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or / ,1,11Mg 43, CADOGAN GARDENS. S.W. 3. r 4/143 Jvh at"-144, /cc< frt ic.441 teti JI4v._,00t4 cc,c04.4t4;Mvc<4. r44., its" 1ct:y tf4(ne.t.3.1& 44.44, /44, et%tIc4.0 Ai; 0 44.1 /4.-- ut. gal cie 1 , tr,(44- tct /AA, LA It er4 ICstA$u oC4:4- tr:1- itsA Itt.4,/4 44fic4,49 644A Su 14, Lc44_.tiont, c4.4.4 uak c,444.;A rk4-4-4) aft..) Ota- pp 1441. pc\ erCr frz/vvr h... itat. cilvtvZ $fek 6vs yit444.v gomA4. 41.4v. kkv,. t low/44i A kge". Otot &NA. 4 4(4t,11;oN a oc4. ottii. 4.4.1. //ft^ 4/14N 4441. Ss.4. (Aft^. es,, .; 41'1 mi.../taz Gt. (I .ep ;4%4 (4.4.40 0,, It*, a- AI tovit4rt,dtc. 44A h4 C14.- 't (v24444 44,4 Artrre644 di/4 0.444t4t 1-vrc444- . 4%444 41 ,01-4 Vas /44#-,- - A/4443 1-u4a. iNA At. re/6 cca-ciA4 CtiliL fru_ vit4.(Aa 144-14,4):9 dat4;. AN Cot t44 4,44:/4 C A ei,. 44,0 . fri44A L..414Ct.144-411Aj BABRAHAM, CAMBRIDGE. Dca. 1/4(7,1 vaLi itA4L4\ PaA4A 4.4a (434.4 114, 1144.D 6/11 a.(4,..t- &Ltd( e.-3 it,-( tt.t. LA4 i-LktA LaAA tha_cvt Ikt,LA V11 19-144t/14,1 atztA-A- td,011 1,44A GIA icx Pi ""cri41 1,wiTzpv rvv-9 ) 4,P,ry vvb .1-10 to 1:7v-P3 "-IN vy .vr-lasup to -vpfrivv-pd NIM 1 rpr) Vst Jis-vi--) J/-1 krilv yr' rVJ vvvi Z101,17 r 1.4 77 "1-1v, (-) *-721 's-Y-aviz"4-117 VI/Ye N4,2}-7 s'Ist '44 CV-rko°7 1".1 1Z11) VP op-ct 14- Clelug,7 Translation of Incoming FEDERAL RESERVE BANK OF NEW YORK CABLEGRAM From Nn 1' (-2124 TRANSLATION OF CABLEGRAM DATED PARIS FRTGE REM DEC. 15, 1920 Federal Reserve Bank, New York City. #11 (Testword O.K.) Your 7 received will be delayed here until Saturday and go direct to London to visit Norman before he leaves end of December. Shall visit Holland from there after Zeilinga arrives unless delaying my date of sailinp; until January 5th will cause inconvenience at office. and information from bArik here. Am awaiting some definite proposal Referring Java proposalbelieVe reciprocal guarantee of bills essential to successful plan particularly for our own protection as acceptorsin Tava are usually merchants and not bankers credits. making I t di ffi lt for ns to incipe n f fro otir egg of Reply promptly here.) Leaving noon on Saturday. Strong Translation of Incoming FEDE3AL REsE 'VE BANK of NEW CABLEGRAM RK From No. c Date , 2 (7 TRANSLATION OF CABLEGRAM Paris Received Dec. 46, 1970 Federal Reserva Bank New York 1? (Testword OK) packages Hereafter send mail for Ben and Kendall separate Care Grenfell Strong ."*"...6"....11111.1184.108.40.20611111%, is r'llir nIMIP. 0m E3Z °r . POST OFFICE TELEGRAPHS. FOR INWARD FOREIGN AND COLONIAL TELEGRAMS. Uthee of Origin. = PARIS 5009E 55 Service Instructions. Recd at FIIIP111111111111111 30 16t110 No.of Telegram. - ()dice Stamp. Sent or Sent out at From. To By T0 = BEIYJAMIN STRONG MORGAN GRENFELL OLD BROAD STREET IfriI ppLONDON ARRIVED PARIS !1EFNESrAY MAIL RECEIVED SUGGEST YOU CABLE PHIL TO JOIN US HERE AND MAKE FRONT TRIP COMING DIRECT T( MORGAN FRANCE STOP IF YOU AGREL_ HAVE HIM COME RIGHT TO 10 CABLE ME DATE OF ARRIVAL ViE COULD POSTPONE,. ARJES AND STRONK Negrau, = LEAVING PARIS IF NECESSARY FEDERAL. RESERVE BANK OF NEW YORK Translation of Incoming Date 7CA13j.,EGRAM t.1040610eisauncr. No. C- SG Received Docamber 20th 1920. London 26 words Case care Federal Reserve Bank, New York, N. Y. Shall visit Amsterdam about twenty ninth meantime with Norman please wire my con7xatulations and hearty good wishes to Bride and Groom. Strong. Translation of Incoming FEDERAL RESERVE BANK OF NEW YORK CABLEGRAM A Date No. C r TRANSLATION OF CABLEGMAY Received December 21, 1920. London, England. Federal Reserve Bank, New York, N. Y. Confidential for Case number 14 (Testword OK) My number 13 not coded. Referring to your number 9 and qovernors cables of today recommends doing transactions as you propose account Bank of England. visitin lifter imsterdam last of December shall sail Adriatic January 7th or 5th Strong. Bank of England. underlined words mutilated: ITAC we read ITLAS January 5th or 7th 22rr1 Deo3;abar, 20. Tha 1,.orlaral iieslrva IAA. of New Yorl... ".aw Yor': . virito to acknowledge tha racoi t yest,Irds..y of your cabla raading as follows Por your information following cable renaived Cro!A. rt antioi.tlt "Rai-Aral 11 Cori L4. SU zln availabla "?