550.S1 Monetary Stabilization/59: Telegram
The Chairman of the American Delegation (Hull) to the Acting Secretary of State 90
[Received June 29—10:28 p.m.]
79. From Sprague. For Woodin and Baruch. Replying to your cable 79, June 28, 6 p.m., and subsequent telephone conversations regarding maintenance of the gold standard in France and other gold standard countries, the future of these currencies is most uncertain. The Dutch position is seriously affected by the situation in the Dutch East Indies and the French by an unsatisfactory budgetary position.
As far as I can learn all the gold countries are determined to stay on gold but this situation may suddenly change. They insist that rumors that proposals for general devaluation at the Conference weaken their position. At all events they insist that some general statement of policy made by Britain and the United States would be most helpful. We have discussed this matter with the British who have discussed the matter with the gold standard countries and a draft proposal may be sent you later in the day. In its present form as agreed upon by the British and ourselves it contains in addition to the general statement of ultimate monetary policy made 2 weeks ago a proposal for concerted action in all countries directed toward restricting speculative foreign exchange operations. It goes no further than this and if the French and the other gold countries accept I think we might wisely agree a gesture of concrete cooperation at this time would be most helpful at the Conference.
Although action to check speculation would be helpful I do not think that this alone would insure the maintenance of the gold standard. On the other hand I do not think it is necessary or desirable at this time to enter into specific arrangements of a tripartite character. Unilateral action can be more immediate and involves less publicity.
I would suggest testing the position by moderate sales of gold by the Federal Reserve Bank of New York directed toward holding the exchange at a point not far from the present rate or a little under that rate say down to 4 dollars and 30 cents. Action of this sort I believe would be helpful to the gold standard countries and also desirable from our own domestic point of view. It seems to me desirable that a moderate amount of gold be used at this time. There is danger that a mentality be developed at home making it increasingly difficult to make future use of our huge gold stocks.
[Page 665]Moreover, it would seem to me that speculation in securities and commodities is going dangerously far and might well be subjected to a mild cold douche.
I have discussed these matters with Moley. The proposal of an international statement mentioned above has not been agreed upon as yet.
Moley sending separate telegram.91 [Sprague.]