811.515 Silver/21: Telegram
The Secretary of State to the Consul General at Shanghai ( Cunningham )
227. Your 372, August 20, 5 p.m.
1. In letter of August 21 Department conveyed to the Secretary of the Treasury a paraphrase of Minister Kung’s message as contained in your telegram under reference. In letter of September 19 the Secretary of the Treasury suggests that the reply to Minister Kung’s message should read as follows:25
“The United States Government welcomes the opportunity to state its policy with respect to silver to the Government of China. It considers the request to be within the contemplation of Paragraph 6 of the Memorandum of Agreement, signed at London on July 22, 1933, by delegates of China and the United States, among others.
The Policy of the United States in the Purchase of Silver will be guided by the following considerations: The Silver Purchase Act of 1934 declares it to be the policy of the United States that ‘the proportion of silver to gold in the monetary stocks of the United States should be increased, with the ultimate objective of having and maintaining, one-fourth of the monetary value of such stocks in silver’. The Secretary of the Treasury is directed to purchase silver to that end at such times and upon such terms and conditions as he may deem reasonable and most advantageous to the public interest. By such an increase in the monetary use of silver, the Government of the United States believes that it is furthering the purposes of the Resolution unanimously adopted on Thursday, July 20, 1933 at the meeting [Page 442] of Sub-Commission II (Permanent Measures) of the Monetary and Financial Commission of the Monetary and Economic Conference.26
In such Resolution, it was recommended to all the Governments parties to the Conference that they should substitute silver coins for low-valued paper currency in so far as the budgetary and local conditions of each country would permit. While the Government of the United States will probably issue a relatively small amount of silver coins from the silver purchased, it is in effect putting silver to the same monetary use by pledging it to secure silver certificates issued in an amount not less than the cost of the silver.
The Government of the United States appreciates that the greatest care must be exercised in carrying out the policy declared in the Silver Purchase Act of 1934. It recognizes the unfortunate effects on its own currency and that of other nations which an excessively high price of silver would have. This was recognized also in the Resolution referred to in the provision that ‘Governments may take any action relative to their silver coinage that they may deem necessary to prevent the flight or destruction of their silver coinage by reason of a rise in the bullion price of the silver content of their coin above the nominal or parity value of such silver coin’.
In making purchases under the authority contained in the Silver Purchase Act of 1934, the United States is desirous of avoiding any action which would hamper the action which any other government might take relative to its silver coinage to prevent the flight or destruction thereof. Should the Government of China at any time find it necessary, in order to protect its coinage, to adopt a policy of discouraging the export of silver, this Government will be glad to receive the views of the Chinese Government of the manner in which the purchasing program may be carried forward in coordination with such policy of the Chinese Government.”
For your information: In this instance the Department is prepared to overlook the obvious irregularity of the channel of communication employed by Minister Kung in presenting his message, which should have been sent through the Ministry of Foreign Affairs. However, should you again be requested by Chinese officials to render a similar service you should, unless you perceive substantial reason to the contrary, inform the officials presenting the matters to you that they should employ the usual diplomatic channels.
Inform Peiping and Nanking.
- The Consul General in his telegram No. 462, October 1, 5 p.m., explained that due to garbles in transmission the reply was not delivered to Finance Minister Kung until the morning of October 1. (811.515 Silver/23)↩
- League of Nations, Journal of the Monetary and Economic Conference. London, 1933, No. 35, July 21, 1933, p. 209.↩