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STRONG PAPERS, Norman to Strong, 1926 (List redone 5/2004, to include all materials) 1926 January 21 [January 29 (from Anderson)] February 2, w/ letters to Lepreux, Dec. 8; Hautain's replies, Dec 15 & Jan 30 February 5, w/ Janssen's letter, Feb 3 (2 in Fr, one translation) February 11, Belgium General Summary [February 11 (from Anderson)] February 19, w/ memo on Belgian Loan March 4 March 5 March 9, w/ memo on Belgium March 9 March 11 March 18 (3 cables) March 23, more on Belgium, with Mance letter to Norman, March 16 March 24, w/ questions for American witnesses [March 30 C (from Anderson)] [April 1 C (from Anderson)] [April 1 (from Anderson)] NOTE: attachment (memo of Norman's and Addis' evidence) is in Papers [May 10 (from Harvey)] NOTE: attachments (Ryti's letter, May 4; Norman to Hautain, May 8, May 10, & May 12; Hautain's cable May 10) are in Papers [May 19 (from Harvey)] [May 19 (from Harvey)] (May 19) May 20 (May 20) [November 17, (Peacock to Mrs. Lundie)] November 17 (November 23) November 28 December 12 [December 15 (from Lubbock)] Also: Hautain to Norman, Dec 15, w/ amendments [October 8 (from Peacock)] [October 25 (from Peacock)] [November 1 (from Peacock)] May 31 [May 31 (from Harvey)] June 8 June 12, w/ A. Miller's letter, June 3 [July 3 (from Harvey)] (July 15) July 19 (July 19, w/ July 16 letter from Vissering) August 19 C (to Harrison) August 30, with letter to Harrison, Aug 23, [and letter from Harvey to Ryti, July 27] (September 18 C) (September 21) October 10 October 17, w/ note to Harrison, Oct 18 October 21, w/ clipping (October 29) Strong Papers Key: [ ] = At earlier date, item was listed as present but no original or copy is now in Papers 06/01/04 ( ) = At earlier date, item was not on list but original is in Papers and was copied if no copy existed STRONG PAPERS, Norman to Strong, 1925 - 1925 1925 Jan.15 (from Anderson) .1/1.18 1926 Jan. 21 Jan.29 (from Anderson) Feb.2 Feb.5, with letters to Lebreux Dec.8 and Hautain's reply Jan. 24 Feb. 10 Feb. 26 Mar.9 Apr.3 from Osborne, with clipping and Montlly letteFyFebv3y1926-Review of Midland Bank Feb.5, with Janssen's letter,Feb.3 Apr.3 Feb.l1, Belgium, General Summary Apr.8 Feb. 11(from Anderson) Apr.15 Feb. 19, with memo on Belgian Loan Apr.15, with draft Report of Committee Mar.4 (.aepy) Feb. 5, 1925 Mar. 5 Apr.20 Mar.9, with memo on Belgium Apr. 22 Mar.9 Apr. 24 Mar.11 Apr. 30 Mar.18 (3 cables) May 5 Mar.23, more on Belgium, with Mance May 3 letter to Norman,Mar.16 May 11, with memo on Cooperation between Central Mar.24, with cuestions for Al,,erican Banks witnesses May 13 ar.30 C(from Anderson) May 15, Copies of Report with Norman's Compliments Apr.l C(frou Anderson) (Not in this file) Apr.l(from Anderson)with memo f May 19 Norman's and Addis' evidence May 26, with clipping May 10(from Harvey( with Ryti's May 28, with 2 copies of Gold Standard Act,May 13,1 925 letter,May 4,Norman to June 4 Reutain,May8,10 +12 and June 5 Hautain's cable May 10 July 28 May 19 (from Harvey) Aug. 15 May 19(from Harvey) Aug.16 May 20 Aug. 17 May 31 Aug. 19 C May 31(from Harvey) Aug.20 C June 8 Aug. 21 June 12,with A.Miller's letter Aug.22 C June 3 Sept.19, with German communique,Sept.8, and cable to July 3(from Harvey) Schacht Sept.14 and latter's reply,Sept.l5 July 19 Sept. 21 Aug.19 C(to Harrison) Sept.25 (from Anderson) Aug.30,with letter to Harrison, Oct.13 Aug.23 ,and Harvey to Byti,July Oct.19 27 oadver Oct.25 Nov. 1 Nov. 8 Nov. 12 Nov. 18 Nov. 23 Nov. 27 Dec.10 Dec.22 (from Anderson) Dec.29(from Anderson)lwith 2 cables to Norman Dec.19 C Oct.10 Oct.l7,with note to Harrison,Oct.18 Oct.210with clipping N Nov.17 Nov.28 Dec.12 Dec.15(from Lubbo4 (ropy of handwritten letter) g 21.Jen 1926 On board S. Majestic My dear Ben If I had come away E. couple of weeks earlier I should have an uneasy mind about I dont complain about your health which you: as it is I feel somewhat reassured. is wonderful, all things considered, & which even with the wise care you give it, may be somewhat beyond your control now & then. But I may rightly complain about your preoccupation - if not worry- for weeks on end over political & to some extent remote cluestions. It is a detail that to me your real self was then unapproachable: but it is of first rate importance to all of us, & especially to your well - being, that you were not then giving yourself a fair chance or making a good showing. That is my protest, coming from affection & need for you. Before I came away you had largely shaken off the preoccupation so that the real Ben was again on deck: now you are wisely going west to the desert air & the past is just nistoly. But the past shows you must work out a plan for the future. I shall try & do so too, with the help of the letter you wrote fnders,on & sooner or later I will writs you as to any development. My time in N.Y. was always a pleasure the more so because had nothing to do but to rub shoulders & aim at an increasingly good understanding among all of ourselves. but your thought & care made it that pleasure & gave me a perfect atmosphere uptown & downtown, with the Mellon & with the Strong family. We are having as good a trip as could be desired & RCL is pleasant & comianioncble. We have had much talk about Belgium & below the surface therr, 1e very little difference between you & him: less than I had expected to find. There remeth various points about the whole situation which are either obscure or unsatisfactory & which we shall not clean up in a few weeks. So my guess is that the best we can hope for is a short Loan to stabilise the Bank & to give time during its currency for a proper house-cleaning. I hope you can do something to help the Bk of France along the lines of Monnetss talk. It seems clear that for one reason & another I am no good about this but eaually clear that you have an opportunity As to general plans I suppose your Mother & you will go to Rome about Apl 1st after Vacation) which is not an easy matter. the less advice I give you on the subject will give up the ides of a visit to London that you will need a real rest (as well as I never manage to take much of a rest s o the better! Thats all I have to say. But we all need you hen & some of us love you: dont forget You have my thanks for all you are to me & for all you did for me-es ecially it. this visit. And the same to Phil & your colleagues. Is ever MN t2 . --frfX" ON BOARD S.S." 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Aret4C& co.c. 44t40 a/A:4 icteA-a%v *et elaiut 'tAyr5(41,44 1,13 a" Aret°62) east4 c&twit, ,4,144-4,k4ut, Ads& gto 40c9,44 La- 42 4,4 So we_ ta44, kem4vt tw 4. q<4.0.4-h044, efalyaug, tutA, it4o du*, t;st. thou% "tli- e.0t)teukolvier a 11"Ant4 k"442.- chtd.."Zzs. Motto 14$4, loosaitcs itte,p4a. 111C49f 30LAtA.tb atec4s 4 Aikkett.6 &cu.. 9C7 4 etZtAar 4 ed.4.44.4 elt..44 F ,...4440,40, a ilLai- ire ate. 6) SetC 4:4 4-4,4 evtmedi LW, Atk 4 IA* Cep 44 yo*t oplirbriu 4a.4^ a.0i, 4,444. re4144wv J aarfhez A.OLgai fir146444 YOU* AtfreGe 4,;(4. frat. Vat& aaut. 1. 4. t,C4t:V CRfrmAttssi, 4 %/&"" itta SO 6. 441WZ., 4150 tL,46 apt af64 t&ak 1444, t4A. ft.:a veet(a. kw L. 4%4 Almee 4 C.; ILIS4' Ct4 IT luck g. A, VAteakt0;%, i tgly-A,4,4;49,C 45141APt.e AdtaALAVI. A. %Till' eov 1,1134. $ 64442.) AuLALL..-4 4 (a.ti atz gt.4;4z, fizet 62.144. Itzck 4A4, tof Aft, alt, tsttatt. y4c9(. Ltd &be. ya70% 449444 (v.e.gek tc Lao., itlAamile4 (11P. Att.& 60 otAkr 1064, ft/46 4400.. lyat4 44Z(.. nub itztiatet AZ) LA4 Vt" fiuudzA0 pka, . . .1.444 cotuAsitzi twervicr 11,4% - !AC CONFlDENIIAl. Benjamin Strong, Esq. Page .3. 2nd February, 1926. copy of a letter from Hautain will show you why the matter was thus delayed, a delay in which our people here had concurred for the reason that they did not consider the Central Bank Credit to be effective or likely to be required for some time. As to the general question of a Loan, there is nothing to report, and all I can do is to send you a draft of the Bank Law with its latest amendments on a separate typescript sheet. It seems to me, however, that Article 24 (which remains unchanged) is contrary to that freedom from control which Hautain had led you to expect and that no steps have been taken to provide that the State debt to the Bank (whatever amount may remain) shall be converted into a marketable Security (see your cable No.22 of the 14th November). 4. You may care to see the enclosed copy of "L'Information Financiere" of the 29th January, which gives the fullest report we have seen of the account which Robineau gave at a recent meeting of the Bank of France of his protests to his Government. Believe me, Yours sincerely, Benjamin Strong, Esq. P c' Since writing the above about India, I have seen the accompanying article in to-day's Times.Weir SPEC EIVE0 II CONFIDEnIAL COPY 4 J. I C.. 8th December, 1925. Dear Mr.Vice- ?resident, I now write to suggest terms for the credit which the Bank of England (in conjunction with the Central Banks of New York, Holland and Switzerland) have agreed to grant upon the security of three months' prime Bankers' Bills - drawn in Belgian Francs - from the portfolio of the National Bank of Belgium. 1. The Bank of England to grant advances in sterling upon the security of the said Bills up to a total not exceeding the approximate ecuivalent of 02,000,000 outstanding at any one time. 2. Such advances to bear interest at the rate of lfo above the Bank of England rate varying with a minimum of 5;, and to be repayable in full in stern/43in London not later than the 31st Larch 1926. 3. The National Bank of Belgium to guarantee the repay- ment at maturity of all Bills 21edged from time to time and to undertake to repay to the Bank of England any sum by which the value of the said Bills when converted into Sterling may fall short of the sum advanced against the Bills. Having regard to the provision of Articles 8 and 9 of the Bank Law effective steps to be taken to render these guarantees indisputable. 4. The Belgian Government to agree not to prevent the National Bank of Belgium from fulfilling its obligations under the preceding; Clause even by the shipment of gold should such be necessary. 5. The said credit of 02,000,000 to form part of a total credit for the approximate equivalent of 010,000,000 divided amongst the following participants in the proportions stated Federal Federal Reserve Bank of New York A5,000,000 Bank of England A2,000,000 Nederlandsche Bank A2,000,000 National Bank of Switzerland A1,000,000 The National Bank of Belgium to undertake that all advances taken under the credit shall be borrowed from the several participants in shares proportionate to their respective shares of the total credit and that every repayment shall be divided amongst the participants in like proportions. 6. Bills deposited as security for advances made by the Bank of England to be lodged with the Bank of England, and the National Bank of Belgium to undertake to defray such charges (if any) as may be incurred for stamping the Bills. I have informed the other participants that will be made with them all arrangements regarding this credit direct by the National Bank of Belgium. The terms will of course be the same in all cases except in so far as variations may be necessitated by the different forms in which the credit is to be provided respectively by the Federal Reserve Bank of New York and by the European Banks. I have thought it well, however, to send you my suggestions without waiting to hear from you in the hope that by so doing I may possibly save you some time and trouble. I confirm and enclose a copy of the Bank's cable of the 5th instant. I am, dear hr. Vice-President, Yours most faithfully, (Sd.) 1:onsieur 0. Lepreux. M. NORMAN. COPY TRA,43LATION brussels, 15th December 125. The Governor, Bank of .ngland, London. Dear -Governor, I beg to acknowledge the receipt of your letters of the 4th and 8th December and the dulaicate of the contract signed in London on the 2nd instant regarding the new provisional credits granted to the National Bank. I note that the original of this document is being kept at the Bank of Englund in the interests of the various contracting parties, who have received a duly certified copy. As regards the discount credits totalling V10,000,000 opened at the National -:;ank of Belgium by yourselves, the Nederlandsche Bank, the Federal :..ieserve Bank and the National Bank of Switzerland, I have to inform you that I have communicate with these Institutions direct and that so f< r we are agreed as to the Procedure to be adopted. I have just stated in a letter to Dr. Vissering, I do not anticipate any difficulty in bringing about these operations by means of advances covered securities in our portfolio, in preference to a discount operation. i_th reference to your letter of the 8th instant, I am quite agreed on the following points:- (1) Advances by your Institution are to be made in sterling -d may reach a maximum equivalent to approximatel; /2,000,000; they are to be repaid in sterling by 31st :.:arch 1YL:': at tho latest. (2) The rate of interest shall be 1,L above that of the Bank of England, but must not be less that (3) Our Institution shall repay to the bank of Englund the amount actually advanced in sterling; Articles 8 and 9 of our Statutes shall be amended so as to make this obligation binding. (4) The Belgian government will Freviousl:, interfere with the engagements entered undertake not to into by the National COPiE. BRUXELLES, Le 30 Janvier, 1926. Cher Monsieur le Gouverneur, Repondant a votre lettre du 26 janvier 1926, it m'avait semble qu'il etait inutile de faire executer ces formalites avant le vote de la loi prorogeant le privilege de la Banque Nationale. Mais puisque vous le desirez Dt que nous sommes d'ailleurs comple-tement d'accord, je fais demander au Ministre des Finances de m'adresser sans plus tarder la lettre en question et je m'empresserai de vous la communiquer. Veuillez agreer, cher Monsieur le Gouverneur, l'assurance de mes sentiments Bien dvou'es. (Sd.) F.HAUTAIN. Monsieur Montagu Norman, Gouverneur de la Banque d'Angleterre, LONDRES, E.C. 2. anh of angina, EC. 2. 5th February, 1926. My dear Strong, I have now received from Monsieur Janssen an assurance on behalf of the Belgian Government in the form of a letter, of which I enclose you a copy. It is clear that, while the required assurance as regards the shipment of gold is now in order, there can be no question of the credit being drawn upon until the amendment to Article 8 of the Bank Law has been passed by the Belgian Parliament and has received the Royal Assent. I do not know how much longer we shall have to wait for this, but the Belgians are some weeks already behind the time-table they originally put forward. With the exception of this amendment the papers covering the Central Bank Credit to the National Bank of Belgium are in order and copies are on the way to you. I take it therefore that the requirements of the Federal Reserve Bank will be satisfied. But as you are in California and I may have to cable on this subject I shall have a set of these papers sent by to-morrow's mail to be put among the files of your Bank. http://fraser.stlouisfed.org/ Benjamin Federal Reserve Bank of St. Louis Believe me, Yours acerely, , Strong, Esq. COPY Bruxelles, le 3 Fevrier 1926. Lonsieur le Gouverneur, 1"..HAUTAIN, Gouverneur de la Banque Nationale de Belgique, m'a mis au courant, en temps voulu, des pourparlers qu'il a menes avec les banques centrales d'emission des principaux pays a etalon-or, en vue de conclure avec elles un arrangement permettant \e. la Banque Nationale de leur reescompter ou d'obtenir d'elles des avances en devises etrangeres sur son portefeuille commercial beige. / La Banque Nationale s'est engagee a garantir le / remboursement, a l'echeance, des operations d'avances ou de reescompte qui seraient effectuees conformement a cet arrangement. Le Gouvernement beige a depose 1 l'article 8 de la loi organique de la Banque Nationale, un amendment concu en ces termes: "Art.8.- 2° A reescompter a l'etranger les effets "de son portefeuille; a remettre ces effets en "gage; ,a garantir la bonne fin de ces effets Cu "des operations d'escompte et d'avances,y "relatives; a acquerir des avoirs a l'etranger "en des monnaies base d'or ou sur des places "payant en or." Cet amendement sanctionne d'une facon nette et absolue la tradition en vertu de laquelle la Banque Nationale s'etait toujours estimee fondee a effectuer des operrItions de 4 de ce genre. Cet amendement sera certainement vote. En outre, le Gouvernement, pour repondre au desir de la Banque Nationale, prendl'engagement de ne mettre aucune entrave aux mesures que la Banque jujerait necessaire de prendre a un moment donne, pour s'acquitter des obligations qu'elle aurait contactees envers les banques centrales d'emission interessees a ces operations, et en particulier a ne pas s'oz:poser a ce qu'elle exporte de 1'or. Veuillez agreer, Monsieur le Gouverneur, l'assurance de ma haute consideration. (Sd.) ,L.E.JANSSEN. it Monsieur NORILN, Gouverneur de la Banque d'Angleterre, LONDRES. CABINET DU MINI STRE R.T.cElvE-0BRinCEMIES' le 3 JANVIER 1926. 