-2.-......7.-nant about 15 ,ftillion dollars b.lfora 2 5t1 act fortillisit s no ti.0 <1 " for invest:malt for two nonths arranc.xa.:nt for holding ona mil lion fl 'Would you considar ti ton lalvsit yrritout, int, ',mist balanca in sliort tine 'loans undar yclur guarantao iritarast b.)ine; carrial to our account. plar-sa &Iv:41a Cc-1 'Also what intarast ations impose:I by On account Our reply follows ' rax is on for foraian f?...Grunt arran[yments for 11invastment our oporatic,ns your cabla 17th Decenbar would hay.) to fund su,vested qlracai:ra a_. royal bot7-. . our Fic,nr0 rf oonsidaration "'Directors and -,'.'arlaral Reslr-e board at .:asiiinatoo, intr-lving "'some d ,lay. No sun difficultios prise BUY'S, " (autilat '.on) asguraA i f aithar of our a,ctiv,3 a silts and :ranoz1 or Panb. of :n: ;land should reuast "cors'aspondantr, "'us to do the business, for thatr account,. We c.-_)uld raCalva "Illposit and ',1aPe su ,:asted invastilont for Lho.l. in r1,-r.lar "'co:II-so without special con.sidaratioi If 1-wsinass .rd -Ira l'proposarl in this way a would suggest inV:3steiant in ,'.3.1ra.sur: .1)fts5.s with "tC3rtificatas of Indeltadness due 15th P.iarch on "Ia7rea!aant on our part, to r !purchase on 15 day:, nctice and/or " invastraant, in rz-__en rankers bills under similar repurchase 4. i.'or your infonlation GOV3I'llOr and j7uarantaa at, of F.:n.7_1E1 'd until 23th Dans-111,:ar. Cas)I.11 "IGtron:.; now visit,in roply in t,h follovrinLr, terms a,11 to confiria No.L3 not coded. "No.14 Lily. Confidantial. for Cr,.s.). "k starring t,o 7our No.9 and Govarnor's cabla o to-day rancy.a.laIrl. "doing t.ransaction as you pro.. oso fo-.±- account 'bait. of '-',114;1and. Anstarri.a.1 lirtst, of D.1c.-1 lmr Shall sail 'Adriatic' Aftor 1Jamlar.r 5th. Strong." Translation of Incoming FEDERAL RESERVE BANK OF NEW YORK CABLEGRAM Date 237z-f-- From No. C 1V SG Dated London, Received December 23, 1920. eserve Bank, w York, N. Y. (Testword OK) Love and Merry Christmas to all at bank legraph same to the board and governors. Strong. DEC 2 Iti41,, Cl BANK OF ENGLAND, LONDON, E.G. 23rd Dacz...._ber, Federal Reserve Bank of New York, Nevi York pie e c 41-1 ig 20. v 1920 JAN p. j. .y,1. I write to confirm my telegram despatched last night reading as follov,z - For Chairman and Governor. The Bank of "England perplexed by outlook over next few months. They "consider general rate policy has so far been wonderfully "successful although the position here flight be better to-day 'had they bean more drastic 6 months earlier. The fact ''remains that world deflation has been started and while this "bound to continue they as we wish it to operate slowly "rather than quickly. They do not believe such deflation "can now be stopped but think possibly its rate of progress "might with advantage be slowed If you sharo these views "I would be glad to learn your intentions as ,to rate policy "for discussion here. Your letters Sac.17th Nov.26th "indicate no intention to change present policy but rather "possible increase of rates later. Are you still of this "view? Strong''. "No .15 Incur. - 1 061R.ccti ymmossomildiltmWt..., Td 1,.30.3ral ri3sar v%) bani: of *ow Yor; I write to oonfir tolatim desDatchad For (*.,lairJan ft Govarnor. Th..) Bari T of xerl bj outlook ovir next raw il.priths 1. rata policy has en far be.a:,t v,:citlart.131:7 ...t;)) the :::;43 sition EST 9 '11:1,ght "1.1 be" 'tier to-4v 7...O drastio earliar. Tif) fact rld ,t; )flat 'on has L. on started alet wle_31) t t 11,3:" an wa w loll it to ol,:zate Tle.y do not holieva suol darlrtion ved but think .;.