblon Tankard but I think your enquiry
about a replica is answered by the enclosed copy of a letter
to Mr.Woodward.

It is a letter I signed but no more.

With kindest regards,
Yours very sincerely,

OnustAit,.
Benjardn Strong, Esq.

COPY
PERSONAL

17th September, 1924.

Dear Ur.Woaiward,

I have tc acknowledge the receipt of your
letter of the 5th September with regard to the Houblon Tankard.
You tell me that the Tankard has been
presented by the New York Clearing House Association to the
Bank of England and that it is being forwarded to us.

When it

arrives it rill be formally accepted at the ensuing meeting of
the Court of Directors, but it will be difficult for them to
express adequately their sense of the great generosity of your
Association in making them such a splendid gift.

It will be

deeply gratifying to us to possess an object so closely
connected with the earliest years of our Institution and your
gift will always stand as a link of friendship and gratitude
between the Bank of England and your Association.
As soon as it arrives, we shall at once
proceed to obtain a replica, which we shall have the pleasure
of forwarding to you.

Believe me to be,
Sincerely yours,
(Signed)

William Woodward, Esq.

M.NORMAN.

CONFIDENTIAL

CONFIDENTIAL.
Page

Benjamin Strong, Esq.

l6th October,1924.

psychology in our favour, as could have been done by showing
publicly that we had confidence in the Exchange and in the returr

to gold.

But it would have been difficult, and perhaps

dangerous, to have proclaimed such confidence at any particular
moment.

There have always been some here to whom the idea of

gold was repugnant because they favoured, or pretended to favour,
some, new -tangled scheme:

there have been public speakers,

notably one ,Barlaw, a year ago who were liable to torpedo confidence at any time:

there have been many who feared a crisis

if prices were deliberately forced down and margins on loans
eliminated,

Lastly, there has been the position of
Germany - uncertain until the Dawes Plan was an accomplished
fact and now possibly liable to be as much a danger as a help
to sterling, though on balance I do not think so

Therefore,

on the whole, my feeling is that however wearisome the pace has
been, we have been wise so far to hurry slowsr.
I agree entirely that we shall need some sort
of an understanding between us as to the future gold policy.
I think you are helping to this end if you keep your rates as
low as possible and lend freely to the rest of the world as
your Market is now doing.

At the moment. I do not think that

we can do anything more than hold our rates where they are and
reduce our loans to the rest of the world to a minimum-

If a

demand for credit should spring up, we might later have to raise

our rates which would be all the the good;

and if your. Market

had

CONFIDENTIAL.

C C/IF ID =,11 IAL .

copy of handwritten letter
41,

Thorpe Lodge, 30, Nov., 1924
My dear Ben.

Of course I ought to have written to you much more often than I have done.
In
particular I ought t o have told you about the question of future Governors,
which has been perplexing, because their duties have so greatly changed since
the system (of which they are a part) grew up. Lubbock is a loyal & good fellow
& by next April will have done the 2 ye ars which, by tradition, is all that could
be asked of him. He would have enjoyed & welcomed the dignity of being Governor
but he has not the training as things are - nor at his age can he acquire it.
So he is to be succeeded, practically speaking, by the next on the List-Inderaonwho, like Lubbock, does not seem to have the training. But he is a masterful &
strong man, who becomes Deputy Gavr. more as a duty than as a pleasure. Thus,
as you know, it comes about that I continue for anothe r year from next tpril:
perhaps it will turn out to be for another 2 years - I dont know.

We are still holding on to the traditional 2 year Governorship, to which I am
considered to be an exception. Collectively we hope to return to our tradition
as soon as world-conditions will allow us to dispense with me. I hope things
may work out that way: anything else would involve all sorts of difficulties
within & without, as you know very well from your understanding of our conditions.
I write this in answer to your cheering letter of the 18th. I could not have
written on the subject from the Bank & for weeks past I have been too pressed
& too weary to write at home. My work has been very heavy, owing chiefly to
Germany & Europe, whose problems are everlasting.

I rather hope to see you a month or so hence & am waiting for a cable from you.
There are many questions for us to discuss face to face for they cannot be answered,
at this stage by writing ldtters. I have been rather held up the last 6 weeks by
"pins & needles" in my right arm: some trouble with the nerve, it seems, which
endless houts of treatment has not yet put right. I cannot at present write much
or easily.
God bless you, my friend.

I wish the Ocean were not so wide.
Ever yours
MN

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Full text of Papers of Benjamin Strong, Jr. : Correspondence with Great Britain : Montagu Norman, Governor, Bank of England, Pt. 2, 1923-1924

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