1 7 1926 DES FINANCES No.515 Monsieur le Gouverneur, M. Hautain, Gouverneur de la Banque Nationale de Beigiqfll, m'a mis au courant, en temps voulu, des -o.rf,arlerc qu'il a mends avec lee banques centrales d'emission dos principaux pays A etalon-or, on vue de conciure avec elles un arrangement uermetttmt a. la 13anque Nationale de lour reescompter ou d'obtenir d'elles dec oiances en devises dtrangbres cur son portefeuill© commercial beige. La Banque Nationale s'est engage° garantir le remboursement, a. l'echeance, dee operations d'avanees ou de reescompte qui seraient effectudea conformement h cot arrangement Le Gouvernement beige a depose d. i article 8 de la loi organique de la Banque Nationale un amendement concu en ces termer: Art.8.- 2 A reescompter a. l'etranger les effete de son "portefeuille; h renettre cee effete et gage; h garantir "la bonne fin de cos effets ou des operations d'occomiAc "et d'avancee y relatives; a. aoqudrir dec avolre d l'atranger "en des nonnaiec h base d' or ou sur des places ra:;ant en or." Cot amender-lent sanctionne d'une facon nette et abeolue la tradition en vertu de laquelle la 3anaue Nationale s'etait toujours estinee fondee h effectuer des operations de cc genre. Cet amendeent sera certainement vote. En outre, le Gouverneent, pour repondre desir de la Banque Nationale, proud l'engagement de ne mettre attune' 2 4 auoune entrave aux mesures que la Banque jugerait necessaire de prendre -in moment donne, pour s'acquitter ues obligations :u' ells a gait contrctees envers les bang- _:es centrales d'emission interessees cec operations, et en particulier a ne 1;as s'o.[.,.oser a ce qu'elle exporte de l'or. Veuillez agreer, ,ionsieur le Gouverneur, l'assurance de ma hate consideration. A.E. JANJSEN A Monsieur JOHLAii, Gouverneur de la '1anque d'Angleterre, LONDRES. TRANSLATIONbrcat4.746-4-te.,-COPY si515 4)17/9 LC-CO-/ Brussels, February 3, 1926. Dear Governor Norman: M. Hautain, Governor of the National Bank of Belgium, in due. course informed me of the negotiations carried on by him with the central banks of issue of the principal gold-etandard countries, with a view to making an arrangement with them permitting the National Bank to rediscount to them or to obtain from them advances in foreign currencies against its Belgian commercial portfolio. The National Bank has undertaken to guarantee the repayment at maturity of advance or rediscount operations which might be effected in accordance with this arrangement. The Belgian Government has added to Article 8 of the law organizing the National Bank an amendment which reads as follows: "Article 8 :- (2) To redi scount abroad the bills in its portto deliver these bills as security; to guarantee the repayment of these bills or of the discount and advance operations relative thereto; to acquire credits abroad in currencies on a gold basis or in markets which pay in gold." folio; This amendment sanctions in a clear and absolute fashion the tradition which the National Bank has always had, that it bad a right to effect operations of this kind. This amendment will surely be voted. Furthermore, the Government, following the wishes of the National Bank, undertakes to place no obstacles in the way of the Bank, whenever the latter may take steps such as it may deem necessary, to carry out tie obligations which it may have contracted toward the central banks of issue involved in these transactions; and in particular, not to oppose the Bank's exporting gold. Respectfully yours, (signed) To Mr. Norman the Bank of England, Governor of http://fraser.stlouisfed.org/ LONDON. Federal Reserve Bank of St. Louis A. E. JANSSEN . CONFiDEITTiio,L. Ranh of 04ream1, Sankt, E.G. 2 11th February, 1926. 1,:y dear Strong, There has not been much to say to you lately about Belgium, chiefly because we have been waiting for final Budget amendments and for information as to actual Treasury receipts and payments, excluding borrowings, during the last two or three years. The latter figures they cannot give us, but we have arrived at them in another way and I feel we have now gone far enough to reach a conclusion; of this I gave a hint to van Zeeland when he was in London a week ago. .k.t the same time I offered to go without delay to Brussels and explain the position to Hautain, an offer which he has declined for a week or two on the ground that it would be best to await the passing of the Bank Law (in t:iis connection please refer to my llo.31, paragraph 3). in order that you may be informed generally of the result of our investigations, I enclose a memorandum on the Belgian position which hr.Osborne has put together for the purpose. So far, none of the Bankers has had any communi- cation with the Belgians since I came here from .Limerica and, by agreement, I have been trying to act on their behalf. I have supplied them, and especially Leffingwell, with such figures as Hautain sent to us, and they may have reached their own conclusions: 4 Page 2. Benjamin Strong, Esq. conclusions: these r know are not very different from what you 11th February, 1926. will have read in my cable which I have mentioned in the previous paragraph. My own view on the three main points is this: Considering the criticisms to which Janssen's 1. Budget is open: considering, too, the promises made by Theunis, published in the Belgian prospectuses in New and the statements York, I do not think that much confidence can be felt in an equilibrium of receipts and payments during 1926. It is doubtful how the Belgians can deal with their Floating Debt, including a heavy maturity next December. For this they have the idea of a forced conversion if necessary in which case the fat would be in the fire! The ratio of stabilisation is to be fixed by decree after the passing of the Bank Law. I understand that confidence requires it should be fixed quite shortly after the Stabilisation Law is passed. The ratio is still undecided, but like yourself I mistrust the 4 to 1 or even 107 to the £ (4.52 cents to Foil) as too favourable to Belgium. Believe me, Yours m set sincerely, Benjamin Strong, Esq. 4"44..t_40l.t/L Eank of &One 12th February, 1926. Enclosure for letter of the 11th February, 1926. 001;FIDEIITIAL 4t BELGIUM GE.,;.z;RAL SUMMARY Illebruary, 1926. )ktnIc of England. 1. Budget 1926 2. Consolidated and Floating Debt 3. Bill for extending the Bank's Charter, etc. 4. 3alance of Payments 5. Prices 6. Economic Position. E L Summary of Position 1,105 (e) There are certain credits granted by the State to industry through the Banks in 1919, the balance of which, a 41 .7cs.6C millions is to be received back during 1926. It would seem safer to reduce this expectation by half, 25 the proportion of the estimate apparently realised in 1920. (f) Credit is taken in the extraordinary Budget for the disposal of deliveries in kind made before the introduction of the Dawes Plan and amounting to about Fcs.206 millions. It seems likely that the first item composing this total, viz., Fcs.168 millions, must be coal and coke. the other two items are dye stuffs Pos.12 millions and "tugs and barges" Fcs.26 millions. As the Government have already taken credit for the sale of about Fcs.600 millions coal, it is unlikely that they will be able to sell any more in the present state of the Market, and as none of these items has been saleable during the last 18 months, it seems not unreasonable to add to the deficit the coal item of 168 and half the "tugs and barges" figure, say, This brings the total deficit to 1,311 To meet this deficit the Government are relying upon the collection of Fcs.555 millions arrears of taxes for all years up to and including 1924.Since this figure includes Fcs.168 millions of Excess Profits, and since nearly half of all arrears has been outstanding since 1923 or earlier, it seems doubtful if the whole can be gathered in in 1926. If reduced by one-third it leaves available The sale of sequestered alien property is expected to yield 13 370 a ______LUZA Linistri of :inaneels accounts are not to enable thous deficits to be ieur van .eolar at7rees that the following , annual movement of the t;onsolidated and mately re.)reuents the Treawiry defiolt of the ,Icternal debt la the difference ding at the end of each year converted t the avernce rate of the franc for the e currencies concerned. of the -aerioan iebt has been eliminated the net result for the three years is 48 oury deficit 19605.3 million francs sury Surplus tAlefi do. sury :eficit Wok do. 1 OV wilimmowireoemollomo.s..w41......- OP (In millions of franc's) Net 4ta1 .02ternak veaent in 19E3 418.5 -loating ::ebt 419 + .5 + ;onsolidated Debt + 353.5 +1,1b1 + 1,54.6 64.7 +1,570 + 1,505.3 - A140,1Ammia Orment in 1924 .=.1...YR. Floating !ebt Lonaolidated Debt + 499.2 - - 1,950 2,518.0 + 1,954 + 2,4W.2 68.5 64.8 4 *mamma asnowedi 6044 - 6,321.0 ovement in 192 5,713.0 Floating Debt 3onaolidated Debt +12,129.2 + 1,305 + L'.4e54,2 + 7,271.2. + 6,416.2 fOROMMOW 697 + 950.2 UamA*111 OMOM xgmAal lAmsolidated 1923 1,534.8 1924 L,453.2 1925 +11,229.2 Pleating Dna - 2,515.0 1924 1925 -41-1:631 - .6,636.0 L,39G.7 ManA.31all Ale figure is made up as follows:(1) 246 million, the portion of the :Aborts= Debt not previously shown in published etatements, at Fr.2 per / 5,324 (2) 'mount of outstcMlag Mparation limas which are setaally held 1.);i. the Belgian ",:reasury 639 6,163 MIMM4,2111, Liank of Enebind. 3UDGLT BUEL:14, 1926 (In milliona of francs) 2.ere u a sever thu totul 2udiset urdun - 4,328 (1) Taxation (2) Taxatiun lees inturnal debt service iirjueted) 4,428 - 2,261 x .65 A 2,406 . 4,328 - 1,922 (3) Total of all Btlets (4) Total of all Budgets loss internal 9,078 ar 7,156 debt service (adj'at)fl j,07J - 1,922 1926 Ludget Jurden compared with - On basis of (1) (4) (3) (2) .rancs per head 'opulatiDn (7.7 11L1LJAci1 2r.364 .:r.412 Fr.1,178 per V5.6 bl. 43,1 14,419 he 411.8 _9.3 Percenta098 National ealth 1. .Pr280,7tr-; million (10 times income) 1.4 C.9 r.120,000 million (sir J.Stamp) 3,5 2,1 "." 2.3 2. Circulation O. 4 30 Ili 87 'r.2::,,r..27b million) 13 9 32 23 2orsign Tracts million) (cr.3, 14 C 29 23 (1r. 8,000 National Income nrevious 211.aian ilaAgpte - total of all budeets. correirponding to Column (3) (Eigures supplied by Latinal 1923 .e r. mi1lion(Fro0 million 10C) r Z10.6 i .;iiku,216 2108 " . 6,897 . t1.513 of outitaating A.01 " " " (ior. 96) - .14.0 do. 68) z13,0 do. 'Lelgium) hood (iigurou ta.con from 3tateeLian's Year book) 639 million =» 426 million(1;TO 2b) as 4,3,7 per hand . 2. Consolidated and Floatil.E Debt This amounts to about 2cs.5,820 millions, which, according to figures supplied by the National Bank, was divided on the 23rd December as follows Small investors 3,680 Banks 1,200 Bills taken by Banks on special terms 740 Short-term Treasury Certificates 200 5,820 Different estimates have been given as to the amount of foreign money invested in internal Treasury Bills and these vary between Fcs.700 millions as a maximum down to Fcs.230 millions as a minimum, but the National Bank say that such figures are pure guesses. A table is attached of short-term and long-term maturities and it will be seen that in 1926 the chief difficulty is the Treasury Bonds for 2cs.1,880 millions maturing on the 1st December. It is understood that the Government will, if necessary, compel the renewal or conversion of these Bonds. BELGIUM: CONSOLIDATED DEBT (In millions) Date of Rate c Amounts now outstanding final Retsvment Description 15elvian Francs Currency External 31 Dec.1937 1939 let '!eb.1941 1943 T1.39.9 356 5 Cost of internment of Belgian troops in Rolland £7.33 784 3 'Aerling Loan of 1914 /22.8 502 8 /30 millions issued 1921 '.F.400 320 6j Issued in '-rance in 1923 let June 1945 /40 880 7i /50 million issued 1920 let Fept.1949 /2E.4 625 61 t30 million issued 1924 let Jan.1955 /48.2 1,060 6 00 million iesued 1925 1st June 1955 /49.7 1,093 7 $50 million issued 1925 let Jan.1956 £9 1987 Various 963 (/171.8 3,780 (046 5 ,412 British "Reconstruction Credit" U.S .War Debt U.S.Post-Armistioe 72Jebt 15,775 Internal 1958 599 5 30 Year Yomis issued 1925 for War Damaes (2,204 6 Bovas et Association Net. des Industriels & Commercants (r.839 million pre held by Bel Pan Treasury) ( ( r69 The amonnt of outstanding "Titres nminatifs" for War Damages which to b, converted into one of the two classes of 30 Year Bonds 1-:hew 4 & Bonds of the "Lloy7a. oyal Beige-. 1966 96 1967 427 Annuities: cavitaliseu value shown 1967 611 do. 1995 2,445 5 Premium 7.oan of 1920 999 4 Devasted Regions Loan - issue 999 5 do, 999 5 do, 220 2i 480 3 2011 2012 2013 Perpetual 6 Issued for purchase of railways SUMO paid to Credit Communal 1921 issued 1922 issued 1923 All these loans sre extinguishable by Sinking Funds which operate by "First Series" drawings or purchases on the market: 2,712 3 "Second Series" 226 3 "Third Series" 1 3 "Military 1.686 5 "National Restoration" Lom 2.066 6 "Consolidation Debt" the date of extinction depends on the rate at which purAlases are effected. 33,014 Bank of England, 8th February, 1926. A ervicd Loan BELGIf-N INTERNAL FLOATIN1 DEBT Fostal Cheque Funds Revolved in 3 months Bills 638,697,493 23,300,000 7Levolved in 6 months Bills Banks 1,961,214,000 Public 3,669,559,000 5,630,773,000 6,292,770,493 Bank of England, 5th February, 1926. Bank of England. BELGIAN SHORT-TERa Not yet funded DEBT ULTURITIE S. French Post-Armistice Debt F.F. 241,024,890 at 80 192,819,912 1926 June/July Bons ordinaires 1st December 51 5 year Treasury Bo ds 2,000,000 1,879,405,300 1,881,405,300 1928 December 10,000,000 Bons ordinaires 1929 lst January Debt to Bank (or balance thereof) 12th ILEy Bons du Tresor Chevaux Canadiene £930,480 at 107 5,680,000 99,561,360 105,241,360 1928-1930 From ist Dec.1928 to Sept.1930 5"1 5 year Bonds issued in exci-ange for Interprovincial Debt 647,510,000 1930 31st December Bonds issued to withdraw larks in Euen-ilalrnedy 45,000,000 1932 http://fraser.stlouisfed.org/ let Federal Reserve BankOctober of St. Louis 10 year Treasury Bonds 7.0.739 .,651a71911-2Z; 3. Bill for extending the Bank's Charter, etc. The points raised by Mr.Strong in his cable 5. Prices - some academic considerations. dholesale prices in Belgium are about times as high as they were before the war, prices in the United States are about 1 3/5 times as high: hence, Belgian prices are about 3 3/5 times as high as American prices now are. Lore exactly, taking the latest figures available, viz., for :oveLoer, 1925, the Belgian price index is 569, the American 157.7, 7ihich means that Belgian prices were then 3.61 times as high as American. Turning to the Belgian exchange, reckoned in terms of dollars, it is found that in November last the rate was 42,g times as high as pre-war - more exactly 4.26. It follows that the internal purchasing power of the franc is greater than its external purchasing power, by the difference between 361 and 426 expressed as a percentage of 361; the calculation for November last being 18. therefore that if the Belgian exchange were stabilised at 107 and devaluation took place on that basis, prices in Belgium would rise about 18i.3. But Belgian prices before the war were probably always somewhat lower than American prices and will continue to be so. It is possible therefore that the actual rise as calculated on the November figures would only be 12 or or perhaps even less. Now the exchange rate, except when pegged, is chiefly influenced by purchasing power parity; hence no further increase in total purchasing media (chiefly Notes) should be required to cover the probable rise in prices upon stabilisation. On the other hand it is equally true that no further deflation should take place after stabilisation. Tables are attached showing, from 1923 onwards, the extent to which Belgian internal prices were below gold prices. There is also a table of the Cost of Living, on a 1921 basis, which shows an upward tendency since May 1925, but a level in _December not much above the previous January. 73EIGIUL 410 1925 (cont.) August 361 ptember A B 353 42621 438 + 21 365 October 426 + 17 361 November 426 + 18 This is an index Showing the increase of Belgian prices over American orices. The figure is ascertained by dividing the Belgian ()rice index by the index number of the United States Bureau of _labor Statistics and multiplying the result by 100. This is an index showing the cost of the dollar in Belgian currency as a -ercentage of its cost at This is the difference between columns B and A expressed as a percentage of A. The plus sign Shows the excess of the internal purchasing power of the Belgian franc over its external purchasing-: power. denotes the exact reverse. The minus sign C 3.-L1GIUE BELGIUM- Cost of Living 6. economic Position The economic situation of Belgium is on the whole fairly satisfactory, if allowance be made for strikes and the unfavourable market for coal, two adverse factors which have been in evidence for some months. Coal. The monthly production of coal for the first ten months of 1925 is about the same as in 1924, but The total production for stocks were about twice as large. 1925 was about 1,900,000 tons which is only slightly less than in 1913. Iron and Steel. Production was ahead of 1924 until May when the output was affected by a strike. The total for the year is, however, about 200,000 tons in each case, which again is about the same as in 1913. Transport. The number of tons-kilometres worked on the railway in 1924 was 7,000 millions, which compared with 4,500 millions in 1920 and 5,725 millions in 1913. Generally speaking, there seems to be a tendency for trains to carry a greater number of trucks and weight,which should be profitable. Railway tariffs have not been increased in proportion to the rise in prices, passenger rates being now about 4 times pre-War and goods about 41' times, whereas wholesale prices are 5i times pre-War. Port of Antwerp. In 1913 7,058 ships with a tonnage of 14,059,845 tons entered the port; in 1919 3,699 ships entered the port with a tonnage of 4,214,970 tons; in 1925 9,971 ships with a displacement of 20,201,598 tons came to anchor in Antwerp. Engineering. This industry has been adversely affected by a strike which lasted from the 1st July to the beginning of September. Textiles. improvement in the wool trade. There has been a considerable The application of the 8 Hours Act passed in compliance with the Washington Convention has, however, however, produced some difficulties recently at Verviers. Unemployment. 