-ioarribly 1.to rate of -or ocresc tztaip be slovrad :r_f u shay.) thoioviaws d. to tarn your lAt.antions as to rate iv:fairly are. Your int ',aro ;42: 2r7V1 7 ;0'4..3..1, nt 'on to ornitq rxr,-)431nt pol!ciy but rather er,oa of rat ,s lalr. Are yon still of this to is the pencil draft of a cable prepared by ng, Out never sent (this took its place) because man hau a rather different point of view than d in Governor Strong's Craft. The araft, aluable as indicative of the state of Governor at the time. shoule be carefully preserves. t.3. - dune 22,1J2b tJ . o citt eAr\C 446 cAt 952 .Cat r Aad iloix) E Ic 001 tt:dx)-z ti 7/1 7(6-el eity4471_ - air) e) a/n b citittis L3 Le.IY tulaty Orcri-a-t , ata-t,k eit.E. cat _ caecrc( _cgkitt i c t / n O t th Meicti Ow? )-Zat ica.Oca. _ "AL 4- P 6 _ 2.1.N at oqeztrai eiCe9Zg-nO ef5 A.vrtd:? /rut- 9-yiLt-tesT Prte;-/DditiE /tethketir714 _ _ 71C-zo- ecilcS (au? AiRodtee at? e t i c tr PkavAt 17216-trE47-1.v).14 qoanA /tars@ 121a.A;nrcum &x,,P14-1,6 LO-rc CA,c r;_R. YE° _ clay aiter-b )02-cti? Xate. iffz-e0 t ctc_ca.iT Pair 04Acupko - 1 7164` XOS3.074 &;FrAyssw.., ), CA-C 0.0_ cC t - _ vivv-antri --tiedazeis go-mtritrer.. atta uk ow? gg-er-c4-0 -knet.A.Na.0 ierscr-40 StemAL/0 Atifli_cuLleLD thirrx , cirecto *Tic_ tU 1 Omriv-tt:ca.. tvti_c_ .61 excheryx_e_ icia7FTQ_ acifim curactA-Nxil daketarerotF Colin-tatiwzi 6 --41e4-- Az-)1,7" Act41. _LW a)-)141t-ertia211-1 tr-r 97)0'S C £0.111.441-7449 gett 47)-tthi COL (-etc( ecile)at7eZ-00 CELLe--- CebrCtlit-id aa---fre-AQ 61Ffneclakt CS:2, CV:rtk- 1,17kb Ca7) ept:e/gei,a_ frtc isex _St)nt ittMCI tft du2-6,x,t?)71/2(1,A 7710,ti, aretR1 *it. NOT SENT, as Strong said COPY OF CABLE PREPARED BY GOVERNOR STRONG "because Governor Norman had a r w,er different point of view" than that indicated in strong's draft below. Strong app_aded a note saying this was valuable and indicative of Felra -1 Reserve these pa ers his state of mind at the time, an hen C New York should be preserved. 92,7No. 15--No. 15--For Chairman and Governor. Please consider following and reply promptly care Bank [of England]. Firkt Paragraphs of Jay's letters regarding credit control and rate policy indicate intention to maintain rates next year. Our rate policy was designed to check expansion but not Second. to precipitate too rapid price reductions. We must now consider possible dangers from too great momentum of present movement if not checked. I regard following as chief dangers: Folgtht, (' Impairment .1: capital margins between inventory values and borrowed money with resulting unnecessary failures in Europe and possibly at home. (b) If our goods markets get much below Europe's, difficulties of paying debte to America will be greatly increased 2 exchange rates on New York will surfer further advance with corresponding currency difficulties on Continent. (c) We may face considerable unemployment at home and even more serious abroad. (d) Fifth. We risk extreme legislative interference with our program. Our friends here feel some concern lest these developments may materialize. Sixth. They and I believe a moderate rate reduction here for a limited period might relieve anxiety without much risk to present healthy process of orderly debt liquidation. Rate reduction here might cause shifting of loans from New venth. York unless our rates also reduced. Also if later increases found desirable, respective Treasuries LIILAI. might be reluctant to increase their rates. Ninth. If situation at home justifies revision of our views, a whole- some sentiment might result from iaentical rate action. Tenth. Without