550.S1 Monetary Stabilization/20: Telegram

The Acting Secretary of State to the Chairman of the American Delegation ( Hull )

42. For Hull for guidance of Cox and information of Harrison and Sprague. In reply to Sprague and Warburg cables the President states the following as his definite policy with regard to stabilization.

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“My difficulty in approving the statement that ‘The governments and banks of issue of United Kingdom and United States have stated that stabilization of their currencies on gold basis under proper conditions forms the ultimate objective of their policy’ is that it may later be construed to mean that Great Britain and United States would so stabilize without world wide action toward the same end. The broad principle we advocated in preliminary discussions in Washington was based on a reestablishment of currencies based on gold or gold and silver by all nations and not by three or four only. Please bear this fact in mind because we do not want to go just part way in a conference of 66 nations.

As to the rest of the declaration and the proposed plan, what I fear is that it may be construed by us as general and permissive in scope but is so worded that London and Paris might later charge us with bad faith if we decline later to go along with their interpretation of it.

As a general principle, I am at present opposed to any agreements aimed at close stabilization of pound and dollar with small leeway either way, especially at present approximate levels.

It is my thought that at this time we should avoid even a tentative commitment in regard to any definite program by this Government to control fluctuations in the dollar.

It seems wiser to content ourselves for the present with an informal statement that if the pound should rise to an excessive point, say $4.25, that we will then consider unilateral action of some kind, the exact nature of which would depend on the circumstances then confronting us.

On the other hand, if exchange goes the other way, resulting in commodity price declines in this country, we must retain full freedom of action under Thomas amendment in order to hold up price level at home.

It is my personal view that far too much importance is being placed on existing and temporary fluctuations of pound, franc and dollars and that the bigger ultimate objective of balanced budgets and permanent national currencies in all countries based on standard reserves of gold or gold and silver far outweigh these temporary conditions in importance.”

Phillips