0 League of rations figures are attached showing a steady reduction in the numbers during 1925. The rational Income is estimated at £36 per head,which is the same as in 1913. Comparative figures for 1924 are - England £88, France £41, Germany :Z25. The rational 1Jealth is estimated by Sir Josiah Stamp at 1156 for 1913 and £157 for 1919. In the latter figure he estimates that the inaccuracy is not likely to be greater than 30;0. BEIGILMI UNBMPLOYMIXT YIGURES TAKEN ":'ROM THE TEAGUE OF 4111 NATIODS MOUTELY BULLETIN STATISTICS FOR DEOEMICE 1925 Unorploynont Insurance Socletico End Of nonth ,holly Unemployed 13ratinily Unenployod, 1922 XII 1923 11,743 14,312 III V/ IC 4,708 5,605 3,008 11,017 12,010 11,653 6,922 12,750 4,060 6,659 4,597 9,344 9,700 15,269 14,940 23,410 9,414 6,483 6,701 5,634 4,758 4,705 33,509 29,106 24,490 17,434 11,174 10,916 XII 1924 ITT VI IX XII 1925 III VI VII VIII IX X Dercentve of workoro unemployed amonr trade Unionists 1922 1923 III VI /K N.rT 1.7 2.1 0.8 0.8 0.5 1.7 1.8 1.6 1.1 1.9 1924 III VI IX XII 1925 III VII VIII IX y 0.6 1.0 0.7 1.5 1.4 2.3 2.3 3.6 1.5 1.1 1.1 0.9 0.8 0.7 5.5 4.8 '.0 2.9 1.9 1.8 Munber of workoro on whioh latoot porcontagoo aro brxed 598,350 CONFIDENTIAL. apt o england, Santion,E.C. 2. 19th February, 1926. 1.:y dear Strong, I have just returned from Belgium where I had interviews with Janssen, van de Vyvere and Hautain etc., and I want to let you know by this mail something of the Belgian position as I left it. I told Janssen and Hautain I had come quite unofficially and not as a representative of the Bankers, but that knowing their views it had seemed to me best that they and Janssen should not meet for the moment. I had come to Brussels in order to endeavour to find a compromise which might be satisfactory to both parties. difficulties were as follows (1) I told them that the chief - The suggested amount of the Loan, $15C million, is too large. (2) A long term loan was not practicable. (5) The Bankers were not satisfied that the Budget for 1926 was in fact balanced. (The opportunity was taken to 4-et further information on various points and I will send you a fresh memorandum shortly) (4) They were also not satisfied that the Floating Debt can be cared for, as it must be, internally, especially in view of the December _Bond maturity. (0) http://fraser.stlouisfed.org/ Page 2. Federal Reserve Bank of St. Louis Benjamin Strong, Esq. 19th February, 1926. CONFIDENTIAL. !allit of angland, Sondini, E.C. 2. 19th February, 1926 My dear Strong, I have just returned from Belgium where I had interviews with Janssen, van de Vyvere and Hautain etc., and I want to let you know by this mail something of the Belgian position as I left it. I told Janssen and Hautain I had come quite unofficially and not as a representative of the Bankers, but that knowing their views it had seemed to me best that they and Janssen should not meet for the moment. I had come to Brussels in order to endeavour to find a compromise which might be satisfactory to both parties. difficulties were as follows (1) I told them that the chief - The suggested amount of the Loan, $150 million, is too large. (2) A long term loan was not practicable. (3) The Bankers were not satisfied that the Budget for 1926 was in fact balanced. (The opportunity was taken to get further information on various points and I will send you a fresh memorandum shortly) (4) They were also not satisfied that the Floating Debt can be cared for, as it must be, internally, especially in view of the December Bond maturity. (ö) Page 2. Benjamin Strong, Esq. 19th February, 1926. A (5) That the rate chosen for stabilisation was not considered satisfactory, because it had not stood the test of time under normal conditions. As regards a compromise, we had a great deal of conversation, and I found they had no very helpful ideas. I finally myself suggested the basis outlined in the enclosed short summary. You will see that the $150 million long term loan is reduced to 0100 million short term loan and the balance of $50 million is provided by a Central Bank credit, in which I have put you down for $15 million and the Bank of England for the same figure.. The whole programme is of course still in a very fluid state and there will be a meeting of the Bankers here on Tuesday next to discuss the scheme in detail. I think, however, that the Belgians would accept any arrangement on these general lines. ur Your Benjamin Strong, Esq. sincerely, BELGIAN LOAN% 1. SUGGESTED BASES FOR PROVISIONAL CO/TROMISE. Reduce amount of loan to $100 million: U.S. ... England ... Holland ... Switzerland... Sweden ... ... ... ... ... ... 050 25 10 10 5 $100 million The amount of 0100 million to be subject to agreement with the Bankers. All existing credits to be liquidated out of the $100 million. If this amount is found insufficient the Central Banks will grant credits (in the form of re-discounts or advances on Bills, as in the case of the existing $10 million credit) for a further p5o million, as follows: U.S. 015 England 15 http://fraser.stlouisfed.org/ conditions. Federal Reserve Bank of St. Louis Ranh of SIT OW, CONFIDENTIAL. Sondwi,EX.2. 4th March, 1926. My dear Strong, I had one or two talks with Volpi while the Italians were here about their Debt settlement. As a matter of fact, they made an advantageous settlement looking at their payments as a whole - probably a reduction of 30 per cent on what they were prepared to pay - but not so advantageous a settlement looking at their payments in the earlier years. Some people of course think that all these inter-Allied Debts will cease to be fully paid or will be cancelled within ten or fifteen years. But my talks with Volpi were unsatisfactory and disappointing for two reasons. attitude towards Germany!! First, because of his He complained that we were all Germanophils - you and I and all our friends in Berlin, including the Italian representative himself. He said the Germans must recognise, the sooner the better, that they are not going to be treated leniently and must somehow pay up: hence, as he foreshadowed, these fiery speeches which Mussolini is making against the Germans. Volpi declared that if full Reparations payments to Italy were not made regularly in cash or in kind he would require to be given Industrial or Railway Bonds to make up any difference; a requirement which upsets the COLFILEUTIAL. Vera of 60420 COrFIDENTIAL. ICATIODU,E.C. 2 5th March, 1926. My dear Strong, to To aid you in your endeavours witnesses before obtain for us certain American whilst it is the Indian Currency Commission herewith (in confidence) sitting in London, I send you has been supplied a copy of the ,questionnaire which to other witnesses. to me,as well as, presumably, Believe tie, Yours Benjamin Strong, Esq. incerely, CONFIDENTIAL. 13 ank of 6040 Veittritit, E. C. 2 9th March, 1926. 14 dear Strong, A.s promised in my cable No.60, the latest memorandum paragraph 4, I send herewith on the Laos, in fil Belgian Budget position. Believe me, AtYours Benjamin Strong, Esq. ost sincerely, CONFIDENTIAL alit of Sontion,E.C. 2. 9th March, 1926. My dear Strong, The cable which I sent :rou yesterday ought perhaps to have been sent to you earlier in the form of a letter. Apart from my usual reason for not writing, I felt that you knew all there was to be known about the Indian Currency situation from Blachett's letters and from our talks and from Kelly and Ryan Quite briefly, to-day's difficulties, as I see them, have arisen thus. 31ackett has recommended a gold currency; which is exactly what the whole of India demands in the hope that the Commission cannot turn down the Finance Minister. This demand is supported by statements made to the Commission in India and may become a strong weapon in the hands of the parlia:aentarians at Delhi. The Commission consists, I think, of four Indians pledged as it were to a gold currency: several members who have no ver:: definite ideas (as I gather): and Hilton Young and Stra::0sch who are as wise as they are sound, and therefore see the dangers towards which the Commission may be drifting. Neither the Indian members of the Commission nor public opinion in India would believe it if they were told by Englishmen in London that India cannot have the gold circulation which the Finance Minister has advocated, not alone because it would CONFTEENTIAL Benjamin Strong, Esq. Page 2. 9th March, 1926. would not be in the interests of England but also - and quite as much - because it would not be in the interests of India and the rest of the world. This fact has to be impressed upon the Commission and on public opinion in India, and if we are to be saved from real trouble both the Commission and the Indian Public must be convinced. Who is to convince them? Hilton Young thinks - and I agree with him - that American evidence will do so and that nothing else can. Of course I don't know whether this is true, but I am passing on to ou what sounds so to me. If it is true, how are we to proceed? I must appeal to Morgans and to you: and in one way or another you surely can help us out of this quandary. The reasons for your doing so are riven in my cable - I need not repeat them: and from the angle of silver C:c. we discussed them several times in New York. The only alternative to :our coming here would be that some of the Commission should go to New York. While theoretically possible, practically I believe it would be dangerous and possibly disastrous: what with the head-lines and the silver producers and the politicians and even the unfamiliarity of your public with native Indians I should fear the results. But your advice is badly needed. With kindest regards, Believe me, Yours 'ncerely, Cot Benjamin Strong, Esq. COPY Eemorandum for ::r.L.C.E.orman http://fraser.stlouisfed.org/ The Federal Reserve Bank of St. Louis tkiferrda to iA letter of BE L G IU 19 I (4, ) 4 . four following questions were to be dealt with in .d -2- cash margin for contingencies and that he had sought to remedy and had remedied this condition in the 1926 Budget in the following way. HSad had a law introduced and passed in September which had permitted Ilkm to make payments due by the State on account of Reparations in the form of "Titres des Dommages de Guerre 5r,1", these bonds, payable in 30 years, to serve also to take up "Titres nominatifs", then outstanding to the extent of approximately ?cs.470,000,000. These latter must be surrendered within a certain period (said to be April 15th) or they become invalid. The Titres des Dommages de Guerre, in which reparations are in future to be paid, are non-negotiable bearer bonds. no market, not being listed on the 13ourse. They have They may however be discounted in the following circumstances. Those who receive the Titres in compensation for industrial damage suffered may obtain cash against the security from the Association Nationale des Industriels et des Comnercants if they are able to prove to a Committee of the Association specially charged with the matter, that if they are not able to discount their Titres they will suffer actual money loss. Communes and villages which are entitled to reparations may discount their -_itres des Dommages at the Credit Communal. Private individuals who are entitled to reparations may rediscount their Titres with the Savings Bank. Exact figures of recent discounts of Titres in the first two instances are to be made available within two or three days. The figure of rediscounts by the Savings Banks to date is 7cs.30,000,000. (Note. In connection with the Dinant Assize Court decision -3- :.-.Seulen offered the following explanation. This decision has been *appealed and the Dinant Court will be reversed within the next four or five weeks. Should by some unfortunate and unexpected chance the reversal of this decision not be obtained the law will be altered by Royal Decreee (consultation of Parliament is unnecessary) and the Treasury will thus be saved any embarrassment in respect to the collection of taxes. The Dinant decision was rendered by the lowest Court in the Belgian ranking, composed of local magistrates, all friends of the litigant and all themselves sinistres.) The sum which the Minister must pay on account of reparations in 1926 totals to about Fcs.525,000,000. This is on account of claims which the War Damage Tribunals allowed in the last six months of 1925 and which will be presented for payment in 1926. He will liquidate this indebtedness through the issue of Titres des Dommages as outlined above. As he anticipates receipts on account of reparations of some Fcs.813,000,000 in 1926 of which between Fcs.450,000,000 and Fcs.500,000,000 will be in cash he will have a contingency fund at the Treasury equal to this latter amount. Third. In budgeting for the cost of his stabilisation loan the Finance Minister Provided a sum sufficient to meet two interest and sinking fund payments in 1926. Actually he will have only one due date in the course of the current year. He therefore has a Treasury margin here of approximately Fcs.100,000,000 available to meet such increases in the rate on the T'loating Debt as may be deemed necessary. Fourth. The mortgages which the Minister receives on account of arrears of taxation are fortems varying between 60 and 90 days. He attributes the fact that he has received so large a percentage of - 4 - his tax arrears in the form of such mortgages to the dear money olicy maintained by the National Bank. He has left the mortgagees 10 however no illusions as to his determination to proceed to the forced sale of the properties mortgaged should the mortgage not be liquidated at the end of its term. He said that he had told one Industrial who complained of the harshness Of these terms, that he was not in the banking business and that the mortgagee must either borrow from his own bankers or liquidate his indebtedness. Fifth. The proceeds of the first tranche of the Congo Loan are not available to the Idinister but must be applied to the payment of public works completed or already in course, in the Congo. The subscription lists to the first tranche of the loan (Fcs.200,000,000) are not actually open but nevertheless subscriptions to the extent of Fcs.325,000,000 are already in hand and are continuing to come in at an exceedingly satisfactory rate. In view of this fact the Linister, who has the right to the first Fcs.150,0vu,000 subscribed to the second tranche, expects to be actually in receipt of this sum by the 15th June at the latest. insistent on this point. Both 1,-..Janssen and E.Senlen were very The Congo, 1.1.Janssen said, actually owes him about Fcs.400,000,000 and he intended, should the second tranche of the loan (Fcs.500,000,000) be oversubscribed, to arrogate to himself for his Contingency Fund the amount of the oversubscription. Sixth. The Antwerp Loan of Fcs.150,000,000 is actually being offered to the public. Subscriptions to this loan are coming in at a fairly satisfactory rate and to date total about Fcs.107,000,000. The i,: inister is not operation. so confident of the complete success of this :Is the full amount of the loan however is underwritten - 5 - he is certain of obtaining before the end of the year 7cs.75,000,000 which the City of Antwerp owes him. The Minister's Treasury position appears to be fairly satisfactory alOthe moment. Me has cash in hand for all normal needs and his position he claims will become increasingly easy in the coming months. He has instituted a system whereby he receives a daily report of his Treasury operations and is thus able to follow fairly closely the flow of funds to and from the Treasury. ::.Seulen is at present organising a service at the Finance Ministry which will be charged with the detailed compilation of such reports for fortnightly publication. (2) 1927 Budget The Minister aduitted that he had as yet had time to give but comparatively little thought to the details of this Budget. In general his views at present are as follows: existing scheme of taxation unchanged. He proposes to leave the He has created an Economy Commissim of which he himself is Chairman, and of which he told me he proposed to be "boss", composed of important men of affairs, Bankers, Industrailists and commercial men. This Commission, which will hold its first meeting next week, has as its objective a reduction o State by one milliard francs. the ordinary expenditures of the He thought that the actual reduction of expenditures would be between Fcs.500,000,000 and Fcs.600,000,000. 