better knowledge of conditions at home, I cannot make definite recommendations but urge consideration of above and early reply. Z140111111. Bear in mind that present depression is worldwide and seems to show no sign of check. STRONG (' 44, DECODE OF TELEGRAM RECEIVED FROM FEDERAL RESERVE BANK OF NEW YORK ,,c(-1 25th DECEMBER, 1920 11. RHYAE. f 1)1d This answers message 15 regarding outlook. First:as to commodity deflatioOur index of 12 basic commodities namal cotton, aides, hogs, rubber, copper, sugar, wheat, corn, iron, lead, lumber, and petrol u.d shows following decline from peak expressed in per cent. may 1 June 2 July 3 August 4 September 6 October 14 :lovember 13 First three weeks of December 4 First 6 commodities near or below pro-war prices. Tho towing up in December indicates deflation of group raw materials fairly well accomplished but not yet apparently reflected in wholesale prices of manufactured goods and still less in retail prices. in commodities is greatly reduced. S,eculation Apparently we are reaching end of first phase of deflation in which babiu commodities fall acutely and entering into a second slower phase in which un- employment increases and wage reduction becomes effective thus permitting lower prices for consuranrs' goods. generally instituted 2a New :]nEland textiles Mills have wages reductions which are being accepted with but few strikes by employees. Movement, graduall: spreading to other industries but as yet only very small percentage of wage earners affected. From observations British indices we conclude our acute raw materials deflation is somewhat ahead of England. Second:as to credit deflation While American price indices have fallen 25% to 35% since May the volume commercial Bank Loans has decreased about 5% and currency Alk currency none. Various elements have kept credit volume high. Anticipate some January liquidation due to drawing on us business and post holiday reduction of currency. In 13 :aoliths volume of call loans declined 1/3 and prices of 30 industrials 43%. But in spite of high ratescredit has always been kept elastic. Third :as to Rate policy Our present view is that we should not consider reducing rates at least until Market rates have fallen below ours and appear likely to reinain lower. Under present inflated conditions should we now reduce our rata and later be obliged by more active business or speculation to raise it again the affect would be more discouraging than if we maintained present rates but kept credit elastic. Only motives for reducing rates in January would seem to be to deflect natural course of prices or encourage resumption business. This seems somewhat akin to various schemes proposed in Gongress to raise agricultural prices or stimulate exports. Purchasing power in agricultural sections is badly damaged but that of wage earners is but little affected yet. People will probably begin buying again when retail prices are substantially reduced. Statistical history of post-war readjustments showsr bounds after acute declines and though there are no precedents for present world -wide inflation already many lines of merchandise stocks here are low and inquiries are slightly improving. It may possibly be that at some point a decrease in our rates if entirely jusified by credit conditfons would be just the thing needed to complete the resumption normal purchasing and production but at present we think it would be unjustified premature and ineffective. only to conditions here. Case. Jay. Foregoing refers of course (20. 2c t7 "? Dece:iber, Mr.Pierre jay, Federal Rese2.