The Secretary of State to the Ambassador in Great Britain (Mellon)
154. On May 13th the British Ambassador,1 presumably under instructions from his Government asked the Department to consider whether the time had not come for the convocation of an international monetary and economic conference and asked for an expression of our ideas on the subject and an indication of our attitude towards participation in such a conference. The subject has received the serious consideration of the Department and the President in an attempt to see what aims could be pursued and what benefits hoped for in the light of existing circumstances of every character.
Yesterday I, after discussion with the President, had a telephone conversation with Prime Minister MacDonald which was based on some mention of the topic by both of us in Geneva. I presented the following views:
- That it seems to the President and myself that despite the difficulty of circumstance and the limitations that would be imposed on various governments, it is our judgment that the early convocation of an international monetary and economic conference might achieve some useful purposes.
- That the two useful purposes in the forefront of our mind were (a) The consideration of joint action which might assist a recovery in commodity prices, and an elaboration of the measures necessary therefor. In that connection, and illustrating the type of monetary idea I had in mind, I made reference incidentally to the leading article in the May 7 issue of the Economist entitled “Factors in Recovery”, subtitle “Monetary Policy”, which article I thought MacDonald might have seen. (b) The encouragement of all economic groups throughout the world by indication of the fact that governments were again striving to find common means of meeting what are largely joint difficulties. The President’s judgment is that serious as are the economic and financial factors governing our present situation, [Page 809] still much of it is due to the exaggerated fears and doubts that continue to deepen and to stand in the way of the private economic undertakings which might ease the situation. He believes that a fresh effort on the part of the governments might have a substantial improving effect on the situation.
- The somewhat incomplete analysis of possible lines of action that the Department has made tend to the conclusion that a hope for real success lies in action taken in the monetary sphere. But the conference would be in a position to give consideration to various matters in the economic sphere in which also something might be worked out. Such, I mention by way of suggestion, might be plans for forestalling further tariff and trade retaliations and discriminations, plans for the development of series of comparatively free trade areas such as the Danubian region, plans for dealing with the exchange difficulties that at the present time are causing various countries further to strangle international trade.
- I said to MacDonald that of course he understood the United States could enter such a conference only within limitations and I recited as the two outstanding limitations that we would not be able to consider the question of debts and reparations, and questions of tariff rates which last Britain and the United States both consider purely domestic issues. MacDonald observed that Great Britain too, of course, would have to enter under strict limitations.
- Furthermore, I informed MacDonald that we would like to see the silver question find a place in the field of discussion of the conference. I stated that I had no conclusive ideas as to how that might be handled but that my general idea was that in relatively minor ways the position of silver in the world’s monetary systems might be enhanced. I added of course that I made the statement without any wish to entrench on the position that Great Britain might assume as regards the silver position in British India. There is support for a silver conference2 in responsible quarters in both Great Britain and America.
- I informed MacDonald that it was the President’s opinion that the conference could most advantageously be summoned by the British Government and held in Great Britain. On the one hand, its meeting in Great Britain would assure a recognition of its importance. Furthermore, Great Britain having departed from the gold standard, would run no new risks and raise no new undesired and premature fears in summoning the conference. On the other hand, were the United States to call it, a wholly new set of speculations regarding American monetary policy might be born, [Page 810] further disturbing our gold and monetary position. The Prime Minister appeared to understand this point.
- I stated further that in my judgment the conference should be one of important figures, such as responsible ministers. He agreed, remarking that the matters mentioned were matters for political leaders. Of course, there would have to be suitable preliminary discussions and expert preparation the method of which could be worked out if and as the conference is determined upon.
- I informed him that I wanted to communicate my ideas and interest personally to him and therefore I had telephoned, and that I was immediately cabling to you the whole situation and asking you to talk it over with him or whatever other members of the British Cabinet might be designated. Will you therefore immediately take up the matter with Mr. MacDonald and inform us fully as to the attitude of the British Government and also report any suggestion or ideas you may develop on the matter. Prompt and determined decision may immediately offset the gathering difficulties.
- The discussion should be kept strictly confidential. We have no desire to proceed without French cooperation at each and every stage. However, it is obvious that until Great Britain and ourselves have reached a decision as to whether there is advantage in summoning a conference, it would be a mistake to widen the discussion unnecessarily. Since our idea is that the British Government should convoke the conference, it is possible that the decision as to when and how to inform the French should be left to the British Government, all on the supposition that there is something positive to communicate. Of course nothing is to be communicated to them without prior agreement with us. We suggest that, if and when the consent to such a conference by France has been obtained, the British Government in calling the conference should state that it issues the call after previous conference and collaboration with both America and France.
- We can see possibilities of dangerous misrepresentation in the mere name of the conference and suggest that that should be handled very carefully. We see danger in the word “monetary” or “credits”. Merely by way of suggestion, we do not see any such danger in a conference described in some way as a conference to deal with commodity prices, international exchange, trade impediments and kindred subjects.