1!.Seulen, who has spent twenty six years in various Departments of the Finance ::inistry and who anpeared to me to be a thoroughly competent Official, stated that the 7:inister under estimated the actual economies which could be made. Me said that there were at least 30,000 more State employees than ;ere necessary and that there was no reason why 15,000 of these could not be discharged in 1927 and 15,000 in 1928. E. Seulen in a sense will act as Counsel for the Economy Comission and explained to I me in detail the nature of the economies which he proposed to have the ommission enforce. The Commission will hold all its hearings in 1, rublic and l'_. Seulen has made every arrangement to have the hearings given very full publicity in the press. He has further planned to invite delegations of citizens from various parts of the country to attend the hearings and has, with the aid of a few of the abler Deputies, made arrangements to have these make a series of seeches throughout the country in the course of the present year in respect to the work of the Commission. Both the lanister and 7. Seulen admitted that they would have probably between 7cs.500,000,000 and Pcs.600,000,000 of extraordinary expenditures to meet in 1927. The Linister stated that he hoped to apply some of the excess receipts which he was to receive from the economies in the ordinary Budget to the part payment of this sum and to oltain the balance through further sales of State property (the State for instance owns 1,100 houses in the centre of the City of Brussels) and from the cash that he is to receive on account of reparations. did not propose to borrow to meet any deficit in 1927. II. He Seulen stated that a preliminary text of the Budget project would -,7,robably be drawn up late in June. prepared for the This first draft of the Budget is usually inister only but he stated that a copy .fould be made available to us for examination as soon as it had been preared. The :Sinister pointed out that he would be in receipt of cash on account of reparations in 1927 to the extent of perhaps Fcs.400,000MO and that as he would meet his reparation expenditures through the issuarre of Titres des Doi.amages this sum would be available in case of need, although he preferred to conserve the cash reparations receipts which he would receive - 7 in the course of the next two or three years for the creation of a d to meet short term maturities between 1928 and 1930. M. Seulen stated that it was the Minister's notion that if one of the smaller short term debt maturities could be liquidated entirely in cash the general oosition of the Treasury in respect to later refunding operations would be greatly strengthened. LI. Seulen offered to inform us from time to time between now and the 1st June of the Treasury's plans in respect to the 1927 Budget. (3) General status of the Floating Debt. LEL Janssen, Seulen and Monceux were all agreed that the situation in resoect to the Floating Debt had greatly improved in the last six weeks. The renewal of those Bills in the hands of the general public was most satisfactory. Indeed as there had been an excess of demands for Bills it had been possible to pay off Pcs.200,000,000 of the debt held by the Bankers through sales of the same extent to private individuals. The Minister admitted that he had had some concern in respect to the December maturity but that in view of events in the past week or so this had now been removed. He pointed out that the dear money policy of the past few months had had no effect upon the renewal of Bills held by the general public and that he did not anticipate, in spite of a probable rise of 100 in prices, in the course of the next few months, any change in this condition. M.MOnceux. He was confirmed in this statement by He pointed out that in the past a rise in prices had affected the holdings of Treasury Bills by Banks but had not caused any fluctuation in the sums held by the public. MOnceux stated that he had lately had enquiries for Treasury Bills from abroad without exchange guarantee. He showed me an order to 8 purchase from one American Bank amounting to Fcs.45,000,000 which he rived on Friday, 26th February. 7e had received an enquiry from Willa-Ad in respect to the purchase of Fcs.100,000,000 of the Belgian perpetual Rente which was now selling on an 8:,; basis. Monceux stated that in view of the improvement in the market for Treasury Bills in the past two months, he felt quite confident of the future. M. Janssen said that the only time that he had noticed any uneasiness among the public holders of Treasury Bills was last October when holders along the Fre:Ich frontier had been scared 1:)- talk in France of forced consolidation, believing that the same might happen in Belgium. He had gone to Ypres and had there made a speech in which he had said that in no circumstances, no matter how critical, would the Belgian government refuse to pay Treasury Bills as they fell due, that this state- ment had had the desired effect and that some of the recent heavy purchases of Bills had been due to increased demand from this neighbourhood. M. Monceux is to furnish us, within the next few days, with complete details of the movement of the Floating Debt in the past fourteen months. (4) Special status of the Floating Debt: Treasury Bills and Rediscounts thereof. (a) The special issue of Treasury Bills, i.e., those Bills issued at 6,72 interest plus l totals about Fcs.700,000,000. Special issue of commission, now M. Lbnceux said that the peak issue of such Bills had been in the neighbourhood of Fcs.1,060,000,000. He was no longer renewing these Bills on the same terms as they fell due but was issuing in their place the ordinary 6;; Treasur: Sill. Exact information concerning the rediscount of such Bills was not available but is to be http://fraser.stlouisfed.org/ forwarded within Federal Reserve Bank of St. Louis the next few days together with other details regarding e. - 9 I these Bills. 41 (b) Treasury's forward commitments in exchange in respect to the sale of Treasury Bills abroad. Such commitments cover Bi] to the extent of Fcs. 650,000,000 or Fcs.700,000,000. Exact details in respect to this transaction will be furnished by the Treasury at the same time that it forwards information in respect to (a) above. (SD. ) 28.2.26. DE SANCHEZ. 1. -gal* of 6140amN :131001t, E. C . 2 11th March, 1926. CL@,04. 14 dear Strong, I assume you would not be happy without a copy of our "Coal Report" which is published to-day: so I send one herewith. Volumes 2 and ;5, Minutes of Evidence and the which will cover the appendices, are not yet ready but will be sent later. Believe me, Yours s' ecerely, trefaMAAANV, Benjamin Strong, Esq. POSTAL TELEGRAPH - COMMERCIAL CABLES CLAAENCE H. MACKAY. Pai:SIDENT CABLEGRAM RECEIVED AT 1st The Postdi leRe.aph-Cable Company (IncorporatedItransmits and delivers this cablegram subject to the terms and conditions printed on the back of this b 'DESIGN PATENT No. 405291 20 Dbl.-40462 3CBRA' 23 V I A HX LONDON MAR 18 26 LCO BENJAMIN STRONG 270 DARK AVENUE NE°YORK ONE BEEN MISERABLE WITH GRIDflE LAST TEN DAY' AS USUAL BUT 'ROBABLY WORKING i,EXT WEEK 7-)LOD'.;ER I TF 926A No inquiry respecting this message can be attended to without the production of this paper. Repetitions of doubtful words should Company's offices, and not by DIRECT application to the sender. be obtained through the POSTAL TELEGRAPH - COMMERCIAL CABLES CABLEGRAM The Postdrletraph-Cable Company (IncorporatedItransmits and delivers this cablegram subject to the terms and conditions printed on the hack of this !DESIGN PATENT No. 405291 20 Dbl. -40362 4CBRA1 14 vu ' HX LONDON MAR 18 26 LCO BENJAMIN FTROr 'G 270 PARK AVE TwO HOPE COO') NEWS FROM NEWYORK ROME rDLODGERITE 930A No inquiry respecting this message can be attended to without the production of this paper. Repetitions of doubtful words shou Company's offices, and not by DIRECT application to the sender. Digitized for beFRASER obtained through the POSTAL TELEGRAPH - COMMERCIAL/CABLES .7...A4ENCE illeiMEIVE13,41 U I 1- CI I NI C-i ii, 46 ST. ,-...,. H. MACKAY. PpEsiorNT CABLEGRAM DILIVERY NO. The Postal t.tcp,raph-CablP Compan, (Incorporated)transmits and delivers this cablegram subject to the terms and conditions rinted on the hack of this hl DESIGN PATENT No. 405291 20 Dbl.-40462 5CBRW 12 V I A HX LONDCN MAR 18 26 LCO BENJPM IN ?TRONG 270 r ARK AVE NEWYORK THREE THANK° AND LOVE °LODGER I TE 930A No inquiry respecting this message can be attended to without the production of this paper. Repetitions of doubtful words should Company's offices, and not by DIRECT application to the sender. Digitized for beFRASER obtained through the CONFIDENTIAL igank of (111191anA Ion, E.c. 2 23rd March, 1926. My dear Strong, In order that when you leave for Europe on the 3rd April you may be posted, as far as possible, with the situation in Belgium, I am sending you herewith a Loom in file further memorandum by Mr.Osborne which corrects, amplifies and brings up to date the one sent 11th February. You ought also to see General :.lance's Report (prepared at the request of the Finance Minister) on the commercialisation of the Belgian Railways in connection with the liquidation of the National Floating Debt and also the letter which accompanied it: copies of both are therefore enclosed. Believe me, Yoursa merely, 6110.-41.44 Benjamin Stronr-, Esq. - COPY c/o Ottoman Bank, 26, Throgmorton Street, LONDON, E.C. 2. 16th March 1926. Sir, I beg to enclose herevith my report on the net revenue which the Belgian ,state Railways, worked commercially, might reasonably be expected to produce towards financing the paying off of the Belgian Government's floating debt. The report has been worked out in close collaboration with ::onsieur Jules Jadot, who has submitted an identical report to the ::inister of ''finances. At the same time vie have agreed that each of us should expand in a covering letter certain aspects of the problem which lie beyond the immediate subject of the report. Monsieur Jadot's coverinc' letter deals more particularly with the effect on the industry and travel of Belgium of the proposed average increase of 25% in the rates and fares. Such an increase in an industrial country in the present conditions is undoubtedly a serious matter. For example the Belgian coal industry, like our own, is in a difficult situation. Nevertheless, the above increases must and can be faced as a comparatively minor part of the sacrifices necessary to attain stabilisation - though doubtless the part which will have to bear most of the blame for future difficulties. Monsieur Jadot has emphasised the fact that Belgian industries are in urgent need of reorganisation, more particularly as regards the consolidation of the present small businesses into more efficient economic units, and considers that this factor alone provides the necessary margin for adapting industry to the new conditions. In his covering letter Monsieur Jadot also mentioned some of the ;tees which will be necessary to bring about economies on the railways, such as reduction of personnel, scrapping of the present 41- S present surplus of obsolete plant and the rigid cutting down of orders for further plant for some time to come. The degree of priority to be offered to the e an important factor in any financial investor will evidently scheme for capitalising the surplus railway revenue. While recognising the great importance of relieving the State budget of any risk of bein: called on to meet some portion of the service of the railway debt, there is evidently a point beyond which such immunity can only be purchased at too great a price. For example there would be little hope of success for any railway financial scheme which leaves the new capital denendent for its service on the surplus revenue after meeting all previous charges; under a regime involving considerable political difficulty in its full application, and in the complete success of which the Government is not directly interested financially. Among other points which :mould have to be safe- guarded in any scheme for the proposed railway company i6 that of the effecti-e representation of the new shareholders on the board of the company. It is assumed that the nationality f all the directors would be Belgian, but it is imrortant that the board should not be constituted solely from sources interest- ed in the lowering of tariffs, in the raising of wages and in the placing of orders. The proposals in the enclosed report are based on the Belgian paper franc at 107. Any alteration in that rate of exchange will therefore involve consequential amendments to the report. Yours faithfully, Sd . The Governor, Bank of England, LONDON, E.C. ) H. 0 .' ANCE. ade(errOd 14 in letter of =lions of francs. Millions of francs. ID Millions of (3) Very The Bel cash on some Fc indebte Fcs.200 negotia will ha (4) Cong A loan first t issued Governm the sec in the (5) Antw The sub quite t Fcs.106 require expect well to to rece (6) Stab The Fin payment he expe in 1926 The dif This wa end of GOVERNMENT'S RELATIONS 'dITH NATIO.NAL BANK PRICES. for the domicile of question is the to be lodged Bills difficulty for the The next possible (2) from several seem hardly Brussels It would back to due Bills. to be sent would be having amounts Bank, difficult as different with each extremely Moreover, become daily. day it would centres Banks, particular any rata on to different pro But it each day credit Bank. its at any each Bank margin no repay to or replacements time leaving repayments same the for small that it while at seems tiresome be therefore in any case and it would daily, the general almost latitude made to be with some to have interpret to at any Bank. held be necessary should might be of Bills margin that no idea BRUSSELS EXCHANGE MARKET Official date A daily official Rate of exchange is required by the Belgian commercial law, chiefly for the purpose of record. This rate is fixed at the Bourse at a meeting (from 1.30 to 2.30 p.m.) of the representatives of the Clearing Banks and 3rokers. A "coteur" announces rates which in his opinion represent the tendency of the Market. The Brokers and Bankers, who sit at a table round the coteur, then announce what deals they are prepared to make, and the rate is not eventually fixed until the purchases and sales balance. The rate named by the coteur therefore alters in accordance with the requirements of the Market. dhen sales and purchases balance the rate at which deals are made is called the official rate of the day. This is published next day in the 'Cote de la Bourse'. This system has been used for many years now, but it is only since the 25th March 1924, that by a decree of the Brussels Town Council, the responsibility of fixing the official rate was Placed with the body of Bankers and Brokers meetin at the Bourse. Previous to the above named date, the coteur alone was responsible for fixing the official rate and, being a Broker himself, was probably inclined to force the rate up or down to suit his own needs. This gave rise to public dissatisfaction, but the present method is also criticised by the "Commission des Finances" reporting to the Senate on the Stabilisation Law, who think that the rates are still rather misleading. It is interesting to note that Sills in foreign currencies payable in Brussels which are presented for payment after 2.30 p.m. and before 1.30 p.m. the next day are paid at the previous official rate. Market and Bourse. The market is divided in two parts: (1) (1) Marche officiel (2) Marche libre COPY 15.3.26 10 NOTE ON THE NET REVENUE WHICH THE BELGIAN STATE RAILWAYS WORD ED 001.11ERCIALLY MIGHT BE EXPECTED TO PRODUCE TOWARDS FINANCING THE PAYING OFF OF THE BELGIAN GOVERNI.aNT FLOATING DEBT. General -particulars of Belgian State Railways 1926 (estimated) 1913 1924 1925 4,368 4,706 4,725 2,920 3,258 3,358 3,400 Passenger km. 5,242 6,194 6,155 - Goods ton km. 5,729 7,041 7,075 - 342 390 407 442 1,626 1,695 1,839 348 379 389 1,450 1,578 1,619 42 28 53 176 117 220 Length: kilometres (in millions) Gold capital expenditure Frs. (Gold frs. Revenue ( (Paper frs. - Expenditure(Gold frs. (as shown in official (Paper frs. accounts) 246 (Gold frs. bet Revenue( (Paper frs. 96 Percentage on Gold capital Operating ratio Personnel - 3.29% 1.29% 72% 89% 93% 78.700 107.500 104.000 0.83 1.55 88% Paper francs converted in Gold at therate of 4.16 paper gold. Hitherto the policy of the ilelEian Government has been to limit the net earnings of their railwa:, to such an extent that they did not always earn the minimum necessary for paying the low rate of interest and sinking fund on the canital account, new construction being looked after b, fresh capital raised by the -3elgian Government. This )olicy has been due partly to the need for enabling the Port of Antwerp to compete for transit traffic with Dunkirk, Rotterdam and Hamburg, and ,,artly to political and economic 0 S economic pressure, which has led to exceedingly low passenger fares being granted, one of the reasons being that the su.,)ply of labour to the industrial districts materiall: depends on the ability of the Belgian labourer to travel considerable distances to his daily work. Before the war 1st class, 3rd class and workmen's fares were:- (in Gold centimes r_is passenger kil.) Belgium 1913 Great Britain 1913 1st 3rd 9.4 3.8 10.8 6.2 7.6 3.0 workmen (1.05 20 kil, 7 kilt 2.1 6i kn. (CL 66 At -)resent they are:- Belgium 1926 16.2 Great Britain 1926 (0.56 (1.08 9.3 4.7 20 kilt 7 kil. 62 kil, The average length of single journey at workman's fares is 20 kilometers in Belgium and 6i kilometers in Great Britain. The Belgian passenger fares are now therefore 805 to 85% of pre-war fares expressed in gold, as compared with 1505 in Great Britain. The Railway Administration estimate that in 1924 the Belgian State Railways incurred a loss of 5.24 frs.paper (say 1.30 f.gold) for every )assenger train km. and 2.2.cts.paper (0.5 cent.gold) for every passenger km. As regards goods, certain important tariffs, such as coal, are considerably below the pre-war level in gold, and rates have only increased on an average by approximately, 25 in gold, as cm-pared with 50-555 in Great Britain, 455 including transport tax in Germany. In 1913 the official accounts as drawn up by the State Railway Administration showed an operating ratio of 72.05 and a net revenue of 7rs.96 million, or 3.29% on the outstanding construction capital. In 1924 the official accounts showed an operating ratio of 89.2% and a net revenue of 176 millions paper francs (42.4 million gold), being 1.295 on the outstanding capital expressed on a gold basis. The S - 3 - The number of passenger kilometers and ton kilometers has considerably increased since 1913, the increase in goods traffic being chiefly local traffic as the transit and international traffic has remained approximately the same. Railway expenses in Belgium have gone up in gold: in 1925, 53%; 1924, 41%; in 1926, 57%, in is compated with 119% in Great .3ritain, above 1913. 