-ve Bank of :-ew York, New York. Pear 7.rLr.JaY, Your various letters arci enclosures have I believe all reached 1:10, and I o..rnot toll you how helpful they P;r)c)1 pic,:are of i.,he situation at hone have been in riving ana in the Bank. You will not ex,-iect an answer in detail to all the ratters discussed as I shT.,..11 be hone within a week of your having this letter. I n.:1-Triting you especially to thank you for the little book you sent no rich I agree is very rcadable and whiCh I have just finished; also I want to thank you and Case for your Christ:-Els 7lessage. othing could be bettor than your plan for the sir I .er. You will find a 7alln web:wile awaiting you here a7id else- where and I hope nothing interferes with the success of the prograne, AoceTt my regrets for having d.ravin such a huge eitertainnent draft upon you in bo:lalf of :1:,Zeilinga: it was to pay a real debt, however, and I an glad that you paid it in rw behalf. I have read the copy of the Act n.eampanying yours of Dec.13th arending the Federal Reserve Act. What it oontains contains is not 3s startling to ne as the source fron which it e-ianates, and I only wish that its sronsors 7'91(1-It 1-.ave been a hit ell or -.-orescr-ctative of the constructive views in the louse of Senate. The following general cements occur to me: (1) The texas is too short - 7 years perilts of a ec7-iplete cl-.ange of oolitical conplexion if such a thing could exist in the Bo-'!.rd vrit'hin the tern of one President and is obleotiona7)1e, (2) If both the Secretary of the Treasury and the Controller of the Currency are to be drooped from the loard, I fear that contact between t,,e, Treasury Depart-lent c.nd Iteserve System will be ton corraetely brohen and niht in future years reFr:lt in a r.eaction to the other extrecae. It would be batter to have an Ass ant Secretor:- set in the meet:321ml in an ex offictio capacity anl I still believe that rxy pion of havino. the Governor of the 'Reserve Flanks serve in rotation for terns of one month each i^ 7reforable to enlarging' the number of permnent members of the Board. (3) The a"..nunt pro7-o 8 ed for bit-1132;11g, 220.127.116.11 sonewhat blurred in the carbon copy sent rie, I read as ,'2,000,17100 which strikes ne as too snall. (4) It appears to ne, although possibly not with foundation, that some of the lutios of the Controller of the Currency specified by statute are not dealt with in this Bill. I such as :Intini7" as Treasurer dirty recall oertain of the 'Tational Red Cross, which are conferred upon him not by appointment by the t-refliClOrt, but by Act of Congress which are I conducted and exercised by the aoserve IIa, i a, then no doubt the new 'aohirto v7:.11 rort: smoothly as between the 1--tesexvo Dnarcl and ourselves. (7) I do not understr.-ind the object of repealinrr that part of Section 2.7 which leaves the cost of exartimtions upon the Bank examined. Does it mean that the aeserve Sywteri shall bear all examining costs? If so, I should think we would lcse iml.ortant hold over -Alezaber 3a-1 s and at the 5rirle; tine the :.!staber Banks would lose the benefit of a certain restinint the Controller has heretofore felt 1n the amount of money which he 3-pent in ;.-kak.in.g exa t ions poirticularly more data as to existing statutes the above oo:i ants are doubtless inocriplete, text, I seed t'ileri for %/hat the;; are worth. With best re:;ards to all at t'-te Dank, Slncerely yours, `.,:ithout more infornatio:k 29th Dor:amber a ':0. Thl ;3dara.1 1,13sn'va 11-.211- of ''Tow Yorl Yor,.. hava your this instaalt as fo3.1ows 411 J7T1. This answarn :13s-s.3 3 rajardinc, out loo . iiTt of 32 basio coriloclit:tas "as to com.rylity daflati.()n. (.11a, st.kc:ar whaat, oorn iron rubb,Yr oo "nmasly cotton *,.(3S "lead luaber r,oet pltrolatha sl-ovrs fo-1-3owLu daolim 1ay Tune 2 t %ay 3 AuLirt "ay-.7-rassad in par oant. "0 Octol).-Ir 14 7.1ova.r 1 First, throe waaks of Deowinar ,s lieu' or Inlow prior 2.irj.vas. Tha s3owin47 u "Daoa:nbar irriloatas dlflatl.on of ,..roz.