861.51/478
The Director of the Division of Foreign Exchange, Federal Reserve Board (Kent), to the Acting Secretary of State
[Received February 5.]
Dear Mr. Polk: It is understood that the Bolsheviki are printing somewhere around 70,000,000 Rubles per day or were doing so some time ago from plates that were used by the old Czar and over the signatures that were in force at that time.
As there is a large demand outside of Russia for Russian Rubles due to a variety of causes the Bolsheviki are in a position with their printing press to obtain foreign exchange without any cost to them which they can use for propaganda work. The situation is an extremely serious one to my mind as the amount of foreign exchange which they can obtain is only limited by the Russian Rubles which can be absorbed. I have been watching the situation for some months and to my positive knowledge individuals in the United States are being induced to buy Russian Rubles at the low rates now prevailing and store them away with the expectation that the Ruble will later assume its former value of 500 and that their speculation may net them three and a half or four times their investment, based on the price which they are paying for Rubles which has been running from 12 to 19¢. The fact that the Bolsheviki only receive their foreign exchange on the basis of 12 to 19¢ need not concern them as they are in position to print all that the world will take.
All dealers which have made it their business to trade in Rubles have been advised by me that they cannot import them into the United States and the Customs officials have been instructed not to allow travelers to bring them to this country. Even so, large amounts of Rubles running into the millions, have been smuggled across the Canadian border, as the Canadian Government has not proper regulations to protect the situation. Have had the matter up with Sir Thomas White29 however, and understand that he is personally in full accord with any arrangement that might be undertaken between the governments of Great Britain, France, Canada, and the United States for the purpose of stopping the traffic in Rubles.
It was my desire to issue a prohibition in connection with the importation of Rubles over the ticker and through the newspapers at the time that I began to take it up individually with dealers operating in Rubles but I was advised that the State Department at that time, which was I believe in March 1918, preferred that it be handled quietly without notice. The situation now however is [Page 165] such that unless notice can be issued it is going to be impossible to control it, as through intentional propaganda or otherwise great numbers of individuals are becoming interested in importing Rubles who are unknown to me as dealers in Rubles as they have never undertaken to trade in them before, and I have therefore no means of notifying them of the attitude of the Government except through the press. Unless such individuals receive notice through the press there is a good deal of doubt in my mind as to whether we are justified in confiscating such Rubles as they may bring in until I have succeeded in finding out who they are and have notified them individually.
In addition to the hoarding of Rubles for the purpose of profit which is going on now, a large demand is being created by exporters in the United States who for their protection when exporting are endeavoring to have Rubles deposited in Vladivostock and Harbin for their account as a guaranty. The situation may be taken care of by the War Trade Corporation with the new Ruble which they expect to issue provided they get into operation immediately and also provided it is handled properly.
Besides the individual speculation in Rubles to be held in safe deposit boxes for an unlimited time, there is the larger speculation by dealers who are handling them in lots of many millions with the expectation of turning them over at a profit quickly as they fluctuate in value. The situation at the moment therefore means that the Bolsheviki have a tremendous outlet for Rubles which they can ship to other countries. Last week I stopped payment on two drafts drawn by Swedish banks on New York banks which were sent to this country to be used to spread Bolsheviki propaganda. The amounts in the Swedish banks were unquestionably built up by the Bolsheviki through the sale of Ruble notes in Sweden. If a few million people in the United States get the idea that they can buy a hundred to a few thousand Rubles a piece and later obtain a tremendous profit upon them the ability of the Bolsheviki to injure the world through their villainous propaganda will be almost unlimited.
I have talked the matter over with Sir Hardman Lever30 and he fully agrees with me that means ought to be taken at once to kill the value of the Ruble and I believe he would be willing to make representation to his Government along these lines, if our Government would co-operate. The French as you undoubtedly know have already issued a decree prohibiting the importation into France in any form of Russian bank notes, coins, and other monetary instruments. It is my belief that trading in Rubles in the United States should also be prohibited.
[Page 166]It is very possible that you may not realize fully the seriousness of the Bolsheviki propaganda in this country. For instance in New York there are papers being published in Yiddish and other foreign languages advertising the Bolsheviki in a most alluring way and in a manner which is extremely difficult to meet because it shows up only the pretentions and not the facts. They are also having nightly meetings in many of the cafés where speeches are being made along the same lines and the places are simply jammed full of people. What is true on the East Side of New York is proportionately true all over the country as far as I can hear. I have been told that the administration is not fully aware of the seriousness of the situation. While to my mind it is very probable that you do know more about it than people imagine, yet under the circumstances, and in connection with the control of the Russian Ruble which I feel should be undertaken, thought it best to mention the matter to you.
Very truly yours,
P. S. Have just received an intercepted letter from a firm in Yokohama to one in Seattle, Washington, stating that the writer was arranging to carry over 300,000 Rubles with him when he sailed the end of the month. Mention this as an instance of the way the transactions are being handled. F. I. Kent.