3efore investigating the net revenue which the Railways might reasonably be exaected to !)roduce on a strictly commercial basis, it is desirable to analyse the )resent situation as regards The present accounts of the Railway show no separate net revenue. provision for renewals, insurance, reserves, working capital, etc., such as is essential for an undertaking run on commercial lines. For example, taking the year 1924, the operating accounts should show the following result: A sum of 80 million which appears to have been spent on renewals, plus 10.5 million °aid for accidents and damages, has been deducted from the expenditure as shown in the official accounts, bringing it to 1,359.5 million. Operating account 1924 1,359.5 Operating expenditure Renewal Fund should be 200 Insurance - 1% of gross earnings Reserve 2% IT ft If 16 32 Gross Revenue let revenue 1,607.5 1 626 5 19 Fixed charges Service on consolidated Debt and annuities 168.5 Deficit 149.5 On the same basis, after deducting from the expenditure shown in the estimates for 1926, a sum of 96 millions which is -provided for renewals, plus 7.5 millions provided for accidents and damages, bringing the expenditure to 1515.5 the operating account based on the budget for 1926 would be as follows: Operating 1,515.5 Operating expenditure S 200 Renewal Fund Insurance Funds 18 Reserve 36 Total expenditure 1,769.5 Gross Revenue 1,839 69.5 Net Revenue Service of the consolidated Debt and annuities 219 Deficit 149.5 The new German Railway Company under the Dawes scheme has to assure (apart from the dividend reserve of 2P of the gross revenue) annual net revenues as shown below. These amounts including tie transport tax, do not represent the whole of the net revenues anticipated, and are less than the net revenue earned by the German Railways before the war. (in millions) Rly. revenue Transoort tax Mks Total Ilk or Paper frs. 200 250 450 2,407 595 250 845 4,520 3rd 595 250 845 4,520 4th and subseauent years 660 290 950 5,082 1st year 2nd Vf The length of the German railways is 52.395 km of standard guage and 942 km. of narrow guage. The length of the S - 5 Belgian State Railways is 4.725 km. standard guage or 8.9% of 411 the German Railways including narrow guage lines. The ton km. on the German Railways from January to December 1925 were 55.860 million. The ton km. on the Belgian Railways for the same period were 7.075 million, or 12.7%. It is not unreasonable therefore to suppose that ti Belgian Railways could commercially earn 1/10 of the net revenue of the German Railways, or say: 1st year 240 million francs paper 2nd Ti 450 3rd_ TI 450 4th 500 Tt TT tt TI It TI Tt and subsequent years The comparatively small net revenue to be earned in the first year takes account of the technical difficulties of bringing revised tariffs into operation at short notice. The provision of the net Revenue envisaged for the fourth and succeeding years would involve an average increase on the present passenger and goods tariffs of about 25 %, assuming that by that time, the traffic would have recovered to its present figure. It is to be expected that this traffic recovery will be facilitated by a similar increase in French tariffs resulting from the stabilisation of the French franc. It is of interest to note that under the Da:::es scheme the German Railways have to earn a net revenue of 3.9 % on their construction capital of 241 milliard marks. In Great Britain, the net revenue earned, before providing for reserves, on the construction capital was 4.41 % in 1923 and 4.01 in 1924. A net revenue of 500 million paper francs (120 M Gold francs) would correspond to 3.50 % on the capital of the Belgian State Railway on a gold basis (3.400 million estimated end of 1926) S 6 S Important economies would undoubtedly result from the operation of the :Railway on a commercial basis. A certain economy should also result from the completion of the works now in hand, lost of the cost of which has already been provided for in the An estimate of such economies could only be made capital account. after a lengthy examination of the question. On the other hand, there is no doubt that some additional expenditure will have to be faced on account of the rise in wages and in the price materials which will unavoidably result from stabilisation. As the above factors operate in both directions, they are not taken into consideration. As indicated above, the present Belgian tariffs for passengers ',ad goods as a whole average, say, 90 tc 95% of the pre-war rates in gold. In Great Britain tariffs have increased to from 155 to 160%, and in Germany to about 145% including transport tax. An average increase in Belgian tariffs of 25% above the present rates would bring them to about 17 or 18% only above the pre -war level in Gold. fhe index numbers of wholesale and retail prices in Great Britain, Germany and Belgium are as follows:Wholesale Great 3ritain 157 171 Germany 132 142 Belgium 137 128 (in gold) It is evident therefore that even after the proposed increase the tariffs would remain well below the level corresponding with the prices of other commodities. A certain redaction of traffic is to be expected as a consequence of the increase in the tariffs, as also as a result of other economic difficulties usually connected with stabilisation It may be expected however that the reorganisation which would, in any case, - 7 - be necessary to adapt the industries of the country gold francs) or nearly 2% on the gold capital of the Railway It would seem has been provided for in the budget of 1926. essential to limit the capital expenditure on the Belgian State Railways to a maximum of 150 million paper francs a year until times are better. After a few years, the new capital expenditure should earn enough additional revenue to finance future capital reLjuirements. At present the Railways are able to draw on the Treasury for the necessary working funds. It will be essential therefore to provide working capital for the new railway company until it has accumulated sufficient funds on its own account. Preawnably, however, part at least of the necessary funds for this purpose could be obtained by means of short term credits through the banks. A further :uestion would be the provision for a newly constituted Railway Company of sufficient cash to form a nucleus for the reserve, Renewal and Insurance Funds. If the Railways are vorked as a Commercial Concern they should look after the service of the part of the State Debt this service amounts in 1926 to attributable to the railways; 219 million paper francs. his amount must be aeducted from the assumed net revenues to ._let7,x..[tne the financing new works and paying of sums available for part of the floating debt of the State. Assuming that the net revenues indicated above are adopted as the basis of the .policy of the proposed Railway Company, and that the Railways, as in the case of Germany, would remain free from taxes, Table A shows the annual amounts which should be available from the net revenue for providing the minimum of reserves and new capital requirements of the Railway and for financing the paying off of the State Floating Debt. And of angland, COITIDENTIAL. SOIldalt, E.G. 2. 24th March, 1926. 1:y. dear Strong, I learnt the other day that a special questionnaire had been prepared for distribution to American witnesses: I have now obtained a copy and send it herewith in time, I hope, for you to receive it before your departure for Europe. As you will see the questions are substantially the same, the wording having been altered to make them apply more specifically to the United States. The memorandum on the"Proposed scheme for a Gold Standard for India" which is mentioned in the first paragraph of the questionnaire is the same both for witnesses in America and Great Britain: I am not, therefore, sending you a further copy. Believe me, Yours si cerely, G46/1014,4A.44L4/11,.. . Benjamin Strong, Esq. r aid (b) the rest of In thehow World? many years will the stoc'/ of gold for mon 100 purposes now held by the U.S. A. aril at present regarded a red.:Inds:It, be absorbed in this manner? B. As to the proposals of the scheme relating to Sil Can you aseist the Commission with any evidence 1. the probable future relation between the World's demand f silver anti its supply, assuming Indian conditions to remai unchaeged? Assuming the proposals referred to involve the s over a period of ten years of an amount of silver equal to three times the present annual World's production: (a) What would be their effect on the silv 20 market? (b) What effect would the proposals have o markets in copper and other base me (c) What effect would a fall in the price silver have on the volume of its production? (d) If a fall has the effect of curtailing production, would it be reasonable suppose that a fall in the price of silver to 24d0 would so contract production as to stabilise the price silver at about that level, and per the absorption of say 20 crores of r annually? 3. In what respects would American interests be af te7 the silver sales in question? Having regard to the desirability of the co-ope 4o of the United Ststes in the carrying through of the plan, in your opinion, would it be viewed by the Goverment and Financial Authorities o of the U.S. A.? What difference would the imrosition of a duty 5. the importation of silver into India make to the conseque which you describe in reply to questions 19 2 and 3 above The average annual importation of silver into I for use in the arts, as ornaments, and all purposes other coinage, for the last five years was 81 million fine ozs0 6, Assu Assuming that the effeot of the proposals under 010 Mt cons ileration with or without the imposition of an import duty, would be substantially to reduce the importation of silver into India:for these purposes: What difference would that circumstance make to the consequences which you have described in reply to questions 1, 2 and 3 above? 7, Can you express my opinion as to the desirability of the proposals of the scheme relating to silver, in relation to the interests of India, and in particular the circumstance that silver is a favourite store of values amongst the poorer classes there? 80 Assuming the Government of India requ#es to raise credits in order to %ridge the period between the introduction of a gold currency and the realisation Of the silver which it would replace, which credits might amount to $150 million in New York and £23 million in London: What considerations, arising either from the nature of the scheme, or from external circumstances, would militate for and against a proposal by the Government of India to obtain such credits in New York? 9. Would a proposal by the Government of lniia to obtain such credits in New York for the purpose of carrying out the scheme referred to (for putting gold into circulation in India concurrently with the sale of silver) be likely to encounter any such difficulties as would make it undesirable to contemplate that step? 10. Assuming that the credit of $150 million would not be required for a longer period than 5 years, what would be the cost to India of embarking on such a credit scheme: 11. (1) if the credit is not required to be actually drawn on; (2) if the credit is only partially drawn on? It has been suggested that the conversion of silver hoards ilit;) gold and the introduction of a gold currency will ultimately/ - a MiAORA:MUM Mr.Norman and Sir Charles Addis appeared as witnesses, jointly and severally, before the Royal Commission on Indian Currency and Finance on 1:onday, March r9, 1926. Their attention was directed to a plan for the establishment in India of the Gold Standard with a Gold currency, the limitation of legal tender for the rupee, end the oonsequentiel sale of the Tilver coins displaoed from circulation. It me stated that the plan would involve a demand for e103,000,000 of gold, in addition to normal requirements for Arts, Hoards, &c., say, £50,000,000, within a year and the remainder within tea years. The plan would also involve, it was estimated, the sale of 600 million ounces of Silver. GOLD. The Witnesses did not question the political right of the people of India to determine the kind of currency which they were in a position effectively to demand. It was, however, their duty to point out the eoonomic oonsequencee to which a demand for Gold, as currency, might be expected to give rise. In their opinion the demand for an extensive issue of ea:ad as a circulating medium would be of no real benefit to the It would people of IndiR and had no economic justification. appear to be based on the ill-founded belief that a Gold. Currency is the hall mark of an advanced civilisation. The Gold currency would not support foreiial exohangee or Experience shows that in any crisis/want of confidence, the people of India, instead of bringing out gold to support the exchanges, stiok to what they have and try to obtain more. The Gold in circulation would be at the expense of the cold tandard and Japer Currenoy Reserves. More would be less rather than more gold available for exchange in the event of a crisis or general lank of confidence. There arA There would be a loss o 6, of Sillier Rupee0 which would have not taken their place. There the circulation o as on verious 000asions between 1 be at the expense of the Notes. The remedr for Gold hoa but an extension of education and these are supplied the extended G advantage in security or utility involved in the substitution of a of currency. The noet suitable form purposes in India is Rupees and No ?or the settlement of e required is Gold in Reserve, by m currency can be freely convertibl 7terling. Gold is the basis of cre the same the withdrawal of Gold fr proportionate reduction in the sup Europe. The diminution in the su a rise in its prices, i.e., in the The initial demand for lark et Where the IndiEu Reserves a The Bank of -11eland export of Gold. ese The currency wou drawal of Notes from circulation. Bank of tLgland and ...7reasury Not delayed by the reduction of the Go Notes issues. The policy of the Benk of 7ngland would be deflected by the necessity of ettraoting Gold from abroad to make good the deficiency in its Recervee. The position of the Central Banks in 'trope would be weakened by the enhanced difficulty of mninteining the Gold Exchange standard, where that has been attained, and in achieving it where it had not, owing to the enhanced value of Gold arising from the diminished supply. In both oases the policy of the Central Banks would have to be direoted to strengthening the position by raising the rat e of interest, contracting credit at home find borrowing abroad. The only alternative to making the demand for the diminished supply of Gold effective, namely, by a reduction in commodity prices, would be by credit or currency inflation. The general tendenoy would be to lower the relative cost of living and money wages in :311,rope es compared with America, where there is a surplus of Gold. In India an increase in Gold Imports would tend to raise the cost of living, and, in the long run, money wages. The financial effect in FUrope of a curtnilment of credit would be a rise in the rate of interest. The eoonoriio effect would be en increased cost of production, a restriction of internal trade and an increase in the burden of foreign indebtedness. The reaction on India of a curtailment of the supply of credit in Turope would probably be slight. Her Imports would cost her lore but against that she can set n large surplus of Fx7orts, the demand fora large portion of which (Jute, Teat) is inelastic. It enjoys, in fact, a Tuasi-monopoly of certain raw materials which do not generally respond to a fall in general prices. As regards the supply of Gold the outlook, apart from new disooveries, or new methods of mining, is for a gradual decline in world production. As regards demand, there will certainly be increased competition for Gold, as backing for the note issues of reoonstructed Europe. On the other hand, it is probable that oertain economies, such as ()henget* in monetary habits, or the co-operation of Central Benks in the International use of Gold, These mny be taken ns may still be effected. P set-off against the increased demand, with this qualification, however, that the demand would appear to be oertain while the