-41)A-Ta2. tarif,zis fairly wa1 3 " :I. "anoo..vlishal but it ;rat a ,,rooiably raflaotad in wholasal.) a,x, still 1-.)ss in ratan prioas. "1--icas of lanufaoturld Ap_arantizi." cu1tin Ii cor.,...ioditias is otaatly in whioh 1asi0 "ara ro±i ani o-r first Ithasa of phasa "oora.;oditias fall aoutaly ayri antarini: into a saoore "in which Linerk)loy;:nAt, inoraasi38 anO. Virk)",3 1)4300::08 t,hul parnit Una lowar "Tinos for none 107' S 0,) 0 CIS as 1' Ti le hava senora 1:- inst., iti It;y1 22 "m F, 'oy "r A.uotL'.,ns whio ar bailie aor;antail with -Jut fay; L,Taduallu s-,roadiyk-1, to othar ireustrios 3..rnars affootod. "but as y.)t, only vat':,- sAall par,.,ani,k2a "Proll obr.;arvat,i.ons irlt.ith irwliom w. oonchlda our aout,a ri "matarials daflation is somewhat ahtlad of M.-L.:1an1. 33oond as to Vihilo 41.,aorloan .r1O) liUcas hraa fU 13n on "ora'Ut, ta:i t 13 voluiao oo,laarcial Ban3-; loans has "2:-7,./., to 35:, sinca ourranoy nom. Various ala.aants hay° "docroasad about on so;.1.1 t Tanuar,y lioui(1 orldi t vo au. n ).iigh. Afltic or r US busimso alld post "duo to arawl.A.,r; o ; "ourroncv - 1 1' nnths vo lu,aa of cal l loans (10°31113d o /10-t drd But in s_ ita of high rotas "and pri..0.3s of 30 Lrlustrials iir 0. as to rat 0 polioy . al:t, 3 3 actin oradit has always loan viav; is that wo shoi.ld not, oons.Vlar ra(liloing ratoc "our -La-; ours ate aor "at least u t 1 ri:at ratar, trio fa31a31 ooriditions 1.1ritor ivasant 131,11,,y to rai.,..t.mn lowar. "ohnuld vir) now raduoe our rata at latar ba obli,:i:ad by riora aot.t_va "businass or s-:),3oule.tion to rais..) it a..aLl tin offooL wu3d ha i2inacl 2,-2..)sant ratos but It aL:t "..3ora di0OouraLiY1S than if Vie tTaaluarz.iaotivas for roduat n7.tas "oradit alastic "would sa:m to in t (1.af1ant natura3 00111'SO 0 r: primes or 321001.17:W a: in to various "rasurrot .7 on busirtass. This saa.ts n ConL,Tess to raiso a;rioultural yr:.oas or "soharies -)roposed. asing powar in a rinUl tAirai S3 Ot 1_01111 "stimulats3 aXpOrt,,S . "is bad1 y. cla,..180.0 bu t. that of warfa lam rc is but littla affootarl. 7'301)11 will -,zobabiy bazin buzil.n;:3 again whon ratail ?Iv:A , "1-rioas ara substantially raeluoad. Statistical irl_story of nix= r Thowylo aft t-T aouto clooli.nc at "pct,-war raadjust. thara arc no rrocadants for prasont wcIrld-w.'_do inflation . et_ nalraady maw linos of aaarcluldiaa ntoas bra ara to all. triroving. It ;ay roasiblu b that at "anquirias axa ro:aa mint a elacroaso in ova' paths if ontiraly justificel ramtaption th lorldIt conditions wn.ad 'b Just th tIth noa1.50 to oolaplata noroa 1(1 "t hink it ta,, "ForeaDirvz, r.;.f a 1 tr.v) t,r non.1.11r o .2.: IREONY. 1.. ;;ivas 1 "and I -oat, yath "upon tsql wor "Oonaultlik, Viosa 'can 1>a acco,.iplia St 139,nuary St . - Translation of Incoming I'FEDERAL RESERVE BANK OF NEW YORK CABLEGRAM Date From t 0.(ke, A,44,41 No. C---(-b-°-. TRANSIATION OF CABLPGRAM DATED London England REC'D nee. 28, 1920 Federal Reserve Bank New York City. Number 17 (Testwcrd OK) La. Chairman and Governor - your able reply my nutber 15 gives precisely information desired for Which Norman and I most grateful. Consideration of effect of our policies upon the world generally can be nostnoned till, my return. After consulting Vissering have decided not to visit Amsterdam. More can be accomplished by remaining here until Adriatic sails JanOth. Strong Underlined words mutilated: GIOFA we read GIMFA "for" OGBEJ we read OGBP2 "postponed till" EOM we read '.1.1 "decided not to" - Bank of England BANK OF ENGLAND. LONDON. E.C. 2 - r 29th rieez..ar, /9 M. The Federal Reserve Bank of New York, New York. I have your telegram of the 24th instant reading as follows This answers mesrlk]p 15 regarding outlook. First Our index of 12 basic commodities "as to