economies are pro- blematical and quantitatively indefinite, since there is no means of estimating the extent to which they will operate. Failing the discovery of new mines of Silver, or of Copper, Lead, &a., of which Silver Is an important by- product, the sup2ly of Silver in the future is likely to diminish rather than to increase. On the other hand, the growing rote issues, not only of 7urope but of the Fer ::eat, and the increasing resort to Niokel end other base rietels as Alloy for subsidiary coinage, point to a diminishing demand for `silver. The mere announcement that the sale of an amount of Silver, aggregating a three years' world supply was in contem- plation, would be followed by an immediate and probably oatastroahio fall in price. Only one-third of the world's production of silver is obtained direct from Silver mines; the remaining two-thirds are a by-product of Copper, Lead, &a., ores. The coot ofxoduction of at 50 gold cents per ounce. ilver was formerly estimated It is now probably in the vicinity of P 6. Credits would not be approved end that this might militate against their issue. Cr, this point there was t. slight divergence of opinion between the witnesses. l=r.rorman was o2 opinion that, unless the eurpose of the loans were approved, they would riot be granted, while :Ar Charles Addis was dieposed to think that the credit of India was sufficiently good to over-ride any objections that night be raised as to the purpose fcr which the Credit was required. The general conclusion of the witnesses was that unless there was some insistent urgency for the immediate introduction of a Gold eurrenoy in India of which no satisfaotory evidence had been braught to their notice, it would be advisable to continue the present system until farther progress had been wade with the stabilisation of the currencies of Airope and the relation of Indian internal to external prices had been determined by the oomparetive steadiness of the Sterling exchange for a period of, say, one year. here again, there was n slight divergence of opinion between the witnesses. nr.Normen was of opinion that the risk might now be taken that the point of price equilibrium had been reached, while Sir Charles Addis was disposed to advocate delay until further experience of the maintenenue of an unfettered Sterling exchange indicated that equilibriure bud been established This did not, however, invalidate their general conclusion as to the expediency of postponing the introduction of a Gold currency in India. The Gold in the Indian eeserves was already being added to year by year through the favourable balanc of trade and this process, if allowed to go on, might end in the aaeavaulation of an adequate stook of Gold, which would enable the Government to under tame with comparative safety s currency reform which could only be attempted now by incurring a degree of risk for for whioh there appeared to be no adequate justification. !f the Gold were aedually withdrswn it might be )onsible for the fkad :Aandard oountrisa to prevent the purohasing The audden withdrawAiet power of Gold being neriousl7 Oisturbed. Itythin4 like e.100 millions of Gold, as propoeed, would render this im?ossible. The effect upon Silver would be no less grave. Apart from the indireot effect upon produoers of Silver, Copper, Lead, &o., it mut be remetabered that Silver to still the aurrenoy of China with a population nearly au large as that of ':rope. Any sudden chenge in the value of ,lilver would be v. oelamity to a 2ountry where there is no credit machinery to prevent or mitigate a fall in values. The demand :or '7.ilver in India iu besed upon its immemorial use as the prinoipal medium of exchange and store The risk of undermining thin eeouler confidence in of value. Silver is very serious. Its use ie based upon the poverty of the people and the smallness of their pecuniary transaotions. -:,ven if the legal tender of the A.lver. rupee were reduced to I.s.50, this does not exclude the possibility of the two aurrenoies, Silver and Cold, circulating side by side at differant imluee. OS* O.. 01111 'POO SOO At a subeequent Meetirv; of the Commission the examine tion of the witnesses is to be continued. They will also be era-aimed upon the iuestion es to wheat nocifieations, if tiny, ax reluired in :ale constitution of the imperial Dank of India. London.lst ;1pril 197'6. 001'Y FINLANDS BANK, HELSING"ORS. May 4th 1926. The Right Hon.Montagu Norman, D.S.O., Governor of the Bank of England, E.C. London, Sir, Very much obliged for your kindness to let me know that ?"r. Strong the Governor of the Federal Reserve Bank of New York is expected to arrive in England. I bej to inform you that it would be more convenient for me to come to London later on, i.e. after his first stay of two or three weeks there. I suppose that :7r.Strong will come to London several times before returning to the States and I should greatly appreciate if you kindly, after knowing his subsequent plans, would let me know convenient dates which would be suitable for Mr.Strong to meet me in London, 9nd I shall have great pleasure in coming at any time later on, suiting my travel to his wishes. With my best thanks for your kind attention to the matter and kindest re;,ards I beg, to remain, Dear l'rr.Governor, Yours most respectfully, (Sgd.) RISTO RYTI. CONFIDENTIAL. Cablegram sent in code to.7--- 0 MONSIEUR HAUTAIN, NATIONAL BAN1( OF BELGIUM, BRUSSELS. Despatched : (67,,P Saturday, 8th May,1926iage) (7496) 9/26-1600 N°. Your letter 6th. 1. Strong has been ill and is much engaged in London next week but hopes to go to Paris on 15th. 2. You could then see Strong in Paris but he goes to Italy few days later for reasons of health and could only visit Brussels in July if you desire his visit. 3. Shall be glad to learn your wishes. NORMAN. 10th May, 1923. di Dear Mr.Governor, I received on Saturday your letter of the 6th instant and immediately telegraphed to you as per enclosed copy. Had circumstances been such as to permit of your coming to London I should of course have been pleased to see you and to hear your views as regards the present situation in Belgium. Unfortunately as you will doubtless have gleaned from your own Press, conditions here though comparatively quiet are so disorganised that it would certainly be unwise for you to attempt to make the journey for the present. If I hear from you that you would like to meet :1r.Strong in Paris where he hopes to proceed towards the end of this week, you will be informed of his movements as soon as they are more definitely arranged. Believe me to be, Dear :Ir.Governor, Yours most faithfully, (Sd.) Monsieur F.Hautain. LI.NORLIAN CONFIDENTIAL. Cablegram sent in code to : -40 MONSIEUR HAUTAIN, BANQUE NATIONALE DE BELGIQUE, BRUXELLE. Despatc&W : 12.15 p.m. Wed.12th May, 1926. (dam) (7498) 9/26-150 Referring to your cable 10th instant desired by Governor Strong to say that he has yet no definite plans for Paris visit but he will communicate with you as soon PS possible regarding meeting. NORMAN. CONFIDENTIAL. Decode of cablegram from M. HAU TAIN, NATIONAL BANK 07 BELGIUM, BRUS S Despatched: (time) Received in C.C.O.: :- 12.15 p.m. Mon.10th May, 1926. (date) :::on.10th May, 1926. (date) (7489) 1/26--15110 N °. URGENT RATE. I would be glad to see Strong in Paris about 15th May. Please ask him to let me know exactly where and when we could meet. HAUTAIN. COPY. FEDERAL RESERVE BOARD, Washington. June 3, 1926. My dear Mr. Governor, I am dropping you this line to tell you that I am coming over to Europe for a couple of months this summer and will spend about two weeks in London, principally for the purpose of "going to school," so to speak, in the London money I also want to inform myself upon the way in which the market. restoration of the gold standard in Europe is affecting the credit and price situation and in general inform myself on conditions and matters that are of concern, or at any rate that ought to be of concern to us over here, and particularly to the Federal Reserve System. I hope that I shall find you in London and that you will let me look to you as "guide, philosopher, and friend" in finding my way about the City and learning something of its ways. The altogether too few occasions upon which I had opportunity for some real talk with you on your Washington visits on real things stand out strongly in my memory whenever your name is mentioned, as it very frequently is. I am sailing from New York on the Leviathan June 12th and will be joined by Mrs.l.aller on the eighteenth at the Berkely Hotel. I shall endeavour to get in touch with you Monday, June 21st. Believe me, my dear Governor, with highest esteem, Very sincerely yours, (Sd.) A.C.MILLER. E±.Montagu C.Norman, Governor, Bank of England, London, E.C.2, England. 19th 1:ay, 1926. 71(-1:y dear Strong, Colleagues and your friends on the Court have directed me to write to the Professors and say how publicspirited they have been to come all this way to give evidence. This I have done in all sincerity and the letters are being sent to Cambridge and. Baltimore respectively. I was also directed to write similarly to you, but this direction I propose to ignore simply because I do not know how to do it. Old acquaintance and great esteem and affection give you the right to ask help from us and us to ask it from you. It may be that you may never require to come to us for help but the fact remains. For the present we look forard to the time when you will come back and live among us again. As you know, H. Feret vas here yesterday: made a very poor showing and is, I thin::, a poor 'crittur'. he But he has told me that he expects to see you this evening, so you can form your o.n opinion. I cannot imagine why he came. If it was to seek credits on the same lines as Farmentier, it was the journey of a madman: if it was to make changes in the principles of Caillaux's settlement with this country, he mist be more of an optimist than a realist: if it was to settle details, he had better / Page 2. Benjamin Strong, Esq. 19th May, 1926. better have left the work to experts, for as it is he has failed to agree on three or four points of so-called detail and has gone away - nominally to come back and complete the task. With Perct came one or two people from the Bank of France in order (so the newspapers said) to negotiate about a variation in our credit arrangements. T:ut Aupetit - who was one of the party - told me he aid not know why he had been chosen to cone to London as he had nothing to discuss or to request. I gathered th',1t he rather expected over the next few weeks of uncertainty to sec the franc gradually disappearing into the heavens like a comet with an ever lengthening tail: 'Zith warmest regards, Yours most sincerely, tt. ACISN1F.D) Benjamin Strong, Esq. Alf. MO 4 alt of 1Y Ialti, Sandpit, E.G. 2. 20th May, 1926. My dear Strong, On receiving your letter of the 15th instant I got into touch with Mr.Campbell, Chairman of our Stock Exchange (about whom you will remember I wrote to you last September] and found he had already seen Mr.Ryan. I do not quite understand the connection between Mr.Ryan and Mr.Simmons but anyway Mr.Campbell will make no arrangements for a dinner or anything else until Mr.Simmons has arrived. He will then try to arrange whatever Mr.Simmons prefers and on whatever lines as regards a speech he may choose. I think this will be precisely as you wish. Your :sincerely, ifyttko44 Benjamin Strong, Esq. 20tL_KaY,'.1920 Ky. dear Strong, T.W.L. came to see no last evening and told ma of his conversation with Earies and yourself at 3 o'clock in the afternoon. You know that I have bean in pretty close touch with him and before he went to see K. Perot on Tuesday I told him generally how matters stood between the selves. Bank of France and our- The information therefore which he gave you yesterday over the telephone was quite correct, as indeed you will already have gathered from the letter I wrote to you yesterday. I have also been continuing to talk with about Italy; and the longer we do so, the more convinced do I become on these three points. Firstly, that the idea of waiting to deal with Belgium, France and Italy on the same basis at the same moment is a mistake; secondly, that Italy must either stabilise or be prepared to support the lira (and this sort of support can only end in. ruin); and thirdly, that therefore, assuming her position to be economically and financially sound, Italy should stabilise and devalue as soon as possible. Italy would be entitled to get money for this purpose in New York and London, but not much, be needed. I should think, would P77:3'7.TAL. Pofe 2. Benjamin Strong, Esq. 20th !:ay, 1D2, I believe T.W.L. has communicated with Rome ou these lines and I trust some result will follow lest there should be further trouble with the Exchange; all of which I mention merely that you may know how matters stand. But so long as the constitution of the Lank of Italy is on its present lines and so long as the Finance Minister persists and glories in dominating the Governor, I do not want to have much to do with the Bank. I guess this is your feeling too. Yours most sincerely, (RIGT41.117)) Benjamin Strong, Esq. M (1r):-.1 N 3 *4.0t44.i.', 0. 21, Benjamin Strong, Esq. 20th Eay, 1.326. I believe T.V!.L. has communicated with Gm e ou these lines and I trust some result will follow lest there should be further trouble with the Exchange; all of which I mention merely that you may know how matters stand. But so long as the constitution of the Lank of Italy is on its present lines and so long as the Finance Minister persists and glories in dominatin;:: the Governor, I do not want to have rr.uch to do with the Bank. I guess this is your feeling too. Yours most sincerely, Cr(mto) M Benjamin Strong, Esq. I Sin It of 0,11.til an Krnbou, E.C. 2 31st May, 1926. My dear Strong, I have received your telegram giving your movements as far as Cap d'Antibes. I am therefore able. to let you know that when Schacht was here last week he asked me, when next I wrote, to tell you that his address from the 4th to the 25th July will be the Hotel Rembrandt, Nordwyck, Holland: before and after those dates he will be in Berlin. He expressed his complete willingness to meet you anywhere you might care to name. Believe me, Yours incerely, r: Jam- Benjamin Strong, Esq. . 10-:; Juno, 1.7y dour 3 tron. , I thin:: ;Tor. onolocod. C; 3 ntoro4 to1/41 fro:3 'Tramoc" ;Jai:ley:hat non.ccTr.nittal c..;11.:1 on is iaaelo to with oa Lhilst you woro in Lonion. most sincerol, You 0.".1014ED) M. NC2S-1,',' Donjai.in 3t-^or,f- T1:30 o ctoo ..-thich .) (Copy of handwritten letter) S 8 June 1926 11. Thorpe Lodge, Campdei hill,W. My deer Ben The mail was slow in bringing your letter from M. CLrlo, but I feceived it with all the pleasure in the world yesterday: also your wire as to plans. Of course you are tired & you need weeks & weekc, of rest. me about Italy or other things. Do not hurry to write to The Belgians are likely to be early next week & that with good luck may be my last engagement. If so I could start about the 17th & join you at !ntibes the following day or so: would you like me to do so? or would you s ooner be let alone? shall probably wire you about this tomorrow or next dry. My doubt is only rbout the heat: I like to be warm but not grilled! On the other hand I much went to sit down with you & ooze out whatever a laestions are in my heed. So a I Es-ume you -re Ell alone I am disposed to join you for 3 or 4 weeks, You can think about this. Lady Sybil (ViviEm smith) is also wishing to go somewhere for a couplc of weeks & perhaps she might come too. She wd. not do more than live in the same hotel. How? I should not be breve enough to go round Europe in July, so I should break from you about the 15th. I feEr you will fin= such places EL BudaPerth then desertd by thP you would went to see: they all seem to go to the country or to BethE for A least a. couple of months . , I mean to be in London in El_ugust God bles you - E:±. ever MN g horpe Lodge, Campden hal, W t", At4p4ka_44- (.d,c01 Pr; itNAIAL pen.41 'et too ( 4,0 y.ecLt_zta at.co-pvco C*41- .5 etyA, oat- 4sx itac4L-stolti 7cArt;410,,,i JA: : ct/C-o iirta44.4 )04.vt af COLOCti, yAWA. (.41f ;'C-1 1LUZ.2 tk%tdia..-tc, itte-kd afrgEa4 itok- (.400t03 rt-e tae gc/5akai 4"-154 eLtiz GAgie7740 24)tarlisi4c-i- caeas, . is,u) cLitoota. Arvt-A--6 agetks4 °`. Yei°1- kat inAkdt lOc 60 Ag-ta u,;01 e 4) otega-A/ c, to4AA- ,(40%/L aka_ A.) nAAK ikeaLl. ct4 J 4.4w woke_ fr, AAA_ alt. ctle-fuv 9v4 Ahaar-10 locA, ydUk S-04 Ascrtis, - `44,. c,44. fre CA4k etto'er. /,e4k, CUCAtt;t,A, S ptAlt) cf-G cri" 4;t4t4..i.t& 10 Sto eAt.a44-et.tfrot, Copt, etc bp,a, _ 144. de ak.euzAutA, eiAke%_J 4444.4.4.etct . 4Ce-s-r- gito hfC.' laaitteN, 5 1(.4441k )1.64 art/ 0.w% le cso **-tt4A1 c---k ck(ZA 4egc.k._ *La? io lkoD41 ty45.4"V 3-feig,0 ot&itAA/4- FriaAte_4_ 6);(4) kftit, 4,41_ 5a,teuk_i foe ,r,oz/ °.e.4/ rvec.tc,) i cat A, ta_ cAttAA,titn &N GertAftg._ tic stiat.,/lko so 4 6cdtek4- 4.4 avidtv tit;fr alb Ranh of eqlantl, Sondon, E.C. 2. 12th June, 196. My dear Strong, In order that you may know his plans, a copy of a letter just received from Dr.Miller. I enclose It looks as if I should fail to see him for some time after his arrival in Europe, but I took the precaution to speak to Schacht about Miller's probable aims and intentions and I am writing to Vissering a discreet letter of warning. As you know from our exchange of telegrams, I am planning to leave here on Friday morning next, hoping to reach Antibes on Saturday, the 19th, at 14.33. I shall be very glad to sit with you in the sunshine, and I am also glad to learn from your telegram that even if we are warm we shall not be grilled. If there are any folk we want to see, it might be worth while to try and induce one or two of them to spend a week at Antibes. Please think this over. With kindest regards, Believe me, Yours veryJsincerely, Benjamin Strong, Esq. ESOP Y Hotel du Cap d'Antibes, Antibes, July 15, 1926. My dear Doctor Schacht, I have not written to you for the last few weeks because Strong and I have been holiday making here and therefore writing as little as possible. But I notice from your letter of the 13th that you are shortly returning to Berlin, and thence again going to Holland at the beginning of next month. This seems to me to present an excellent opportunity of bringing about the meeting between us three which was planned for this year when we were in Berlin a year ago. Since Strong has to be in Switzerland for the first few days of August, I suggest that from Switzerland he should go to such place in Holland as you may designate perhaps Noordwijk - that you should arrange to stay there for a few days, and that I should come from London and join you both there, about August 5th. You will be writing about this plan to Mr. Strong in Paris, and will you please write to me in London. I am returning to England on the 19th and shall be at the Bank in London on Monday, the 26th, when I should hope to hear from you on this subject. You will remember that, had it not been for the strike in England, we should have had just such a meeting in London during the month of May, and I think you will agree that no better opportunity for this meeting will now occur during the present Summer than if Strong and I come to Holland and meet you there. I hope very much indeed, thereforo, that you will see your way to agree to this plan, which happens to suit Strong very well. If you should think it wise to communicate with Vissering on these lines, pray do so, and if you should think it wise, too, to invite him to come and meet us at Noordwijk or elsewhere, both Strong and I will be glad if you will do so. As you will be in Holland just before the arrival of Strong and myself, perhaps we may ask you to reserve accommodation for us at whatever place and hotel you may select. And owing to the activity of the newspaper reporters, perhaps you would be wise not to use our names, at least not the name of Strong, who enjoys particularly the affection of all the newspaper men in Europe: Hoping to hear from you in London, and hoping, too, that you are greatly the better for your holiday, believe me Faithfully yours, (signed) M. C. Norman Dr. Hjalmar Schacht, President of the Reichsbank, BERLIN, SW.11l, Germany MCN:M I am leaving a copy of this letter with Strong so he will be fully informed. PERSONAL. 19th July, 1:323. ,P\4- ry dear Ben, It was piping hot all the way to 7aris and beyond, and as each hour passed I grievea more and more for the loss of Antibes and you. At Paris Warren was so very kind as to come and see me, also Gilbert, and I had a talk with them for an hour or more, for the latter came along a short distance round the Ceinture. On the way to Paris I was much perplexed about Caillaux, never thinking that he would already have been thrown out. I had thought it just possible that he night have got pleinsuvoirs, in which case his position would have been pretty well assured and I should have stopped off in Paris. I had thought it almost certain that his proposals would still be hanging in the balance, in which case I should have come on to London. As things were, there was clearly nothing left for no to do, and! to-Eay I an just writing him a polite letter of acknowledgment. I am going away to-night until Tuesday, the 27th, and after that I can, if necessary, run over and pay a call 117:2jOLLI. Page 2. Benjamin Strong, Esq. 19th July, 192(L. call on Moreau in accordance with the conversation I had with Varren. Vie had a really delightful month together which means a great deal, though for the moment I only send my lc:ye and wish you the hest. Zolieve me, Yours most since:1'01y, IZ'iTi?1.1.7D) M. NORMAN. Benjamin Strong, Esq. http://fraser.stlouisfed.org/ Federal Reserve Bank of St.Extract Louis from a letter dated the 16th July 1926 addressed (Copy of handwritten letter) 19 July 1926 Thorpe Lodge, Campden Hill, W.8. My dear Ben Since I wrote to you from the Bank today I have had a letter from Vissering who I do so, by enclosing asks me to send on to you his proposal for an Excursion. a copy of it, as explained by him. I have not answered Vissering, because we are waiting to hear from Schacht about the visit to Holland. But the dates seem to fit in quit4 well with the plan we discussed + if we are in Holland I dont see how we can avoid the Excursion! Anyhow, whatever suits you will suit me, as soon as you hear from Schacht. Ever yours M. Norman. ilairerb THORPE LODGE, CAMPDEN HILL. W.8. ct*ty 61( `t, &plaktko2,4, 4C-4 London, England August 19, 1926 FedeTbl heserve Dank of New York, New York, N. Y. No. 63 STRICTLY CONFIDENTIAL FOR DEPUTY GOVEENOF Your #47 CNF London Times today publishes dispatch to similar effect from New York correspondents stating 00,000,000 ae total to date exclusive of latest shipment of $4,900,000 TWO Origin of publicity would appear to be note in London Financial News of August 17 which was probably a ballon dessai THREE le are of course greatly embarrassed by this publicity but shall make nc announcement FOUh Have you any suggestions NOhMAN 0 PERSONAL. *mh of (gitgland, Soirdon,E.C. 2. 30th August, 1926. My dear Ben, As I have already told you, I am sitting at Plodge with open arms from now onwards. I have no engagements except next week-end with Peacock, which was arranged for your benefit, and on Tuesday, the 7th. The only possible visitor is Mrs.Markoe who you know comes and goes without saying "boo" to me. I will be happy for you to go home with the Morrows and am glad that you find yourself able to wait for the "Mauretania" on the 18th. : was afraid they might pull you home earlier. Please note the enclosed copy of my letter of the 23rd August to Mr.Harrison. Please also do not forget certain promises which were made to E. Ryti of Helsingfors (see copy of enclosed letter of the 27th July). With kindest regards, Yours mo sincerely, 6r7w1-614,4 Benjamin Strong, Esq. s.s."Homeric" 1111' Copy ID Lost Confidential 23rd August, 1926. Dear 11±.Deputy Governor, Allow me to write you few lines of thanks for your private cables No.47 and others, and for the trouble you have taken about the publicity regarding the current gold shipments from Australia to San Francisco. In the first place, as to the origin of these reports, I feel pretty sure that a gossipy little note in the "Financial News" of the 17th of his month started the whole I doubt if the man who wrote that note knew anything, and_ he did not really pretend to be writing facts, but it is a paper that has been taking a good deal of interest in gold shipments, in the Bank of England, and in your country, since Hilton Young became connected with it on the editorial side. I agree with your (your No.51, paragraph 5) that informal discussions with reporters are usually the way to deal with this sort of occurrence. The trouble on this occasion is that I do not wish to admit the truth, even confidentially, to any reporter. In other words, I wish the renorters and everybody everywhere (except yourselves and ourselves) to believe that the Bank of England was merely a middleman in connection with these shipments, either receiving the gold for account of someone else or else passing on the Dollars within a short time of having acquired MOST CONFIDENTIAL 1103T CONTIDEN2IAL 21st September, 1926. 17y dear Ben, I just wish to remind you that J....Beaumont Pease is on the boat which carries this letter: he will be in rew York for a woe:: or two and will certainly call upon you. Please make him a nice bow and give him a smile. 'laving told. you so much about these banking folk, I need only remind you that Beaumont Pease is the Chairman of Lloyds La:. Perhaps he is not a great Banker, but he is certainly a real white man, maintaining a tradition in his Lank which excels the tradition of any of our other Banks. good friend of ours. With kiLdest reGards, Yours most sincerely, Benjamin StronG, Esq. And he is a B or C ICE TELEGI; Charges to pay s. d. TELEGRAMS for INLAND addresses mas This fo should tu. spec RE At VED ...... M 1 be handed to the messenger who delivers this form. possib.e enyui 688 No Post Office accepts telerarris by telephone. Time handed in . - From 12/30 LuN.iUAI 01 T ZJ 7 By BENJAMIN -STRONG Office of Origin & Service Instructions . S S MAURETANI A Words. SENT At To Y X By SOlON 11EIISP APER TODAY PUBLISHES BRUSSELS TELEGRAM :ORECASTING THEurns OR YOU ALL z MONTAGU FRANCK AS GOVERNH- LOVE TO :4" COPY 10 Oct 1926 M - Thorpe Lodge, Campden Hill, W.8. Dear Old Ben. While I am glad you had a good voyage + reached home in "fine" shape, I am distressed that you have since been so ill. This is most disappointing - as it comes so soon after a long vacation which had seemed to set you up - + I need to know more than I do from Harrison's hopeful messages to Jay + myself. F.J. has behaved like an old Roman these days in giving up his vacation + coming back to London + sitting in at meetings morning, noon + night. We owe him a debt of gratitute, as you may tell him. I wished you could have met M. Franck - so very different from Hautain. A gentleman, who speaks English beautifully + opens his heart as well as his head + states his case firmly without being dogmatic... and Flemish instead of Latin: As to internal questions I have been guided by your advice + wishes - referring a; times to Peacock for help. But the more my friends have discussed the future the more have these difficulties come to dawn upon them, so that they are now as much concerned with ultimate policy as with immediate solutions. I have said over + over again that I am in their hands + there I remain. But if I am to continue as at present I ask their goodwill - + not merely their grudging support because they have got into a mess. Thats rather how it looks. We had a wonderful summer, Ben + I am happier when you are within 100 miles than 3000. Things are beginning to clear too the sky is brighter than it was + though there are black clouds they will break in one way or another sooner than seemed likely a few months ago. Give my love to Ben + Phil + all the boys.but keep for yourself the Lions share. As ever [signed] MN. io Oct 12.6 VI. HOPPE LODGE, CAMPDEN HILL. W.8. 10C 3 (4 °1-Iti LI *CO% kaLlkt, 16t4eg 4ejake so at, S 4LALOU YlkA; -ate' coluizt so Soo,` 464- ?Welt Alk:40 oysr leacd,fic;tA. 64-44:ek 9tcatt. A-414412, %IA)" icAut: s Kopf., kestiub orptie, ruNre- lo 6L44A aek yam.. 4411 Co gic 140/4.._ /Jict,014,at Ytt-ouz. AAr*-et- Amt24240-ce_A Pj i 4a.,AmA, tA; e ,o (fLALes i*:14:1(A4-7- Krka itcLe4tA0/... w. Ce*wwtir (ALAAii 16,s4e1. .AX.,4,:y g,y; els Otoktft.i ALIA- 644.v., SAN:4gal etAA oC 4teA4,3 1 NeAocit. d std tt.0 kt.a cALiaz, LCJ . Federal Reserve Bank of St. Louis yo, VIALty CIA144ia. "" SO Velif A gos,0,24%ftx.", &trete sitoicem Ar_AAXast 1t4-41% http://fraser.stlouisfed.org/ Setex,erAxAt CeVaa---("Cklje 14.* NdLAAek nit ty#90 c9tAx kee..14, PLA5c9tot, 2-etn" cAcrv-es ti;Attua of &pa(a.., "14(k.o-vt* eft.t.+15 .(0,..fc,A, /640 0.;.tefirmasE cktup.4.0-Z44/ thwm, lowc eaNI 1,.<0,44 katp. lAY&Scni2.4 Tt-ptle&44.9. - twAyc;)(A97 As4k fatAAI, AccAte, 914e-4"ate:. 7:4121 , _co 44:46 atit*t-l.rx& pe4:iey Cer*Veg"ftkal se,evikt.0-tAL4 10 C aoa- soa..4 1.0.4).97 at . itrild244 cLA(ki oCtAii t4t44i, ctla nef fkaPtify -MILL< S 4 St/V(5, AAMC PV\114 CA/k1 ett-W.u(ea Aiik5 Vlaukt54 k4,40, Z.A: 60044 . cuaN, Acyaptg-t oG afnes.. yip vs vb: 10 0 Iriata, ILOLAe 5 O o . W WU, '6.efg/11 10 de OJC/2.0e) - irrity (-64,0k JAWS-, It 64044 ikEkAlsG 41101. 4r;55h114 itay AA* Z( I ct,44,v gAtt-Ift* r.ectw,Atv texy f. 4,1\41Wi Leo iltoat 61,,su;. (Pfe..A& he. cioo_.oC ci.v.etto4 Se ..90. 414.a"kstat-6:Atey c4fitat so&c: keep/riot yekoze4. ikt p(` 4a)M vka, cat_ 64 4.4)-kAs SAGfrt.V ekorr. auf a,o-J21,0eA' Jea to Oct N.:-HORPE L CAMPDEN Lee ke.a.4 O 3cAt44.0 Licd freu_A,fic;rA, 911(24 io--(tA kofrfixe r AtiN Li f 4 (A . Sh. 14/e, dpi Vic Szo t4,61.1 31;ftekg.L.A 5"26C`';(''' / htZl. 440 isikt-ak LCJ Cc"--70110 NI"rg1 ttiA4s) gotr. " Olg 'hiliv-vwv7c----Kgarvw?-04 -4--094 anew p7 44"AfeI5CalY -1.0.0 4*. Props -'r'* 112P)r9----PWIrrr ?wog '1A06' 4"Z9-NY °Ar-ahrr" 40.1Atwzr 411/ tiavvvvoe of 01 0 Virirto s ^.9.-x, WW vc1/-le"P C. tideActy 0 1:7 171 itgiv)...4/ -grv, Jv Irvvrawro -1,0,7y <ray sus Wow evvwww fif7x)-1°wag --7roN iv -749p 1r9r 44N-9. Bank of 64ane 116 18th October, 1926 The Governor would be obliged if Er.Harrison would be so good as to have the enclosed personal note conveyed to Governor Strong. COPY 17 Oct 1926 Thorpe Lodge,Campden Hill, W. COPY 21.Oct 1926 Bank of England *B.S. I enclose a cutting from a newspaper. The words are those of the "Standard" but the sentiments are those of McKenna: I do hope you are well again. [signed] MN Oct tet2(0 Thorpe Lodge,Campden hill oc_44. B-e4t. Yak nAc. sk,a, htx45,44) 4..tte c itc,C.:5 440a- -Aee, skai_ cf Malkee'b caAt AlItt tat'Az ?A-etc"' a 0 _orti 4_ ,64we. L,A,Q, Ala rett_ 0,AizAt4 ACcul .8-44,44,v 4.4 ii(ty 4"111 wel.de4 /X.ct4% ety at et.0 ZAL '6-e itvoeltamt Citithk;zio ievAR.44, fit ciZet.p (el . a_ ik lc L - 94, t:/kelytb 2, dettu.o twit1A. optt.i tt, 494' a.-{ Iv. o a-4N re .c-4/60 fae ck. Ast:41/4 . to-A cy,04,t A.)-0-L(*.40 ook./-7.c, 0 opt dktk,tog aKCE456 /vv./ k (vuf '14s:id eC a.,LAI c&(-{eifri4 a,* kce) /to t rliWiAnk) 4QcA'Actk AAA a 4A gisv. 0(4_4- AAA. /Kg-, ClAYt 10 con. az-4,4 t-? &"2:- 4g-1% - COQ AA` ik ant c'e oct,,440k ilCLA)42) a roact, 442, Jeptutti ci;d1 t,.;; 14. Nt().t, t, fruu, 11,. (44 IN 4tif k 4e, Akik c& e N1TG e n.e. )(A' tirco6 A.Yea*, oc, (yoky 4.6 ev KA- Lit &J i( 7444,4% tot 4;t,o DIP d e ear_ova, "`xi so ite,0 aqua d.9-t 141lAti irt AAAt & go_ Cl 'ettArf (X vio-(43 toac IAA12) 94 tta. Al 62;4 Kfial itikctift44 (-6432-01 4CA,14,44 %Auk °Z1 Ott 4%6, Sets 2.6 a.m. (Mon.). THE EVENING STANDARD. Governor of the Bank-Mr. Norman's Long Term-Liberal War Goes On. A New Governor? The election of the Governor of the Bank of England will take place next March, and there is some speculation afoot as to whether there will or will not be a change in the hylder of the office. At that date Mr. Montagu Norman will complete his seventh year as Governor, having been chosen originally in 1920. Mr. Norman is a bachelor of 55 and an interesting personality. He was at Eton and King's College, Cambridge. But he was a comparatively unknown man in the City when he became Governor of the Bank. His firm was Brown, Shipley and co.-a British branch of the far more important American business. Since then he has become famousi-if onl %kr the persistency with which he. has forced through his policy of deflation and the return to the Gold Standard. The strongest opponent of this policy must recognise the consistence of its author. A Term. Without Precedent. None the less, a seven years' Governorship of the Bank of England raises some question, of national importance. The Bank as a public institution is under private ownership and control. Its Governor has immense power and cannot be called to account by the nation. The system has survived its anomalies because it has worked in practice. But one of the checks placed upon it by custom was that no man should be Governor of the Bank for more than two years in succession. This prevented private idiosyncrasies in finance becoming a public danger. The late Lord Cunliffe, it is true, survived the allotted span of two years during the war, but in the end he retired. recedent. A seven-years' term has no Creation Parliament. The public only tolerate the special and privileged position of the Bank so long as it conforms to their views. If the Bank got on the wrong side of the nation it could be called to account easily enough. It is the creation of Parliament and a breath can unmake it as easily as a breath has made it. The Deputy Governor is usually considered as a probable successor. When Sir Alan Anderson was Deputy Governor it was under- stood that he was prepared to accept the succession. At least he retired from his own business, and when promotion failed to eventuate, he returned to it. Mr. Lubbock, another Deputy Governor, did not apparently want the higher post. The present Depu'y Governor is Mr. H. A. Trotter. He is the obvious candidate for the office of Governor should Mr. Montagu Norman retire. Mr. Trotter, who is a director of the Alliance Assurance Company and of many other concerns, was Deputy Governor from 1920 to 1923. He would appear to have given up the post in despair of promotion and his return to a indicates that there is at least some prospect of a change. wv 1 I S.:.."1:auretania". CONFIDRITIAL. 29th October, 1926. My dear Strong, Has the time come when I should write to you So far I have sent you nothing but handwritten letters on Sundays since we parted at Waterloo on the 18th of last month. It has been most distressing to hear they had fixed you up in bed with doctors and nurses and other miseries. Of course we have had a great hunt after Belgium and are somewhat weary, but at least M. Franok and the rest of them are riding in different waters and with better eventual prospects than most of them had any right to expect. P.J. and Harrison can tell you about this and if they choose they may tell you about one or two snags during the period of the hunt. 2. This is the third foreign loan since the holidays -Hambug, Tokio, Belgium, to say nothing of Australia.