commoditT deflation. "namely cot on ?rldeS-bogs rubber copper sugar wheat corn iron "lead lumber and petroleum shows following decline froa peak May 1 June 2 July 3 August 4 September "expressed in per cant. "6 October 14 November 13 First three weeks of December 4. First The slowing up in "5 comilodities near or below pre-war prApas. "December indicates deflation of groupYttmaterials fairly well "accomplished but not yet ap,-reciably reflected in wholesale "prices of manufactured goods and still lass in retail prices. Apparently we "Speculation in commodities is greatly reduced. "are reaching and of first phase of deflation in which basic "commodities fall acutely and entering into a second slower phase "in which unemployment increases and wage reduction becomes ?effective thus permitting lower prices for consumers' goods. "New England textiles Mills have generally instituted wages "reductions whici-. are being acoepted with but few strikes by 'Tovement gradually spreading to other industries "employees. "but as yet only very small percentage of wage earners affected. "From observations British indices we conclude our acute raw Second as to "materials deflation is somewhat ahead of England. While American price indices have fallen "credit deflatjon. "11 RHYTTE. "25,g. 1-6-3-5% suite May the volume coy iaercial Bank loans has Various elements have "decreased about 5% and currency none. Anticieate some January liquidation "kept credit volume high. "due to drawing on us business and post holiday induction of I r 13 months volume of call loans declined one-third "currency. But in spite of high rates "and prices of 30 industrials 43. Third as to Rata policy. credit has always been kept elastic. "Our present view is that we should not consider reducing rates "at least untll Market rates have fallen below ours and appear Under present inflated conditions "likely to remain lower. "should we now reduce our rata and later be obliged by more active nr speculation to raise it again the effect would be "mon; discouraging than if we maintained present rates but kept Only motives for reducing rates in January "credit elastic. "would seem to be to deflect natural course of prices or encourao This seems somewhat akin to various "resumption business. "schemes proposed in Congress to raise agricultural prices or Purchasing power in agrlcult,ural sections "stimulate exports. "is badly damaged but that of wage earners is but little affected People will probably begin buying again when retail "yet. "prices are substantially reduced. Statistical history of "post-war readjustments show rebounds after acute declines and "though there are no precedents for present world-wide inflation "alrealtr already many lines of merchandise stocks hero are low and "(Inquiries are slightly improving. It may possibly ba that at "some point .a decrease in our rates if entirely justified by credit conditions would be just the thing needed to complete the "resumption normal purchasing and production but at present we "think it would ba unjustified premature and ineffective. "Foregoing refers of course only to conditions here. Casa. Jay. tt It and have to confirm ix.y teleEram to you of the 28th instant as follows "No.17.IREONY. For Chairman and Governor. Your able reply my "number 15 gives precisely information desired for which Norman Consideration of effect of our policy "and I most grateful. "upon the world generally can be postponed until my return. After "consulting Vissering have decided not to visit Amsterdam. More "can be accomplished by regaining hare until"Adriatic" sails Strong.' ?January 5th. 7'aE I omi11411 r From p71.-r.D L. RESERVE BANK F NEW Y R K O, No. C ti CABLE,GRAI.! Southaripton Received January 5th, 1921 Federal Reserve Bank, New York City SAILING TODAY Strong