-. I do not want more of them yet awhile. Schacht had already sucked £6$ 1- millions in gold out of London and if we have any more foreign loans we may be having to supply others as well as him. Your rates have softened during the last week or two to such an extent as to make me hope that we can get through on a 51, rate. At present I do not see the way clearly. 3. You know you ought to have signed that anti-tariff bn IL/ COYFID-TITLA.L. Page 2. Benjamin Strong, Esq. nth October, 1x26. anti-tariff Y.anifesto, as I told you at Antibes:: It would have been much more amusing to have watched you in hot water along with J.P.:. and Schacht. Those are the only /two who have had any abuse, though there was, of course, a general apology from the Latins to say that whatever they had done they did not mean it But it would all have been better if you het signed and suffered. 4. To co bscl, to Belgium for a moment. C6ntral Bank Credit was a miracle. The Some people think the age of miracles has passed, but it is quite clear that neither reconstruction nor stabilisation miracles. France. can be accomplished without The outstanding point of the miracle was the Bank* of It was remarkable, was it not, that Belgian stabilisa- tion should be supported on the one side by France and on the other side by Germany to an ecual extent and under equal conditions. All the participants were "stabilised" except France - an afterthought. I mention this for the sake of an incident which occurred last Saturday. Look back at the letters I wrote to you on the 4th Larch and 20th 1:ay. On Saturday Franck and I asked the Ileprosentative in London of the Bank of Italy telegraph to Stringher as an act of courtesy about the arrangerents for this Central Bank Credit and with an offer, late though it was, of a participation. This was simply courtesy. Later Benjamin Strong, Esc. age Z. 2(.)th October, 1'2C6. Later in the day the neprecentative ca:ae bacl:. to me, having concocted his communications to Stringier, to say that he would give the information but that on second thoughts he could not offer the participation. was out. Prance was in: Gorma-m7 was in: How coula such a sliEht be cast on Italy: Italy The offer of a participation after the event, even tholighit yere accel)ted, might m:he trouble, both for Strincher and himsolf,with Volpi: Volpi dominctod the ran: of Italy Rna would regrd tlis not only as a slight but as a means of bringing pressure on the Bandc of Italy to coniorn to the ideas of the other Central Banks. I Seel lae giving 3tringher a wide berth when it comes to the question of engagements, for as we r311 hnow a measure of independenco in fact is essential for the conduct of any Central Bank on financial (rather than political) lines. ;oustria, Gen:lany, Hungary, and now Belgium have acquired it in one way; Ir.oreau is aceuiring it in another. 5. Don't lore t, please, that you were to con- sider the position of your Credit to the Bank of ':nglana - as to its termination and vis-a-vic the 1:organ Credit - and to ,:rite to me. With warmest regards, Yours most sincerely, Benjamin Strong, Esq. CC0FY] AiliThorpe Lodge Canpden Hill, w.3. 17. Nov. 1926 Dear old Ben I think that you have been gone a couple of months from here - + what do I know about you? Not for years have I seemed to know so little, although the kindly Harrison from time to time has been sending snippetts of news - or rather of the absence of news. Anyhow you have had a rough + disappointing fall + coming after a long + hopeful summer it is to one the more distressing. That's all I can say: earlier I have written you several letters on more precise questions - which perhaps you have not been able to read - or will not be able to answer. I long to grasp your old hand. I think much + often of you - you believe it. Last week I was "selected" for another year from next April + with all the show of unanimity. Indeed I guess this, + goodwill too, were genuine enough as the only way out of a tangle. But our friends now have to consider the future + as they are Quite alarmed, I think, they will start in + do so. I went away from Loridon for a long week end (after last Thursday) which is just over. Lady Sybil + I were together + tried to pretend it was Antibes but it was very different here in Novr.:: She sends all sorts of greetings. I judge the coal strike ended last week + for months to come we shall have to pay for it one way + another, slowly but surely. Your gradual easing of rates has of course helped us enormously these last 6 weeks: otherwise it must have been 6% + it almost seemed so up to a couple of weeks ago: Now I rather hope we have turned the corner. Tell some one to write me of your health + plans. Of course you need a time in Califa to build up. As ever [signed] MN 17, Afmr (92(9 tHORPE LODGE, CAMPDEN HILL. W.8. ehLt cr-ct cL- -45e4A, 9t,s, ye,,. LLAre, exik.k, 4,,,,traKi COttrida_ ,c4cAt ysw, ? UtuAygi _ yilsou kguire.. J tecatkaree) 1:11 Sitt(u, ,Ltitent Jcuzctfy/gooticiA,44, fittmk- "LA"k*- lc; sx4ite.it kit4 4432Ac,,oe,4k2(Acy- tutab - 64. voi-An 4-v.4/4.0 cc y4,1412/ 4rLAffie-J kva V644.. 0. 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J At, s AU- di *IA /WAIL 440 11431A40 go,, C04411.4X1 it042.J up. 46060 sari 4c4.1 PJ 444., k- Wit -41t0C PK tux : N oak asat, yeal"_/46 4.014t. YoL444. natugt 'to at.L. 444. kma, ii&ibint a., &d.ta, LI p'L .4-ew go4/f afki) FoAt gee tecd ptiel*ic4a, E4441% A k ) 7 ts4 ar 1..e44 tk /3404 o-C1/41, ke_etel a . *Adxfiraa akIct&%tpf -5Pw;i1N9 jr's oetr r4t, 4),,t sek iNroosett, mak. Lot a kIN:a 4 14. Atine>4 ilreApA 044. (Oa S14-66.A. goo, 4E1) okg S I /Lai, : 4(44; ft4 OVV1. "0/4400 OA 0 ./i0 6ity- c&4 to...Avk Lat4 A.! f.e yog. fteglic, ekeuf 4E' treny sop Nei4 Jo 41-11tio nut_ geNeb 4, y06%, A-oup oc we-t L-Ar. ac [C 0 P Y.] 20 Nov 1926. Ilit Thorpe Lodge, Camden Hill, W.B. My dear Ben. I had a good letter last week from the late Miss Bleecker which told both what I wanted to know + what I didn't want ever to hear. But such is Life'. I cannot exactly answer the letter because it is in my drawer at the Bank + I am at Chequers spending Sunday with the Prime Minister. I have told him about your troubles + he sends his love + hopes better times are awaiting you. You must now be near to journeying to Colorado - which makes me quite unhappy, however wise it may be. th Gilbert writes me that he will be sailing about Dec. 15 + I wish indeed I were going too. He also says that P.J. has accepted the post in Berlin + will begin work early in the New Year: I am glad of this + so will you be, though I have no idea who will take his place. Last week the Govt. of India accepted the Currency Report as a whole + will proceed with the necessary legislation in the spring. I guess the worst of the Fall is now over + so with the practical ending of the coal strike we ought to get through with our 5% rate: this is better than I dared expect a month or two ago. Mr. Jay[?[ of Buffalo came to zee me a few days ago which was very good of him: you recall that he succeeded Nelson Perkins in Paris. The best to you, Ben, now + ever + I am [signed] MN As 104 gab. ORPE LODGE, C PDEN HILL. W.8. 44 ttitfts 6, x.a.,2 ., stiocN. (41,{1 e~.4, ituiu 6Gge.kg.r editA-et iektA, 40 4 or4Aufhow. tio_ Gke, 1 ak,A,t4 (o kk,,,,, t/tA% Sit 4, rte,. 4/$441.044, L4 5' eUieta V 63 a-14 uF 0C:f;- ! j eAustA&Aso EicaxiCeit, 4 4141 (Lik_AA44e z(-- a hsk & geaAav a IL *44 4 Prg4v4, /Choc P-141 A'ag44rOL4 it4iAl.; ass, ,4, 4 a.ouviketc,i Srim,a uu.sg SokA.Ab ay &A.:4;4 btt ki,c&Age, ii,eil Atuk, mAtr..4, 4,&t, 1.Ct.lt9a- Cl; ec*4-C A,v.ia,Zioot . 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I an not a good + delightful fellow who just loves you + we had much talk. going to write of all the matters we discussed - for I told him + showed him everything + he will repeat all to you. We talked for many hours on end for a couple of days + there was no more to he said unless he was going to stay for a real visit, so he sailed on Thursday.+ as he was in a hurry I guess he was wise. I will try + arrange to pay you a visit next month: thats as much as I can say at present. When the extent of your illness became etident, I gave up the idea of visiting you + changed all plans here. For instance Harvey is just starting off for Australia: Nairne has taken on some new word; about But what Trotter you know: Siepmann is learning + in time will be a great help. It is difficult to see just now. to do for this winter? A committee has been set up to study our internal affairs but I doubt if they will reach any result for 6 months. - Lady Blackett came home from India suddenly + secretly 3 weeks ago: she had all the signs of a serious disease but after an operation the prospects are hopeful: perhaps she will even be al]owed to return to India during this winter. Blackett's appointment lasts till the spring of 1928 .- The Gilberts are to sail on the 14th but will only stay on your side for a couple of weeks. P.J. I hear is to leave the Bank about Jan 1st + I wonder who will take his place. - The story of your illness is harrowing, but now that its past, the less said or thought about it the better. At least the immediate result seems almost encouraging - as I judge from your letter - which is a deal more than I could have hoped. Bless you - as ever [signed] MN ilitud,ouic ()eke, - )/fr.ORPE - z10 LODGE rA MPDEN HILL. 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A, AUX et4.41/41/ -644k alif ^,r. gs c:144)41 awl'a .rate d aAie gUY P./ num..4. ifavy kAZ R#6.4Ag.tl4 cif-fulaikmAAAit fa/rva ka° 11-' 444 ivA ervir Amde,.. :s edis4Ake-A, Fo y4e.geve-KAo Jul airvi.m/ty 428 jcz4411 .643 tauter ieet(.*V4 frecnite64 cute, tApat -EARAA-Zei ,,to 624te ecug Ito urleAk ak ma; ;k re4 44101: Xtelgi4 Uitta--cea 10 IAA, *AA' d totilA KatAPt, 4,0 kif-2 1444 yaft _ VAN-P- AM - kreua, TRANSLATION. eft Brussels, 15th December, 196. The Governor, Bank of England, London. Dear Mr. Governor, I beg to acknowledge the receipt of your letters of the 4th and 8th December and the duplicate of the contract signed in London on the 2nd instant regarding the new provisional credits granted to the National Bank. I note that the original of this document is being kept at the Bank of England in the interests of the various contracting Taties, who have received a duly certified copy. As regards the discount credits totalling $10,000,000 opened at the National Bank of Belgium by yourselves, the Nederlandsche Bank, the Federal Reserve Bank and the National Bank of Switzerland, I have to inform you that I have communi- cated with these Institutions direct and that so far we are agreed as to the procedure to be adopted. As I have just stated in a letter to Dr. Vissering, I do not anticipate any difficulty in bringing about these operations by means of advances covered by securities in our rortfolio, in preference to a discount operation. With reference to your letter of the 8th instant, I am quite agreed on the following points: (1) Advances by your Institution are to be made in sterling and may reach a maximum equivalent to approximately 02,000,000; they are to be repaid in sterling by 1st March, 1925, at the latest. (2) The rate of interest shall be 1 England, (o) above that of the Bank of but must not be less than Our Institution shall repay to the Bank of England the amount actually advanced in sterling; Articles 8 and 9 of of our Statutes shall be amended so as to make this obligation binding. (4) The Belgian Government will previously undertake not to interfere with the engagements entered into by the National Bank as far as the ;-receding clause is concerned even if the National Bank are obliged to export gold. (5) The withdrawal of any amounts from this credit shall be effected simultaneously at the four issuing institutions in proportion to the share allotted to each; repayments shall be effected in the same proportion. (6) The securities delivered as cover shall be deposited at the Bank of England: stamping expenses are to be borne by the National Bank of Belgium. I have pleasure in informing you that the Sveriges Riksbank are prepared to combine with the four issuing Institutions in bringing about the discounts described above. I thank you for communicating with the other parties concerned regarding the arrangements to be made for effecting this operation and I am deeply grateful to you for your personal assistance in bringing these to a satisfactory conclusion. I am delighted at the co-operation which is growing closer and closer between our two Institutions co-operation of twofold value to my country in the present circumstances. I enclose the text of the announcement published by us in the Belgian newspapers. Yours most faithfully, (Sd.) F.HAUTAIN. I have this moment received your letter of the 14th instant, which has my attention. In a few days I intend to send my collaborator r:r.van Zeeland to the Deputy Governor, in order order to gire the latter an account of our journey and any information on the subject of stabilisation operations which may be required. UENDEMENTS PRESENTES PAR LE GOUTnrEMENT (N0.132) ARTICLE PREMIER a) Modifier comme it suit is premier alinea : Les dispositions formant l'objet des articles 2, 3, 4, 6, 7, 8, 9, 12, 16, 17, 18, 20, 23 et 26 des lois oombineeo des 5 mai 1850, 20 mai 1872 et 26 mars 1900, sont remplacees par les dispositions suivante. b) Sub.Art. 4. Remplacer is second alinea par le texte suivant : Cinquante mills actions seront souscrites par l'Etat. Ces actions seront ensuite mises en souscription publique aux conditions a determiner par un arrete royal nris sur la nroposition du Conseil des :anistres. Des institutions d'utilite publique, a designer par arrete royal, pourront participer a cette souscription, et autorisation est donnee ces fins aux dites institutions. Un credit de soixante-quinze millions de francs (75,000,000 de francs) est ouvert a cette fin au Budget des Depenses extraordinaires pour l'exercice 1926. o) Sub Art. 6. Ajouter a cet article la disposition suivante : A l'expiration du droit d'eMission de la Banque, les trois 1 cinquiemes de la reoerve seront acquis a l'Etat. d) Sub Art. 7, : Remplacer les mote "trois quarts" et'un quart" par "troie cinquiemes" et "deux cinquiemes". e) Art. 7 bis. Supprimer cette disposition. f) Sub "rt. 8, 2. Completer le texts du projet ainsi qu'il suit 2. : A reescompter a l'eftranger les effete de son portea rernettre cee effete en gage; feuille; a garantir la bonne fin de oes effete ou des operations d'escompte et d'avances y relatives; a aoquerir des avoir a l'etranger en des rnonnaiee a base d'or ou cur des places payant en or. g) Sub Art. 8. Completer le texte du projet comue it suit 7. : .nfin, a faire des avanoes en compte courant ou a court terms sur deph d'effets publics nationaux ou d'autres valours garanties par l'h'tat, atrial que cur lea valeure similaires du grand Duohe de Luxembourg, dane lee limites et aux conditions a fixer periodiquement par l'Adminiutration de la lianque, con- jointement avec is Conseil des censeurs. h) :=outer : I1 est formellement interdit a la Banque de se Art. 9. - livrer a d'autres operations que cellos qui sont doiterminoes par l'article 8. Elle ne pout emprunter, sous reserve de ce qui est prevu au 2 de l'article precedent; elle ne peut faire des prets, soit cur hypotheque, soit sur dep-ot d'actions industriellee. Elle ne peut priter sur see propres actions, ni lea ruoheter. ne pout prendre aucune part, soit directe, soit indirecte, duns des entreprises industrielles, ou se livrer a auoun genre de comiaerce mention an a; :titre quo celui dont it est fait 2 de l'artiole precedent. She ne pout acquerir d'autres proprietea immobilieres que cellos qui sont strictement necessaires an service de 1 4ablissement. generale des actiormeiros, 84r une liste double de candidate presentee a chaque vacanoe 1. : Par les membres conseillers de groupe elus par lee deligues de °less° du Conseil euperieur de l'Industrie et du Commerce et par les membres du Conseil superieur des LTetiers et Negoces, chaoun de ces Conseils preeentant un oandidat; 2. Par lee membres ouvriers et employee du Conseil superieur du Travail; 3. Par lee membres emus et cooptes du Conseil superieur de l'Igriculture. Ces administrateurs sont dispenses de constituer le cautionnement statutaire. DISPOSITION'S ADDITIO7NELLES ARTICL3 3. 21odifier comme it suit is premier alines : La presents loi eortira see effete a partir d'une date qui sera determine° par un arrete royal Iris de co:ar:Iun accord aveo to Conseil d'administratiou do is nanque. Completer Vartiale ainsi qu'il suit : Le revenue du placement des valeurs sur l'etranger qui seront remises hi is Banque par l'77.tat eat attribue au Tresor. Au surplus, la Banque renonoe, au profit de 117,tat, au revenu des valeurs sur l'etranger qui entroront on compte, conformement a l'artiole 34 des statute, pour 1 etabliseement de la proportion entre l'encaistie of lea engagements a vue. riti Banque retiendra une commission de un pour mille par sernestre sur le montant moyen des valeurs stir l'etranger tel quill s'etublira d'upre:; le s situations liebdomadaires 2ubliges au I.Lcuiteur beige. Tout.